ネックスポイント・レジデンシャル・トラスト（NXRT）2026年第3四半期決算説明会：ガイダンス下方修正、レバレッジに注目

NexPoint Residential Trust（NYSE：NXRT）は、稼働率の低下、フリーレント等の条件緩和（コンセッション）の拡大、不動産経費の高騰が既存物件NOIを押し下げたことで、2026年第3四半期の業績悪化を発表しました。経営陣は、デレバレッジ（負債削減）、選別的な資産売却、稼働率の回復を優先する一方で、通期のコアFFOおよび既存物件NOIの見通し（ガイダンス）を下方修正しました。

要点

• 2026年第3四半期のコアFFOは1,340万ドル（希薄化後1株当たり0.52ドル）となり、前年同期の0.70ドルから減少しました。売上高は前年同期の6,280万ドルから6,450万ドルに増加しました。
• 既存物件売上高は0.7%減少、経費は11.2%増加し、NOIは8.2%減の3,560万ドルとなりました。四半期末時点の稼働率は92.9%で、70ベーシスポイント低下しました。
• NXRTは通期の希薄化後1株当たりコアFFOのガイダンスを2.17〜2.27ドル（中間値2.22ドル）に修正しました。既存物件NOIは3.6%〜5.1%の減少（中間値は4.3%減）を見込んでいます。
• スワップの満期到来に伴い、支払利息は第2四半期の1,580万ドルから1,810万ドルに増加しました。調整後加重平均金利は、6月30日時点の3.58%から4.75%に上昇しました。
• 取締役会は1株当たり0.53ドルの第4四半期配当を決定しましたが、経営陣は、試算される第4四半期のコアFFO（1株当たり約0.35ドル）では配当を賄えないと述べました。取締役会は2027年最初の会合で配当の再設定（減配等）を検討する見通しです。
• デレバレッジは経営陣にとって最優先の資金運用課題です。NXRTは資産売却による収入をまず債務返済に充て、その後、新設された1億5,000万ドルの自社株買い枠に基づき自社株買いを行う可能性があります。

主な財務データ

2026年の最初の9か月間（第1〜第3四半期累計）において、既存物件売上高は1.2%減少、経費は3.9%増加、NOIは4.6%減の1億930万ドルとなりました。経営陣によると、入居者向けアメニティサービスおよび前年のナッシュビルでの還付金を排除した基準化後の既存物件経費増加率はわずか0.4%にとどまりました。

事業および運用実績

四半期の既存物件NOI減少額320万ドルのうち、経費増加が約270万ドルを占めました。Residences at Glenview Reserveにおける前年の固定資産税還付金が約85万4,000ドルの前年比マイナス要因となりました。ナッシュビルを除いた固定資産税の増加率は1%未満でした。

アトランタ、ナッシュビル、フェニックス、サウスフロリダの各物件で一括光ファイバーインターネットを展開したため、入居者向けアメニティサービスのコストは約64万ドル増加しました。経営陣は、入居者からの関連料金を差し引いた後でも、アメニティプラットフォーム全体で当四半期に約40万ドルの営業利益が生み出されたと述べました。

管理可能経費も増加しました。内装退去修繕費が14.9%増、外装およびアメニティ修繕費が13.8%増、造園費が13.7%増、光熱費が11.8%増、マーケティング費用が30%以上増加しました。経営陣は、増加の一部が入居者誘致を目的とした部屋の準備加速、外装メンテナンス、室内アップグレードによるものだと説明しました。

賃貸市場環境は引き続き競争が激しい状態が続きました。NXRTが価格を引き下げ、コンセッションを拡大したことで、新規契約時の賃料改定率（トレードアウト）は7月のマイナス3.3%から9月にはマイナス6.0%へと悪化しました。四半期のコンセッション総額は前年同期比74%増の63万4,000ドルに達しました。稼働率は8月末の92.5%から四半期末には92.9%へ回復しました。

契約更新はより堅調でした。ローリーが4.2%の更新時賃料伸び率でポートフォリオを牽引し、フェニックスが3.5%で続きました。10月の更新率は9月の54.9%から57.5%に改善し、内覧から申し込みへの成約率は41%に達しました。経営陣は、電話会議時点で既存物件ポートフォリオの契約率が94.6%であると述べました。

NXRTは当四半期中に、425戸の改修を含め、708件のバリューアップ施策を完了しました。これらの改装により、月額平均42.54ドルの賃料プレミアムと21.1%のリターンが生み出されました。

10月2日、NXRTはローリーにある228戸の物件「Midtown Crossing」を3,200万ドル（1戸当たり約14万ドル）で取得しました。経営陣は、3年目までにNOIが144万ドルから215万ドルに増加し、安定化時点のキャップレートが7%を超えるとの見通しを示しています。なお、これらの数値は実現した実績ではなく経営陣による引受の前提条件です。

業績予想（経営陣のガイダンス）

経営陣は、第4四半期のガイダンスが示す既存物件NOIの減少率は約3.3%となり、第3四半期の低下幅から改善することを示唆していると述べました。NXRTは第4四半期決算の発表とともに2027年のガイダンスを公表する予定です。

同社は2027年の主要な変動要因としてNOIを挙げています。KeyBankとの金利スワップの失効後、SOFR（担保付き翌日物調達金利）が25ベーシスポイント変動するごとに、年間のコアFFOに1株当たり約0.14ドルの影響が及ぶと経営陣は試算しています。

リスクと注目点

• 住宅ローン債務の大半が変動金利にさらされています。既存のスワップは変動金利住宅ローン債務の約13%しかカバーしておらず、SOFRに対する感応度が高まっています。
• NAV中間値に基づく純レバレッジ比率は57%から62%に上昇しました。経営陣は現在の金利環境においてレバレッジが高すぎることを認めています。
• 第4四半期のコアFFOは発表済みの四半期配当を下回ると予想されており、2027年初頭に配当の再設定（減配等）が行われる可能性が生じています。
• 賃貸市場での競争は依然として激しいままです。経営陣は、入居募集中の新規物件による積極的なコンセッションや、NXRTが展開するサブマーケットとの稼働率ギャップを指摘しました。
• 資産売却はプライベート市場での価格形成に依存します。経営陣は魅力がないとみなす割引価格での物件売却は避ける方針だと述べました。
• 経営陣は、修繕の加速、マーケティング、入居者向け改善施策により、経費水準があと1〜2四半期は高止まりすると予想しています。

アナリスト質疑応答のハイライト

経営陣が2027年に向け楽観的な見方を示した主な根拠は、アパートの新規供給および着工件数の減少、サンベルト地域での雇用成長の継続、NXRTの中価格帯住宅（ワークフォース・ハウジング）ポートフォリオの相対的な割安感です。ただし、売上回復の具体的な数値見通しの提示は見送りました。

金利リスクに関して質問された経営陣は、2026年序盤により大きな割合でポートフォリオのヘッジを行う意向があったものの、目標金利で実行できなかったことを認めました。現行の水準でヘッジを追加する意向は現在ありません。債務削減のための主要な手段として、資産売却と減配の可能性が挙げられました。

NXRTは複数の潜在的な物件売却を検討しており、Midtown Crossingの取得に合わせて1〜2件の売却を行う見込みです。売却益はまず取得関連の借入金やその他の債務の返済に充てられ、余剰資金は自社株買いに使用される可能性があります。経営陣は「Avant at Pembroke Pines」は現在売却対象ではないと述べました。

より大規模なポートフォリオ取引について、経営陣は大規模な流動化（現金化）を行うための市場の厚みが現在は不十分であると述べました。賃貸動向が改善し、プライベート市場環境がより魅力的になれば、2027年後半に戦略的選択肢を検討する可能性があります。

決算説明会トランスクリプト全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Hello, everyone. Thank you for joining us, and welcome to the NexPoint Residential Trust Third Quarter 2026 Earnings Call.

I will now hand the conference over to Carley Musser with Communications and Corporate Affairs. Carley, please go ahead.

Carley Musser

Thank you, Al. Good morning, everyone, and welcome to NexPoint Residential Trust conference call to review the company's results for the third quarter ended September 30, 2026. On the call today are Paul Richards, Executive Vice President and Chief Financial Officer; Matt McGraner, Executive Vice President and Chief Investment Officer; and Bonner McDermett, Vice President, Asset and Investment Management. As a reminder, this call is being webcast through the company's website at nxrt.nexpoint.com.

Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions and beliefs. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's most recent annual report on Form 10-K and the company's other filings with the SEC for a more complete discussion of risks and other factors that could affect any forward-looking statements. The statements made during this conference call speak only of today's date, and except as required by law, NXRT does not undertake any obligation to publicly update or revise any forward-looking statements.

This conference call also includes an analysis of non-GAAP financial measures. For a more complete discussion of these non-GAAP financial measures, see the company's earnings release that was filed earlier today.

I would now like to turn the call over to Paul Richards. Please go ahead, Paul.

Paul Richards

Thank you, Carley, and good morning, everyone. I'll walk through our third quarter and year-to-date same-store results, expenses, interest, the Midtown Crossing acquisition, the balance sheet, NAV, the dividend and changes to our full year outlook, including how we think about 2027, and then Matt will cover operations and market fundamentals looking forward.

I'll start with the headline. Q3 came in below expectations. Core FFO was $0.52 a share, $0.07 below consensus. We're lowering our full year core FFO midpoint to $2.22 from $2.45 and our same-store NOI midpoint to negative 4.3% and negative 1%. Third quarter core FFO was $13.4 million or $0.52 per diluted share compared to $0.70 a year ago. FFO was $11.7 million or $0.46 a share and AFFO was $16.2 million or $0.63. Net loss was $11.5 million or $0.45 per diluted share, including $23.2 million of depreciation and amortization. That compares to a net loss of $7.8 million or $0.31 a share a year ago.

Total revenue was $64.5 million, up from $62.8 million with Sedona in the numbers. Total NOI was $36.6 million across our 36 properties. On a same-store basis, 35 properties and about 98% of our units, revenue was down 70 basis points. Expenses were up 11.2% and NOI was down 8.2% to $35.6 million. Occupancy ended the quarter at 92.9%, down 70 basis points and average effective rent was $1,487, down 0.7%. Year-to-date, core FFO is $1.87 a share against $2.14 last year.

Expenses drove most of the quarter's NOI decline, about $2.7 million of the $3.2 million. 3 specific items explain the decrease. First, Nashville real estate taxes. Last year's third quarter carried a onetime real estate tax refund at Residences at Glenview Reserve, which equates to a swing of about $854,000 and does not reoccur. Excluding Nashville, real estate taxes were up less than 1%.

Second, resident amenity services, which is mostly our bulk fiber Internet rollout. That line was up about $640,000 this quarter as we brought fiber online at about a dozen properties in Atlanta, Nashville, Phoenix and South Florida. Residents pay for those services, so most of that cost comes back to us. Amenity fees rose about $387,000 and in Las Vegas, the equivalent fees now sit in rent under all-in pricing. Net, the program cost roughly $100,000 more than last year, which is immaterial. And looking at the full program, including the smart connection fees residences pay, our amenity services brought in about $400,000 more than the cost this past quarter. It's a net contributor to NOI, not a cost center.

Third, controllable expenses, usually a reliable strength for us, ran higher through the quarter. Interior turnover repairs were up 14.9%; exterior and amenity repairs, 13.8%; and landscaping 13.7%. Marketing was up more than 30% and office operations, 14.2% as properties below target occupancy expect to drive traffic. Lastly, utilities rose 11.8%. Some of what was delivered choice. Given how soft this year has been, we pulled a lot of work forward into 2026 and spent capital where we think it attracts new residents. Unit turns and readiness, move-in gifts, exterior amenity projects such as pressure washing, vent and gutter cleaning and in-unit upgrades like washer and dryers, we'd rather put that money in front of prospects now even if it keeps expenses elevated for a quarter or 2.

Other spending didn't earn its keep and we're cutting it. Net of national real estate tax swing, expenses grew about 7.3%, strip out resident amenity services as well, and it's about 5.1%. Part of that is by design and part of it is noise in a seasonally heavy quarter, but it's more than this revenue environment supports over time. Matt will walk through the specific actions we're taking. The bright spot is insurance, down 11.8% on our April renewal.

Moving on to year-to-date same-store. A single quarter can carry a lot of noise, so the 9-month view is the better read on the run rate on the portfolio. Year-to-date, same-store revenue was down 1.2%, expenses were up 3.9% and NOI was down 4.6% to $109.3 million. That 3.9% includes fiber rollout and the marketing we put in front of prospects. Excluding resident amenity services year-to-date, same-store expenses were up 1.6%. Normalizing for last year's Glenview tax refund as well, same-store expenses were just 40 basis points year-to-date -- were up just 40 basis points year-to-date, apologies.

Underneath that, the core cost base is holding. Year-to-date, insurance was down 16.3%, real estate taxes were down 0.7%, payroll down 0.6%, and property management fees down 1.6%. The pressure is concentrated in repairs and maintenance, up 16.4%, including fiber program, utilities, up 7.2% and marketing, up 39.4%. It's important to state clearly that the third quarter's negative 8.2% is not our run rate. It carries a prior year tax refund that won't reoccur, a fiber rollout that pays for itself upon penetration and expense work we choose to pull forward. Our fourth quarter guidance implies same-store NOI down about 3.3%, better than year-to-date pace and well under half of the third quarter decline.

Now interest expense, which we flagged since initial guidance. The step-down landed in September on schedule. Swaps tagged to about $717.5 million of debt at a fixed rate near 1.14%, reset or scheduled runoff. Today, we have about $192.5 million of swaps at a weighted average of 2.68%, which fixes about 13% of our floating rate mortgage debt, that $92.5 million with KeyBank that runs through January 1 next year and the $100 million JPMorgan swap at 3.49% that runs 2030. Swap settlements contributed $5.2 million in the second quarter and $3.4 million in the third, and we expect about $0.6 million in the fourth. Third quarter interest expense was $18.1 million, up from $15.8 million in the second quarter. Full year interest expense is now projected at about $71.8 million, close to $71.2 million we discussed in August.

Our adjusted weighted average interest rate was 4.75% at quarter end against 3.58% at June 30. The rate backdrop hasn't helped, the Fed raised rates in September to a range of 3.75% to 4% held last week, with 2 members voting for another hike. The 10-year treasury touched 5.3% early October and sits near 4.9% today. On maturities, our first mortgage maturity is October of 2028, and the rest of our mortgages run to 2031 and beyond. Total indebtedness was about $1.6 billion at quarter end.

On October 2, we acquired Midtown Crossing, a 228-unit, 1997 vintage community in Raleigh for $32 million or about $140,000 a unit. Our all-in cash basis, including $1.9 million of CapEx funding is about $152,600 a unit. We bought it from an REO lender book and the seller had already put about $3.1 million of capital into the property, so the upside is operational. Raleigh is a market we all know well. It's our strongest renewal market this quarter at positive 4.2% with the smallest new lease decline in the portfolio at negative 0.9%. Midtown takes our Raleigh exposure from 625 to 853 units. We are starting at a lower occupancy and getting to 93% occupancy, takes about 27 net leases and in-place rents at about 10% below the Raleigh 2 to 4 star average, $1,325 versus $1,481. We underwrite to grow rents to $1,403 by month 36, which grows NOI from $1.44 million to $2.15 million by year 3, stabilizing north of a 7% cap rate. On returns, we project a 7% NOI CAGR, a mid-teens levered IRR and a 2.1x multiple on invested capital over a 7-year hold.

Balance sheet deleveraging. Our leverage is too high for the rate environment and bringing it down is our first capital priority. Here's the order. Disposition proceeds to go to debt reduction first. Share repurchases are funded from sale proceeds with no new borrowing, and we'll measure progress against our leverage targets. We're planning to pair Midtown with a disposition or 2. The proceeds are expected to retire the borrowings we use for Midtown, which keeps that trade roughly levered neutral and any incremental amount creates capacity for buybacks. Disposition guidance stays at 0 to $200 million with $100 million midpoint. Each sale at private market prices also supports our NAV.

During the third quarter, we completed value-add initiatives on 708 units and 425 upgraded units at an average monthly premium of $42.54 and 21.1% return. The premium continues to run lower because the mix of targeted scope has shifted. Most of the quarter's work was lighter bespoke upgrades plus washer dryer installs at lower performing properties. These upgrades cost less, reduce vacancy time related to the work being completed and allow for a more targeted approach relative to individual competitive set at each property. Since inception, for properties currently in the portfolio, we've completed 11,010 interior upgrades, 5,302 kitchen and laundry packages and 11,520 tech packages. They've earned an average monthly premium of $147, $51 and $43 and returns of 20.7%, 62.7% and 37.2%, respectively.

Our estimated net asset value at quarter end is $38.33 per share at the midpoint using a cap rate range of 5.5% to 6% across the portfolio. That's down $8.43 from $46.76 last quarter, and I want to take some time to explain the change. We moved our cap rate range up 25 basis points to reflect higher long-term rates and wider pricing on older assets. That accounts for $4.45 of the decline. The rest comes from lower NOI expectations and other balance sheet changes. Net leverage on our NAV at midpoint is now 62%, up from 57%. We think the range is grounded. Walker & Dunlop's third quarter average cap rates in our markets range from 4.6% to 5.5% and UDR's recent joint venture with Apollo, valued portfolio averaging 39 years old at about 6% cap rate. Our range is at or above those markets and in line with the UDR mark on older products. At a price of $18.04, the stock trades about 53% below our midpoint and well below our low end of the range. Matt will cover how we're using the tools that have -- we have to help close that gap.

On the dividend, the Board declared a fourth quarter dividend of $0.53 per share payable December 31. Third quarter core FFO covered it almost 1x. With the swap repricing now in our run rate, fourth quarter core FFO at about $0.35 implied will fall short of it. In setting the fourth quarter dividend, the Board weighed a lot of moving pieces, including the macro backdrop and the Fed path. It will decide by its next meeting whether to reset the dividend at an appropriately covered level, and we'll announce the decision when it's made.

We're lowering full year core FFO guidance at a range of $2.17 to $2.27 per diluted share with a midpoint of $2.22, down from $2.25. Same-store NOI guidance moved to a range of negative 5.1% to negative 3.6% with a midpoint of negative 4.3%. Here's a bridge from $2.45 to $2.22 in 5 pieces. Same-store revenue down $0.10. Vacancy is the largest piece at $0.08 and bad debt at $0.04 and concessions at $0.01, partly offset by $0.01 from each rent, fiber, revenue and other income. Same-store expense down $0.10. $0.07 is controllable, led by repairs and maintenance at $0.05. $0.03 is utility and real estate taxes, and we're seeing fewer appeal settlements. Interest expense, down $0.02 from additional clearing of borrowings, including financing of Midtown Crossing. Interest income, down $0.01 on a quicker repayment schedule on the DST loan than we had initially modeled. And lastly, corporate G&A roughly flat. About $0.09 of that is third quarter actuals and about $0.11 is a lower fourth quarter forecast. The rest is interest.

We will give 2027 guidance with fourth quarter results, but the pieces are visible today. Financing line is visible in the contractual obligations table in our supplement, and it moves with SOFR because most of our debt now flows. Each 25 basis point move in SOFR is worth about $0.14 a share once the KeyBank swap ends. NOI is the swing factor, and that's our operating plan. Our expense work and disposition program are built to move.

Here's a full set of revised ranges. Earnings loss per diluted share on the low end, $1.72, midpoint of $1.68, high end of $1.63 with a prior midpoint of $1.54. Core FFO per diluted share at a low end of $2.17; midpoint, $2.22; at high end, $2.27; and prior midpoint of $2.25. Acquisitions now range from $32 million to $200 million with $160 million midpoint that includes Midtown Crossing, which closed October 2. Dispositions remain 0 to $200 million with a $100 million midpoint.

And with that, I'll turn it to Matt.

Matthew McGraner

Thank you, Paul. On the revenue side, operations are still moving sideways, as you noted, and we're grinding through it and work is starting to show in renewals, retention and conversion. In August, our guidance assumed new lease pricing slightly negative in the third quarter and slightly positive in the fourth. We ran the summer to that plan. We held asking rents and set minimum renewal increases of 1% to 3% from June through August for a significant portion of our assets.

Turnover suffered and anticipated demand did not sustain our previously strong occupancies. Occupancy slipped from 93.6% at the end of June to 92.5% at the end of August. In September, we cut price and added concessions to win it back. New lease trade-outs went from negative 3.3% in July to negative 6% in September and concessions for the quarter were $634,000, up 74% from last year. Occupancy recovered to 92.9% by the end of the quarter, but came at a cost and effective rent.

RealPage puts occupancy in our submarkets at 94.3%. We ended the quarter about 140 basis points below that. The good news is that our same-store portfolio is 94.6% leased today, and we expect physical occupancy to improve throughout the fourth quarter. Ultimately, the supply picture keeps improving. In the third quarter, our submarkets absorbed 3,650 units against 3,234 units delivered. For the full year, RealPage has our submarkets roughly balanced. Deliveries in our submarkets are 42% below the 2024 peak and new starts are running 54% below last year's pace.

Taking an even closer look, 28 of our 36 properties have fewer than 500 units delivering in 2027 and 2028 deliveries are on track to be the lowest of the cycle. Deliveries are well off the peak, but there are still about twice as many apartments in lease-up as normal, roughly 1.2 million units nationally in August. We believe that as interest rates moved up this summer and into the fall, developers accelerated the depth of their concessions. Modestly fewer properties are offering concessions, but the ones that do are offering the most in 15 years. RealPage has the average discount on stabilized units at 11.1% in September, close to 6 weeks free. And it's reached to older buildings like ours, about 1/4 of units in 1990s vintage buildings now offer concessions, up from 18% 3 years ago.

Positives for the quarter were -- there were many. Renewals were a bright spot for the quarter. Every market posted positive renewal growth outside of Las Vegas, where all-in pricing impacts the comparison, Raleigh led at 4.2% and Phoenix followed at 3.5%, both encouraging signs. In October, we lowered renewal increases on purpose to protect occupancy and retention rose to 57.5% from 54.9% in September. We also saw same-store blended lease trade-outs rise quarter-over-quarter by 100 basis points and reached basically equilibrium for the quarter, another positive sign.

Conversion improved. Tour application conversion was 39.3%, up from 34.2% a year ago and 41% in October. Self-guided tours were almost half of all tours, fewer people are touring, but more of the ones who tour are signing leases. Credit held steady. Bad debt was 80 basis points across -- of gross potential revenue, flat with last year. Rent to income across the portfolio was about 21% on average household income of about $86,500. Atlanta's operations are stabilizing and provide a useful road map. NOI grew 5% there with vacancy loss down 43% and concessions down 50% from last year. Regional fundamentals can't be replicated overnight, but the trends in this bellwether Sunbelt market are encouraging for the remainder of our portfolio.

Insurance, as Paul said, savings stuck and other income grew 29%, most of the fiber fees that offset the new amenity costs. In October, leased occupancy was 95.3% against 92.3% physical, and that gap is signed leases we expect to move in over the coming weeks. Today, we are at 94.6% leased.

On the go-forward plan at this point in the year, we're prioritizing occupancy first through the winter. We've reset renewal pricing and October retention of 57.5% is the early result. New lease pricing continues to target recovery of the 140 basis point gap to submarket occupancies ahead of the spring leasing season. Our fourth quarter guidance assumes average financial occupancy of 92.8% and concessions of 1.9% of gross potential rent. We'd rather spend that now and start 2027 off with positive momentum in occupancy. We decided to pull a lot of expenses forward, as Paul said, into 2026 also. And that spending is aimed at winning new residents, turns, exterior and amenity work and in-unit upgrades. It will keep expenses elevated for the final months of 2026, and we think that's the right trade in a year this soft.

Regarding capital allocation, first, we'll pair Midtown Crossing with a couple of dispositions, as Paul mentioned, and are expected to retire the Midtown borrowings and the incremental amount thereafter creates buyback capacity. Second, we'll buy back stock with sale proceeds while we trade at a roughly 7% -- north of a 7% implied cap rate on our NOI guidance. On October 26, our Board authorized up to $150 million of repurchases over the next 2 years. Our disposition guidance is 0 to $200 million, and we're working the market to execute on 1 or 2 rifle shot dispos in assets where we made a lot of money and can transact at a healthy spread to our implied cap rate.

On the dividend, as Paul said, the Board has weighed a lot this fall, including the macro backdrop, recent Fed moves, midterm elections and real estate fundamentals. By its first meeting in 2027, the Board will decide whether to reset the dividend to a level that's appropriately covered. The fourth quarter dividend of $0.53 already declared and payable by December 31 is not affected.

In closing, operations remain challenged in Q3 as we digest again, 50-year highs in supply and a 30-year high in interest rates. Lease-ups discounted hard this summer, and we held rate a little too long into that tape. On expenses, we chose to spend this year -- chose to spend this year to win residents, and you'll see that for another quarter or 2. But we're not panicking. We're not going to chase occupancy at any price, sell assets into a weak bid or make a decision we regret when this cycle inevitably turns, which it will. We'll continue to grind through the supply, operate the properties well and protect their equity value. After all, the portfolio still throws off enormous cash flow.

On capital, we'll be methodical. We'll sell assets 1 or 2 at a time when the price reflects private market value and put the proceeds to work in order, fund Midtown, reduce debt and buy back stock at a discount. Each sale size and timed on its own merits. As we go, we still believe this is a great business and our portfolio is impossible to replicate at scale. Deliveries in our submarkets are again down 42% from the peak, starts are down about half and 2028 is set to be the lightest year of the cycle. Once the lease-up backlog clears, pricing power comes back to well-located workforce housing in Sunbelt job markets. And the real estate is worth far more than the stock. Our NAV midpoint $38.33 a share and the stock trades around $18. We believe our largest asset, Avant at Pembroke Pines alone is worth $8 to $9 per share, about half of our market cap today.

We'd now like to open the call up and take your questions. Operator?

Operator

[Operator Instructions] Your first question comes from the line of Peter Abramowitz with Deutsche Bank.

質疑応答

Peter Abramowitz

I appreciate all the color in the prepared remarks. Just wanted to ask, I guess, as you kind of approach year-end and do your 2027 budgeting process, it's been a very challenging year. So as you kind of look across your markets and your footprint, not only from a supply-demand perspective, but also an operational perspective, what kind of gives you confidence that things can potentially get better in 2027? And how are you sort of thinking about that as you prepare for your budget process?

Matthew McGraner

Yes. Peter, thanks for the question. I think the math gives us confidence. We're doing a little work about the supply coming out of the GFC, and it's almost the same story coming out of GFC that I think we're seeing coming out of this latest cycle. And what happened after that is we had pricing power for a number of years. And I think we see that same trend today. We've been probably a little bit too optimistic in 2026 as I think the rest of the Sunbelt peers have also. We also didn't forecast Iranian war, the AI trade becoming what it is today and then a lot of the other macro factors that I don't think will replicate in 2027.

So I think as we're not done with the budgets, but we're reviewing them now. And I think we see reasons for optimism just from the supply picture alone. We think that migration into the Sunbelt markets will continue. There's certainly still robust job growth in our markets. And so the macro backdrop for us is, I think, as good as it has been in 5 years going into next it's next year. And then hopefully, the units and the markets will be absorbed. I think the midterm elections will maybe portend some new net international immigration, which will be a helpful demand driver.

And then I also think affordability continues to be another demand driver for our portfolio that hasn't really mattered, and I think it will in 2027. Our units have -- we have great places. We have great assets and places to live, and we've amenitized the assets and now offer a great product at an affordable price. And I think we'll see that next year show up to our benefit.

Peter Abramowitz

Okay. I appreciate that, Matt. And then you mentioned the fiber optic rollout had somewhat of an impact on the expense mix in the quarter. But I think you said it should come back to you in the form of revenue in the future. Could you just sort of quantify how much the uplift could be? And how should we think about that from a timing perspective?

Matthew McGraner

Yes. I think if you strip out the -- it's a net neutral effect on NOI because -- but if you strip out the expenses, I don't know, Bonner, what we said the expense was after 1.9%?

Bonner McDermett

So the noise in terms of the rollout and we're rolling it out in several of our major markets. So the expense growth is offset, and it's actually captured in 2 revenue lines. So it's a little bit more challenging. It's in other revenue, and it's also in resident amenity fee income. So the net effect, and we spoke to it on the call, our resident amenity service platform provides a margin, I believe for the third quarter, it was $400,000 operating profit on those expenses. The noise of it is just getting through the volume of new lease charges that we're applying to the resident base.

So the typical structure is a 1 gig fiber program at about a $60 to $65 resident charge. So you're seeing that growth in both revenue and expense. There's some noise in the same-store year-over-year comparison because of that. But ultimately, our resident amenity service package does drive revenue growth and NOI growth.

Peter Abramowitz

All right. I appreciate that. And then a question on the dividend. I think you said you may revisit that next quarter. But I guess just curious kind of why not reduce it now, put yourself in sort of a more conservative position? I'm just kind of curious how you're thinking about that.

Matthew McGraner

Yes. Well, ultimately, again, it's Board decision management. We have a view. I think why not now is because the -- just literally the last kind of 30, 45 days have been incredibly volatile. You saw SOFR tick up 100 basis points, a 10-year up 116 basis points in 60 days and something like that. So something material. You got midterm elections today. And I think there's a lot of good views on the Board that studied this for a living and they appropriately, in my view, wanted to get through this period of time. On an annualized basis, the dividend is covered. It won't be in the fourth quarter on a 1 quarter spot in time. But I think that we'll have a clear view in the first of the year in January to make a better decision. We're already seeing with the CoreWeave's bond issues and all the AI trade and demand and that whole story play out. We're back -- the 10 year is off 40 basis points in a week.

So again, I think it goes back to where we're not panicking. And I think that if you look at the appropriate time to make that decision is when we have more information. And I think that that's why they're not saying, let's do something today. But we are focused on it. Like I said, the portfolio generates a tremendous amount of cash flow, and it's a tool that we'll use to bias time and not degrade the portfolio by selling assets at a discount that don't make sense in this environment. Because, again, that we think this is going to be a really good business still and 2027 is going to be better in 2026, at least for us.

Peter Abramowitz

Right. And so I guess that leads me into the next question. You mentioned, I think, Avant, a number of times, I believe you said you think it's worth $8 or $9 a share in the private market. So I'm just curious like what consideration have you given to exploring selling, especially some of those larger assets where there could be more liquidity and more demand in the private market, particularly to address either capital needs or bring down leverage. I'm just kind of curious if you've given consideration if that discount is so wide is that something that you're actively considering in terms of kind of addressing that discount near term?

Matthew McGraner

Yes, 100%. I mean we're looking at every asset every day, getting BOVs from the Eastdil, the Newmark, the JLLs, the CBREs and trying to figure out what the assets are worth. I think right now, as we sit here today, spot cap rates are elevated because you have negative leverage across most value-add deals. But I think at the first of the year, we can rifle shot, as I said in my prepared remarks, a couple of deals where we've made a ton of money and generate enough cash flow to pay off that debt. It won't be Avant. That thing is a unicorn. So we'll keep that and operate it well. But I think the -- there's 2 or 3 deals of some size in markets that are doing well, that we're actively getting BOVs on and trailing processes that are already in the market.

For example, in Atlanta, there's a deal that's pretty similar to Terrell Mill. Terrell Mill we've owned forever and have made a bunch of money there and we can sell and generate a lot of cash and feel good about where that could possibly trade in the near term. So we're not worried about paying down this stub of debt on the facility. And then to the extent that we can generate excess cash, we'll buy the stock aggressively like we have in the past. What we're not doing is trying to do something weird like merge and do an all-stock deal or something down here because we protect the equity. I mean, keep in mind, we own 20% of the company as management and Board. So we're highly aligned to do the right thing.

Peter Abramowitz

Right. Okay. That's helpful. And then last one for me. On that point, I guess, could you speak to kind of interest in the private market at the portfolio level? I know it's something you've kind of talked about if you don't get the cost of capital and the equity performance you're looking for, it's something you'd consider. So just curious on your latest thoughts on that and any conversations or interest that you're feeling from potential parties?

Matthew McGraner

Yes. I think we have to, again, give ourselves the grace of getting through this 50-year high of supply. I think we've largely done that. And I think once you see new lease growth inflect and you get blended lease growth that's positive sequentially for a few quarters, not even a few, just maybe 1 or 2, enough to where the breadth is across the market and everyone is saying the same thing. RealPage is saying the same thing, Witten saying the same thing, Parsons is saying the same thing. Burns is saying the same thing, then I think that that's when you would look to monetize, I think, a portfolio like ours that, again, it's hard to replicate and scale. I don't think we're too far off of that period. I think, again, call me optimistic or hopeful or whatever, but I think the math in our markets points to absorption and points to better lease pricing in '27 than '28. It was better in '26 than it was in '25.

So I think it will happen, and we want to give ourselves a few quarters to bring the buyers back to market. There's not enough depth in the market as I sit here today to recommend doing anything in scale, especially given the volatility in the macro backdrop. A Fed hiking into an economy that has really propped up on sort of one trade. And I think interest rates are likely to be potentially broken if we continue this path. So that's something else we're watching. If you get any more retracement back in the risk-free rate, then that will help our pricing in the private market and the public market. So I'd say we're again, not doing anything right now, but looking forward to the back half of 2027, if something is attractive, we'll consider it.

Operator

Your next question comes from the line of Michael Lewis with Truist Securities.

Michael Lewis

My first question is a clarifying question on the operating expenses in the quarter and kind of what it means for the run rate going forward. So it sounds like you underestimated real estate taxes, but that number won't carry through into the future. And like, it sounded like the repairs and maintenance might not carry through more than a quarter or 2 either. Am I characterizing that right that expenses should ease? Or are they structurally higher now?

Bonner McDermett

Yes. I think that's right, and I'll hit both. The first is a little bit easier. So there's really 2 components that drive if you just look at the Q3 real estate tax number. So one is that pretty significant real estate tax refund we realized in Nashville last year, right? It was great news then. It's a terrible comp today. So if you exclude that, overall, I would say our real estate tax control has been really good. I think year-to-date, excluding that, our real estate taxes are about 1% growth year-over-year.

In terms of the full year outlook, there is a little bit of an impact. I think Paul mentioned in kind of the bridge to full year core. There's about $0.04 that I would say we were in August, a little bit more optimistic for settlement of some appeals, right, Dallas County, Tarrant County in Texas, a couple of others. We got since then, our trim notices for our Florida valuations as well. And so all of that has really informed what we think the full year expectation is for tax settlement. We're historically very aggressive in terms of fighting the counties with kind of the softness in the market. We feel like we have even more ammunition to go and really drive some better outcomes on taxes.

But I think a couple of things we think are either slipping into Q1, particularly in Texas, right? We're not getting to settlement as quickly as we would like. There could be a little bit of upside maybe in the higher end of our range. But I think that we took down a couple of refund expectations into Q4 that probably moves into Q1. So it's not a structurally higher tax outlook. If anything, we feel better about this year and next year's taxes.

And then in terms of the repairs and maintenance, so it kind of balances with what we're seeing with occupancy, right? We've talked about the amount of information we're collecting in terms of the NexPoint intelligence platform, the AI data points, the funnel, everything that we're gathering today is really informing. So when we are touring a prospect, we're surveying, we're getting that feedback. And some of -- I think that some of what we've seen that we need to be doing a little bit better is building hygiene maintenance, right? So we spent a little bit more heavily on contracted pressure washings, making sure that the landscaping is top-notch, right? As we compete more directly against some of these A- and new construction deals, we've got to make sure that our seasonal flowers are top notch, our buildings are fully maintained, right? We're not encountering cobwebs, things like that.

But I do think that as we look to push pricing, we took some of that feedback and spent a little bit more on repair and maintenance. It's largely building and improvements landscape. And it's kind of chunky in terms of the Q3 timing of it. I don't think that it's necessarily structural, but something that we're focused on resident and prospect satisfaction, and that goes to address those comments.

Michael Lewis

Okay. And then what should we read into the October portfolio trends, right? So the blended rent spread was 20 bps lower than in 3Q, occupancy fell 50 or 60 bps in the month, maybe some seasonality there as well. But at one time, you had been talking about kind of a hockey stick same-store revenue recovery in '27. And I understand your comments about supply and such, but it seems like we should take from these results that there's no reason to expect that now. Is that fair?

Matthew McGraner

Sorry, no reason to expect what, a hockey stick?

Michael Lewis

Yes. A sharp recovery in same-store revenue in '27.

Matthew McGraner

Yes, sharp recovery. I guess, to what degree? I think we're going to be incrementally positive on the revenue side and these numbers. Like we're not at all pleased with the occupancy numbers and the new lease numbers, and we were pleased with the renewals. But yes, I think it's fair to say perhaps that the analyst community was right, but maybe for the wrong reasons. And what I mean by that is the increase in interest rates that we saw over the last 60 days, we did feel concessions start to creep up right as we were basically reporting in Q2 that the short term and the long end both rallied, and we saw the development community and the ownership community in our markets, particularly in the Sunbelt, starting to get really defensive.

So maybe you could say that we didn't anticipate that. I'm not sure that anyone did, but I don't think that's going to be the case in 2027. So I do think not putting a number on what revenue will be right now, but I don't see that happening again. If anything, I think I see the opposite. And we're very, very pleased with the job growth numbers in our markets, and that's to our benefit. And hopefully, we can start getting some of the supply-demand imbalance back in our favor, finally.

Michael Lewis

Okay. And then lastly for me, I just feel like this leads to the ask, and it's really kind of how did this happen kind of question. And what I mean is how are you so exposed to interest rates and so naked to this increase in rates? I think you said every 25 bps in rates is now $0.14 on an FFO number that's expected to be $2.22. And SOFR is already higher than what you used when you projected your interest expense in the supplemental and forecasted to go higher. So what do you -- what can you do now? It sounds like maybe some asset sales. And how do you manage leverage going forward now?

Matthew McGraner

Yes. It's a good kind of like, I guess, armchair quarterback question when we -- the truth is we were focused on swapping 1/3 to 1/2 of the portfolio in February and March and didn't hit our targets. Perhaps we're penny-wise at the time, but we were ready to swap out a lot in the range of kind of 3.3% on the SOFR swap rate, which would be basically equilibrium on $0.53 dividend. So that's what happened. And then we weren't going to chase it along the way up and kept getting away from our target.

I don't think that we believe the short term is stronger than the market believes. And what I mean by that is rates have been negative for several years, and it's not showing up in the data yet. So we -- I think we have a lot of intelligent people around the company and around the firm, but we did miss a target that we internally set, and that has led to some unfortunate pain, and we feel it as much as anyone. What can we do? Well, I don't think we're going to hedge here, again, given our outlook that I think it's more likely that the Fed continues to hike into this economy and ignoring the effects on the commercial real estate universe and the credit markets and regional banks. I think credit conditions will continue to get tight. And I think that something is liable to break there.

So that's kind of our near-term view. I don't think that there's any appetite to hedge at this point. So the tools in our toolbox, our sell assets or reduce the dividend. I don't think we would preferentially take selling assets at a wide discount right now against the backdrop that we think is going to get better for a lot of reasons, even though some are still bearish. So then the source of funds is the dividend. And like I said, we still throw off a lot of cash flow. So I think the plan is to actively market -- actively monitor the swap market, do a disposition here or there that makes sense, and not panic and throw our arms up and say, well, we lost because we don't think we lost. We think that this is a spot in time kind of had a bad quarter, bad quarter or 2. But we also think the windshield is larger than the rearview mirror for a reason. So we're still optimistic, and that will be the plan.

Operator

[Operator Instructions] Your next question comes from the line of Buck Horne with Raymond James.

Buck Horne

Appreciate all the color so far. I kind of want to also follow up on those October trends, just to clarify a little bit further. And in terms of -- correct me if I'm wrong, I think you guys mentioned that your 4Q assumptions are basically that occupancy will stabilize around 92.8%. But it looks like the occupancy trend through October has already trended through that number, at least by 50 basis points and maybe trending lower, correct me if that's incorrect. But how do you intend to rebuild occupancy into the seasonally slower period? And what kind of levers do you need to pull in order to stabilize that number?

Matthew McGraner

Yes, I'll start and Bonner, you can add to this. So October is better sequentially in September, obviously, from new leases, occupancy -- ending occupancy down 50 basis points, but the trend and the renewal retention both are up. And so I think our -- I think my comment was that the fourth quarter portends 92.8% physical occupancy and maybe 91.8% financial occupancy. But I think we feel good about the conversion rates on the lease trend going into the fourth quarter. It took a lot of pain in August and September. So I think we like the last few months.

I don't know, Bonner, if you have anything.

Bonner McDermett

Yes. I think the prepared remarks, so the full quarter average financial occupancy 92.8%, that's up a little bit. Obviously, have some work to do from the 9/30 number to fill that out. As we mentioned, the portfolio today is about 94%, 94.5%, 94.6% leased. There's a spread there, right? That's the forward-looking lease assumptions. There are some move-outs. I think that in terms of what we're doing, so closing the back door, right, I think we feel really good about retention, trying to get back up to high 50s to 60% retention in Q4, really focused on just moving kind of the low payers there and the opportunity, taking a little bit off in a lower demand season on some of the higher payers in that subset.

And then in terms of the front door, I mean, we've been heavily focused really for the last 90 days on making sure every asset manager turn out to the market as part of 2027 budgeting, obviously, but also making sure that we really get back to basics in terms of fundamentals as much as we've highlighted and discussed the implementation and utilization of AI and the chat functions, right, the immediate response on an inbound call. What I think we're recognizing and have recognized over the last 120 days is that just getting a chat response, right, you may get an instantaneous response. That might not be the warmest touch, right? It's kind of like every political donation text you're getting right now, right?

So we have to be really thoughtful about what that messaging is and making sure that it's followed up by a warm body in our office. So working on really the fundamentals on the front end to make sure that we can close. We feel like the lead tour, tour to app conversion ratios are healthy. We've done some incremental things, some special pricing on some units. There's certainly more concession activity in some of our lower end and that was, I think, reflected in the public commentary.

And then really just focusing on moving the needle. I think that our goal is certainly to finish the year at a much better clip than 92.8%, starting from the pace of 9/30, I think that we work up to probably peak occupancy around the end of the year is our goal. So that's what we're focused on. That's what our teams are focused on. We also referenced a little bit of additional ad spend, marketing, right? That's kind of the other side of the concession and pricing, right? We've got to make sure in the shifting landscape where Google Search was the leading driver of so much traffic over the course of the last 15, 20 years, right?

That's really shifting a lot where some of our younger tenants are going to ChatGPT and asking, I want this and that submarket of Phoenix, right? We're having to kind of reevaluate really everything that we're doing and making sure that we're top-notch, our websites are AI-friendly, right? The photos on the website are attractive. We're capturing that exposure. So there's a little bit of a shift that we're focused on in the marketing side as well. I think that we can certainly do better there. But we're focused really across the board on driving occupancy into what we think will be a better year next year.

Matthew McGraner

We took revenue down $0.10, too, just to state it, like we -- it's not like we're like maintaining an equilibrium. So revenue guidance, as Paul bridged you from $2.45 at the midpoint to $2.22 at $0.10 in that number.

Buck Horne

Got it. Okay. That's helpful. Appreciate the color. And just for clarification, just on this WiFi expense or added WiFi, which line item in same-store expenses? Is that going into utilities? Or is that in the R&M expense line? Kind of where -- and I guess, how much of the year-over-year increase is in either of those lines is driven by the WiFi rollout?

Bonner McDermett

Yes. So it's in the R&M, and we're looking at it. As it continues to grow, I think it's now about 20% of the total R&M spend for the year. It's getting to be significant and noisy. So it may be something that we look at as we go into the 10-K annual audit season that we might want to break out contract services because it's getting a lot of scrutiny, right? We're continuing to do it. We think that there's a lot of value in being able to provide 1 gig fiber for $65 fair value. And so we we've done it across a significant chunk of the portfolio, but there's still a lot of opportunity left. And so we'll have some visibility there. But again, it's something as we're rolling those contracts on from an expense side, we're also rolling in tenants that are paying for it. So it is a net positive for the property in the P&L.

Buck Horne

Got you. So of that roughly 20% year-over-year increase in R&M is like half of that driven by the WiFi?

Bonner McDermett

Yes. So our resident amenity services line specifically is up about 37% year-over-year. So the full year is about $2.4 million of added. The significant majority of that is the bulk fiber.

Operator

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.