인디펜던스 리얼티 트러스트(IRT) 2026년 3분기 실적 콘퍼런스 콜: 임대 실적 개선, 가이던스 재확인

핵심 요약

• 인디펜던스 리얼티 트러스트(IRT)는 2026년 3분기 주당 핵심 FFO(Core FFO) $0.29 및 동일 점포 순영업소득(NOI) 성장률 1.6%를 기록하며 두 지표 모두 경영진의 예상치에 부합했다고 발표했다.
• 동일 조건 종합 임대료 성장률은 2.8%를 기록해 5개 분기 만에 가장 강한 실적을 나타냈다. 신규 임대 계약 스프레드(trade-outs)는 전분기 대비 210bp 개선된 마이너스(-) 0.6%를 기록했으며, 갱신 임대료 스프레드는 4.6%로 상승했다.
• 평균 점유율은 95.0%를 유지했으며, 입주자 유지율은 전분기 대비 240bp 증가한 60.5%를 기록했다. 잠재 고객 문의량은 전년 동기 대비 11% 증가했다.
• IRT는 2026년 주당 핵심 FFO 가이던스를 $1.13~$1.15로 재확인했으며, 동일 점포 매출 및 NOI 성장률 전망의 중간값을 유지했다.
• 경영진은 추진 중인 센터스페이스(Centerspace)와의 합병이 2,400만 달러 규모의 식별된 시너지 효과에 힘입어 레버리지 중립 기반으로 2027년 주당 핵심 FFO를 약 5% 증가시킬 것으로 예상하고 있다.
• IRT는 올해 첫 9개월 동안 평균 미레버리지 ROI 약 15% 수준에서 1,707건의 가치 창출형(value-add) 리노베이션을 완료했다. 회사는 2026년 목표인 2,200건의 리노베이션을 차질 없이 진행 중이다.

주요 재무 데이터

사업 및 영업 실적

성수기 임대 시즌 동안 임대료 유지를 우선시한 IRT의 전략 덕분에 신규 임대 판촉 인센티브 사용이 2분기 대비 절반 가까이 감소했다. 호가 임대료는 2026년 초보다 약 3% 높았다.

애틀랜타는 동일 조건 신규 임대료 스프레드가 2.1%로 2025년 3분기 대비 755bp 상승하며 가장 큰 폭의 전년 동기 대비 개선을 기록했다. 오클라호마시티는 2.9%, 롤리-더럼은 2.5%, 콜럼버스는 1.5%를 기록했다. 덴버는 보합을 보였고, 댈러스는 전년 동기 대비 70bp 개선되었으나 마이너스(-) 3.5%를 유지했다.

경영진은 애틀랜타, 롤리, 내슈빌의 임대 동향이 개선세를 보이고 있다고 밝혔다. 반면 댈러스, 탬파, 덴버는 공급 부담과 판촉 인센티브 사용 압박을 계속해서 받았다. 덴버의 경우 2026년 상반기 강한 임대 수요 흡수로 시장 안정화에 도움이 되고 있다.

회사는 2026년 첫 9개월 동안 평균 미레버리지 ROI 약 15% 수준에서 1,707세대 리노베이션을 완료했다. 평균 리노베이션 소요 시간은 약 25일에서 17일로 단축되었으며, 경영진은 2027년에 리노베이션 물량이 늘어날 것으로 예상하고 있다.

IRT는 계획보다 빠르게 초기 커뮤니티 와이파이 구축을 완료했다. 이 프로그램은 3분기 230만 달러의 매출을 올렸으며 2027년에는 연간 매출 및 NOI에 기여할 것으로 기대된다. 회사는 2027년에 IRT 4,000세대 및 센터스페이스 3,000세대를 포함해 최소 7,000세대에 추가로 와이파이를 확대할 계획이다.

분기 종료 후 IRT는 댈러스 라스 콜리나스에 위치한 275세대 규모 주거단지인 머스탱(Mustang)의 합작 투자 파트너 지분을 인수했다. 현재 점유율과 인센티브 수준에서의 추정 첫해 수익률 약 5.2%와 비교해 안정화 단계의 경제적 캡레이트(cap rate)는 5.9%에 달할 것으로 예상된다.

경영진 가이던스

IRT는 2026년 전체 주당 핵심 FFO 가이던스인 $1.13~$1.15를 재확인했다. 또한 동일 점포 매출 및 NOI 성장률 예상 범위를 변경 없는 중간값을 중심으로 좁혔다. EPS 및 FFO 가이던스에는 주로 공정성 의견서 작성, 법률 및 공시 수수료 등 현재까지 발생한 합병 관련 비용이 포함되어 있지만, 그 외 추진 중인 센터스페이스 거래 영향은 제외되어 있다.

머스탱의 연결 재무제표 편입을 반영한 수정 자산 인수 가이던스는 2억 6,600만 달러다. 센터스페이스 합병 건을 제외하면 IRT는 2026년에 추가적인 자산 인수를 예상하지 않는다.

경영진은 2027년으로 이월되는 현 임대료 이월 효과(rent earn-in)를 전년 동기의 0~마이너스(-) 10bp와 비교해 약 80bp로 추정했다. 2027년 전체 가이던스는 2027년 2월 2026년 4분기 실적 발표와 함께 공개될 예정이다.

4분기에 IRT는 임대 만료 건수가 계절적으로 적은 시기를 활용해 점유율 확보를 우선시할 계획이다. 경영진의 목표는 연말까지 점유율을 30~40bp 끌어올려 2027년 상반기에 임대료 인상을 추진할 수 있는 포트폴리오 여건을 마련하는 것이다.

센터스페이스 합병 현황

경영진은 센터스페이스 인수 통합 절차가 예정대로 진행 중이라고 밝혔다. IRT는 평균 금리 약 3.5%의 담보부 부채 약 5억 달러를 인수하기 위해 대주 승인 절차를 진행하고 있다.

회사는 이번 거래가 레버리지 중립 기반으로 2027년 주당 핵심 FFO를 약 5% 증가시키고 거래 첫날부터 순자산가치(NAV)를 늘려줄 것으로 예상한다. 예상되는 혜택으로는 2,400만 달러 규모의 식별된 시너지, 가치 창출형 리노베이션에 적합한 약 3,200세대의 센터스페이스 물량, 커뮤니티 와이파이 도입이 가능한 10,000세대가 포함된다.

IRT는 시너지 효과와 일회성 비용 반영 후 인수 가격이 7.3%의 명목 캡레이트를 나타낸다고 밝혔다. 센터스페이스의 10,500세대가 합쳐지면 통합 포트폴리오는 30% 이상 확장되어 약 44,400세대의 아파트 주택을 갖추게 된다.

IRT는 합병 후 레버리지 중립을 유지하기 위해 이전에 상정한 1억 4,000만 달러 규모의 자산 매각이 2027년 1분기에 완료될 것으로 예상한다. 경영진은 시너지 추정치가 보수적이라고 설명하면서도 임차인 보험 프로그램 등 일부 영업상의 이점은 즉시 시작되기보다 단계적으로 도입될 것이라고 지적했다.

리스크 및 주시 항목

• 댈러스, 탬파, 덴버는 공급 압박이 지속되고 있어 어느 정도의 판촉 인센티브 제공이 필요한 상황이다.
• 센터스페이스의 최근 영업 압박은 경쟁적 공급이 점유율과 가격 결정에 영향을 미친 콜로라도주에 집중되었다.
• 합병 효과는 성공적인 인수 통합, 계획된 자산 매각 및 영업 시너지의 적시 실현 여부에 달려 있다.
• 국채 금리 상승으로 일부 사모시장 매수자들이 더 높은 환원율(캡레이트)을 요구하고 있으나, 경영진은 실제 완료된 거래의 캡레이트가 더 높아질지 여부는 아직 명확하지 않다고 밝혔다.
• 경쟁사들의 판촉 인센티브 전략은 계절적 비수기 임대 기간 동안 잠재적인 부담 요인으로 남아 있다.

애널리스트 Q&A 주요 내용

경영진은 추가적인 자산 매각에 의존하지 않고 EBITDA 성장을 통해 향후 12~18개월 내에 순부채 대 EBITDA 비율을 5배대 초반으로 낮출 수 있는 경로를 보고 있다. 가치 창출형 리노베이션은 평균 수익률이 약 15%에 달하기 때문에 여전히 잉여 현금 흐름의 우선적 활용 방안으로 꼽힌다.

경영진은 현재 주가 수준에서는 자사주 매입이 추가적인 부채 상환보다 우선순위가 높은 것으로 파악되지만, 자본 배분은 자금이 확보되는 시점의 상황에 따라 달라질 것이라고 덧붙였다.

경영진에 따르면 대손 손실(Bad debt) 비중은 1분기부터 3분기까지 전 시장에 걸쳐 감소했다. 애틀랜타의 대손 비율은 수년 전 약 5%에서 3분기에는 1.4%로 낮아졌다.

경영진은 잠재 고객 문의량이 전년 동기 대비 11% 증가하는 등 수요 지표가 긍정적으로 유지되고 있다고 밝혔다. 또한 정상적인 계절성을 벗어나 2027년에 우려를 유발할 만한 징후는 나타나지 않았다고 덧붙였으며, 점유율, 임대료 상승률, 대손율에 대한 구체적인 전제 조건은 2월 가이던스와 함께 제공될 것이라고 전했다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good morning, ladies and gentlemen, and welcome to Independence Realty Trust's Third Quarter 2026 Earnings Conference Call. As a reminder, today's call is being recorded, and a replay will be available in the Investors section of the company's website shortly after the call concludes.

At this time, I'd like to turn the call over to Stephanie Krewson-Kelly, Senior Vice President of Investor Relations and Capital Markets. Ms. Krewson-Kelly, please go ahead.

Stephanie Krewson-Kelly

Thank you, and good morning.

Today's call will focus on IRT's third quarter results and stand-alone outlook with a brief update on the pending merger with Centerspace. We will provide more detail on the combined company after the merger closes.

On the call with me today are Scott Schaeffer, Chairman and Chief Executive Officer; Jim Sebra, President and Chief Financial Officer; Janice Richards, Executive Vice President of Revenue Strategy; and Jason Lynch, Senior Vice President of Investments.

Before we begin, please note that there may be forward-looking statements made during this call. These forward-looking statements reflect IRT's current views with respect to future financial performance, future events and the proposed merger with Centerspace. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially. Such statements are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and IRT does not undertake to update them, except as may be required by law. Please refer to IRT's press release, supplemental information and filings with the SEC, including the definitive joint proxy prospectus for further information about these risks.

A copy of IRT's third quarter earnings press release and supplemental information is attached to IRT's current report on Form 8-K, which is available in the Investors section of our website. They contain reconciliations of non-GAAP financial measures referenced on this call to the most directly comparable GAAP financial measures.

With that, it is my pleasure to turn the call over to Scott Schaeffer.

Scott Schaeffer

Thanks, Stephanie, and thank you all for joining us this morning.

I'm pleased to report another solid quarter. Core FFO per share of $0.29 and same-store NOI growth of 1.6% were both in line with our expectations, and we are reaffirming the midpoint of full year guidance for both metrics. Our rate over occupancy strategy this leasing season worked as intended. During the third quarter, asking rents held firm and we cut concession use on new leases nearly in half from second quarter levels. As a result, new lease trade-outs on like-term leases accelerated by 210 basis points sequentially and increased 310 basis points year-over-year. The recovery is now broad-based. Over the past year, new lease spreads on like-term leases improved in 9 of our 10 largest markets, led by Atlanta and lead volume was up 11%. Renewal rents improved 200 basis points year-over-year. Average occupancy of 95% was flat sequentially and resident retention improved. Taken together, blended rents on like-term leases grew 2.8% in the quarter, our best result in 5 quarters.

During the quarter, we continued to recycle capital, selling the property in Memphis and subsequent to quarter end, acquired our joint venture partner's interest in the Mustang, a 275-unit newly constructed community on the last Lakefront multifamily development parcel in the Las Colinas submarket of Dallas. As we close out 2026, favorable market tailwinds and company-specific growth initiatives position IRT for meaningful earnings growth in 2027. First, supply-demand fundamentals continue to improve and support higher effective rents. New deliveries in our markets have fallen by more than half since peaking in 2024 to about 2.5% of inventory this year, and CoStar projects a further decline in 2027. Demand continues to outpace national averages and absorption remains strong.

Second, with sticky inflation and higher interest rates, the cost of homeownership continues to favor renting over ownership, generating more demand for rental apartments. Third, people continue to migrate to our non-gateway markets motivated by employment opportunities and are seeking a better quality of life, which includes overall affordability. IRT's portfolio offers residents the attractive solution of high-quality housing at monthly rents that are materially below new construction rents. Fourth, we completed our initial rollout of community Wi-Fi ahead of plan, and it will contribute a full year of revenue and NOI to 2027 results. Finally, our value-add program remains an important low-risk way to capture higher market rents and drive core FFO growth.

During the first 9 months of this year, we completed nearly 1,800 value-add renovations at an average unlevered return on investment of approximately 15%, and we remain on track to complete 2,200 renovations for the year. We are always refining our renovation processes and have further reduced the average unit turn time from approximately 25 days to now 17 days. This shortened turn time allows us to complete more renovations without meaningfully impacting occupancy. Accordingly, we expect to increase the number of units renovated during 2027, which will further drive NOI and earnings growth.

Turning to Centerspace. The pending merger builds on the momentum I just outlined and amplifies it across 3 dimensions: growth, value and scale. First is growth. We expect the transaction to be approximately 5% accretive to 2027 core FFO per share on a leverage-neutral basis and accretive to day 1 NAV, driven largely by the operating synergies of IRT's more cost-efficient platform. More importantly, it enhances our longer-term earnings profile. Beyond the $24 million of identified synergies, approximately 3,200 of Centerspace apartment units are right for our value-add program and 10,000 units will be added to our community Wi-Fi program, extending these 2 revenue-enhancing initiatives across a larger combined portfolio.

Second is value. After accounting for synergies and onetime costs, we are acquiring Centerspace at a 7.3% nominal cap rate, a meaningful discount to its net asset value and at a price per door that is well below replacement cost. Third is scale. Centerspace's 10,500 units will increase our unit count by more than 30% to approximately 44,400 apartment homes in markets that are demand-rich and supply constrained. The merger also brings our G&A load in line with our larger cap peers. As a final note, since the merger announcement, both Fitch and S&P have reaffirmed our investment-grade ratings, and I am pleased to report that multiple independent proxy advisory firms have recommended that IRT stockholders vote in favor of the merger. Our special meeting is November 10, and we encourage all stockholders to vote their shares.

With that, I'll turn the call over to Jim.

James Sebra

Thank you, Scott, and good morning, everyone.

I'll start with a brief update on our integration with Centerspace. While we are still in the early stages, the overall process is on schedule. Lender consents for the assumption of approximately $500 million of Centerspace's secured debt with an average interest rate of approximately 3.5% are progressing as planned. On the people side, we have identified the go forward and transition teams and execute employment letters accordingly. Our technology integration is planned and ready to launch shortly after closing. Additionally, the $140 million of dispositions that we identified to keep the Centerspace merger leverage neutral are progressing and expected to close in the first quarter of next year. All of this is pointing to a successful integration post-closing and securing the synergies we've identified.

Turning to our third quarter results. Core FFO per share of $0.29 was in line with our expectations. Same-store NOI grew 1.6%, also in line with expectations as a 2% increase in same-store revenue was partially offset by a 2.5% increase in operating expenses. Same-store revenue growth reflected a 60 basis point increase in average effective monthly rents, a 16% increase in other property revenue driven by $2.3 million of Wi-Fi revenue and stable bad debt of approximately 90 basis points.

As Scott mentioned, we prioritized rate over occupancy for the duration of our peak leasing season. Stable asking rents, which are up approximately 3% since the start of the year and the demand environment that required fewer concessions drove our effective rents higher during the third quarter. We maintained stabilized occupancy of 95% during the quarter and resident retention increased 240 basis points sequentially to 60.5%. Improving fundamentals continue to support better pricing power in the quarter. For like-term leases, new lease trade-outs were negative 60 basis points in the quarter, improving 210 basis points sequentially and 310 basis points year-over-year.

Looking at like-term new leases by market, Atlanta was our largest market, registered the biggest improvement year-over-year with new lease trade-outs of positive 2.1%, a 755 basis points improvement over the third quarter of 2025. Oklahoma City delivered positive 2.9% and Raleigh-Durham and Columbus saw new lease spread of positive 2.5% and 1.5%, respectively. In Denver, new lease trade-outs were breakeven, up 360 basis points year-over-year. In Dallas, new lease trade-outs were negative at 3.5%, improving, albeit by 70 basis points over last year.

Renewal lease spreads remained strong, reflecting solid demand, high resident satisfaction and our data-driven approach to maximizing revenue growth. Renewal spreads on like-term leases were 4.6% in the quarter, up 50 basis points from the second quarter and 200 basis points year-over-year. As a result, like-term blended rent growth of 2.8% was 150 basis points higher sequentially and 270 basis points higher than a year ago.

For same-store operating expenses, the 4% increase in controllable expenses was driven primarily by higher contract service costs associated with the Wi-Fi rollout. Without the Wi-Fi service fees, the increase in controllable expenses would have been 3% year-over-year. Recall that our Wi-Fi program requires no capital from IRT. Noncontrollable expenses were flat year-over-year as a 17% decrease in insurance offset a 3% increase in real estate taxes. Please note that 2025 real estate taxes were low due to real estate and franchise tax refunds in the prior year.

Turning to capital allocation. During the first 9 months of the year, we completed 1,707 unit renovations at an average ROI of approximately 15%. Value-add activity continues to be an attractive investment opportunity to support long-term earnings growth. We expect to increase future renovation volume to capture higher rent premiums as market rents continue to recover. As Scott mentioned, subsequent to quarter end, we acquired our joint venture partner's interest in the Mustang and began consolidating this 275-unit community on our balance sheet. Our basis represent a 5.9% economic cap rate on stabilized NOI.

We did borrow $79 million on our line of credit to repay the in-place construction loan, which improves the earnings profile of the property for the remainder of 2026 and beyond. The previous construction loan was bearing interest at SOFR plus 275 basis points, whereas our line of credit bears interest at SOFR plus 77 basis points. The consolidation is reflected in our updated acquisition guidance of $266 million. Other than our pending merger with Centerspace, we do not forecast any additional acquisitions this year.

On the capital recycling front, in September, we sold a property in Memphis for $55.8 million. We used the proceeds to delever the balance sheet ahead of the Mustang closing in October. Our balance sheet remains flexible with strong liquidity. As of September 30, our net debt to annualized adjusted EBITDA was 6.2x, down from 6.5x last quarter. We had approximately $492 million of liquidity, 86.5% of our debt was fixed or hedged at a weighted average effective interest rate of 4.3%, and we have no significant debt maturities until 2028.

Heading into the fourth quarter, leasing is following its normal seasonal pattern with demand still better than in prior years. Without getting into monthly details, asking rents are remaining flat with blended lease spreads continuing their year-over-year improvement. Like the third quarter, double-digit growth in other property revenue led by Wi-Fi will continue to drive fourth quarter revenue growth. With respect to our Wi-Fi program, we plan to expand it to at least another 7,000 units in 2027, consisting of 4,000 IRT units and 3,000 units from Centerspace. With expirations seasonally light, we're building occupancy now, which positions us well to push rate in 2027.

Turning to guidance. Our EPS and FFO per share guidance now reflect merger-related costs incurred to date, consisting primarily fairness opinions, legal and filing fees. Otherwise, our guidance does not incorporate the pending merger with Centerspace. We are reaffirming our core FFO per share range of $1.13 to $1.15. We are also narrowing our same-store revenue and NOI growth ranges around unchanged midpoints. Overall, we are on track to deliver on our full year 2026 guidance, and we look forward to completing the merger with Centerspace. We will provide full year 2027 guidance with our fourth quarter results in February 2027.

Scott, that's it. Back to you.

Scott Schaeffer

Thanks, Jim.

In closing, our year-to-date results are solid, and we are reaffirming our 2026 guidance. Lease rates are improving as fundamentals strengthen across our markets, and IRT is building earnings momentum heading into 2027. We expect the proposed Centerspace merger to amplify that momentum, creating a larger IRT with more runway for low-risk internal growth through value-add and community Wi-Fi backed by our disciplined operating platform. On behalf of IRT's management team, I want to thank our stockholders for their support and every IRT and Centerspace team member for their hard work and dedication.

Operator, please open up the call for questions.

Operator

[Operator Instructions] Our first question comes from Austin Wurschmidt with KeyBanc Capital Markets.

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Austin Wurschmidt

Just given the improvement in leasing spreads versus last year that you talked about in your prepared remarks, I think you said that continued into the fourth quarter. Can you share how you expect your 2027 earn-in to shake out and just how that compares versus last year?

James Sebra

Yes. Good question, Austin. Thank you. I think we continue to see good trajectory, as I said in my prepared remarks, we're really getting away from trying to give monthly details on these calls. We continue to see great trajectory in the blended spreads, kind of a 220 basis points improvement year-over-year in third quarter and certainly continued to kind of perform in Q4. And when it comes to our earn-in, that estimates in earn-in kind of give or take about 80 basis points today. That earn-in last year was about either anywhere between 0 and minus 10 basis points.

Austin Wurschmidt

That's helpful. And then just second question, recognizing you're a little bit limited in what you can say about the Centerspace transaction. But first, can you just provide some thoughts about how maybe the results last night stacked up relative to what you had underwritten? And anything that would change that 5% accretion? And then can you also just share when those synergies are expected to kick in?

Scott Schaeffer

Sure. Yes. Centerspace's third quarter results was very consistent with what we underwrote and obviously, within their guidance range. The pressure for them is concentrated in Colorado, where competitive supply certainly weighed on occupancy and pricing. Every other region grew revenue and same-store NOI. It's not a one quarter thesis for us. Obviously, we're acquiring what we believe is a well-located portfolio on an attractive basis. And it's exactly where our operating platform and value-add programs will make a difference over time.

And I think on the synergy side, we underwrote the synergies to be 5%. And it's everything is within our control. As I mentioned in our prepared remarks, the G&A stuff and the people is certainly the big driver of it and all the operating synergies associated with property insurance and other kind of things are all things that will just kind of start to happen as the portfolio comes on to our platform. Obviously, like renters insurance programs, the synergies is assuming that, that kind of happens and gets billed through time. It's not all day 1. So we think the synergy number is still very conservative off the run rate.

Operator

Our next question comes from Eric Wolfe with Citi Research.

Eric Wolfe

For the fourth quarter, can you just talk about your strategy on the rate and occupancy side? So how much occupancy do you want to build going into next year's peak leasing season? And why do you think that specific level is the right level going into next year?

James Sebra

Yes. Obviously, the right level is obviously in the eyes of the beholder. I would say if you look at kind of the strategy that we communicated around last year by building occupancy in Q4 so we could attract or achieve rate growth in the first half of '27 and be able to maintain it, that certainly worked, it really benefited us. As you know, the seasonal kind of expiration curve for leases in the Q4 is the lowest that it generally throughout the year. So it's the right time to prioritize occupancy and not focus so much on rate growth. I think for us, our goal is to try to build it 30, 40 basis points of occupancy into the end of the year, and we think that's a good level. I mean we'll obviously continue to try to grow it as much as we possibly can. You've heard Scott certainly say over the years, occupancy between 95% and 96% is probably the right level. And if we start seeing our occupancy building over 96% we'll certainly move back to a great priority.

Eric Wolfe

Got it. That's helpful. And then you talked about the earn-in. I think you said 80 basis points. I guess any other thoughts, I know it's still early on sort of the more predictable pieces of growth for next year, whether that's the other income, the Wi-Fi income, how that should trend or bad debt to the extent that there's a certain amount of bad debt improvement you think is predictable or the contribution from the value-add program. Just any thoughts on some of the other pieces that are going to be contributing to growth next year?

Scott Schaeffer

Yes. We'll obviously give guidance in February 27. So I don't want to get too far ahead of myself. I would say that the other things that are currently being planned out is obviously the incremental Wi-Fi program of about 7,000 units, 4,000 IRT units and 3,000 Centerspace units. Obviously, you will have good revenue growth coming from this year's Wi-Fi program in the first half of next year. And we expect those kind of 4,000, call it, 7,000 total units will start to hit, call it, in the kind of late second quarter next year, maybe a little bit earlier depending on how fast we get it moving, but that will certainly provide a lot of revenue growth in the back half of next year. As for the rest of it, occupancy trajectory, rental rate growth and bad debt, we'll leave all that for the February guidance update.

Operator

Our next question comes from Jason Wayne with Barclays.

Jason Wayne

So just with the occupancy-led strategy, you're looking into next quarter, should we expect concession usage to remain elevated versus recent quarters? And which markets are you seeing the heaviest concession usage in still today?

Scott Schaeffer

I'll ask Janice to answer that one.

Janice Richards

Yes. I think seasonal -- we'll continue to follow seasonal patterns and leverage concessions. We were able to minimize concession uses during our peak season, and we'll follow those seasonal patterns throughout the rest of the year. I think we're still seeing some concessions in the Tampa, Dallas and Denver market as we're working through supply challenges, and we'll continue to optimize where we can and continue to pull back when demand is stable.

Jason Wayne

Got it. And then -- so as those concessions burn off, could that be a tailwind to same-store revenue growth kind of, I guess, in the second half next year?

Scott Schaeffer

For sure. Certainly, as concessions burn off, depending on the size and amount. Obviously, you never know who's going to renew and who's going to move out. And if you need to give a new concession on somebody moves out. But yes, the expectation would be just like we're experiencing this year, nice renewal growth that's coming from just that concession burn off.

Operator

Our next question comes from Jamie Feldman with Wells Fargo.

James Feldman

Great. I appreciate the update on your leverage level. Can you just talk more about target leverage, where you think that's going to go, kind of the road map to get there? And then as you just think about uses of capital between Wi-Fi build-out, acquisitions, development, anything else, share buybacks, how we should think about a, the target level and b, getting there?

James Sebra

Sure. Jamie, obviously, our goal was to kind of get to the mid-5s net debt to EBITDA in Q4. We'll probably be a little bit higher than that with just the Mustang that's kind of taken over in early October. But we see certainly a path towards low 5 net debt to EBITDA in the next kind of 12 to 18 months, just simply through EBITDA growth, no extraneous kind of events like selling assets and delevering. So again, we think the leverage trajectory and path is certainly achievable.

In terms of capital allocation, obviously, you've heard us say multiple times, the value-add continues to be our best use of capital. So kind of all of our retained earnings or free cash flow that's available. It's been going into the value-add program, and it continues to produce really good returns. Outside of that, any capital coming back through a joint venture redemption, a desire to sell an asset, we will evaluate at that time for what at that time, the best opportunity is. Today, where the stock price is, it certainly screens that buybacks are a higher priority than debt deleveraging. But again, it just depends on the situation that the circumstance at the moment.

James Feldman

Okay. That's helpful. And then I guess just thinking about market conditions versus the start of the year or your September update, can you just help us understand which are kind of acting better than you thought they would, which are a little slower? And then I guess, focusing on Denver specifically, I know you mentioned it as kind of a drag in the CSR portfolio. What are your thoughts on that time line for recovery there or bottoming out there?

Janice Richards

Yes. So we're seeing strong recovery in the Atlanta market. Year-over-year, we saw a 50 basis point increase in our blended rent trade-out on all leases and new lease trade-outs were positive for the first time in 2 years and average occupancy increased year-over-year. So excited on the Atlanta front. Raleigh following that, blended trade-outs have improved, and we've reduced average concessions on new lease by more than half in Q2, and we'll follow seasonal patterns throughout the year -- for the rest of the year. And Nashville is also showing some really positive lease trade-out improvement year-over-year, driven by new lease trade-outs.

For the communities where we're still seeing some headwinds in supply, we've got Dallas. We're still seeing positive trade of 110 basis points year-over-year there. So we're excited to see that continue as it starts to accelerate. And then Tampa working through the supply as well. Absorption is steady in both markets. And then I'll turn it over to Jason to dive into the Denver market specifically.

Jason Lynch

Yes. This is Jason. On Denver, we're seeing -- we've seen absorption really pick up in the first half of this year and kind of outsized relative to historical performance. That is helping to stabilize the market and to help to raise rental rate growth momentum there. So we're seeing that as a positive trend being in next year.

Operator

Our next question comes from Peter Abramowitz with Deutsche Bank.

Peter Abramowitz

Just wanted to ask first, I guess, in terms of the interest rate backdrop, you had a couple of transactions in the quarter. But just from kind of a more macro higher-level perspective, what have you seen in terms of early changes in terms of the private capital markets? And any changes that you're seeing on the ground? Just curious for some color there.

Jason Lynch

Yes, sure. So we've seen some live deals where the cap rates have obviously buyers have looked to push up cap rates as treasuries have pulled back around at 5% range or we still haven't seen whether or not that will translate into actual printed cap rates moving higher, and we'll continue to follow that.

Peter Abramowitz

All right. I appreciate that. And then just as a follow-up, just kind of curious, maybe some high-level thoughts on the demand environment. Certainly, the supply narrative, and we can look at CoStars or the RealPages for how much supply is dropping off in your markets, and that's been a big part of sort of the debate for a while now. But just curious from a demand perspective, anything that's kind of surprising you on the ground either way? Or just curious for your sort of high-level thoughts on employment growth, household formation and how you're thinking about that and how it feels as you consider your 2027 budget?

Janice Richards

Yes, we're seeing positive trajectory with our lead volume being up 11% year-year and that's converting well for us. We -- no surprises, only positive trajectory. And so we're going to continue to optimize on that through '27 as we build occupancy and get ready for that pricing power.

Scott Schaeffer

Yes. A little bit of additional color. I think the job growth and the population growth, we're certainly seeing it continue to develop. And there's nothing that we see other than just kind of seasonality that would give us any kind of cause or pause for 2027.

Operator

Our next question comes from Ami Probandt with UBS.

Ami Probandt

I appreciate your commentary on concessions. But I'm wondering how concessions at your competitors are trending and if that could be a pressure point as we move into the slower demand season, the seasonally slower demand season. So do your competitors have occupancy levels that you think enable them to start focusing on rate as well? Or at what point do you think the concessions can be mostly burned off across your MSAs?

Janice Richards

Yes. So overall, we're starting to see some stabilization in our market occupancy over that 90% to 92% average occupancy that allows for pricing power to kick in. I can't speak to exactly what they're going to do on their strategy with concessions. However, we continue to monitor on a daily, weekly basis to optimize at that floor plan level and create -- continue to create the value that we saw in Q3.

Scott Schaeffer

Yes. I mean, Ami, as I kind of alluded to earlier, our occupancy strategy over rate kind of heading into this kind of slower expiration period simply is a goal of being able to set ourselves up for a stronger 2027, at least to push rate in the first half of '27. I think the expectation we have and what we see on the ground is different developers, different owners follow different strategies. Right now, we haven't seen a significant increase in concessions. Certainly, one here, one there might be ebbing and flowing. But ultimately, our goal is to continue to kind of work in and function in the market that we're focused on while still achieving our overall guidance and our overall revenue strategy.

Ami Probandt

Great. And apologies if I missed this. Were there any moving pieces that changed within your maintained same-store revenue guidance midpoint in terms of blends, occupancies, other income, et cetera?

Scott Schaeffer

So no, I think ultimately, they're all pretty much kind of continue to move forward with what our original kind of guidance was that we updated in early -- sorry, early August. I was going to say early July, early August. No, I think generally speaking, everything is continuing to kind of line up with our expectations. We thought that Q4 was going to kind of develop the way we see it developing, and we're excited to finish out the year strong and deliver the midpoint of our guidance.

Operator

Our next question comes from Wesley Golladay with Baird.

Wesley Golladay

Can you talk about what your expectations are for year 1 yield at the Mustang and an overall stabilized yield?

Jason Lynch

Yes. So the overall stabilized yield that we're expecting at the Mustang is about 5.9%.

Scott Schaeffer

That's an economic cap rate.

Jason Lynch

Economic cap rate, and that's after burn-off of concessions that were used during the lease-up of the asset. Year 1 is probably around 5.2% or so based on current concession levels and occupancy.

Wesley Golladay

And it looks like the Tisdale had a nice increase in the leasing activity in 3Q. Can you talk about how rate is tracking versus your expectation?

Jason Lynch

I think rates are tracking in line to what our expectations were. Concessions are being used, but we're -- like Janice mentioned, we're working on trying to pull those back as best as we can through the lease-up.

Scott Schaeffer

Yes. I would say just a little bit of additional color. The Tisdale, we originally anticipated that it would be, call it, stabilized occupancy by the, I think, end of Q1 of next year. So we certainly see it in that trajectory still.

Operator

Our last question comes from Ann Chan with Green Street.

Ann Chan

So just quickly going back to the bad debt. Could you share whether any markets have seen an increase in bad debt in the last few quarters and where Atlanta is currently trending versus pre-COVID?

James Sebra

Good question. I would say that from looking at the data here across our markets, no increases in bad debt in any markets from Q2 -- from Q1 to Q2 to Q3, they're all moving down. I don't remember Atlanta pre-COVID. I would tell you, I think a few years ago, Atlanta was plus or minus 5% bad debt. In the third quarter, their bad debt was 1.4%.

Operator

This concludes our Q&A session. I will now turn the call back to Scott Schaeffer for closing remarks.

Scott Schaeffer

Thank you all for joining us this morning. We appreciate your continued support of IRT and look forward to seeing many of you at the upcoming NAREIT conference in Atlanta. Have a good day all.

Operator

This concludes today's call. Thank you for joining. You may now disconnect.