Q1 2025 Earnings Summary
- Resilient Rental Growth Through Strong Renewals: Management highlighted robust renewal performance with lease-over-lease improvements in the 4.5% to 4.8% range and record high renewal acceptance rates, which help offset weaker new lease pricing and support overall revenue stability.
- Cost Discipline and Pipeline Stability: Responses indicated that development costs are largely locked in—with prepurchase development carrying construction cost guarantees and in-house projects being about 95% fixed—thereby mitigating risks from macroeconomic uncertainties such as tariffs.
- Favorable Leasing Trends and Market Recovery: Management noted sequential improvements in leasing activity, such as accelerated new lease pricing and a 50% increase in lead volume for certain properties, along with market-specific recovery in areas like Atlanta and Tampa, suggesting a positive outlook for occupancy and rent growth.
- Sustained Weakness in New Lease Growth: New lease rates declined by 9% in December and only modestly improved to –4.6% in April, with forecasts expecting just a slight positive turnaround mid-third quarter, indicating uncertainty about an enduring recovery in rent growth.
- Persistent Supply Overhang in Key Markets: Markets such as Austin, Phoenix, and Nashville continue to face significant supply pressures, which could suppress occupancy and rental rate improvements, potentially hindering revenue growth.
- Operational Risks in Lease-Up Execution: Issues like the flooding-related delays at the Raleigh lease-up, which impacted occupancy stabilization despite recent recovery signs, highlight execution risks that could delay new development revenue.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Up ~1% (Q1 2025: $549.295M vs Q1 2024: $543.622M) | Total revenue grew modestly driven by stable Same Store operations ($518.825M) and a slight boost from the Non-Same Store/Other segment ($30.470M), reflecting a steady contribution from completed developments and acquired communities compared to the previous period. |
Net Income | Up ~26% (Q1 2025: $186.406M vs Q1 2024: $147.610M) | The significant net income increase is primarily due to a large gain on the sale of depreciable real estate assets (+$71.9M in Q1 2025 versus a minor loss in Q1 2024) and favorable non-cash adjustments, which offset modest revenue growth, demonstrating the impact of one-time asset sale gains compared to the prior period. |
Basic EPS | Up ~27% (Q1 2025: $1.55 vs Q1 2024: $1.22) | EPS improvement mirrors the net income surge as increased profitability—including a substantial asset sale gain—translates directly into higher earnings per share, despite concurrent increases in certain expenses, indicating efficient profit conversion relative to the previous period. |
Operating Expenses (excl. real estate taxes & insurance) | Up 6% (Q1 2025: $124.955M vs Q1 2024: $118.199M) | Operating expenses rose moderately due to higher costs in both Same Store and Non-Same Store segments, particularly from completed developments and associated operational cost increases, which built on the expense base observed in the previous period. |
Depreciation & Amortization | Up 6.5% (Q1 2025: $152.350M vs Q1 2024: $143.020M) | The increase in depreciation and amortization expense reflects additional depreciation from completed development communities and extra capital spending activities, continuing the trend of escalating asset base and expenditures noted in the previous period. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Core FFO | Q2 2025 | no prior guidance | $2.05 to $2.21 per diluted share, midpoint $2.13 | no prior guidance |
Core FFO | FY 2025 | $8.61 to $8.93 with a midpoint of $8.77 | Remains unchanged from prior expectations | no change |
Same-Store Guidance | FY 2025 | no prior guidance | Remains unchanged, with no specific numeric details provided | no prior guidance |
New Lease Pricing | FY 2025 | Around –1.5% for the year | Remains aligned with prior guidance; anticipated to turn slightly positive by mid‑Q3 then trending down in Q4 | no change |
Renewal Lease Pricing | FY 2025 | 4.5% | Expected to remain strong | no change |
Development & Redevelopment | FY 2025 | no prior guidance | Plans to start 3 to 4 new developments and renovate approximately 6,000 units | no prior guidance |
Capital Allocation | FY 2025 | no prior guidance | Additional $1 billion to $1.5 billion in debt growth | no prior guidance |
Expense Line Items | FY 2025 | no prior guidance | No meaningful deviations from initial expense guidance | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
New Lease Growth and Pricing Trends | Q4 2024: Discussed a seasonal slowdown with new lease pricing down 8% on a lease-over-lease basis, blended pricing down 2%, and improvement noted in January with atypical acceleration trends. | Q1 2025: New lease pricing improved sequentially by 180 basis points (from –9% to –4.6%) and blended pricing improved by 160 basis points, with expectations of a potential turn to slightly positive new lease growth later in 2025, though some caution remains due to economic uncertainties. | Positive improvement: There is a clear sequential improvement with more encouraging pricing performance, even as caution persists over economic conditions. |
Supply Dynamics | Q4 2024: Emphasized a record-high supply overhang (50-year high), significant new supply causing pricing pressures, and forecasts of a sharp decline in supply deliveries in 2025 and 2026. | Q1 2025: While supply overhang remains a concern, the call highlighted strong absorption (units absorbed exceeded units delivered), increased occupancy, and anticipated demand-supply tailwinds as supply pressures are expected to moderate in upcoming periods. | Moderating pressure: The tone shifts from deep supply concerns to a more optimistic view as absorption improves and supply pressures begin to ease despite the ongoing challenge. |
Occupancy and Renewal Performance | Q4 2024: Reported stable occupancy around 95.6% with slight sequential improvement and renewal rates growing around 4.2% to 4.6%, supported by strong collections and favorable market conditions. | Q1 2025: Occupancy remained at 95.6% with a 30 basis point year-over-year improvement and renewal rates increased to 4.5% (with expectations for further strength in May and June), reflecting robust renewal performance and resilient market dynamics. | Consistently strong: Both periods show solid occupancy and renewal performance, with Q1 2025 building on and slightly improving the momentum observed in Q4 2024. |
Cost Discipline and Pipeline Stability | Q4 2024: Highlighted reduced construction costs (4%-5% declines), a growing development pipeline from $450 million to $900 million, clear funding strategies, and a strong balance sheet with ample liquidity. | Q1 2025: Continued emphasis on cost discipline with locked-in pricing for development and redevelopment (95% locked costs for in-house developments, appliances locked through mid-2026) and a stable development pipeline expected to remain in the $1 billion to $1.2 billion range, along with ongoing rollout of renovation projects. | Steady and disciplined: Consistent focus on controlling costs and maintaining a robust pipeline, signaling confidence in managing development and redevelopment expenses. |
Operational Risks in Lease-Up Execution | Q4 2024: Briefly mentioned through extended stabilization dates and adjustments given high competition and pricing expectations, without a deep dive into operational challenges. | Q1 2025: Addressed directly by acknowledging specific lease-up challenges (such as a flooding issue in Raleigh) that temporarily impacted occupancy; however, remediation efforts have resulted in a recovery in leasing performance and strong rent outcomes. | Managed risk: While operational challenges surfaced in Q1 2025, they were actively resolved, reflecting a mixed but improving sentiment compared to the less detailed discussion in Q4 2024. |
Regional Market Recovery and Leasing Trends | Q4 2024: Expressed optimism about overall market recovery with early signs of improved lease pricing, moderated supply pressures, and a recovery cycle expected to strengthen in spring/summer, though some larger markets struggled due to high supply. | Q1 2025: Provided more granular regional insights; noted significant improvements in markets like Atlanta (occupancy up by 120 basis points), strong performance in Virginia and mid-tier markets, record-level absorption rates, and detailed lease-up performance information, though some larger markets like Austin and Phoenix continue to face challenges. | More granular and positive: The narrative evolved with detailed market-by-market performance, indicating an overall recovery with variation by region, and a generally more positive outlook compared to the broader regional commentary in Q4 2024. |
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Development Costs
Q: How locked-in are construction costs?
A: For prepurchase projects, a construction cost guarantee fixes pricing from the outset, and for in-house developments about 95% of costs are locked in, minimizing execution risk. -
Lease Comps
Q: How do lease comps vary seasonally?
A: Management noted that new lease pricing troughs occur in Q4, making comps easiest later in the year, while Q2 and Q3 already show solid relative strength. -
New Lease Growth
Q: When will new lease growth turn positive?
A: Although rates were negative in early parts of the year, management expects marginally positive new lease growth by mid-Q3, with a modest rebound as economic conditions continue. -
Capital Allocation
Q: How will you fund future developments?
A: With a strong balance sheet and net debt-to-EBITDA at 4x, management favors debt financing for incremental growth and relies on property sales for additional capital. -
Move-Out Trends
Q: What explains the record low move-outs to buy?
A: Move-outs for home buying dropped to 12%, a 16% decline year-over-year, driven by affordability challenges and economic uncertainty, supporting stable occupancy. -
Lease Renewals
Q: How strong are renewal rates compared to new leases?
A: Renewal rates have remained resilient, consistently in the 4.25%-4.5% range, with forecasts for May and June slightly higher, emphasizing strong resident retention. -
Leasing Visibility
Q: Do you have visibility on upcoming lease spreads?
A: Yes; management has clear insight into new lease rates, covering about half of May and roughly 25% of June leases through pre-leasing, improving forecasting accuracy. -
Development Lease-Ups
Q: Can lease-up schedules be extended further?
A: Some development lease-ups are slower than expected, but rent performance has exceeded expectations, and management remains confident in achieving stabilization as planned. -
Urban vs. Suburban
Q: Will urban assets outperform as supply normalizes?
A: Urban properties could see more upside since they've historically absorbed more supply, though current performance is converging with suburban trends. -
Acquisition Activity
Q: What are the trends in deal volume and pricing?
A: Deal volume has fallen significantly recently without affecting pricing, which remains stable around sub-5% cap rates, highlighting a steady market despite uncertainty.