NexPoint Residential (NXRT) Earnings Transcript

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DATE

Tuesday, Feb. 24, 2026 at 11 a.m. ET

CALL PARTICIPANTS

• Executive Vice President and Chief Financial Officer — Paul Richards
• Executive Vice President and Chief Investment Officer — Matthew Ryan McGraner
• Vice President, Asset and Investment Management — Bonner McDermett

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TAKEAWAYS

• Net Loss -- $10.3 million, or $0.41 per diluted share, compared to a loss of $26.9 million, or $1.06 per diluted share, in the prior year’s fourth quarter.
• Total Revenue -- $62.1 million, down from $63.8 million in Q4 2024.
• Net Operating Income (NOI) -- $37.1 million, representing a 4.7% decrease year over year on 35 properties.
• Same Store Rental Income -- Decreased by 2.8% for the quarter; same store occupancy closed at 92.7%.
• Same Store Expenses -- Increased 1.1% compared to Q4 2024.
• Same Store NOI -- Decreased 4.8% compared to the prior year’s fourth quarter.
• Core FFO per Diluted Share -- $0.65, compared to $0.68 a year ago.
• Share Repurchases -- 223,109 shares repurchased in 2025 at an average price of $34.29, approximately a 29% discount to Q4 2025 NAV midpoint of $48.57.
• Value-Add Renovations -- 380 full and partial renovations completed this quarter, 275 renovated units leased, with an average monthly rent premium of $74 and a 22.2% ROI.
• Dividend -- $0.53 per share paid for the fourth quarter; full-year dividend coverage was 1.35x Core FFO; payout ratio was 73.8% of Core FFO.
• Liquidity -- $13.7 million in unrestricted cash, plus $108 million available undrawn on the unsecured corporate credit facility, for $121.7 million total available liquidity.
• Debt Profile -- Total indebtedness of $1.6 billion at a 3.28% weighted average rate; $900 million of floating-rate debt swapped to fixed, representing 62% of total floating-rate mortgage debt.
• No Near-Term Debt Maturities -- No scheduled maturities until 2028.
• 2026 FFO Guidance -- Core FFO per diluted share of $2.42 (low end), $2.57 (midpoint), and $2.71 (high end).
• 2026 Operating Guidance -- Rental income growth of 0%-1.9%; total revenue growth of 0.1%-2%; expenses projected to rise 4.2%-2.8%; same store NOI guidance of negative 2.5% to positive 1.5%.
• NAV per Share Estimate -- Range of $41.43 to $55.72, with a midpoint of $48.57.
• Sedona Acquisition -- Acquired Sedona at Lone Mountain in Las Vegas for $73.25 million, with a stated strategy to improve occupancy by 900 basis points over four years and target a 7.2% NOI CAGR through 2029.
• Same Store Revenue Trend -- Down 1% year over year; five of ten same store markets delivered positive revenue growth, with South Florida, Atlanta, and Raleigh each up at least 1%.
• Expense Control -- Full year same store operating expenses declined by 10 basis points; payroll costs fell 3.7% year over year, and office operations expense declined by 80 basis points.
• Occupancy Performance -- Same store occupancy closed at 92.7%, with South Florida and Phoenix both at 94.5%.
• Bad Debt Reduction -- Bad debt finished at 80 basis points of GPR, a 42% improvement year over year.
• Concession Utilization -- Increased from 38 basis points in 2024, with notable rises in Phoenix (up 1.1%) and Orlando (up 4.4%).
• Value-Add CapEx 2026 Plan -- Targeting 300 full upgrades at $16,500/unit and 400 partial upgrades at $3,500/unit, plus 680 washer/dryer installations at $1,200/unit; anticipated average monthly rental premiums of $240, $70, and $54, respectively.
• AI and Centralization -- Continued rollout supports expense controls, maintenance podding, and moderate labor growth at 2% for 2026.
• Real Estate Taxes and Insurance -- Real estate tax expense up 1.8% and insurance expense down 12% for 2025; for 2026, taxes projected to rise 4.4%, insurance projected to fall 2.1% (assuming 0%-10% renewal rate).
• 2026 Earnings Guidance -- Earnings per diluted share guidance: negative $1.54 (low end), negative $1.40 (midpoint), negative $1.26 (high end).

SUMMARY

The company reported a smaller net loss on reduced revenue and NOI, emphasizing share repurchases at a notable discount to NAV. Management detailed stable dividend coverage, strong liquidity, and embedded leverage, supported by fixed-rate swaps and no near-term debt maturities. The firm acquired a Las Vegas property targeting operational enhancements, and provided near-flat-to-modestly-up revenue and expense growth forecasts for 2026, with Core FFO guidance slightly below prior year levels. Management noted positive bad debt and expense trends but reflected a cautious outlook on same store NOI, with explicit acknowledgment of limited revenue catalysts and margin pressure. Guidance expects stable to slightly improved occupancy through value-add initiatives, advancing AI deployment, and targeted cost containment across the portfolio.

• Matthew Ryan McGraner stated, "Renewal conversions were 57.4% for the quarter and 54.25% for the full year, with 2026 retention starting off strong with January over 50% and February month-to-date at 51.6%."
• Paul Richards confirmed, "The dividend is covered by cash flow, and its target ratio is 65% to 75% of Core FFO."
• First-quarter guidance models occupancy at 93%, rising from a fourth-quarter close of 92.7%; recent blended lease rates showed January and February sequential improvements but remained negative year over year.
• AI-driven operating efficiencies contributed to both payroll and office expense reductions, according to management.
• Bonner McDermett outlined that total capitalized rehab spend should remain stable year over year, with flexibility depending on realized pricing power and ROI thresholds.
• The firm indicated capital allocation could shift toward further buybacks if market price persists below $30 and the implied cap rate remains elevated.

INDUSTRY GLOSSARY

• Core FFO: Funds From Operations adjusted for recurring, non-cash, and non-core items; serves as a key REIT earnings metric reflecting core operating performance.
• NOI: Net Operating Income, calculated as rental and other property income less property operating expenses; central to property-level profitability analysis for REITs.
• GPR: Gross Potential Rent; represents total possible rental income if all units are leased at full market rates.
• Value-Add: Strategy emphasizing property improvements to increase rents, occupancy, and overall asset value.
• Controllable Expenses: Property-level expenses that management can directly adjust or influence, such as payroll, repairs, or contract services.

Full Conference Call Transcript

Operator: Hello and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the NexPoint Residential Trust, Inc. Q4 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during that time, simply press star and the number one on your telephone keypad. I would now like to turn the call over to Kristen Griffith, Investor Relations. Kristen, please go ahead. Thank you.

Good day, everyone, and welcome to NexPoint Residential Trust, Inc. conference call to review the company's results for the fourth quarter ended 12/31/2025. On the call today are Paul Richards, Executive Vice President and Chief Financial Officer; Matthew Ryan 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 and are based on management's current expectations, assumptions, and beliefs.

Listeners should not place undue reliance on any forward-looking statements and are urged 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 as of today's date and, except as required by law, NexPoint Residential Trust, Inc. 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 will now turn the call over to Paul Richards. Please go ahead, Paul.

Paul Richards: Thanks, Kristen, and welcome everyone joining us this morning. We appreciate your time. I will kick off the call and cover our Q4 and full year results and highlights, update our NAV calculation, and then provide initial 2026 guidance. I will then turn it over to Matt to discuss specifics on the leasing environment and metrics driving our performance and guidance and details on the portfolio. Results for Q4 are as follows. Net loss for the fourth quarter was a loss of $10,300,000 or $0.41 per diluted share on total revenue of $62,100,000, as compared to a net loss of $26,900,000 or $1.06 per diluted share in the same period in 2024 on total revenue of $63,800,000.

For the fourth quarter, NOI was $37,100,000 on 35 properties compared to $38,900,000 on 35 properties for 2024, a 4.7% decrease in NOI. For the fourth quarter, same store rental income decreased 2.8% and same store occupancy closed at 92.7%. This, coupled with an increase in same store expenses of 1.1%, led to a decrease in same store NOI of 4.8% as compared to Q4 2024. We reported Q4 Core FFO of $16,500,000 or $0.65 per diluted share compared to $0.68 per diluted share in Q4 2024.

During 2025, NexPoint Residential Trust, Inc. repurchased 223,109 shares for a weighted average price of $34.29 per share, which is approximately a 29% discount to the midpoint of our Q4 2025 NAV, to be discussed here shortly. We continue to execute our value-add business plan by completing 380 full and partial renovations during the quarter and leased 275 renovated units, achieving an average monthly rent premium of $74 and a 22.2% ROI. Since inception, NexPoint Residential Trust, Inc. has completed the installation of 9,866 full and partial upgrades, 4,979 kitchen and laundry appliances, and 11,199 tech packages, resulting in $158, $50, and $43 average monthly rental increases per unit and 20.86%, 37.2%, and ROI, respectively.

Results for the full year 2025 are as follows. Net loss for the year ended December 31 was $32,000,000 or a loss of $1.26 per diluted share, which included $95,800,000 of depreciation and amortization expense. This compared to net income of $1,100,000 or income of $0.04 per diluted share for full year 2024, which included a gain on sale of real estate of $54,200,000 and $97,800,000 of depreciation and amortization expense. As a quick reminder, the company sold our two remaining Houston assets as well as Radbourne Lake in Charlotte in 2024. For the year, NOI was $151,700,000 on 35 properties as compared to $157,000,000 on 35 properties for the same period in 2024, or a decrease of 3.4%.

For the year, same store rental income decreased 1.3% and same store occupancy closed at 92.7%. This, coupled with a slight increase in same store expenses of 0.1%, led to a decrease in same store NOI of 1.6% as compared to the full year in 2024. We reported Core FFO in 2025 of $71,300,000 or $2.79 per diluted share compared to $2.79 per diluted share for 2024. Since inception of the business in 2015, NexPoint Residential Trust, Inc. has generated an 8.54% compounded annual growth rate in our Core FFO. Moving to the NAV per share.

Based on our current estimate of cap rates in our markets, unchanged at 5.25% to 5.75%, and our 2026 NOI guidance, we are recording a NAV per share range as follows: $41.43 on the low end, $55.72 on the high end, with $48.57 at the midpoint. Next, our dividend update. For the fourth quarter, we paid a dividend of $0.53 per share on December 31. Since inception, we have increased our dividend 157.3%. For 2025, our dividend was 1.35 times covered by Core FFO with a payout ratio of 73.8% of Core FFO. Now our capital markets balance sheet leverage, and liquidity.

On 07/11/2025, the company entered into a $200,000,000 revolving credit facility with JPMorgan Chase Bank and the lenders party thereto from time to time. The credit facility may be increased by up to an additional $200,000,000 if the lenders agree to increase their commitments. The new facility improves pricing by 15 basis points across all leverage tiers, to Term SOFR plus 150 to 225 basis points. The credit facility will mature on 07/30/2030 unless the company exercises its option to extend for a one-year term. NexPoint Residential Trust, Inc. has $13,700,000 of unrestricted cash and $108,000,000 of available undrawn capacity on our unsecured corporate credit facility, giving the company $121,700,000 of available liquidity as we head into 2026.

We have no scheduled debt maturities until 2028. Over time, we will look to reduce leverage, credit facility leverage in particular, through a disposition and recycling of long-held, lower-growth assets where we have the ability to harvest gain and put capital back to work into more productive strategies and investments. As of 12/31/2025, we had total indebtedness of $1,600,000,000 at an adjusted weighted average interest rate of 3.28%. Interest rate swap agreements effectively fixed the interest rate on $900,000,000, or 62% of our $1,500,000,000 of floating rate mortgage debt outstanding.

As we have done historically, we will continue to evaluate the credit markets for opportunities to hedge or restructure our debt to best position our assets and the portfolio for future growth while maintaining a highly liquid, low friction optionality afforded to us through the use of floating rate agency mortgage financing arrangements. Full year 2026 guidance. For 2026, we are issuing the guidance as follows. Rental income, on the low end, 0%, with a midpoint of 0.9%, and the high end of 1.9%. Total revenue, low end of 0.1%, with a midpoint of 1.1% and a high end of 2%. Total expenses, low end of 4.2%, midpoint 3.5%, high end 2.8%.

Same store NOI, low end negative 2.5%, midpoint negative 0.5%, and the high end of 1.5%. Earnings per diluted share, low end, negative $1.54, midpoint, negative $1.40, and the high end negative $1.26. And lastly, Core FFO per diluted share: low end, $2.42; midpoint, $2.57; and at the high end, $2.71. Matt will go into detail on our same store operating assumptions with his prepared remarks, and the largest driver from our 2025 actuals to 2026 midpoint guidance is interest expense. And, again, Matt will provide details on our thoughts regarding upside on the operational front and our same store operating assumptions. And with that, I will turn it over to Matt for commentary on the portfolio. Thank you, Paul.

Let me start by diving a bit deeper into our fourth quarter same store operational results. Same store average effective rents closed the year at $1,489 per unit per month, down 10 basis points year over year.

Matthew Ryan McGraner: Six of our 10 same store markets generated positive year-over-year growth in effective rents with Tampa leading the way at 3.1%, followed by Las Vegas, South Florida, and Charlotte at 2.1%, 1.6%, and 1.3%, respectively. On the occupancy front, the same store portfolio closed the year at 92.7%, down 195 basis points year over year. South Florida took the pole position at 94.5% with Phoenix, Charlotte, then Raleigh rounding out the top four markets with at least 93% occupancy as of the year end. We saw noteworthy occupancy improvement in Phoenix in particular, building to 94.5% as the team maintained heavy focus on defense to combat the heavy delivery of new units over the past several quarters.

Renewal conversions were 57.4% for the quarter and 54.25% for the full year, with 2026 retention starting off strong with January over 50% and February month-to-date at 51.6%. March is projected to finish around 56%. Revenue for the year in five of our 10 same store markets delivered positive revenue growth with South Florida, Atlanta, and Raleigh each growing at least 1%. Tampa and Charlotte rounded out the growth markets. Bad debt continued to trend down, finishing the year at 80 basis points of GPR, a 42% improvement year over year, demonstrating both the health of our tenant demographic as well as the efficacy of the centralized screening techniques we have employed to strengthen our portfolio post-COVID.

Tampa, Raleigh, and Atlanta saw particular improvements to bad debt, with each reducing losses by more than half the prior year total. Concession utilization has increased from 38 basis points as a percentage of gross potential rent in 2024. Phoenix, Orlando, South Florida, and Atlanta each saw a need for increased concessions with 1.1%, 4.4%, 0.4%, and 0.36% increase in utilization, respectively. Overall, same store revenues were down 1% year over year, and turning to the expense side, with limited catalysts for revenue growth in 2025, the team paid particular attention to expense management and we are pleased to report a full year decline of 10 basis points to same store operating expenses.

Advances in AI and our strategic focus on its development to streamline workflows across both our resident and property staff experience enabled us to achieve a 3.7% year-over-year decrease in total payroll costs and an 80 basis point decline in office operations expense. We see this trend continuing, and I will have more detail later on this in my prepared remarks. Thoughtful asset management, zero-based budgeting, and our sharp focus on turn cost management and material contract negotiation kept the lid on repair and maintenance expense inflation, growing by just 2.5% for the year. Other favorable results were realized through our real estate tax and insurance strategies, up 1.8% and down 12% for the year, respectively.

Our full year same store NOI margin was a stable 60.8% while our year-over-year same store portfolio finished down 1.6%, as Paul mentioned. Notable same store NOI growth markets for the year were South Florida, Charlotte, and Nashville, at 1.4%, 1%, and 90 basis points, respectively. On 12/11/2025, NexPoint Residential Trust, Inc. purchased Sedona at Lone Mountain in Las Vegas, Nevada for $73,250,000. Management identified an opportunistic high-growth acquisition in a long-term market. The strategy involves deploying accretive value-add capital to normalize economic occupancy and expand operating margins through targeted demand generation, interior and amenity enhancements, lifestyle upgrades, and disciplined execution, ultimately driving asset appreciation and outsized returns.

Recent large-scale developments have driven significant expansion, job growth, and residential revitalization in North Las Vegas, which is now the Las Vegas Valley's most prominent industrial market. Over 15,000,000 square feet of industrial space is currently under construction or planned, supporting the creation of 8,000 new jobs in the market. As a reminder, we intend to improve economic occupancy by approximately 900 basis points over four years while upgrading 182 units and installing smart home technology throughout the community, driving a 7.2% NOI CAGR through 2029. Now turning to 2026 guidance.

As Paul said, we are guiding between a 2.5% decline and a 1.5% increase in same store NOI growth for 2026, with the midpoint projecting a 50 basis points reduction year over year. Our 2026 guidance includes the following assumptions. A 90 basis point rental income growth at the midpoint, forecasting 93.4% to 94.1% financial occupancy with peak occupancy modeled for Q3 with a more normal seasonal demand and performance expectation for the year. A negative 30 basis point earn-out from lease trade-outs and a gain-to-lease inversion in 2025. A positive 1.2% market rent growth in 2025 with roughly 40% realized this year predominantly in the second half of the year.

A positive 40 basis point top line growth attributable to ROI CapEx spending, as detailed further hereafter. Economic occupancy at 91.8% at the midpoint, 30 basis points lower vacancy costs at the midpoint, 93.7% versus 93.4% for the prior year. We are stabilizing bad debt at approximately 80 basis points with a range of 70 basis points to 90 basis points, down more than 75% from peak pandemic era payment behavior. And then flattish concession utilization at 71 basis points to GPR, heavily weighted in the first half of the year. We are assuming 1.1% total revenue growth at the midpoint, driven by modest rental income growth expectations I just went over and mid-single-digit other income growth.

Turning to expense guidance. We are assuming 6.4% controllable expense growth at the midpoint. 80% of this growth is attributable to bulk increase Wi-Fi contract costs that have a direct revenue offset. We are assuming down 1% R&M and turn cost growth, but turnover in interior R&M is expected to decrease $375,000 or 8.4% due to effective cost management and an increased volume of renovations in 2026. We are assuming 2% labor growth; the continuation of our rollout of AI technology and centralization of operations contribute to modest labor growth. We see optimism in outperforming our midpoint as we further implement agentic AI strategies and maintenance podding across our markets.

We are assuming a 7.4% growth in advertising and marketing expense and just a 10 basis point growth in G&A expense. We are assuming total expense growth of 3.5% at the midpoint, a 4.5% increase in the utility expense line item, and a 2.1% insurance premium reduction, assuming a 0% to 10% renewal on April 1. For that, our team, including Paul here, were recently meeting with the markets in both London and New York and we are optimistic we will achieve another favorable outcome for the program with this 2026 renewal. On the real estate tax expense growth side, we are assuming a positive 4.4% growth.

Real estate taxes make up 31% of the 3.5% total expense increase at the midpoint, and we are expecting the band of real estate taxes to increase from 2% to 8% across the portfolio. And, of course, we will protest and litigate outsized value assessments vigorously throughout the year. On the value-add side, we continue to be an internal growth business at our core. And to that end, our guidance includes the following assumptions regarding our value-add programs, which remain aligned with our historical 15% to 20% ROI targets. We expect to accelerate value-add CapEx deployment toward the back half of 2026 and into 2027 as our submarkets see net demand and occupancy pricing power improve for landlords.

We are assuming approximately 300 full interior upgrades at an average cost of $16,500 per unit generating a $240 average monthly premium. We are assuming approximately 400 partial interior upgrades at an average cost of $3,500 per unit generating a $70 average monthly premium. These partial upgrades include varying bespoke additions such as new stainless steel appliances, hard surface countertops, updated tub enclosures, and private yards among other aspects. These partial bespoke rehab initiatives are strategically tailored by 1,500 bespoke upgrades across the portfolio with double-digit ROIs. Finally, we also plan to install 680 washer/dryer installs at an average cost of $1,200 per unit generating a $54 monthly average premium or 54% return on investment.

Now turning to summarize our outlook for the 2026 year. Basically, we like what we own. We believe affordable residential assets in well-located suburbs in the top job growth and net migration markets in the country will outpace demand over the near term. Our markets are business friendly with the continued persistent tailwind of factors pointing towards Sun Belt growth. You name it, we have it: taxes, weather, business climate, jobs, investment in physical and digital infrastructure. Indeed, many signs for growth were already pointing to the Sun Belt, and we believe still are. And underpinning our guidance for the year is cautious optimism. We think the Sun Belt multifamily market is approaching its long-awaited inflection point.

After absorbing the largest supply wave since the 1980s, with completions peaking at almost 700,000 units in 2024, a 54% increase from 2021 baseline completions, we are optimistic that new lease growth is set to turn positive across most Sun Belt markets by 2027. Reasons for our belief include persistent structural demand. The cost to own a home is three times more than to rent an apartment in our markets. A 60% decline in new market rate deliveries from the peak and construction starts running approximately 70% below their 2022 peak, locking in a multiyear supply trough.

Weighing each NexPoint Residential Trust, Inc. market by unit exposure, the portfolio level jobs/new construction unit ratio bottomed at approximately 1.5 jobs to 1 unit of new delivery in mid-2025, and our entire portfolio is projected to cross back above the historically significant ratio of 4 jobs to 1 unit by 2027. However, the recovery is highly asymmetric. Roughly 35% of our portfolio—South Florida, Las Vegas, and Atlanta—is already at or approaching equilibrium, while 44%, including Phoenix and DFW, will not reach that threshold until 2026. But, for example, South Florida, or 21% of our NOI, has an adjusted BLS nonfarm payroll divided by the CoStar and Yardi delivery ratio of 7.5 jobs to 1 unit, well above the equilibrium.

Atlanta, or 12.5% of NOI, just crossed back over 5 to 1. And given that supply is now relatively muted over the near term, the key variable is whether Sun Belt job growth and net migration can maintain its recent pace. If it can, the supply cliff now baked into every NexPoint Residential Trust, Inc. market's pipeline creates the conditions for sharp and synchronized recovery in 2026. Another reason for optimism is the demographic profile of our renter population. We do believe in AI, and it will have a near term chilling effect over entry-level white collar jobs.

But today, the NexPoint Residential Trust, Inc. average renter is largely blue collar, 38 years old, with a household income of $90,000 per year. Not really the AI bull’s-eye. Furthermore, advances in health and wellness are adding longevity to the population, creating somewhat of a demographic backstop to demand. The 65 population is 5% across NexPoint Residential Trust, Inc. markets, and Harvard JCHS projects the senior renter population to double from 5,800,000 households to 12,200,000 households by 2030. While obviously a senior housing tailwind, we are starting to see sizable signs of this trend in our own remotes.

So in closing, even though the last few years have indeed been difficult, we are optimistic that new lease inflection will happen in the Sun Belt this year for the vast majority of our portfolio. In the meantime, we will continue to do all that we can to utilize technology, become more efficient, drive value-add programs, and ultimately drive value for our tenants and our shareholders. That is all I have for prepared remarks. Thanks to our teams here at NexPoint Residential Trust, Inc. and BH for continuing to execute. And with that, we will turn the call over to the operator for questions.

Operator: At this time, if you would like to ask a question, press 1 on your telephone keypad. To withdraw your question, simply press 1 again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Omotayo Okusanya with Deutsche Bank. Please go ahead.

Omotayo Okusanya: Yes. Good morning, everyone. First question around the refurbishment and remodeling. I think you mentioned that in 2026, you are going to do about 400 of those. And then you do, like, 600 washer/dryer installation. So that is, like, 1,000 altogether versus, I think, 2025 you did about 1,800 total volume. Just kind of curious why you kind of have the drop, especially as you are talking about they could still do another 1,500, you know, if market conditions allow?

Matthew Ryan McGraner: Yes, sir. Hey. It is Matt. Good morning. Maybe I did not come across or you misheard the category. So the plan is to do 300 full upgrades across the portfolio, an additional 400 partials and then roughly—yeah. And so I think that was the delta, but we are ending up basically at the same place, about 1,700 units. And then as you know, if what we believe will happen happens, then we will be able to drive those incremental bespoke upgrades that I mentioned that can reach up to 1,500 additional units.

Omotayo Okusanya: Okay. That is awesome. That is helpful. And then in regards to the interest rate swap, again, a few years ago, you guys kind of successfully negotiated some of these swaps and kind of came out ahead with some lower rates. Just kind of curious as you kind of think about 2026. How you kind of see that playing out this time around, especially when, again, you do kind of see, you know, rates have been coming down at least to start the year.

Paul Richards: Yeah. Great question, Kyle. This is Paul. So, yeah, we look at 2026 and what the swap market is pricing, you know, the U.S. three-, five-, seven-year swap, and just taking in what we fully expect on the rate cut side. If you look at the current Fed dot plot, the dispersion is extremely interesting. You have a deeply divided committee with 175 basis points of actual spread with Mester at the bottom end at 2.125%, and you have a few multiple hawks that are, you know, pricing in zero rate cuts this year. You had three dissenters this past meeting.

So it is a really deeply divided, you know, dot plot, which is, you know, affecting swap markets and not really pricing what we truly believe, you know, will be at the end of the year with rate cuts. So we are holding tight right now on putting and layering in additional swaps, but again, this can change in a moment's notice. So it is a constant daily recheck and refresh of those rates to see if they are, you know, hitting what we believe to be kind of two and a half to three rate cuts for the year. And, you know, I am a little more bullish too on that too.

So it is just a constant refresh and remodel of our models and when we want to layer in additional swaps for the year to layer in behind the ones that are burning off here in Q3, Q4 this year.

Omotayo Okusanya: Gotcha. Thank you.

Operator: Your next question comes from the line of Buck Horne with Raymond James. Please go ahead.

Buck Horne: Hey. Good morning, guys. Just wondering if you could give us any updates on either January and or February trends since quarter end in terms of new, renewal, blended lease rates, just occupancy? Any additional color on how early spring leasing has gone?

Matthew Ryan McGraner: Yeah. Hey. Hey, Buck. Good morning. It is Matt. The January new leases were down 7%. Renewals were 1.6% for a blended minus 2.6% or 2.7% or $40 trade-out. February is better and getting better and firming. The new leases were down 5.7%, and renewals were a positive 1.7% for a blended negative 1.8%. And, again, we are seeing pretty positive trends on the renewal side too, on the trend.

Buck Horne: Gotcha. Gotcha. Appreciate the color there. And then I think secondly, my other question was on CapEx and maybe potential CapEx spending for the upcoming year. Looks like the trend in both kind of the recurring and nonrecurring maintenance CapEx number is still trending above normal or above trend line, historically. How are you thinking about what were some of the key drivers for that this year? And then total CapEx spending for this coming year?

Paul Richards: Yeah. On the maintenance side, I will kick that to Bonner. But some of the outside that we are doing are the, you know, the bulk Wi-Fi on the resident amenity side, which again has a direct offset. So that is kind of elevated the numbers. But, again, the net effect of that is minimal on the income statement. Do you have anything to add on the maintenance side?

Bonner McDermett: Yeah. So our 2026 outlook—and relative to, you know, 2025—you see 2025 we had a little bit of a pickup in interior rehab spending. We had less of the exterior and common area this year post refinancing the portfolio. That $2,200,000 in 2024, there were some more major projects there. So outside the Sedona acquisition, there is about a million bucks of exterior work to do there. The capitalized rehab should be pretty stable year over year. And I think that same for the capitalized maintenance, the recurring and nonrecurring. You know, we are certainly looking to control those expenses, understand that is roughly $30,000,000 for the full year 2025.

I think that we have seen some price easing, certainly being thoughtful about that as a team. And as Matt mentioned, we kind of have a strategic approach here where, you know, pricing power is going to dictate the volume of renovation output for the year. So if we can get healthy trade-outs that justify the spend, we will see a little bit higher spend, probably more in line with 2025. But if we are not getting to the, you know, the trade-out that we need, the ROI that we want, we may look to skinny that down a bit.

Buck Horne: Gotcha. Alright. Thanks, guys. Good luck.

Operator: Next question comes from the line of Michael Lewis with Truist Securities. Please go ahead.

Michael Lewis: Great. Thank you. Maybe this question kind of logically follows after talking about CapEx. When we subtract CapEx from your AFFO calc, it looks like the dividend is not covered. I know you recently raised the dividend. This is always a tough—I realize it is a board decision. It is a hard question to answer. But as you look forward to 2026, I mean, do you think the dividend is covered by cash flow? And maybe just kind of remind us of what the dividend policy is.

Paul Richards: Yes. The dividend is covered by cash flow, and its target ratio is 65% to 75% of Core FFO.

Michael Lewis: Of AFFO. Okay. And then I wanted to ask, you know, you gave a lot of great data about supply and demand. Really detailed. The occupancy for 4Q was a little lower than we expected. I was wondering if it was lower than you expected and, you know, how you are kind of managing pricing versus occupancy, you know, right now where we are before we kind of get to that inflection whenever it comes.

Matthew Ryan McGraner: Yeah. It is a great question, Michael. It is lower than we expected, but it was somewhat intentional. So, you know, concession utilization was increased over the fourth quarter and into January. It is abating somewhat in February. But we were reluctant to utilize, you know, more than a month of concessions, particularly when we, you know, believe pricing power will significantly increase over the year. And I also did not want to lock in a negative twelve-month, you know, earn-in and cannibalize what we believe is an inflection year. You know, we truly believe that on a deal-by-deal basis, largely for the vast majority of our portfolio.

And, you know, not, you know, jumping up and down happy with 92.7%, but the good news is our first quarter guidance is at 93%. So, you know, I think we are on track to hit that. And, you know, hopefully, we will capture some of this inflection.

Michael Lewis: Okay. Thank you.

Paul Richards: You got it.

Operator: Your next question comes from the line of Linda Tsai with Jefferies. Please go ahead.

Linda Tsai: Hi, thanks for taking my question. In terms of your comments on the senior renter population doubling by 2030 and seeing sizable signs of this trend in your markets, can you delve into this comment more? And then would you start to amenitize properties any differently based on an aging population?

Matthew Ryan McGraner: Yes. Again, great question. We are seeing it because our average age is picking up, and we are just getting, you know, anecdotally, from the sites, especially in, you know, the Sun Belt and particularly in Florida, for, you know, resident amenities that cater more to the senior housing population. It is something that we have, you know, I guess, taken notice of as, you know, Welltower and the others catch a really good bid and believe in this demographic backstop, as I mentioned in my prepared remarks. We do believe this trend.

We think AI is going to grow GDP ultimately and have, you know, people when, you know, when they live longer and, you know, make more money, they want to invest in their health and entertainment. And so we are, you know, actively looking to resource our portfolio design to, you know, to cater to health and wellness and entertainment. And I think that those things will, you know, produce a wider demand funnel than what we have historically been used to and catering to blue collars.

So there is no reason in our portfolio why we cannot attract, you know, in Richardson, Texas, a suburb, well-located suburb outside of Dallas, some empty nesters that want to, you know, be closer to their kids. They go to SMU for example. So I think that trend will continue, particularly in the Sun Belt, particularly in our markets, and just follow the same net migration trends as we have seen over the last five years.

Linda Tsai: Are you seeing new renter income from the older population increasing?

Matthew Ryan McGraner: Yes. Indeed. And that is adding to both our AEG and our average household, you know, demographics. When we started this company, you know, eleven, twelve years ago, you know, our average renter was, you know, 28 years old and, you know, made $60,000 a year. So we are increasingly catering, I think, to a purpose-driven renter. And,you know, it makes sense. You know, aging population, they want less yard. They want, you know, more amenities. They do not want to deal with, you know, maintenance themselves, and they want to travel. So, we like that trend. We are going to play into it, and I think we have the portfolio to take advantage of it.

Linda Tsai: And then just one guidance question. It does not seem like your guidance incorporates buybacks. Are you still considering buybacks in 2026?

Paul Richards: Yeah. We are.

Matthew Ryan McGraner: We will always consider them. I think that, you know, the Sedona deal was important because we liked—yeah. We like the ability to take that cap rate from a 5.7 going into a 7.5, and that was, you know, one-off opportunity. And those opportunities we will always do. But in the meantime, you know, I think if we do, you know, sit stock price, you know, sub 30 and a 6.6 implied cap rate, you know, and we stay here for a while, I think you will see us buy back some stock.

That being said, I really do believe that, you know, that this year is the year that, you know, we will inflect, and I think stock prices will follow that upwards in the second half of the year.

Paul Richards: Thanks.

Operator: That concludes our question and answer session. I will now turn the call back over to management team for closing remarks.

Matthew Ryan McGraner: Thank you for all your time this morning. Appreciate everyone's, again, time and attention. I look forward to speaking to you next quarter.

Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

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