Mid-America Apartment Communities Aktie

Good afternoon. Welcome to Bank of America's 2026 Global Real Estate Conference. I'm Jana Galan, BofA's residential REIT analyst, and we're thrilled to have with us MAA's President and CEO, Brad Hill; CFO, Clay Holder; and Treasurer, Andrew Schaeffer.

I'll turn it over to Brad for opening remarks, and then we can jump into Q&A.

Yes. Well, thank you. I appreciate everyone being here. I appreciate the time. It's been a great conference. We enjoy the building. It's been well received. So what I thought I'd do is just give a few opening comments and just jump right into questions. For those of you who aren't as familiar with MAA and our story, just a quick update or background.

MAA is a $22 billion S&P 500 multifamily REIT. We have about 105,000 apartment units, predominantly across the Sunbelt region of the U.S. We are located in 16 different states and our exclusive focus really is on multifamily in what we call high-growth, high-demand region of the country. Generally, that overlaps quite well with the Sunbelt markets throughout the Southeast.

If you look at our markets, what's characterized them historically has been significant outperformance on demand metrics, whether you're looking at household formation, population growth, migration trends, job growth, wage growth, our markets have consistently outperformed other regions of the country on all of those demand factors, and that continues to be the case today. Certainly, our markets, particularly if you look at the last 3 years, has faced more supply pressure than other parts of the country as we've seen really a record level of deliveries in the Sunbelt region really across the country, but in particular, in the Sunbelt region.

But as we sit here today, that supply pressure is moderating. So we're really encouraged by what we're seeing there. We continue to work our way through that supply overhang. Definitely, our new lease rate performance continues to be impacted by that new supply that's coming into the market or is into the market, but a lot of that -- those lease-up communities are leasing up. And so we are seeing some better performance. And finally, after 3 years of excess supply, we are seeing those new deliveries trend down below long-term averages. And based on what we've seen in terms of new deliveries for the last 3 years being below long-term averages or new starts for the last 3 years being below long-term averages, we do expect the trajectory of supply to be more muted as we go forward for the next 3 to 5 years.

And so if we look at our markets from a market perspective, certainly, some of our high supply markets, as I mentioned, are still under pressure. If you think Phoenix, Jacksonville, Charlotte, Raleigh, Nashville, Austin, those markets continue to face supply pressure, but we're making our way through that. I'll hit on one of those markets here in just a second. We're also encouraged by some strength that we're seeing in our mid-tier markets. If you were to rank all of our markets from top to bottom in terms of performance, you'll see the top 10 or so of our markets are all mid-tier markets. And those are markets where we have seen less supply pressure or those markets peaked in supply pressure before other markets did. So we're seeing pretty good performance out of those markets.

And then if you look, kind of, below the line in terms of our average performance, what you'll see is all of those markets are high supply markets. So we continue to see pressure in those. But the good news is, if you look at a high supply market like in Austin, even though that market has seen the highest supply in the country, we do continue to see good performance -- relative performance out of that market. If you look at our blended performance just over the past year, we're up about 300 to 500 basis points in blended performance year-over-year. So while it's still negative and it's still at the bottom of our list, we are seeing some stronger performance in that market. So again, as the supply pressures continue to be absorbed and dissipate across our portfolio, we would expect to see similar performance in terms of trends across our portfolios.

And ahead of the conference, you guys provided a bit of an operating update. I know you touched on some parts of it, but maybe if you want to go through a little bit more on, kind of, how third quarter is trending?

Absolutely. Yes, we did put out on Page 33, if you have a package in front of you. I'd say, in general, what we're seeing so far in the third quarter, consistent with our comments on the earnings call, we are seeing and expect to continue to see less of a seasonal slowdown in the third and fourth quarter than what we saw last year. If you look at our blended results quarter-to-date in third quarter, we're seeing that at this point. Tying back to my comments I made a moment ago with still dealing with supply pressure in some of these high supply markets.

Our new lease rate performance is probably a little weaker than what we had hoped in the third quarter, but we are seeing some strength on the renewal side. If you look at our renewal rates, third quarter is consistent with what we saw in the second quarter. It's also up about 70 basis points year-over-year, and our retention rates continue to improve. If you look out into the fourth quarter, as we sit here today, we have over 60% of our renewal decisions have already been made. And we continue to see improvement in the retention rates and the renewal rates are improving. We're up to about 5.5% in the fourth quarter, which again is about 70 or 80 basis points better than last year. So continued strength on the renewal side.

The other thing I'll mention about third quarter performance, we have seen a build in occupancy every month through the quarter. So August occupancy was better than July and September occupancy, average daily occupancy will be better than what we saw in August. So we've continued to build occupancy as we've gone through the quarter.

That's great. Very strong renewal rates. I guess it is very surprising, kind of, the difference when you look at the numbers. But can you help us think about it maybe in terms of like what those actual dollars are between the minus 5.7% and the plus 5%?

Yes. I mean, so the spread between a new and a renewal lease on a dollar amount is about $180. So that spread and the dollar value isn't quite as big as you would think. And if you think about that from the position of a renewing resident, what we're asking them to do is to pay about $90 more than what they're currently paying. So from a resident perspective, we do a lot of focus on customer service. And what we found is if we continue to take care of that resident, provide good maintenance, a good experience for them and really not give them a reason to leave, then they generally won't leave for us -- from us. And that $90 rent increase that we're asking them to give is about $1,000 a year. So it's very reasonable. And so what we found is if we do that, folks will stay with us. And that's, I think, more so than single-family affordability concerns. I think that's why we've seen our retention rate continue to climb.

And just as we, kind of, towards the tail end of this peak leasing season, just curious if you can, kind of, comment on, kind of, what were the best markets and then which markets are seeing potentially like the best momentum, which could potentially be the leaders in '27?

Yes. I think for the best markets, I mean, it goes back to Brad's earlier comments on some of these mid-tier markets that continue to show strength through the third quarter, coming out of the second quarter and into the third quarter. And again, it goes back to the function of the supply discussion that he was just bringing up. I think when you think about some of the markets that we're seeing some good momentum even as we come out of the summer leasing season, Orlando comes to mind, Orlando, we've seen some really good strength in its performance over the course of the summer months. And that was one that has dealt with supply, has seen a lot of it over the past couple of years, and it's beginning to, kind of, turn that corner there.

Dallas is another one that we've seen some good momentum. We've been talking about Dallas for a couple -- a little over a year now probably, and it continues to show some strength even year-over-year at this point as -- so that's, again, good -- less in supply and then really good demand in that particular market. And then the last one I'll point to is Austin, and Brad talked a little bit about that. But I mean, if you think about Austin, I mean, it's got supply everywhere in that particular market. And we're starting to see different parts of Austin get some relief from the supply pressures that it's been seeing.

And those parts of Austin, where we're getting that relief, you're really seeing that benefit and that strength starting to show itself in its rental and its blended rate trends. So as the rest of that market gets past the supply wave that it's been experiencing and it's been experiencing a supply wave that's probably exceeded all other markets, I think you'll -- that the benefit and the growth that we'll see in that market will continue to build on what we've seen today.

And maybe can you talk about the concession usage you've seen in your markets and how that's ranged?

Yes. I mean, I think, in general, concession usage is pretty consistent right now to what we have been seeing. I mean we're not seeing a material change in that really one way or another. We saw an uptick in concessions probably 2 years ago ahead of the supply wave. We haven't seen that materially pick up. As we sit here today, we have in our markets about 200,000 less units in lease-up than we did 2 years ago. So the number of communities that are out there in lease-up continues to decline. So while I think the concession usage in a lease-up community is consistent, call it, 6 to 8 weeks, the prevalence of that -- as the number of lease-ups decreases, the prevalence of those concessions is decreasing in the markets.

Can you quantify your asset exposure to that percent of where there's a decrease in lease-up properties? You have like a breakdown?

Yes. I don't have that. I think it's going to vary by market, honestly. I mean, to Clay's point, if you think about a market like in Austin, we haven't been -- I mean, first of all, the supply has been everywhere, but I would say we haven't been as exposed to some of the supply as we have in other markets. Charlotte, for example, we're seeing a little bit more pressure right now from some of that supply that's in the market. I think we're more exposed to it in a market like that. But it varies greatly by submarket, product type and market. So it's hard to pinpoint what that percentage is across the board.

And then maybe on the demand side, kind of, what are you seeing in terms of migration, job growth and household formation trends?

Yes. I mean, I would say across all of our markets, all of the demand fundamentals continue to hold up quite well. I mentioned on the earnings call, one of the things that we saw an uptick in the second quarter that we needed to keep an eye on, which I think is a positive was migration. We saw the slope of the quarterly change in the second quarter of in-migration was stronger than what we had seen in any other quarter. One quarter doesn't make a trend. So we've got to certainly keep an eye on that. But that was also broad-based. It wasn't coming from one market versus another. It was pretty much all over. We saw even some migration coming from Midwestern markets, which you haven't seen a lot of that historically. We started to see some of that. So migration continues to be pretty strong for us.

And I'd say all of the other metrics of demand that we're tracking, there's not really a weakness in any of those. And in terms of markets, the one market I would say that we're watching from a demand perspective is Denver. Again, across our markets, I think we've got strong demand, but Denver has probably been on the weaker side of the demand fundamentals than any other market that we have. The migration into Denver has been a bit slower. The job growth has been a bit slower there. I think the good news for Denver is the supply picture is coming down considerably. So I do think the supply-demand balance should be okay for the next couple of years as that supply continues to come down. But we're pretty excited about the demand fundamentals across our footprint.

And then maybe just some comments on Atlanta being one of your largest markets?

Yes. Atlanta, kind of going back to the discussion I had with Dallas a few minutes ago. Now, Atlanta and Dallas, both started kind of moving in a very positive direction. about this time last year. And that momentum continued through probably the first half of the year. It's maybe slowed down a little bit versus what Dallas is continuing to show that momentum. But I think we're still seeing overall good fundamentals, good -- overall generally good demand in that particular market. The supply impact is kind of over and done with there. And so now I think it will be more of a typical market for us as probably pre-COVID levels of just kind of some general growth, but not going to be the leader of the pack at the same time.

Maybe changing topics a little bit, thinking about just this past year in terms of the public REIT apartment space, there's been a lot of consolidation. Historically, you guys have been some very large consolidators. Just curious your thoughts on scale, platform?

Yes. I mean, we have been very active in that space. And I think if you look back at the mergers that we had with both Colonial and Post, it was about a strategic advantage that we could use to get stronger in some way to ultimately deliver long-term TSR performance for capital that was strong and growing. Colonial was more about scale. We got more in the same markets where we are. Post was -- we got a development capability. We got a stronger balance sheet. So there were specific capabilities we got with those.

As we sit here today, we're 105,000 units. From a cost structure standpoint, I think we have some of the best cost discipline in the space. If you look at our maintenance cost per unit versus the space, we're probably better than most in the sector. Our growth rates are well controlled. Our G&A as a percent of revenue, the lowest in the space. So from a scale benefit perspective, I think we've harvested quite a bit out of that. From a data capability, we do have 170,000 residents in our community that we're collecting transactional data from that we can analyze and look at. So I feel like we have pretty good scale in that area, probably an area of continued scalability for us.

We're doing it on our portfolio now is the podding where we have overlap in terms of where certain properties are located between other properties, and we manage those properties instead of 2 managers, there's 1 property manager for both properties. So we have some more opportunities to do that. So for us, it's about how can we drive long-term differentiation and growth to our shareholders in a way that's sustainable. And if we find opportunities to do that, we'll certainly entertain those ideas as they come along. But for us, it's about continuing to focus on the operations side of the business. And as we strengthen what we're doing in that area, we'll find opportunities to put our platform on more properties to drive additional benefit to shareholders.

And maybe can you talk a little bit more on some technological initiatives, how you're using some of the data you've collected to either, kind of, drive other revenue or you've highlighted some of the...

Yes, absolutely. I mean the focus that we have, we term as Reimagine. And that's really what we're doing is we're rethinking how we staff properties, how we're structured operationally. We're redesigning what we're doing on site to really drive higher customer service. Customer service has been a focus of ours. It ties back to our strategy of maximizing the renewal transaction that we have on site. And if you go back and look at our performance over the last 4 years, you'll see that our renewal performance is 5.25% for the last 4 years. So we significantly outperformed in that area, also has cost implications to it as well. So we're really focused on that piece of the business. And certainly, technology is a part of that. Process workflows is a part of that.

We're looking to take all of the administrative tasks off of the site that we can to allow them to focus on customer service. That gives us an ability to further scale what we're able to do, the number of people that we have and the number of units per headcount, if you will, across the organization has continued to improve. So AI is a part of that. Process workflows is a part of that. Staffing certainly is a part of that. We've used AI for years on -- for the last probably 2 years on prospect engagement. So we continue to use it in that way where today, upwards of 75%, 80% of our interactions with prospects are now through a chatbot or voice bot or something of that nature, which frees up our staff to be able to really focus on customer service type items, which I think is really driving some of our customer service scores in the space. So it's a big focus for us.

We're probably in the pretty early innings of using AI for some of our back-office staffing and improvement and scalability items from a back-office support perspective. Maintenance side is also another area that we're working early on in terms of considering some of the technology and how that could apply there as well.

Maybe turning over to, kind of, the capital markets transaction activity, what you guys are seeing in terms of product in the market, and you've been active both buyers, sellers and developers. So where do you see the best opportunities?

Yes. I mean, certainly, where we've seen the best opportunities in the last couple of years has been in development. We've obviously tried to grow our development pipeline. A couple of years ago, we were around $300 million to $400 million. Today, we're around $800 million or so with the goal of, kind of, keeping that around $1 billion. We do think that in terms of driving long-term TSR performance, development is the way to do that. We're getting accretive yields and higher NOI growth rates than what we're getting out of our existing portfolio. So it's a great growth opportunity for us.

We haven't been as active on the acquisition side, just given where cap rates have been. They've generally been in the, call it, 4.5% range, which is obviously lower than where our cost of capital has been. And so we haven't been very active in that space. We've sold a few deals this year, about $150 million. We've taken that capital given what's going on in the acquisition market, and we have redeployed that into share repurchases. So that's been the use of that capital. But we still believe that development is a great place for us to be. In this environment, certainly, our cost of capital has changed. So I would expect that the hurdles needed to move forward with developments will change as well. So we'll continue to focus our capital in the best avenues that we have.

Other areas where we're focused at smaller scale, but great returns is our unit repositioning and redevelopment. We continue to ramp up that focus. We're up about 30% in the number of units that we're doing this year. That program continues to benefit as the new supply in the market gets stabilized. So we're seeing 20% cash-on-cash returns from that. Our property-wide WiFi, we're ramping up investment in that area of the business. That's about a $45 million NOI opportunity over the next, call it, 5 years or so. So we continue to ramp up in that area as well.

And then just back to the development side. Can you talk a little bit about, kind of, construction costs and how you're monitoring and managing them?

Yes. I mean, certainly, there's been a lot of unknowns over the last year or so. We've seen costs come down about 5%, I'd say, over the last year, and that's really been on the margin side. Haven't seen much change in terms of materials. We've also been cognizant of the risk associated with oil prices and how that can maybe impact some of the materials. So we've increased contingencies in our deals to try to protect us if something does happen and costs go up in terms of that area. But we haven't seen that to date. I think as we sit here today, it's hard to see that construction costs would continue to come down going forward, but because you can only reduce margins so much. But I feel like we've gotten a little bit of benefit over the last year in terms of reduction.

And then maybe just on, kind of, supply in the markets. We did see, kind of, this historic wave, but these markets have always experienced a good level of supply. How do you, kind of, see the cycles playing out?

Yes. Well, I think you're right. The long-term average supply in our markets is about 3%. If you go back and look at the last, call it, 25 years or so, it's about 3% of inventory. I think it's important to keep in context the level of supply that we've seen over a 3-year period, we saw 5 years' worth of supply being delivered into the market. So a significant excess level of supply. Having said that, this year is the first year where we have come below that long-term average.

Now we're still absorbing some of the supply, as I talked about a moment ago, but supply levels this year are expected to be about 2%, 2.2% in our markets. That will fluctuate a little bit. If you go back and look at the trailing 3 years' worth of data, the starts that have happened in our region of the country have significantly trailed long-term averages. The trailing 12 months, we're at 1.9%. So from a forward-looking perspective, we should be below long-term average deliveries for the next 3 to 5 years in our markets.

As we sit here today, construction costs are not coming down. There's pressure on interest rates. Equity is -- it's hard to raise equity for some of these development deals. So I think the supply pipeline will likely materially decline even further from here. And to go back and look at a time where we saw supply levels at this level, you've got to go back and look at post-GFC time period, and there's a 5- or 6-year period where new supply deliveries were similar to this 2% range, and we were able to deliver NOIs that were about 200 basis points higher than historical average for us.

So I do think we're getting to the period where we should see better performance from an NOI perspective from a historical basis based on the fact that supply is coming down, demand is remaining pretty robust, and we're already seeing that. We're seeing that in our mid-tier markets. We're seeing that positive trend in Austin, as we talked about, and I think that will become more broad-based as we get into next year.

And I guess the development economics for others don't look as great, but you want to lean in more to your development. I guess, how are you solving for that? Is it land you already own?

We do have some land we own. I'll tell you that it's difficult. We look at about 40 to 50 development projects every quarter, and there might be 1 or 2 that underwrite or underwrote to, call it, a 6.5% yield. When we underwrote realistic rents, realistic taxes, most of those deals were in the mid-5s. So there is a material difference in gap between where deals need to be and the majority of deals need to be and where they are today for that to really pick up. And again, the difficulty in starting new developments has been in access to capital. Debt is there, but it's been equity. And I think a part of that is because when you realistically underwrite these deals with the correct expectations, they just don't underwrite.

How long is the construction time line right now? So I know you're saying 3 to 5 years. It sounds like maybe those out years, it's more about -- that it will get -- it will become more difficult to develop versus like is it really like the next 2 to 3 years that we have true visibility? I don't know.

Well, I think we have visibility right now based on the last 13 quarters of starts being below long-term average. I think we've got good visibility of what that looks like. And so in our markets, it takes -- if I were to go and say today, hey, guys, let's go find a project, it normally takes about a year to get approval, and then it takes about 2 years for construction to get to your first unit. So you're talking 3 years from today if you were to go out and start that process today. And I say if because what we're hearing from a lot of our development partners is there's staff changes happening right now because of the lack of business in the development world, developers are being let go. There's challenges in that space. So...

That has no impact on...

I don't think that has any impact on the resi developer. I think these development partners are skilled in developing multifamily and there's just no volume out there right now for them.

I ask one follow-up on the concessions. RealPage puts out articles on the concessions. And I think the latest, but again, Adrian, tell me what we've been seeing. I think they've been talking about that it remains fairly deep like a lot of -- or widespread. And then, how do we tie that to -- I thought earlier you were saying concessions, they're not changing. But I guess what is going on?

Yes. My comment would be in a high supply market, they're deep in terms of the size. So they're, call it, 8 weeks free, 2 months free, but the number of units in lease-up is shrinking. So normally, the market gets away from concessions in a stabilized -- we don't offer concessions on our stabilized product. And most of the market, if they can, they don't have concessions in those communities. But to the extent that there are properties in lease-up, those are offering concessions. It's just the number of lease-ups has contracted.

So do you have any visibility into that? Again, these lease-up projects, are we finally clearing a point where on average, we're past 70% or is there any visibility into, okay, yes, come '27, this really should start to burn off. I don't know.

Yes. I mean the only stat I have in that regard, and these meetings run together, so I can't remember if I mentioned it in this one, but we have 200,000 less units in lease-up this year than we had 2 years ago. So clearly, what's happening is the number of units in lease-up is significantly contracting. It's being absorbed. If you look at the first half absorption, it exceeded the new supply coming into the market. So the units are getting absorbed. And when you also add to that the fact that there's less new supply coming into the market and demand continues to remain pretty strong. The fundamentals are shifting as we've seen in the mid-tier markets, and we've seen in a market like Austin, where there is a lot of supply, it is shifting to where we're starting to see some better pricing performance. I think we would expect that to continue.

And then on the external growth side, just there hasn't really been much distress out there. I guess, just given the volatility in rates over the last month and that we're approaching the slower season, if there potentially be some, kind of, pickup in opportunities?

Well, I think there could be. We always prepare for that. That's part of the reason why we want to keep our balance sheet capacity where it is. So we're able to take advantage of those opportunities materialize. We took advantage of that after the GFC. We bought 10,000 units and one-off transactions in a 3-year period. So we're prepared and capable of doing that. I'd say in terms of distress, I think that's going to have to come from lenders forcing product to be sold. My sense is that may not happen just because the lenders don't really have anywhere to put that capital. They don't have other transactions to put that capital in. They don't have new developments to put that capital in. So they may be more reluctant to push that, but they certainly could. And to the extent that they did, we would be there and ready to move.

And I guess, kind of, just like a catch-all or in case we missed anything that came up in other meetings, just if you can, kind of, comment on what gives you the most optimism heading into 2027 for the MAA portfolio?

Well, I'm optimistic because for the first time, we have -- this year, we have a year where supply is decreasing below long-term averages, and that will continue as we get into next year. And I think you're starting to see the impact of that on the blended rates. I'm excited about the trajectory of what that will look like when you get into a busier leasing season. Hard to see that impact a lot of times when you're in a slower leasing season in the fourth and first quarter. But I think certainly, as you get into first quarter, we would expect that to be more broad-based. So I'm excited to see what that looks like because we're seeing the green shoots of that occurring right now in a number of our markets.

Is that different than there's been hope for a while now that the turn would come and some were hoping even in '26. So is that the key difference between -- for '27 versus '26?

Having proof that it's occurring in a number of markets, yes. I mean if you look at our mid-tier markets today, we're seeing blended rate growth of 3% to 5% even third quarter to date. So we're seeing significant strong performance in those markets. And then when we start to see that also occurring in some of our higher supply markets, I think it gives us confidence of what that trajectory could look like when we get into the busier spring leasing season.

And so I think you said that you were tracking, kind of, 2.2% of supply in 2026. Can you share '27?

Yes. I think the last I saw was about 2.4%, something like that. And some of that -- those numbers move a little bit between years, some things get moved around, but that's the latest that we've seen.

And anything, kind of, giving you a little bit of concern heading into 2027?

Well, I think the interest rate headwinds for sure, given us concern. And the thing that keeps me up is just anything that happens on the macro job front, potentially impacting us. But I think the broad demand fundamentals continue to perform well from what we can see right now. But any shock to the system is obviously a concern.

Clearly, balance sheet is in great shape, but just any, kind of, near-term maturities to call out for '27?

Yes. For '27, we have a maturity in June of next year for about $600 million. It's at an effective rate of about 3.7%. So we'll be working to see how to refinance that maturity, and there are some different opportunities that we'll have that we're evaluating at the moment. We'd love to see interest rates come back to us a little bit, but where we sit here today, it's probably hard to see that making a material move that would be in our favor.

I don't know if there's any questions in the room. Otherwise, we'll jump into our rapid fire. So we have -- 3 questions we've been asking all of the REITs at the conference. The first is, if long-term rates stay higher for longer, which has the biggest impact on your sector's earnings? Is it higher refinancing costs, lower transaction activity or less new supply?

Less new supply.

Over the next 3 years, will third-party capital become a more important source of growth for public REITs? Yes or no?

I can't answer that with yes or no. I think it will be more prevalent, but not more important.

And for your sector, will 2027 same-store NOI growth be higher, the same or lower than 2026?

Higher.

Thank you so much. Really appreciate it.

Thank you.

Good morning, ladies and gentlemen, and welcome to the MAA Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, July 30, 2026. [Operator Instructions]

I will now turn the call over to Andrew Schaeffer, Senior Vice President, Treasurer and Director of Capital Markets of MAA for opening comments.

Thank you, Regina, and good morning, everyone. This is Andrew Schaeffer, Treasurer and Director of Capital Markets for MAA. Members of the management team participating on the call this morning are Brad Hill, Tim Argo, Clay Holder and Rob DelPriore.

Before we begin with prepared comments this morning, I want to point out that as part of this discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statements section in yesterday's earnings release and our 34 Act filings with the SEC, which describe risk factors that may impact future results.

During this call, we will also discuss certain non-GAAP financial measures. A presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial debt. Our earnings release and supplement are currently available on the For Investors page of our website at www.maac.com. A copy of our prepared comments and an audio recording of this call will be available on our website later today. After some brief prepared comments, the management team will be available to answer questions. [Operator Instructions]

I will now turn the call over to Brad.

Well, thank you, Andrew, and good morning, everyone. Core FFO results were ahead of our expectations with the sequential improvement in new resident and blended lease-over-lease rates exceeding the prior year sequential improvement. While recovery in new resident lease rates is showing improvement, the pace is slower than we would like given cautious consumer sentiment as we continue to work through the unprecedented high levels of new supply deliveries over the past couple of years and a few of our high concentration markets. We are seeing solid demand, including job growth, household formation and population and wage growth and the increase in inbound migration tire properties in the set.

And the second quarter was the strongest quarterly increase we have seen since we began tracking the metric, reflecting the broad appeal of our high-demand markets. As a result, units absorbed in the first half of the year significantly outpaced new units delivered. As demand remains resilient and new deliveries continue to decline, we expect the recovery to expand and accelerate. Additionally, we're benefiting from our scale and operating discipline. We continue to focus on expense control and with second quarter year-over-year same-store operating expense growth of just 80 basis points, the teams are excelling in this area.

At the same time, the persistent single-family affordability and availability challenges are supporting resident demand for affordable and high-quality rental housing, 2 areas where MAA excels. Our customer service focus continues to differentiate the MAA experience, driving increased resident loyalty and contributing to our record low turnover and strong renewal rate growth, improving 50 basis points year-over-year. We continue to invest in strategic areas of the business to drive future earnings growth, including various new technology initiatives to support our centralization and specialization efforts that will further strengthen our customer service and drive future margin expansion.

As Tim will talk about, we are expanding our interior renovation and repositioning programs, which are supported by the new deliveries in our markets stabilizing. We are, on average, the effective monthly rent per unit new community is over 30% higher than our existing rents, giving us substantial room to expand these highly accretive initiatives. Our property-wide WiFi initiative is in high demand from our residents and is performing well. On the external growth front, the improving demand supply dynamic combined with the decreased availability of capital for new projects makes disciplined investing in new developments and attractive capital allocation option.

In addition to the Kansas City project, we started construction on in the second quarter, we started construction on a project in Nashville, Tennessee in July. And next month, we expect to start construction on a project on the land we recently purchased in Northern Virginia. With one more start later in the year, we are on track to hit our 4 development starts for the year. The acquisition market remained slow with cap rates in the mid- to upper 4% range for high-quality communities that fit our profile. But should more compelling opportunities materialize, we have the balance sheet capacity to support growth in this area.

Together, these initiatives reflect a disciplined approach to deploying capital across multiple growth opportunities while maintaining flexibility as market conditions evolve. This same discipline is also evident in our ongoing portfolio recycling efforts, which remain focused on enhancing portfolio quality and supporting long-term earnings growth.

In the second quarter, we sold a high CapEx 30-year-old property in Raleigh and have 2 additional properties that should close in the back half of the year, a 42-year-old property in Dallas and our 1 property in the District of Columbia. These transactions will wrap up our planned dispositions for 2026. With a track record of successfully navigating economic cycles for over 30 years, we remain confident in our ability to emerge from this recovery period with a stronger, more efficient and higher growth operating platform. We believe our focus on high demand and high-growth markets will continue to lead to higher earnings and lower volatility over the full cycle while our investments in accretive growth initiatives are well positioned to deliver increasing value and earnings contribution as the demand supply balance improves.

We are encouraged by the building blocks in place resilient demand, strong absorption, potentially growing migration trends in a financially strong resident base, all with the backdrop of decreasing supply pressure as we wrap up July and head into August and September, we see the opportunity for growing momentum and remain confident in our ability to deliver compounding revenue and earnings performance as the recovery continues to accelerate. To all associates across our properties and in our corporate offices, thank you for your continued dedication and focus during this pivotal season.

With that, I'll turn it over to Tim.

Thank you, Brad, and good morning, everyone. For the second quarter, same-store NOI beat our expectations with continued lower-than-projected property operating expenses more than offsetting slightly lower average daily occupancy. From a pricing standpoint, new lease-over-lease growth improved 170 basis points sequentially from the first quarter, 20 basis points ahead of the acceleration achieved from the first quarter to second quarter of 2025.

As Brad mentioned, new lease rates have been slower to recover due to lower consumer sentiment and still elevated but moderating new supply in some markets, but we are encouraged by forward-looking trends. Renewal retention rates and lease rates remain strong. Turnover once again moved lower to 39.6% and renewal lease over lease rates were 5.2% for the quarter. As a result, blended lease and re-lease rates were up 100 basis points from the first quarter and up 20 basis points from the blended rate at the second quarter of 2025. Our resident health remains strong as reflected in an improvement in our rent-to-income ratio to 18% and continued strong performance in collections with net delinquency representing just 0.3% of build rents, consistent with what we achieved in the last several quarters.

Broadly, our stronger-performing markets remain relatively consistent with the last few quarters, and we are starting to see some pockets momentum in other markets. We continue to see strong performance in Virginia and South Carolina with Norfolk, Richmond, Charleston, Greenville and the DC area markets continuing to outperform the broader portfolio from a pricing standpoint. As with last quarter, our 2 largest concentration markets, Atlanta and Dallas, outperformed the portfolio in the second quarter in terms of blended lease-over-lease price. Austin is still an underperforming market showed good momentum and achieved blended lease-over-lease pricing that was 300 basis points better and occupancy that was 40 basis points better than the second quarter of 2025.

Orlando is another improving market with blended pricing up 130 basis points from the same quarter of 2025. Phoenix, Charlotte, Raleigh and Savannah are high concentration markets for us that are still facing challenges and the wake of heavy supply pressures despite continued strong demand. During the quarter, MAA Cathedral Arts and Dallas stabilized and MAA Plaza Midwood in Charlotte completed construction and moved into our lease portfolio. MAA [indiscernible] will officially stabilize in the third quarter, though it achieved over 90% occupancy during the second quarter. We moved up the stabilization date of MAA Breakwater, Tampa by 2 quarters due to strong leasing velocity ramps well ahead of our pro forma expectations. We have an additional 2 properties under construction that are actively leasing.

Given the supply pressure in Charlotte, our 2 lease-ups in this market remain the most challenged in the near term with concessions running up to 8 to 10 weeks on certain floor plans. But with our overall lease-up portfolio, we expect to achieve our underwritten yields as markets continue to improve, retaining the expected long-term value creation opportunity. NOI contributions from this group will continue to build through the rest of this year and into 2027. As Brad mentioned, we continue to accelerate and exceed expected returns on our various targeted redevelopment and repositioning initiatives. During the second quarter of 2026, we completed 2,118 interior unit upgrades, bringing our year-to-date total to 3,540 units, 30% higher than the number of units renovated in the first half of 2025.

With year-to-date rent increases of $110 above non-upgraded units and average per unit spend of $5,134, the average cash-on-cash return of approximately 25% versus expected returns of 19%. These units continue to leach faster than nonrenovated units when adjusted for the additional turn time averaging about 10 days quicker. We would expect to further accelerate this program at 2027. For our common area and amenity repositioning program, we have 6 properties that are wrapping up the repricing phase. Five properties that are just starting the repricing base at 6 additional that are in the early construction phase and will begin the repricing base of the spring of 2027. The first group is 98% repriced with average cash-on-cash returns of 13%. We expect similar returns from the remaining active projects that we want to expand our scope on this initiative in 2027.

Our community-wide WiFi initiative that began in 2024 continues to expand. We have 28 live properties where the service is rolling out to residents as leases are signed, and we are further expanding the initiative this year to an additional 38 properties. Resident adoption of the first 28 properties is accelerating, with revenues quickly increasing from $500,000 in the first quarter to $850,000 in the second quarter and will continue to grow from here.

Looking forward to the third quarter, we are encouraged by the early momentum we see in pricing and occupancy and early signs of potentially later seasonal peak. Our strategic decision to push new lease pricing where possible in late second quarter and into July has allowed us to maintain momentum in renewal pricing and new lease pricing, combined with declining supply pressure, strong demand and the broad market level absorption that occurred in the first and second quarters, our crunch sets us up to capture momentum and new lease-over-lease pricing later in the season and achieved renewal rates consistent with the second quarter and well above what we achieved in the third quarter of last year.

With an assumed backdrop of steady demand, fewer units and lease-up and current pricing trends continuing, we expect third quarter blended pricing to be better than the second quarter, a trend not seen in the last 4 years since third quarter deployment pricing typically trails the second quarter.

That's all I have in the way of prepared comments. Now I'll turn the call over to Clay.

Thank you, Tim, and good morning, everyone. We reported core FFO for the quarter of $2.08 per diluted share, which was $0.02 ahead of our second quarter guidance. The outperformance was driven primarily by continued strength and expense management with same-store expenses coming in $0.015 favorable to our expectations and NOI from our non-same-store portfolio contributing an additional $0.01 partially offset by same-store revenues that were slightly below our expectations.

As Brad and Tim highlighted, our teams continue to demonstrate an ability to control cost while maintaining strong resident retention and high resident satisfaction. That consistent execution remains a key strength of our operating platform and contributing meaningfully to our second quarter outperformance. Repair and maintenance and personnel costs were the primary drivers of our expense favorability during the quarter. We funded approximately $81 million in development and predevelopment costs during the quarter. At June 30, our development pipeline totaled $598 million, leaving $237 million of remaining funding commitments over the next 3 years. Combined with the 2 projects that Brad referenced is starting in the third quarter, our development pipeline will total approximately $804 million.

Looking ahead, we expect to add additional projects to the pipeline during the balance of the year and into early 2027, supporting our objective of building and sustaining a development pipeline of approximately $1 billion and reinforcing development as an important driver of long-term earnings growth. Our balance sheet is solid and is set to support our development pipeline any acquisitions that may emerge along with the other growth initiatives Tim discussed. At the end of the quarter, we had over $880 million in combined cash and borrowing capacity under our revolving credit facility, and our net debt-to-EBITDA ratio was 4.5x.

At June 30, our outstanding debt had an average maturity of 6 years at an effective rate of 3.9%. During the quarter, we continued our measured approach to share repurchases and repurchased 383,000 shares of our common stock at a weighted average share price of $130.66 for a total of $50 million. In June, we entered into an unsecured delayed term loan with a committed principal amount of $350 million with $100 million outstanding under the loan at quarter end.

Turning to our outlook for the year. We have maintained our core FFO guidance and have updated our same-store revenue and expense guidance to reflect our current view of leasing conditions for the balance of the year. While underlying demand remains healthy, the pace of recovery in new lease pricing has been somewhat slower than assumed in our prior guidance. We continue to prioritize long-term revenue performance through disciplined pricing decisions. which we believe support renewal performance and position us well to capture the coming new lease pricing momentum. As a result, we have slightly reduced our expectations for both effective rent growth and average occupancy for the year.

As we updated our revenue assumptions for the balance of the year, we also recognized favorable trends developing in other areas of the business. Expense performance has remained strong, driven by continued discipline across our operating platform, lower projected real estate taxes and favorable anticipated insurance costs given our recent coverage renewal. In addition, our non-same-store portfolio continues to perform well with lease-up communities performing in line with and, in some cases, slightly ahead of our expectations and contributing incremental earnings support.

In 2026, we project over $25 million in incremental year-over-year NOI from the properties represented in this portfolio. Collectively, these favorable trends offset the revisions to our revenue outlook and support our maintained full year core FFO midpoint of $8.53 per diluted share.

That is all that we have in the way of prepared comments. So, Virginia, we will now turn the call back to you for questions.

[Operator Instructions] Our first question will come from the line of Jamie Feldman with Wells Fargo.

Great. I mean just comparing some of your comments on July and thoughts on the third quarter versus what you delivered in the second quarter and then the revenue cut. Can you give us some comfort or maybe talk us through how you decided to cut now how much you decided to cut the revenue guide now? And what gives you comfort that this won't be the same situation, third quarter, fourth quarter in terms of needing to pull back?

Yes, Jamie, this is Tim. I mean I'll talk a little bit about what we're seeing in July, Q3. And I think that's really what is driving our optimism as we are starting to see some momentum as we look out in Q3.

July itself, we expect will be pretty similar in terms of pricing than what we saw in Q2 with occupancy building as we have moved through July and ending at in a good spot with July, I can see. But where we see the optimism and where we think we've made the right decisions is what we're seeing for August, September. First, if we look at renewals for the entire Q3, we have retention rates well above what we saw this time last year, well above what we saw in Q2, and we're continuing to see renewal rates in that 5-plus range. I mean we have visibility pretty much in all of -- but Q3 at this point, probably 98% of our renewals, we have locked in at this point. And then when we look at where we stay with new lease pricing and what we've done on the pre-lease side, obviously, still more to come in the rest of the quarter. We've probably still have about 40% of our new leases or so will still come over the next 2 months.

But when we look at the pre-leasing for all of us, we're running 70, 80 basis points better than we were this time last year and we look at September even running higher than that. So we think with this continued demand, what we're seeing lead volume is up 10%, 15% this time compared to this time last year, visit volumes up close to 10%. And so we do think all of these factors lead essentially could be a little bit of an extended lease season.

And Jamie, I'll just touch on the guide change. I mean the one thing that to Tim's point, and we're still seeing very strong acceleration as we work into the back half of the year. What I would say is just not quite at the same pace as what we had initially expected coming into the year. So still seeing the trajectory, move in the direction we expected, just not quite to the same pace that we [indiscernible] then.

And Jamie, not to be left out here. I'm going to add a couple of comments to this one as well. This is Brad, what the guys have said here a little bit.

And I think it really starts with what we're seeing on the demand side in terms of our view for the back half of the year. Across the board, we're seeing really good demand really across our markets. And in the markets where we do have heavier supply, you think of Phoenix, Charlotte, Raleigh, Savannah, and Nashville. Those markets are a little bit more difficult for us right now. We have a bigger hole that we have to dig out of for those, but we are showing progress. I mean if you look at our entire portfolio for the second quarter, almost 80% of our markets posted positive blends in the second quarter. So you can see the recovery is pretty broad-based. 2/3 of our markets are showing blends above our portfolio average. So if you look at what is below average for us, 1/3 of our portfolio, those are predominantly some of these higher supply markets. So again, we have a bigger hole that we have to dig out for those, but we're doing it.

On the demand piece, you look at absorption in the first half of the year that Tim talked about, second quarter absorption across our markets was 1.8x new delivery. So we're seeing really strong demand. And as we continue through the balance of this year. We certainly believe that more of those -- our markets start to show some of that stronger pricing power, particularly as we get -- we look at the blended rates in the third and fourth quarter.

Our next question will come from the line of Eric Wolfe with Citi.

Maybe just a follow-up on Jamie's question. Can you just discuss your guidance in the second half from blended rent growth perspective, so what you're forecasting in the second half, specifically. And just to make sure I understood sort of the components of what you're seeing right now, you expect your August and September blends to increase from July because renewals are higher and your retention is higher. I just want to make sure I heard that correctly.

Yes. This is Tim. And to confirm on your under second point, yes, I mean, we would expect August, September pricing to get a little bit better from what we had in July for all the reasons we just talked about and the trends we're seeing so far. But if you think about our full year blending in kind of the back half and how we hit our guidance, we're at -- we're a positive 0.3% blended year-to-date through June at our full year forecast is somewhere in the 50 basis point range deployment for the full year.

So with a little more of our leases skewed to the back half of the year, we are somewhere around 0.6% blended is what we're tracking for the back half of the year. And so to maybe put that in a little bit of perspective, what that would look like from a blended standpoint is our Q3 blended performance to be a little bit better than what our Q2 performance was. And then our Q4 performance to look a little bit better than what our Q1 performance was. So that's kind of a way to think about it. And it's the expectation that August, September show the strength that we're seeing right now and then you see a little bit less of a moderation in Q4 based on, again, the demand, the moderating supply and everything we're seeing and not experience the same level of drop-off that we saw in Q4 of last year.

Our next question will come from the line of Nick Yulico with Scotiabank.

I just wanted to, I guess, go back to some of the commentary that you guys gave on the pricing for assets. I think, Brad, you're saying cap rates below 5% you're still seeing in your markets? And I guess my question is, that's the case, and we're still dealing with a sort of a slow recovery in certain markets. Why not like buy back more stock, sell assets rather than put more money into the development pipeline right now?

Well, thanks, Nick. Yes. I mean, I think, first of all, what you have to consider those 4.5 to, call it, upper 4% cap rate range or from the types of assets that we want to buy. So those are brand-new assets and some of our higher-growth markets, on average, what we purchased the last few years have been 1 year old, a lot of times in lease-up. So that's a little bit different type of product than what we generally are looking to sell.

The assets that we have sold this year, the property that we sold, as I mentioned in my opening comments, in the second quarter, it was an older asset, had a lot of CapEx needs. The cap rates that we're getting for those are market cap rates are probably in the mid- to upper 6% range on average. I would say we've got 4 properties that we're selling this year. Those will be in the high 5s to low 6s in terms of cap rates. So there's a little different math on what we're selling.

But in terms of share buybacks, we've talked about this a lot. Our overall focus is about driving long-term TSR performance without introducing a lot of earnings volatility. And so it's very balanced. You've seen that in terms of what we've repurchased. We continue to believe in the merits of putting capital into the development market into the properties that we are developing the average yield expectation of those with conservative underwriting is still in the 6% to 6.5% range. The NOI margins, we've been able to -- or excuse me, NOI growth we've been able to generate from those on average exceeds what our overall portfolio delivers by 50 to 100 basis points.

And then especially given the fact that supply continues to be lower than long-term averages this year and projected to be that way for the next 3 years at least, we'll be delivering into a pretty strong operating fundamental market. So we continue to believe that's the way that we want to allocate capital for long-term TSR performance at the moment.

Our next question will come from the line of Jana Galan with Bank of America.

I was hoping you could talk a little bit about the better-than-expected performance from the lease-up properties. Has there been any shift in strategy on pricing concession usage or job growth in those markets? And then maybe if you could just talk to concession activity overall in your markets.

Yes. This is Tim. I'll touch on that. So on the lease-up portfolio, I mean not really any change in strategy. I mean we -- we're starting to see some momentum. We're starting to see some good demand. If you look at some of the properties, our lease-up portfolio, make [indiscernible] gain over 20% of occupancy over the last quarter. Liberty Row were 30%, Plaza Midwood over 20%.

So I think as we're seeing with the broader portfolio, the number of units in lease-up and the pressure on supply is starting to moderate, and we're starting to see that with the lease-up portfolio, the 2 Charlotte assets, as I mentioned, are the ones that are still a little bit behind in terms of where Charlotte is in the supply pipeline. So as the ones that we're watching that we've seen really good momentum with the leased portfolio, as you mentioned. And then on the broader concession market, not a lot of change from what we talked about last quarter. If you think about our overall portfolio, broadly 4 to 5 weeks is pretty consistent across most of our markets, we are seeing some improving concession activity in Orlando and Charleston or 2 markets I would point to that we're seeing concessions down and then Charlotte, Austin are still were not necessarily up where they've been, but probably the broadest usage of what we're seeing is still in Charlotte and Austin.

But overall, pretty consistent, such a picture from what we've seen in the last few months.

Our next question will come from the line of Brad Heffern with RBC.

Yes. You mentioned in the prepared comments that second quarter in migration was, I think you said the strongest ever strongest since you started tracking it. Can you -- are there any numbers that you can put around that or additional color?

Yes. I mean the numbers that we could put around that, we saw in migration go from, call it, 10% in the first quarter to about 13% in the second quarter, and that -- it's not really one market that we can point to that's really driving that. It was generally an overall increase just in general. So we have seen absolute levels of migration in migration that's been higher than that, but we've never seen a quarterly increase that's matched that in the past. So certainly, 1 quarter doesn't make a long-term trend, but I certainly think in terms of incremental demand components for the business, that's something that we're continuing to watch as we go forward.

Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.

Tim, I just wanted to clarify, is the expectation for blended rate growth in the third quarter specifically from the lower turnover and stable renewal rate growth? Or are you also seeing new lease rate growth improve? Because I know you had talked about the easier comps earlier in the year being a benefit. And then can you also share what new lease rate growth and occupancy were for July?

Yes. To answer the first part of your question, we did -- I mean, it's a little bit of both. Obviously, the renewals are a huge part, and we're seeing, as I mentioned, the retention rates be higher in Q3 than it was both in Q2 of this year and Q3 of last year. So obviously, more nodes of blending in, and we're running 5-plus percent, whereas last year, we were in the 4.5% range. So that obviously played a big part. But we are seeing, as I mentioned, the momentum on the new lease side as well with everything on demand and what we've seen with pre-leasing August, September new lease pricing looks better than it did at the same time last year.

And then to your point about the comps as well. I mean we really saw pricing drop off pretty significantly around this time last year. So last year, July and August new lease pricing dropped about 70 basis points. And then August, September dropped 140 basis points, and we don't expect that to recur this year from all the things we mentioned. But for July, I expect we'll end July around 95.4 in terms of occupancy. And I think the new lease in blended pricing comes pretty similar to what we reported for Q2.

Our next question will come from the line of Adam Kramer with Morgan Stanley.

Just wanted to ask on the capital allocation side. It sounds like dispositions maybe wrapped up for the year. It seems like acquisitions for the type of stuff you guys want to buy probably not -- shouldn't expect much here for the next little while, at least. So I was just wondering, should we expect sort of more share repurchases? Maybe just an update sort of on the debt side, I know there's some moving pieces there. But I guess, more generally sort of what is capital allocation priorities here sort of for the next little bit?

This is Brad. I can certainly kick that [indiscernible], I mentioned that a moment ago. I mean our approach is to have a pretty balanced approach about taking advantage of near-term opportunities as well as taking advantage of long-term opportunities.

To your point, yes, I mean, our disposition plans for the year are close to being wrapped up. We have sold 2 properties. We've got 2 more that should sell by the end of the year. That puts our proceeds. By the way, one of those properties is in the JV, the one that's in the DC market. But the proceeds we'll get from those will be pretty similar to the -- what we've used so far to repurchase shares. So very balanced in terms of how we're looking to allocate capital there. But our priority continues to be development. That's number one. And as Tim talked about, continuing to invest in our WiFi initiative, which is highly accretive use of capital for us. We're growing our redevelopment and repositioning to drive earnings performance over the next year or so. That initiative continues to perform better.

And as the new supply coming into the market stabilizes with rents that are over $500 a unit higher than our rents on average debt. That program continues to perform quite well. So you'll see us continue to lean into that as well. Our property reposition continues to be an area of focus for us. So that's kind of the prioritization that we have in terms of capital allocation.

Clay, I don't know if there's anything you want to add on the debt piece you mentioned?

Yes, this is Clay. I mean as we talked about in the past, we do have a maturity that's coming due in September of this year for $300 million. So we've got plenty of capacity with this term loan in place at some of these other dispositions that Brad had alluded to that will help cover that maturity. So that's our plan for the financial need. Good chance that we come back into the market at some point late this year, potentially early next year. as we continue pushing our development pipeline. But that's what we see right now over the next few months.

Our next question will come from the line of Haendel St. Juste with Mizuho Securities.

I wanted to go back to the markets that were underperforming, you outlined Charlotte, Raleigh, Nashville, where supply still seems to be a factor. In contrast that with some of the Sunbelt markets where you're seeing some improvement, you mentioned often a few times, I think you mentioned Orlando. I guess I'm curious if it's that's down to submarket locations? Is it something else? And also maybe some color on the -- you mentioned the top 2/3 of the portfolio blends are better than the bottom [ 2/3 ]. So maybe some color on the top 2/3 blends versus the bottom?

Haendel, this is Tim, and I'll touch on the first part of that. I mean for the markets that are performing pretty well, it's generally pretty broad-based. We've talked a lot about the stronger markets here for several quarters. So I would say those continue to be broad-based in most of the submarkets. I think where we're starting to see some momentum and some green shoots as some of these improving markets where it's popping up in submarkets.

So Austin is a perfect example of that, where some of the near South submarkets. We've seen some momentum over the last couple of quarters. And then I would say, into the second quarter, some of the Round Rock and even some of the northern assets started to show some momentum where you had some of those properties that were mid- to high teens negative new lease pricing just a couple of quarters ago that are now at the mid-negative single digits 1,000 basis point types of improvement in new lease pricing, and that's where the opportunity lies in a lot of these highly supplied submarkets as those concessions burn off, that's where you start to see some pretty quick momentum, but still saying broadly in our larger markets, more of the urban submarkets do well, particularly in the Dallas and Atlanta, in Tampa that's been a little bit weaker. We're seeing some good performance there.

And then on the weaker markets, it's more just -- it's more broad-based. So Charlotte and Raleigh, some of those is -- they were a little further along in the supply -- or a little bit later in the [indiscernible] pipeline and get an extreme amount of supply. So those are ones where if you have a market that's overall underperforming, it's because we're seeing it more broadly across a lot of submarkets. I think those are -- become more of a story as we head into next year.

And Dale, this is Brad. I'll just add one comment there on your question about the top 2/3 versus the bottom. And I think in general, what you see playing out there is an indication of our overall diversification strategy, where we are allocating capital between large markets as well as mid-tier markets.

And generally, what you'll see on the top portion of that graph, so to speak, are a lot of our mid-tier markets. A higher proportion of those certainly are above the portfolio average. And generally, that's what you would expect right now as they face less supply pressure than some of these other markets -- some of the larger markets that you mentioned and we've mentioned, and so the demand supply balance weighs more to the demand. We're seeing strong demand in those markets. So you see obviously stronger performance out of those right now. And that's what we would expect to occur as demand continues, absorption continues in some of these more supplied markets like Charlotte, Phoenix or Raleigh as that new supply continues to get absorbed, but that's what I would say characterizes that breakdown to some degree.

Our next question will come from the line of Alexander Goldfarb with Piper Sandler.

Just a sort of question on markets overall. Clearly, Sunbelt has a long history of strong growth over time. The amount of oversupply is clearly a lot to deal with for anyone. But the lack of supply just nationally, how is that affecting your thoughts on other markets? I mean we've seen the Midwest become more popular from some of the coastal guys. And just as you guys look to allocate capital, are there other markets that maybe previous cycles, you said you would have said no but now you're increasingly interested in? Or is it sort of the basic reality that there's just a lack of supply of product on the market? And therefore, even markets that you'd like to enter, it's just hard to see a path to establishing a presence that's economic?

Alex, this is Brad. I mean we've talked about it in the past. We do continue to look at new markets and evaluate new markets. And I think, certainly, the key component of that is we want to maintain what our overall strategy is, and that's allocating capital markets that are -- have high demand.

And if you look across our portfolio, our markets generally have that, particularly when you're comparing to other markets. I don't think we want to go into a market just because it's a low supply market that's only a benefit to the extent that you have demand. And so we do think over time, the demand fundamental is what has the highest impact is -- has a higher correlation to overall performance or performance. So we'll continue to focus on the highest demand markets that we have. There are markets that we're looking at that have similar dynamics. Columbus, Ohio. We've talked about that before as a market that we've considered given some of the dynamics there.

We want certainly a business-friendly environment in low taxes continues to be part of that. But I think it's also important to remember, if you look at the demand drivers really across our markets, I think it was in the second quarter, 18 markets across the country showed greater than 1% job growth. 11 of those markets were in our footprint. Only 5 markets showed greater than 2% job growth and 4 of those were in our markets. If you look at population growth, whether you're looking at 1-year, 5-year, 10-year, 14 of the top 15 markets or MAA markets. So I think we continue to be in the right markets and continue to allocate capital to the right markets for long-term performance. It has the comment we were thinking about our markets and the number of markets that are performing above average and are showing positive blended lease rates being so broad the recovery is coming.

And so as the new supply continues to get absorbed in some of these other markets, this high demand that we continue to see will pay off, and we'll continue to see the long-term performance dynamics, I think, that we've seen historically that you mentioned it at the beginning of your question.

Our next question comes from the line of Ami Probandt with UBS.

The sense of [ Bureau data ] has shown an uptick in permits across a handful of some markets. So recognizing that some of these might not be directly competitive to your portfolio. I'm still wondering, is this a sign that developers are starting to get more comfortable with the trajectory of rent growth moving forward? And getting back in and ramping up starts again?

Well, I definitely think developers want to develop. And from the developers that we talk to as part of our repurchase platform where we have relationships with the top developers in the country. I would say broadly, we're not seeing an uptick in starts coming. In fact, we continue to find opportunities to partner with those developers on additional projects because their equity partners have backed out. of projects.

I think the ability to find capital, equity capital, in particular for new developments continues to be challenged. And we're not seeing that really change at the moment. I think to your point, permits kind of ebb and flow a bit, and the relationship between permits and construction starts can ebb and flow. But we're not seeing from the folks we're talking to and the data we're looking at, we're certainly not seeing an uptick. If you go back and you look at new starts for the last 13 quarters have trended below long-term averages. So we see that trend continue as we look out over the foreseeable future, we don't see a material pickup from this point right now.

Our next question will come from the line of Anthony Paolone with JPMorgan.

You have [ Nolan ] on for Tony. Going back a little bit, I think, Brad, in your prepared remarks, you mentioned the cautious consumer. Was there anything, I guess, you guys were seeing specifically from a consumer perspective point of view that caused a slowdown in new lease pricing, I guess, were you seeing tenants shop around a bit more? Just curious on any color you could give us to what's driving that shift?

Yes. This is Brad. I can start. Tim can give any other details. Yes. I mean I think what we've seen is a very healthy resident, a very healthy prospect. Our rent-to-income rate ratios continue to be the decline, the best that we've seen in a long, long time at 18%. Our collections continue to be really, really strong. But I think in markets where there are a lot of options. There is a lot of supply. We do see folks shopping around a bit more, looking at all their options in the market and taking a little bit longer to make decisions. So we have seen that.

I think the good news is, even to the point that Tim was mentioning earlier about the momentum we have in August and September. I think in part that does indicate a little bit more optimism from the prospects perspective as they look out over the next couple of months, there is a level of, I think, optimism that we're seeing as we sign those pre-leases out for the next couple of months.

Tim, anything you'd add to that?

Yes. And just to your point about it's the impact on new lease pricing. I mean I think for Q2, we did see people just taking longer shopping boards, as Brad mentioned, our pre-leasing was down a little bit in Q2 relative to last year. That's more of an indication of people that are making decisions and feeling confident where they are.

I think what people shopping around longer, they're making their decisions later, they're doing more immediate type of move-ins. And that is kind of the most volatile part of the new lease pricing curve. And so I think that plays into it. But to Brad's point, we're seeing that change a little bit in Q3. We're seeing a little more pre-leasing and a little more momentum that gives us confidence for the rest of the year.

Our next question will come from the line of Steve Sakwa with Evercore ISI.

I just wanted to touch on expenses, which has obviously been a bright spot for the company this year. Are there things that we should be thinking about as we think about '27 expense growth? Any kind of one-timers or things that may not repeat that help this year that may not be there next year?

I say, this is Clay. I'll touch on that for a second. I mean I think what you're seeing here this year is just our continued focus, as you alluded to, our continued focus on controlling expenses. And we've shown a long history of that and continue to show that even in the current environment.

As we look forward to next year, I don't see anything on horizon at this point that would make me think that there are some onetime savings or any onetime large items coming in our direction. I would expect next year to look somewhat similar. It could be a little bit higher growth rate just given where we are today. But I would expect, generally, it would look not too far different than what we're seeing at the moment.

Our next question will come from the line of Michael Gorman with BTIG.

Maybe going back to Alex's question on markets for a second and take the flip side of it. As you've gone through this cycle, looking at any of your market exposure, maybe especially some of the smaller exposures, are there any markets that have changed structurally in your view or operated in such a way that your view of either expansion or even existing in those markets to begin with has changed I'm thinking maybe even specifically like Denver where the regulatory environment has gotten tougher. So any commentary there would be helpful.

Yes, this is Brad. I would say broadly, not really. I would say, you mentioned the one market that we've seen the most change from regulatory perspective. We've seen it in Nevada, but we only have 2 properties there, which are core for us long term. But there's certainly some talk in Virginia. I think some of that got pushed off another year or so. The District of Colombia.

A lot of things going on in that market, but with us selling our one property in the district shouldn't be exposed to that. So not a lot of change from [indiscernible] just overall portfolio perspective, we still have some markets where we have 1 asset or 2 assets, which from a long-term perspective, aren't properties that we want to hold. But I would say those markets also continue to do quite well. Another market that we'll have to consider long term that continues to perform very, very well. from a demand perspective, it can get some supply, but demand continues to be really, really strong in Dallas, but it's also one of our largest markets. So that's a market that we could potentially look at adding to and certainly recycle capital out of longer term.

But for the most part, we're not seeing big changes in any market [indiscernible] Denver component that you talked about, the impact of that is supply at Denver is coming down very, very rapidly. So I think performance will turn around in that market as a result of that.

Our next question will come from the line of Alex Kim with Zelman & Associates.

I wanted to drill a little further into the same-store expense growth guide [indiscernible] by 90 basis points at the midpoint. I was curious how much of the improvement reflects sustainable operating efficiencies versus timing items and was wondering if you could discuss the outlook for some of the cost buckets, specifically insurance as well with the, I believe, the repricing occurring in July at some point.

Yes, Alex, this is Clay. Yes, as we're guiding to for the -- as you mentioned, the total expense growth for the year, our same-store portfolio is a little about around 1.75%. And what we're seeing there -- what where we're seeing some good benefits there is really across the board. We talked a little bit about repair and maintenance costs, personnel costs that we saw in the second quarter that we're expecting that to continue out through the back half of the year. The teams have done a really good job of controlling those expenses. We've got a full staff, which, in turn, typically leads to lower cost whenever we need to turn a unit and then you've got the increased retention rates, which are clearly moving in our favor. And so that's helping provide some benefit there as well.

You mentioned -- and then I'll go back to the personnel costs real quick. I mean we continue to plot some properties. So we are continuing to see some benefit there, and I expect that benefit to continue on over the course of the year and potentially even into next year as we look to do more of that. You mentioned insurance costs, we did have a renewal in July 1, and it was a very successful renewal. We had premiums that in total, declined by over 12%. As you kind of layer that through what the impact is for this year, for the back half of the year -- for the full year, we're expecting a little over a 6% decline in insurance costs year-over-year. That marks our third year of reduction in premium and insurance costs. So continue to see really, really good performance from that standpoint.

And then the last one I'll call out is property taxes. Given just the environment that we're operating in, the NOI decline that we've seen and others have seen in our markets, obviously, having an impact on real estate valuations. And so we are getting a little bit of benefit there. We continue to focus a lot on that area. It's one of the largest -- it is the largest expense line in our and the stack there. And so we spend a lot of time fiction that making sure that the valuations that are assigned to us are appropriate and pushing back when we need to. So we'll continue doing that to manage that aspect of it.

Our next question will come from the line of John Pawlowski with Green Street.

My question is on understanding the development economics for your pipeline right now in an environment where there's a potentially a pretty big wide spread between yields when you quote and others kind of gross yield based off of face rents and then net yields once you factor in concessions. So let's just take the lease-up pipeline. When these 4 or 5 projects actually stabilize second half of this year, early next year, what's like the true net effective cash yield on this vintage of deliveries, assuming no change in market rents, just today, net effective rents, what kind of yields are we looking at?

John, this is Brad. I think [indiscernible] now. But I'll tell you for our current lease-up pipeline, all average projected NOI yields cash yields on [indiscernible], I would say to date, what are those delivering probably close to a 5% yield because of the higher concessions that we have. I would say the good news about that is on our renewals for really across the board of all of our lease-up properties, we're getting about 9% to 10% lease over increases. All those lease-up renewals.

So the concessions are burning off, which that's what gives us confidence in our ability to hit those yields that we originally underwrote, which were call it, about 6%. If you look at a new underwriting that we're doing today for a new project, we think the yields are somewhere in the 6.25% to 6.5%. That will include about 4% or so contingency on construction costs today, we're delivering projects 2% to 3% below cost of what our expectations are. That also does include some trending.

Generally, what we do is we'll trend rents from today until we use today's market rents, we'll trend those to the stabilization period, which is 3 to 4 years, somewhere, call it, in the 2% or so range a year. If you go and look at where we're trending rents versus submarket expectations were normally 2%, 3%, 4% below market expectations in terms of rent growth over that period of time. So that gives you a little bit of a sense of where our revenues need to be or where we're expecting revenues to be versus where the market is expecting revenues to be. And I certainly don't think that it's unrealistic to think that from today's market level rents that they would increase a couple of percent over the next 4 years.

Our next question will come from the line of John Kim with BMO Capital Markets.

I know you talked about this a bit, but I think there's still some confusion on your assumption that the rents will accelerate in August and September because July, you mentioned is similar to the second quarter of the year -- or second quarter. So can you just clarify what momentum you saw in June and July? And what gives you confidence that it will accelerate towards the end of the quarter given in a normal seasonal year of rent since we peaked in August?

John, this is Tim. Yes, I mean, what we're seeing is, one, the demand side, as we talked about, on the ground, lead volume, visit volume is significantly higher at this time this time, this year compared to this time last year. And with some of the strategic decisions we made late Q2, that was really geared towards maximizing pricing as we could in Q3. And I think where we're seeing that play out first is on the renewal side, as we talked about, where again, retention is higher and the actual renewal rates that we're getting are significantly higher than what we got in Q3 of last year.

And then we spent a lot of time just looking at what our leasing velocity is and what are the leases on the books that we have for Q3 so far. Obviously, still allowed the time to go with new [indiscernible] over the next couple of months. But when we compare where we are this time compared to the same time last year, the rates we're getting in August, September, new lease rates are pretty significantly better than, again, the same time last year. So you combine that with moderating supply on the absorption that we saw in the first half of the year.

But frankly, with a little bit easier comps at this time last year. So all of those factors play into the to what we're seeing and the momentum that we're seeing that we expect to play out over the back half of the year.

We have no further questions. I'll turn the call back to MAA for closing comments.

All right. [indiscernible] the comments from us. Certainly, if you guys have any follow-up questions, feel free to reach out. Thanks, everyone, for today.

This concludes today's program. Thank you for joining. You may disconnect at any time.

All right. Well, good morning, everyone. We'll go ahead and get started. First of all, I just want to thank everyone for joining us this morning. What I thought I would do is start out just giving you guys a summary of who MAA is, what we're focused on for those of you that aren't as familiar with the story, introduce the team here for sure. And then really walk you through some of the areas and reasons why we're pretty excited about where we sit today and what we think the next few years and the opportunity for growth looks like for us.

So first, on my left, I have Clay Holder, who's our CFO. On my right, I have Tim Argo, Chief Strategy and Analysis Officer; and I'm Brad Hill, our President and CEO. But -- and then we'll do questions at the end, too, or you guys can raise your hand at any point and ask a question. We're happy to answer whatever you guys have there.

So for those of you that aren't as familiar with MAA, we're a multifamily-only focused REIT. We're in the S&P 500. We have a strategy of delivering really long-term TSR performance for shareholders through the full cycle. And we look to do that by delivering high-quality earnings growth and dividend growth. And our strategy is really focused on driving that long-term TSR performance. And we do that in what we think is a pretty differentiated way by focusing capital on the highest demand region of the country, which for us generally aligns with the Sunbelt region of the U.S. And we also have other markets that aren't considered Sunbelt, but they have a lot of the same high-growth, high-demand characteristics, pro-business environment as generally the Sunbelt markets do.

And then we look to broadly diversify within those markets and if you look at where we're located, we're probably the most diversified multifamily real estate REIT. We are in more markets, more submarkets across our regions. We also allocate capital both in large markets as well as mid-tier markets. And I think that's pretty important and aligns well with our strategy, which is providing the highest return possible at the lowest volatility. And that's really what our goal is.

And if you look at Slide 6, if you don't have a presentation, we can certainly get you one. I'll walk through some of the slides here. But certainly, if you look at Slide 6, you'll see that we've performed quite well over the long term. If you look at the 10-, 15-year performance that we have there, if you look at the compounded dividend growth that we've been able to provide, it's pretty significant. And so I think we've really held true to what our strategy is in terms of long-term TSR performance.

Certainly, if you look at performance over the last few years, it's been more of a challenge. In our region of the country, in particular, we have seen high demand, but we've also seen high supply, a record level of supply in our markets, the highest we've seen in over 50 years. And if you think about we had 5 years' worth of supply delivered in a 3-year period, certainly, our performance has been impacted and been challenged, particularly on the new lease rate side of the business. Occupancy has continued to be strong. Renewals have continued to be strong, but certainly, the new lease rates, which is the most competitive rate for us, has been under more pressure for the last couple of years.

However, our focus and our team's focus has been to compete, and they have competed very, very well over this time. And in fact, if you look at our effective rent performance over the last few years in our markets and you compare that to our peers in those same markets, you'll see that we consistently outperform, which I think is a testament to our teams and the overall strength of our platform.

And so as we enter what we think is a multiyear recovery period, certainly, as we're entering the stronger leasing season, May to August, where we'll sign 50% of our leases during that time, we're certainly excited about the trends we're seeing and the momentum that is currently building for the recovery over the next few years. And there's really a few reasons why we're excited about that. First, we are capturing improving leasing trends. And these trends, that's what we expected this year when we laid out our forecast, and our pricing and revenue are generally in line with our expectations to date.

And I think importantly, we're seeing building momentum. If you look at Slide 31, I'll talk about that here in a minute. We are achieving the momentum that we expected coming into this year. And there's really a few reasons for that building to Slide 31. If you look at Slide 18 first, what you'll see is the demand dynamics in our markets continue to remain pretty robust, whether you're looking at job growth, household formation, or you're looking at population growth, the trends in our markets continue to be quite strong, 2x what you see in other regions of the country, which aligns very well with our strategy to be in the high-demand region of the country.

And one of the encouraging components of the demand side of our story is, in particular, we've seen a pickup in job relocations coming to our markets, particularly over the last 3 or 4 months. which we really didn't see for the past year. It really calmed down a bit, call it, mid last year to the end of last year. But that's really picked up now. If you think about Starbucks announcing 2,000 new jobs that they're moving out of Washington to Nashville. If you think about Goldman Sachs relocating more jobs to Dallas, JPMorgan to Charlotte. So those are encouraging trends that we continue to see within our footprint that just indicates still strength on the demand side.

As we indicate on that same slide, migration trends continue to be really positive. We have not seen that. Certainly, it's down from the COVID peaks, but it's really in line with long-term averages where we generally are seeing more people coming into our markets.

And then the other thing is supply continues to decline. If you look at Slide 24, kind of long-term average supply in our markets is about 3% of inventory. We have seen that decline significantly. This year, it's down about 40% from last year, and it's down 60% from 2 years ago. So the supply picture is materially changing in our markets as we speak. And that's pretty encouraging as well. And sorry, but we're going to go, kind of, back and forth a little bit here.

The other thing on Slide 20 shows that the new starts continues to be low. So not only is supply declining, but new starts is also low, and it's been below long-term averages now for the past 3 years. And in fact, the trailing 12-month starts is about 2% of inventory. So that just indicates the runway that we have over the next few years is pretty compelling. And then getting to the actual results that we put out, we did put out in this package an update of performance.

You look at Slide 31, and I think that really shows the capturing momentum that we're talking about. We have seen an acceleration in our blended lease-over-lease rates, which are up about 140 basis points in May from the first quarter. As I mentioned a moment ago, our renewals have remained strong. And the improvement that we're seeing is coming on the new lease rate side, which is really encouraging given that's the most competitive. And that's up 240 basis points in May from the first quarter.

So one of the things that we're also pointing out in this -- the chart on the top left on Page 31 is there are some nuances in lease-over-lease rates. You get differences in unit mix, you get difference in term time lines that can change -- impact those numbers a bit. But if you look at just the actual dollar amount of the average blended lease pricing that we're getting and you look at that for May, it's the highest that we've seen in almost 2 years. So we are making continual progress in terms of the rental rates that we are executing. And I think that's a positive as we continue to work through the summer leasing season here over June, July and into August, we expect that to continue to build.

And then the second reason why we're encouraged about the trajectory of where we're going is we have had a very intentional and disciplined approach to expenses, believing that as we control the expense line, as the revenue line continues to improve, more of that benefit will make it to the bottom line to NOI and then ultimately to earnings growth. And if you look at our expense performance versus peers over the last 3 years, you'll see that we've done a tremendous job in controlling expenses, and that's very intentional on the part of our teams.

And then the third point is that we do have -- we'll talk about these in more detail but we do have a number of growth initiatives that will increasingly contribute to our NOI performance going forward. We've talked a lot about these over the years, and we're leaning into them even more now, our growing renovation and redevelopment pipeline, which is benefited by the stabilizing new supply that's coming into the market. We are also maintaining our focus on development. We have built that development pipeline from just a couple of hundred million to close to $1 billion on a run rate basis, and we'll continue that. I'll talk about that here in a moment. And then we have our property-wide Wi-Fi initiative as well that will continue to deliver for us.

And then the fourth reason that we're excited about our ability to deliver compelling earnings growth going forward is on Slide 12 and 13. And we've put a lot of focus in this area. We -- this is what we call our reimagine. And it's really a focus to continue to strengthen our operating capabilities. It's something the entire organization is excited about. We've worked on this now for about 2 years to get to the point where we can actually roll this out, and we're piloting this, we'll talk about here in a minute, in 3 markets today. And we're really focused on driving customer service. We -- through our renewals, we continue to believe that customer service is a differentiator on our platform, and we're able to drive better results as a focus -- as we focus on customer service.

So it is a focus on customer service, improving the alignment of our roles, our workflows, all geared toward increased -- using technology to support consistency and efficiency across the platform. So we'll talk about that here in a moment, but some tremendous opportunities really building from that. So we're really excited about where we're heading as an organization.

So with that, I was going to turn it over to Tim and let him talk about some of these growth items.

Thanks, Brad. So Brad alluded to the improving supply-demand environment that we're seeing that we think will drive some pretty strong organic earnings growth over the next few years, but we have several additional opportunities that we think could push that even higher and drive earnings growth beyond just what the supply-demand environment will give. And Brad alluded briefly to a couple of these, and I'll touch on a little more detail the main ones we're focused on right now.

So first -- and these are detailed in Pages 12 to 15 in the presentation, if you want to take a look at that. The first is our unit redevelopment program, and this is a program that we've had in place for years now. But with the supply environment, new developments coming in on average about $400 to $500 higher than what our average rents are, and that's what really creates the opportunity to where we can expand this program even more. So we have plans for about 7,000 units that we'll do this year. It's varying scopes, and we do it on turns, very disciplined in how we do this program. We have multiple scopes. We can -- there are lighter scopes, we may spend, $3,000, $4,000, $5,000 per unit. There are heavier scopes we may spend, $10,000 to $12,000 per unit just kind of based on the market and the submarket and the property and what we think the market is needing or can get the returns we're looking for.

On average for this year, we're planning to do about 7,000 units and spend about $7,000 per unit. So call it $50 million or so of spend. We think we can accelerate that over the next couple of years as the supply picture continues to be reduced. On average, we're getting about a 20% cash-on-cash return. There's about an 8% to 9% rent increase that comes with that. So it's certainly one of our strongest and highest best uses of capital. And the way we do it, as I mentioned, we do it on turns so that we can test and make sure we're getting that -- really getting that return. There's one approach where we can go in and do a heavy redevelopment, take units down and redo the whole building and raise rents, but it's difficult to know are you getting those returns.

So we do it on churn, renovate unit compare it to a nonrenovated unit of a similar floor plan. We can make sure are we getting that rent increase that we thought we could or should. And if we are great, we continue; if we're not, we can pause it, we can adjust the scope up or down. It's a very flexible program, and it's an evergreen program. And we continue to have more units that we think can be a part of this program as they age or as tastes change and as we go through. So that's certainly an opportunity that will drive additional new lease growth as part of that program.

Second would be our property repositioning program, which is similar to the unit redevelopment, but more focused on the property amenities. So going into certainly the properties that are well located and maybe have dated amenities that we can upgrade, redo pool areas, redo fitness areas. We're doing a lot of retrofits of open or common areas of what we're doing pet spas, which is certainly a huge amenity right now. And again, we go into properties, we're spending there $3 million to $3.5 million on average and able to raise the rents once we complete that and reprice once we complete that program, getting again about a 13%, 14% return on those. So also a great use of our capital. That's a program that we're doing 5 to 6 new properties per year, and you'll see us continue to move on that program as well.

And then the third one I'll mention is the reimagine that Brad touched on. And this is really a transformational program that we're doing to reimagine how we think about our on-site operations, which is really Phase 1. I think there's additional phases where we look at other areas of the business. But the first phase is focused on the on-site office teams. And it's really all about creating specialist roles and centralized roles that we can -- that our associates can do their job better. They're more engaged and we can serve the residents better. We can serve the prospects better. We can ultimately serve the shareholders better as well.

The historical model has been more generalist type roles where you're having one person need to -- they got to be good at customer service, resident service; they got to be good at sales. They got to be good at administrative duties. They got to be good at systems. What we're trying to do is specialize those roles, and we think as a result of that, each employee, each associate can be better at what they're doing. It's something they enjoy. It's something they're more engaged. We believe lower turnover can come with this. And so what we've laid out in the deck is we think over the next 2.5, 3 years, $25 million or so of NOI from this phase of the program. It's a combination of expense reduction and revenue growth.

And we're going at -- as Brad mentioned, this is all about improving the resident prospect customer associate experience. There'll be some expense cuts that come from that or expense reductions that come from that as we introduce new technology and restructure, but it's really about improving the resident associate experience. We think of that $25 million, probably $15 million or more of that is more on the revenue side. And it's -- I mentioned the specialists. It's a collection specialist. We think we can improve collections. It's a renewal specialist. We think it can improve our renewal results. It's specialists on generating leads and driving leads and nurturing leads, specialists on touring and leasing.

So we think we can get better at all of that and ultimately drive more tours, drive more demand and that ultimately manifests itself in new lease growth. So that's -- as Brad mentioned, we just started on that. We have 3 waves that we've rolled out over the last few months, testing and kind of making sure and tweaking where we need to, and then we'll continue to roll this program out over the next year, 1.5 years. So certainly excited about that, excited about all these opportunities. I think we can push earnings growth even well beyond our historical average.

Yes. Well, thanks, Tim. One of the other areas we talked about from a growth perspective was development that I'll hit on real quick. This has been a very intentional focus of ours over the last few years. We've built our development pipeline from 4 years ago, call it, just a couple of hundred million dollars in size, and we've now grown that to close to $1 billion. It will ebb and flow a little bit as projects deliver and come off of the construction line. And while we're in the midst of starting new projects, I think we're around $700 million today, as indicated on Slide 10.

We started a new project in the second quarter in Kansas City. We have another project we'll start shortly in Nashville with a couple more coming by the end of this year. But we've really built that pipeline to be about $1 billion, which is about $350 million to $400 million worth of spend a year. And now that we've built it at that level, we want to maintain it at that level. It's a very accretive use of capital for us. We're able to achieve yields on our developments that are between 6% and 6.5%.

So very accretive there. And I think importantly, the development capability for us continues to deliver higher NOI growth rates than what we're able to get out of our existing portfolio in the 50 to 100 basis points range. So for us, what that basically entails is delivering an incremental $20 million to $25 million of NOI every single year that's at a higher growth rate than our existing portfolio. So from a value proposition perspective, that continues to be a great use of capital.

And if you go back and look at our performance over development -- on development over the last 10 years, we have been able to deliver developments that, on average, have delivered rents 2% to 3% higher than what our expectations are. So we're not stretching in terms of our underwriting on deals to make deals work. We've been able to deliver them on time. And we've also been able to deliver them about 2% below our expected cost. So the result of all of that, on average, we've been able to exceed the yields on development versus our expectations by between 50 and 70 basis points. So a significant value creation opportunity for us.

And we'll try to keep that pipeline, as I mentioned, in the, call it, $1 billion, $1.2 billion range, which is $350 million to $400 million of spend a year. And that's about 4% to 5% of enterprise value. Given the size of the company, the size of the balance sheet, we feel like that's a really good place for us to continue to hold that. So that continues to be a really good use of capital for us and something that we'll continue to maintain.

So with that, what I thought I'd do is turn it over to Clay to just maybe hit on some other items that he has from this area.

Yes. Just a couple of quick comments I would make, particularly around our resident health, touch a little bit on the expense control that Brad and Tim both mentioned and then talk a little bit about our balance sheet. Today, as we sit here, our residents remain very healthy with rent-to-income levels at about 20%, which is roughly 200 basis points lower than what it was 2 years ago. Our collections performance remains very strong with us collecting well over 99% of rents. And our delinquency at the end of the first quarter was just under 30 basis points. So a really healthy resident profile as we sit here today. These guys touched a little bit on expense control and how we've been very focused and disciplined in our approach to that.

Brad mentioned that we've shown some very good performance versus our peers over the past number of years. Over the past 5 years, we've outperformed by 290 basis points on both property same-store and overhead expenses. And we'll continue to focus on that as we go through this next year and 2026, and you're already seeing that a bit as we've continued to push on one of our initiatives to pod our properties, and that shows itself in personnel costs, where we're taking 2 properties that were previously under 2 managers and combining those to be under 1 manager. So you get some savings there.

And then lastly, I'll touch on our balance sheet. With our A- credit rating, our balance sheet remains very well positioned to support the development, the redevelopment and the other initiatives that these guys just spoke about. At the end of the first quarter, our net debt to EBITDA was 4.5x, and our debt maturities are well laddered with an effective interest rate of just about 3.8% -- looking ahead over the remainder of this year, we have a $300 million maturity coming due in September of this year. And then we also plan to redeem some preferred shares in the third quarter as well at around $43 million. So it's a little bit of an outlook of what we see for our financing needs over the remainder of the year.

With that, I think we're ready to turn it over for questions.

Yes. If anyone has got any questions.

How higher oil prices affect your...

Yes. Well, I think in terms of our tenants, certainly, I think we're all, to some degree, impacted in terms of the gas prices. But I think to the Clay's point a moment ago, if you look at the average income for our residents and the rent-to-income ratios that they're paying, it's very, very low at 20%. So the discretionary income that our residents generally have is still significant. And so we're not seeing any impact at the moment on, as Clay mentioned, in terms of our residents' ability to pay associated with that. I think where we also keep an eye on that is how does that impact our R&M expenses? How does that impact potentially our construction costs on new developments. As Tim mentioned, we also have a big component of our business is on redevelopment and repositioning our properties. So we have significant spend there. And to date, we really haven't seen any impact associated with that.

And I think if the oil price increase drags on for 6-plus months, I think it's something that eventually starts to make it into whether it's the cost of paint, the cost of plumbing materials where oil is a component of all of that could start impacting those costs. But at the moment, we really haven't seen any of that impact.

If you see that impact, do you think that there's room to raise rents...

Yes. I mean, as we talked about, I think oil as a percent of spend for our residents and the population in general is less than what it has been historically. So I do think that it's less impactful than it has been in the past. It's still impactful. But I do think if you look at our rent-to-income ratios 3 years ago, we were at 23%. And so today, we're at 20%. So I do think we still have significant room even if there is some headwinds associated with oil prices.

[indiscernible]

Yes. I mean we haven't seen anything yet. I mean a couple of things that we look to track with our resident base is, one, it's been talked about the unemployment rate for 25 and under being higher and those being the most impacted potentially by what's happening with AI. So we've been tracking what percent of our residents moving in are 25 or under. It's about 20%, and that's consistent with what it's been over the last few years. Our average age is about 37, 38 or median age, I think it's around 34, 35. So we have a little bit older demographic as well. And then the other thing we look at is of our applicants are they needing to get a guarantor or get somebody to help pay for the rent, and we've seen that actually go down.

So at least in terms of what we're seeing on the impact, I don't think -- we haven't seen it as of yet. There'll likely be some dislocation disruption. But as Brad mentioned earlier, the amount of jobs coming into our markets that are high-quality, high-paying jobs continues to increase. So there'll be some ebbs and flows to that, but nothing we've seen impactful so far.

Can you give us context on the 30 basis points [indiscernible]?

Yes. Honestly, for us, delinquency has been a key part of our outperformance for years. So to put the 0.3% in context, it's right in line with what we were pre-COVID. In the heart of COVID, we got up to 0.6%, 0.7%. There were a few markets that were a bit higher than that. But we've long had a process of trying to make sure we're doing what we can on the front end to screen out those applicants that may have payment issues. But yes, for us, this 0.3%, and we've been at that now for the last 2 or 3 years. We've been back to our pre-COVID levels. So it's really a nonissue for us.

How about the [indiscernible] I mean I'm going back to then...

We were probably 0.6%, 0.7%, something like that.

Any other questions? One last point I'll make, and then we can wrap it up, see if there are any last questions. But I wanted to just quickly comment on Slide 21. As we go through the recovery that we're certainly in right now, I think Slide 21 shows a little bit about where we've been. And really what this slide indicates, I think, is there's a progression that we go through as the market heals from where we've been and recovers. And generally what that progression is, market level occupancies are impacted by the amount of supply coming into the market. You see concessions pick up.

And then as you -- which is what we saw, by the way, last year, we -- as we got into April and May after Liberation Day, we saw folks focusing on occupancy. We also saw increased usage of concessions. As we sit here today, it's a very different picture as we look out where we are and where we're going. Generally, what you see is market level occupancy start to stabilize. And what this chart is really showing, this includes lease-ups in our markets, we see occupancies are in line with where they were kind of pre the supply impact. So they're, kind of, in line with historical averages.

And generally, what you see from that point is you start to see concession usage start to decline, which starts to give you more pricing power. So we're in the midst of that kind of recovery process at the moment. We're seeing certainly some of our markets, we're seeing less concession usage. which can lead to pretty rapid improvement in lease performance and effective rent growth. We need to see that increase more for the trajectory of that and the pace of that recovery to continue to increase more robustly.

I see a question there, I'll try to get to here in just a second. But for context, certainly, we're not building that into our forecast of rapid acceleration there. But there are some markets, some properties that we have, for example, in South Austin, where you see concession usage fundamentals improving, where we've seen a 10 percentage increase in terms of the new lease rates that we have at our properties. So as we work through that progression of improvement, market level occupancies, concessions coming down, we should see new lease rate continue to improve.

So sorry, go ahead.

Picking up on that. I think it was last year at this conference, you painted a very optimistic picture would be like because of lack of supply. As you sit here now a year later, you still feeling the same level of optimism, less so more so, late or anything in that?

Yes, definitely more so given -- I mean, if you look at just the supply levels that we're seeing in our markets, this year, it's 40% less than what it was last year. Last year, it was coming down. We were at 5.5% inventory of deliveries in 2024. Last year, we were 3.5%. This year, we're 2%. So the trajectory of supply, yes, we're still very optimistic about that recovery. And the thing that we're seeing right now, and my clock is blinking at me, I'll wrap this question up, is last year, we were pushing on rents into May. And what we saw is the market started focusing on occupancy. So we started getting less traction as we were pushing on rents. We're not seeing that today. We're pushing on rents, and we continue to see traction in getting those improving rents as we showed on Slide 31. So thank you for that.

All right. Well, thank you for your time. If you guys have any questions, feel free to reach out.

Good morning, ladies and gentlemen, and welcome to the MAA First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, April 30, 2026. [Operator Instructions] I will now turn the call over to Andrew Schaeffer, Senior Vice President, Treasurer and Director of Capital Markets of MAA for opening comments.

Thank you, Regina, and good morning, everyone. This is Andrew Schaeffer, Treasurer and Director of Capital Markets for MAA. Members of the management team participating on the call this morning are Brad Hill, Tim Argo, Clay Holder, and Rob DelPriore. Before we begin with prepared comments this morning, I want to point out that as part of this discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statements section in yesterday's earnings release and our 34 Act filings with the SEC, which describe risk factors that may impact future results.

During this call, we will also discuss certain non-GAAP financial measures. A presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial data. Our earnings release and supplement are currently available on the -- for Investors page of our website at www.maac.com. A copy of our prepared comments and an audio recording of this call will also be available on our website later today. After some brief prepared comments, the management team will be available to answer questions. [Operator Instructions]

I will now turn the call over to Brad.

Well, thanks, Andrew, and good morning, everyone. As highlighted in our release, we delivered first quarter results that exceeded our expectations, driven by the resilient demand in our footprint, strong resident retention as well as our focus on expense management and some timing-related items. New lease pricing continued to reflect supply pressure in several markets. But despite this pressure, new lease pricing improved sequentially and supported by our continued strong renewal performance, blended lease-over-lease pricing improved 140 basis points from the fourth quarter. With the bulk of the leasing season ahead, we like our positioning and momentum going into summer with stable occupancy and better 60-day exposure than a year ago.

Our high-growth markets are producing solid demand to absorb the new supply in a steady manner that we believe will enable continued stable occupancy, favorable renewal pricing, strong collections and overall earnings performance in line with the outlook we provided in our prior guidance. Our leasing traffic remains strong and positive migration trends, strong wage growth and stable employment conditions across our diversified portfolio and markets combined to drive solid demand as evidenced by first quarter absorption exceeding new supply deliveries in our footprint.

Operationally, our on-site teams actively supported by our asset management team continue to execute at a high level, controlling expenses while delivering an excellent resident experience as reflected in our sector-leading Google scores. As a result of our strong customer service and the ongoing single-family affordability challenges, renewals remain consistent, helping to deliver year-over-year blended lease improvement for 5 consecutive quarters. We continue to allocate capital in a balanced and disciplined manner, taking advantage of the current pricing dislocation of our existing portfolio in the public market to buy back shares as well as executing on initiatives to deliver long-term earnings growth while protecting our strong balance sheet.

With acquisition cap rates around 4.5% for high-quality properties in our footprint, our external growth efforts are predominantly focused on new development through our existing pipeline of owned and controlled land sites, representing over 4,300 units of future growth. We started construction on our first project for the year in April, a 286-unit community in the Kansas City market. Based on our current approval and construction time lines, we now expect to start construction on 4 projects this year, reducing our expected development spend for the year to $350 million. While this is down from the $400 million in our original forecast, it's up from the $315 million we invested in the 2 projects we started in 2025.

The projects we expect to start this year will deliver in 2028 and 2029 during what we believe will be a more favorable supply-demand environment. As we look forward, we remain encouraged by underlying demand across our markets, declining new deliveries and the strength of our resident base with continued strong collections and affordable rents at a 20% rent-to-income ratio. Our high-growth markets continue to offer attractive long-term appeal for employers, households and investors. With positive absorption, stable demand and market level occupancies improving, we are optimistic we will continue to build momentum through the spring and summer, supporting improved new lease pricing as the year progresses.

In addition to capturing increased organic growth from our existing asset base through the year, we expect a growing NOI contribution from a number of areas, including new initiatives to drive efficiencies and higher operating margin from our existing portfolio, our growing redevelopment opportunities, as well as a growing development pipeline that continues to lease up. Today, we believe our more diversified and higher quality portfolio, our stronger operating platform and our stronger balance sheet position us to capture improving performance and to deliver meaningful shareholder value over the approaching recovery cycle. We're excited about the outlook over the next few years. To all our associates across our properties and corporate offices, thank you for your continued dedication and focus.

And with that, I'll turn the call over to Tim.

Thank you, Brad, and good morning, everyone. For the first quarter, same-store NOI beat our expectations with in-line same-store revenue, combining with lower same-store expenses to drive the favorability. From a pricing standpoint, new lease-over-lease growth improved 110 basis points sequentially from the fourth quarter, but continues to be under pressure due to elevated but moderating new supply combined with more macro level economic uncertainty. On the renewal side, similar to the last several quarters, retention rates and lease rates remain strong. Renewal lease-over-lease growth improved 70 basis points sequentially from the fourth quarter, driving blended lease-over-lease growth up 140 basis points from the fourth quarter. Average physical occupancy remained strong at 95.5% for the quarter. Additionally, we had another quarter of strong collections with net delinquency representing just 0.3% of billed rents, in line with the last several quarters.

From a market standpoint, many of the markets where we saw strong performance in the fourth quarter and most of last year continue to show strength in the first quarter. We have noted on several occasions the performance of our mid-tier markets, particularly in Virginia and South Carolina. Richmond, Greenville, the D.C. area markets and Charleston all demonstrated strong pricing power and strong occupancy in the quarter. Encouragingly, our 3 largest markets in terms of same-store NOI contribution, Atlanta, Dallas and Orlando, all outperformed the portfolio in the first quarter in blended lease-over-lease pricing.

Austin, though improving, is still a challenge, particularly on the new lease pricing side. Charlotte and Savannah are 2 other markets facing challenges in the wake of heavy supply pressure. In our lease-up portfolio, MAA Liberty Row in Charlotte and MAA Breakwater in Tampa completed construction in the fourth quarter and moved into our lease-up portfolio. We now have 5 properties in lease-up with a combined occupancy of 68.3% as of the end of the first quarter and an additional 2 development properties that are actively leasing units. Elevated concessions remain the case for some of these lease-up properties with up to 8 weeks on certain floor plans. However, these projects are still expected to achieve our underwritten yields as markets continue to improve and therefore, retain their long-term value creation opportunity.

We're off to a quick start in the first quarter on our various targeted redevelopment and repositioning initiatives. During the first quarter of 2026, we completed 1,386 interior unit upgrades, up from just over 1,100 units that we renovated in the first quarter of 2025. We achieved rent increases of $104 above non-upgraded units on average unit level spend of $7,349, representing a cash-on-cash return of approximately 17%. These units continue to lease faster than nonrenovated units when adjusted for the additional turn time, averaging about 9 days quicker. For our common area and amenity repositioning program, we are over 90% repriced at 6 recent projects with an average NOI yield above 10% and rent growth far exceeding peer MAA properties. Five additional projects are nearing construction completion and will begin repricing between May and August. And then 6 additional properties are in the planning phase with expectations to be complete in time for repricing in the spring of 2027.

Our WiFi retrofit initiative that began in 2024 and expanded in 2025 continues to grow. We have 27 live properties where the service is rolling out to residents as leases are signed, and we are further expanding this initiative in 2026 to an additional 35-plus properties. As we head into the busier part of the leasing season, we are well positioned. Average physical occupancy for April is 95.5%, in line with April 2025, and 60-day exposure is currently 8.3%, 20 basis points better than where we ended April of 2025. With increased absorption in our markets in the first quarter, where the number of incrementally occupied units exceeded new deliveries, supply pressure continues to moderate. And despite the previously mentioned economic uncertainty, lead volume remained strong and ahead of last year.

Strong renewal performance continues in the second quarter with retention rates and lease-over-lease growth rates on renewals accepted remaining consistent with what we have seen in the last few quarters. With an assumed backdrop of steady demand, we expect gradual seasonal improvement in new lease rates through the second and early third quarters, along with consistent renewal growth and retention. As we get later in the year, improving fundamentals will become even more impactful, setting up a stronger 2027. That's all I have in the way of prepared comments.

Now I'll turn the call over to Clay.

Thank you, Tim, and good morning, everyone. We reported core FFO for the quarter of $2.13 per diluted share, which was $0.02 ahead of our first quarter guidance. For the quarter, same-store expenses were favorable to our guidance by $0.015, along with non-same-store NOI favorable by $0.01, offset by unfavorable interest expense of $0.005. Same-store repair and maintenance expenses, personnel costs and marketing costs were all below our expectations and were reflective of our disciplined expense control along with expense timing.

During the quarter, we funded approximately $100 million in development costs. At quarter end, our development pipeline was at $623 million, leaving an expected $234 million to be funded on the current pipeline over the next 3 years. As previously discussed, we did adjust the number of development starts from our initial guidance and accordingly lowered our development spend for the year by $50 million. While the size of our pipeline at a point in time can vary based on starts and deliveries during the quarter, we expect the pipeline to grow throughout the year as we begin construction on new projects. Our balance sheet remains in great shape to support this and other growth initiatives. At the end of the quarter, we had nearly $840 million in combined cash and borrowing capacity under our revolving credit facility, and our net debt-to-EBITDA ratio was 4.5x. At quarter end, our outstanding debt had an average maturity of 6.1 years at an effective rate of 3.9%.

During February, we issued $200 million of 7-year public bonds at an effective rate of just over 4.6%, using proceeds to repay borrowings under our commercial paper program. Also during the quarter, we repurchased 558,000 shares of our common stock at a weighted average share price of $130.46 for a total of $73 million. As for our full year outlook with the bulk of the leasing season ahead of us, we are reaffirming the midpoint of our same-store and core FFO guidance for the year while tightening the core FFO range. For the quarter, we expect core FFO to be in the range of $2.00 and $2.12 per diluted share or $2.06 per share at the midpoint.

Our second quarter guidance reflects the typical seasonal increase in leasing as well as higher maintenance-related operating costs. The increase in interest expense from first to second quarter is largely attributable to the delivery of additional development units and incremental borrowings associated with share repurchases and the litigation settlement. These impacts of interest expense are expected to be partially offset by proceeds from property dispositions.

That is all that we have in the way of prepared comments. So Regina, we will now turn the call back to you for questions.

[Operator Instructions] Our first question will come from the line of Eric Wolfe with Citi.

Based on your guidance, you're expecting blended rates to ramp through the year. I think you just said a moment ago that you're expecting sort of a typical seasonal impact in the second quarter. Could you just talk about sort of specifically what you expect to see over the next couple of months? I think last quarter, you actually gave sort of the guidance for first quarter blends. So I was hoping you could do the same for the second quarter blends and talk about whether you're finally starting to see some of the supply impact easing in some of your markets.

Yes, Eric, this is Tim. I'll answer that. And I'll walk you through kind of how we're thinking about our blended guidance for the year. So the guidance remains 1% to 1.5% blended for the full year. As we reported, we did negative 0.3% blended in Q1, but we are starting to see some steady incremental improvement on the new lease side and then continue to see the steady renewals. So as we think about the rest of the year, to your point, like we expect new lease pricing to continue to accelerate through to about July and then start to moderate seasonally, but we expect that seasonal moderation to be less so in the back part of the year than it typically is as we continue to see the supply impact moderate, continue to think that renewals will be in that 5-plus range and stay pretty consistent. So if you think through all that to get to our 1% to 1.5%, you're kind of 1.3% to 1.8% blended for the last 3 quarters of the year. So you can kind of think about how that trajectory will work out from where we are here and using that seasonal curve that I talked about.

Our next question will come from the line of Jana Galan with Bank of America.

Sorry, Tim, question for you again. Can you maybe speak to performance on both the concessions and supply absorption in Atlanta and in Dallas?

Yes. So Atlanta and Dallas, we continue to see some pretty solid performance, particularly in Dallas. If I look at Dallas for a moment and you look at where we are from a pricing standpoint right now and an occupancy standpoint compared to, say, this time last year, we saw about a 240 basis point improvement in blended pricing from Q1 '25 to Q1 '26 and steady occupancy along with that. Similarly, in Atlanta, we saw about a 50 basis point increase from blended pricing last year to this year and about a 20 basis point increase in occupancy. So Atlanta probably starting to recover for us a little bit early, and we've seen that continue to stabilize and move forward. I think Dallas was a little bit later, but we're seeing some good strength out of that. As I just mentioned, I expect Dallas to be one of our stronger performing markets this year. We're seeing it pretty broad-based. There's still some pressure in the Allen McKinney areas, but uptown performing well, some of the other suburban markets.

And similar in Atlanta, we're seeing still some of the intown and downtown, Midtown, Buckhead submarkets outperform some of the suburbs. Duluth and Smyrna are still a little bit weaker, still seeing higher concessions. So for Dallas, we've seen concessions come down a little bit. They're not as broad-based in Dallas as some of the other markets. So we have seen some relief there, particularly in the urban areas. And then we talked about Atlanta, the concessions were coming down a little bit last quarter, and they made pretty consistent with where they were last quarter. You still have a month or so out there on average, but the submarkets that I talked about have come down quite a bit.

Our next question comes from the line of Austin Wurschmidt with KeyBanc.

Kind of sticking with Tim here. One on new lease rate growth. I know you had some weather disruption in the first quarter. I guess, were you surprised with the pace of improvement in new lease rate growth versus the fourth quarter? And are you seeing that pace improve or accelerate, I guess, into the second quarter? Or is it more similar from what you saw from the fourth quarter of last year into the first quarter of this year?

Yes. I mean if you remember last year, we were seeing some strong acceleration in new lease rates through about April and then it really kind of plateaued mid-May, and we saw it sort of peak there and not really get momentum past May. I think what we're seeing this year is more of a steady acceleration. To your point, February kind of stalled out for a little bit and brought Q1 new lease pricing a little bit down from where we expected, but then we saw it quickly return in March, and then we're seeing some momentum play out in April as well.

And then we think about where we are with exposure and occupancy, I would expect May to outperform where we were in May last year, where we -- again, where we kind of stalled out. So I would say we're seeing a more seasonal or more normal acceleration in new lease rates this year. Last year, it was a little quicker, but then it slowed to a complete halt. I think we would expect that not to continue and all the stats we look at where we are with exposure, where we are with lead volume, where we are with occupancy and kind of seeing what's out there with pre-leasing, we would expect that momentum to continue beyond May unlike it did last year.

Yes. And I would just add a couple of points to what Tim is saying, just speaking more broadly. I mean, I think one of the things that gives us encouragement about the trajectory, as Tim was mentioning a moment ago, as we go throughout the balance of the year is, first, if you look at just the broad demand fundamentals in our region of the country continue to screen quite well, really across the board. Job growth continues to be resilient. The other demand factors, migration trends, population growth, all continue to be very resilient within our region of the country.

And then if you look at just the momentum that Tim was just talking about, market level occupancies in the first quarter continue to firm up. You look at absorption numbers exceeding deliveries in the first quarter with the renewal positioning that we have right now, as Tim mentioned, our occupancy is stable and our exposure is in a better position than it was this time last year, puts us in a really good position to continue the momentum that we've seen in April as we get into May and June. And so we feel like the momentum is building from the dashboards that we have to date. That momentum continues to build in the second quarter, which is what we need to see in order to continue to see new lease progression throughout the year, which aligns with what our expectations are for the year.

Our next question will come from the line of Haendel St. Juste with Mizuho.

Maybe a question on capital deployment. I understand the decision to lower the acquisition guide given market pricing and your cost of capital, but maybe expound a bit more on the decision to pull back on some of the new development starts. And would that lower use of capital, I guess, lower capital deployment overall suggest you might be more open to doing more stock buybacks here in the near term given the compelling yield on that side?

Yes. Haendel, this is Brad. Well, as I mentioned in my opening comments, the pullback in development spend, just development is a little bit fluid with timing of when deals can start, approvals can take a little bit longer than you think, things of that nature. So that's the nature of the reduction from -- as we mentioned in the prior call, we could start between 5 and 7 deals this year. Just based on where we are in the approval cycle of those, it looks like it's going to be closer to 4. But you never know, some of those could get approvals earlier. And if the economics make sense, we could start those towards the back part of the year, but that's where we certainly expect to be in terms of development for the year.

We continue to believe that's one of the best uses of our capital to deliver long-term value for shareholders. So we'll continue to focus on that. As Clay mentioned in his comments, we expect that the size of that pipeline to continue to grow. Our spend for the year is down from what we originally expected, but still up from where it was last year. And we expect that on an ongoing basis to be into that $300 million to $400 million range. So no real change in terms of that. But I think in terms of share repurchases, as we think about really how best to allocate capital, we're really focused on generating high-quality compounding earnings growth that supports a steady and growing dividend. We really think that's the best way to drive TSR performance over the full cycle.

And when we do that, there are 3 things that we're considering when we decide where do we put our capital. And the first is we want to take a very balanced approach. And that balanced approach really helps us take advantage of near-term opportunities, which right now just happens to be the share buybacks. And so -- you've seen us be active in that space. But we also want to be able to take advantage of opportunities that we think, again, contribute to that long-term TSR performance. And that's where development comes in. We still think that's the best opportunity for us to drive long-term TSR performance. We're getting accretive returns. And today, those are in the mid-6s. And our development, importantly, has been able to deliver higher NOI growth about 50 to 100 basis points on a long-term basis versus our existing portfolio. So we want to be balanced in terms of what we're doing.

The second thing is we want to protect our balance sheet capacity. And so you're not going to see us go out and leverage up our balance sheet because we want to protect what we're able to do with our balance sheet. And then the third thing really is we like our portfolio. We like where we're located. We like the markets we're in. So we don't have a need to go and really materially reallocate capital amongst our markets, which can drive certainly higher dispositions and capital redeployment. So that's really how we're looking at our various opportunities for capital allocation and where share repurchases falls within that.

Our next question comes from the line of Alexander Goldfarb with Piper Sandler.

Just a question on the guidance. You guys talked pretty optimistically about the balance of the year, acceleration. You're talking about this year's leasing trends not looking to stall like last year did, but yet you adjusted guidance, you basically tightened the range. A lot of your peers sort of left it open-ended to revisit guidance in the second quarter. So based on your commentary, it would sound like you think there's potential for upside, but yet you trimmed the top end and tightened the range. So can you just talk a little bit more about your decision to revisit guidance now versus waiting to the second quarter?

Yes, Alex, this is Clay. Just the real reason that we kind of brought down the guidance there, at least a range, keeping our midpoint the same as we came out with our initial guidance. But we were a little wider in our range as we started the year than what we would typically do. And we did that because of the macro uncertainty that Tim mentioned earlier, some of the demand concerns that were out there at that time. As we sit here today, that's lessened. We've got 1 quarter behind us. And so we tightened that range down to a range that we would typically go out the year with. And so that's really all that we were reflecting by tightening the range. Still feel very confident in our overall guidance as we move throughout the year, though.

Our next question comes from the line of Adam Kramer with Morgan Stanley.

Just wanted to ask a little bit about sort of the renewal growth with regards to concessions. And if there's any way to sort of maybe disaggregate or break down what sort of percentage of the renewal growth that you guys are able to sort of get each quarter comes from concession burn off versus sort of gross rent increases? And then maybe just the second part there with regards to concessions. And I think you mentioned it for some specific markets, but just maybe across the portfolio, what are you offering today in terms of concessions? And how does that compare to the same period a year ago?

Yes. This is Tim. So for the first part of your question, there's not a lot there. I mean, with our portfolio, we don't use a ton of concessions. We're mostly in net effective pricing. If you look at our financials, concessions represent about 0.6% of our net potential rent. So for us, the burn-off of concessions in our same-store renewal base is very minimal, probably maybe 10 basis points or something like that. It's more impactful in our lease-up properties. We're getting 8%, 9%, 10% renewals on lease-ups where there is some burn-off of concessions that is driving part of that. So you can kind of distinguish between those 2 there.

As far as the concession market across our portfolio, across our markets, I would say for Q1, pretty consistent with what it was in Q4 and we're seeing 60%, 65% of our competitors offering some level of concession somewhere between 4 and 5 weeks is sort of the standard. And so that's broadly across the portfolio. We have seen it tick down just ever so slightly as we got into April, where not only the percent of competitors offering concessions come down a little bit and then a little bit decrease in the overall average concession. So I think that's perhaps a sign of some of the momentum to come. Absorption was positive this quarter. So fewer lease-up units out there. So we are starting to see it tick down just a little bit.

Our next question will come from the line of Michael Goldsmith with UBS.

This is Amy on with Michael. We were wondering how much of an impact does hiring from new college grads have on your peak leasing season? Do you tend to see more people trading up into MAA units? Or are they more first-time renters?

It's pretty consistent. We've been looking at some of that, our younger age demographic with all the talk around some of the unemployment rates for that group in particular. And so if we look at Q1, for example, about 20% of our move-ins were 25 or under in age. And that's been really consistent over the last several years. That hasn't really ticked up or down. And then we look at also to try to gauge some of that pressure, are there more of our residents needing a guarantor indicating perhaps that their economic situation isn't great, and that's actually come down a little bit. So -- but I would say on average, it's about 20-ish percent of our move-ins are in that 25 age group or under, but we're not seeing really any pressure or any changes in that as of yet.

Our next question will come from the line of Jamie Feldman with Wells Fargo.

I think you had mentioned pulling back on development starts this year. Obviously, supply has come down in a pretty meaningful way, and some of your competitors are actually talking about ramping up into '28 and '29. Can you talk about that decision and how we should be thinking about development going forward? Is it more project specific? Or is there a bigger picture story we should be thinking about?

Yes, Jamie, this is Brad. Yes, I mean, again, the development reduction for the year of $50 million really is just a couple of months delay on average in terms of starts for deals. And that's really deal specific to your point. That does not signal in any way a change in our posture toward development. We still continue to believe in the merits of developing and in particular, the benefits of that for long-term TSR performance. So you'll continue to see us focus on development. I mean we own or control, I think, 16 sites with approvals for over 4,000 units. So that will be a continued focus of us.

We'll continue to focus on spending $300 million to $400 million a year. The start level numbers for each year can vary a little bit as it can be a little bit lumpy. You've got to go through the approval process, which can take a little longer than you expect sometimes. So -- but our strategy and focus on development is the same as it has, and we'll continue to expand that pipeline to the $1 billion, $1.2 billion range that we've talked about previously.

Our next question will come from the line of Steve Sakwa with Evercore ISI.

I guess kind of a big picture question. If I told you that you could double the size of your portfolio today, I guess, what are the pluses and minuses of managing a substantially large or larger portfolio than what you currently have. Is the data flow that much better that gives you better insight on pricing? Are there just more operational challenges? Like how do you sort of think about size and whether you need to be much bigger than you currently are?

Well, I think certainly, size isn't everything. We have been through, obviously, 2 significant events in our recent history as an organization, and those events are very, very difficult to do and take a lot of time, and there's risk associated with them, but there certainly could be a lot of upside if they're done right and the cultures align well between the organizations.

I would say at the scale that we are today, to double our portfolio size, I wouldn't think there's a material improvement in information flow, data flow and things of that nature that you mentioned. Cost of capital is probably very similar. It really is going to depend on, I would say, what we can get operational efficiency-wise, some of the things that we're doing on the operating side from centralization and specialization and how we're approaching podding properties and things of that nature, having scale near to one another within a particular market is very meaningful in that process. So certainly could see some ability to drive some level of operating efficiencies depending on where the properties are located.

Our next question will come from the line of Rich Anderson with Cantor Fitzgerald.

So about a year ago, Brad, we had a dinner with the group, and there was some -- at least some indication from my perspective that this time, a year later, we would be talking about a lot more in the way of stabilized new lease rate growth and so on. And obviously, it hasn't quite happened yet. I'm curious, in your mind, taking over CEO around that time 13 months ago, are you surprised by the tail of supply impacting that line item in particular? Or is everything kind of lining up the way you thought? We all know the biblical nature of the supply that came online in your markets over the past couple of years. I'm just curious if all this is coming as more of a surprise and not necessarily in alignment with past cycles of supply that you guys have been through. I just wanted to take your temperature on that topic.

Yes. No, thanks. Yes, I recall our dinner and certainly, at that time, believed that we would certainly see better improvement on new lease rate side over the past year, which is what our expectations have been as related to our forecast for last year and going into this year. And I think it's also you mentioned the biblical size of supply, but I do think it's important to put that in perspective. In a 3-year period, we had 5 years' worth of supply delivered into our markets. And so there is a level of lingering impact associated with that supply. The good news is, though, that absorption is happening. Market level occupancies are improving. When we had that dinner, I didn't think that new lease rates would take as long as they have to see improvement that we've seen. But the good news is we are seeing improvement. The other positives are that the demand within our region continues to hold in there quite well, outperforming other regions of the country sometimes by factor of 2 to 3.

The other good news is that the supply pipeline is significantly declining. If you look at the size of what's being delivered in our region this year, it's down 40% from last year. So while it is taking a little bit longer, if you keep in perspective just the size of -- and the magnitude of the decline that we're seeing in supply in our region of the country, which is declining to a larger degree than it is other regions of the country, balanced with the fact that demand continues to be resilient. We're pretty excited about what the trajectory looks like from here. Yes, last year, I would have hoped that it would have improved a little bit quicker, but that's not where we are. And certainly, I think as we look forward based on supply and demand fundamentals, we're pretty excited.

Our next question comes from the line of Mason Guell with Baird.

Do you expect to continue buying additional land parcels for the balance of the year?

Well, this is Brad. It depends. We will likely have additional land parcels that we purchase later in the year. But the way that we are approaching buying land at this point is we are not looking to land bank various sites. We do not want to buy land that is speculative. We want to buy land that we have a clear and near-term path to being able to put that land into production. So you could -- based on timing, you could see us buy a piece of land at some point this year that maybe starts construction next year, but certainly not with the intent to buy it and hold it for a few years before we're able to start construction on it. That's not what we're looking to do. We want to keep the balance sheet very efficient and be able to put land into production pretty quickly after we buy it.

Our next question comes from the line of Julien Blouin with Goldman Sachs.

Maybe following on from Steve's question, I mean, you guys are probably the best authorities in the space on public-to-public apartment deals, just given the Post and Colonial deals. Obviously, there's the initial G&A and overhead benefit that can be realized. But I guess you mentioned the podding benefit. How long does that sort of take to realize? And then if we think about what's different today versus when you did the post and Colonial transactions, are there any additional benefits today, whether it's on, I don't know, the technology front, the AI front, WiFi rollout and scale with vendors that would maybe make a deal make even more sense today?

Julien, this is Brad. I think in terms of podding, that's more related to the quality of the property managers that you have and just opportunities that present themselves in terms of how quickly those can manifest themselves. Those can be relatively quick endeavors, but you got to make sure you have the right people. As you know, this is a very -- in any merger, this is a very people-intensive business. And so they can quickly determine whether or not you have success or not at a property level. So you've got to be really careful with what you're doing there. And I'm sorry, the second part of his question.

Any additional benefits weren't there?

Yes. In terms of the other benefits, I think they're different than when we executed the Post and Colonial merger is on the technology front like you talk about. I think the cost of technology today continues to increase. But I also think the ability to spread that cost across obviously, a bigger footprint, a bigger platform. One of the things that we've been focused on as an organization is continuing to improve our platform capabilities and be able to drive more out of our portfolio than what others are able to do. And part of that is the technology. Part of that is the centralization and specialization that we have and that we're focused on so that the marginal G&A cost associated and technology costs associated with adding additional units is less. So I do think that's a difference today versus what it was 10 or so years ago when we've gone through mergers.

Our next question will come from the line of Alex Kim with Zelman & Associates.

I wanted to ask about how lease-up velocity has trended so far year-to-date and kind of fitting that into the context of acquiring projects that are in lease-up. Is that still a strategy that you maintain on a go-forward basis?

Yes, Alex, it's Tim. I'll answer the first part of that question. We have seen the lease-up velocity tick up, particularly as we got into late Q1 and into April. Obviously, it's a little bit slower in Q4 and Q1 just with traffic patterns, seasonal patterns. But if we look at April, for example, the 5 properties that are in our lease-up bucket averaged about 23 move-ins in the -- on average in the month of April. So we're starting to see that momentum pick up. We got really good lead volume. We're starting to see -- we're not seeing things get slower. We're not seeing concessions go up or anything like that. We're starting to see the momentum there. And I think as we get into the spring and summer, much like we've talked about with our same-store portfolio, we would expect to continue to see some momentum in that group.

In terms of acquisitions, I think you asked if we're focused on buying properties and lease-up. I mean, I think at this point, the best use of our capital is not acquiring. So we're not active in that market today. We continue to evaluate projects. I would also say we haven't seen as many lease-up trades or lease-ups coming to market to trade as we have historically. I think if a seller is bringing a property to market today, they want it as leased up and occupied as they can get so that there's less risk out there for the buyer so that they can get better pricing at the moment. So we'll continue to look at lease-ups as they come to market. And if we find an opportunity that makes sense, we certainly wouldn't -- for the right price, we wouldn't hesitate to execute there, but we're just not seeing a lot of opportunities in that front that makes sense today.

Our next question will come from the line of Ann Chan with Green Street.

So going back to other income, were there any unusual or nonrecurring items that caused a drag or a boost on other income in the first quarter? And related, when do you expect the benefit from the delayed WiFi rollout in late '25 to start to flow into '26, if not already?

Ann, just to confirm, are you referring to same-store other income?

Correct.

Yes. So in Q1 -- this is Clay, by the way. So in Q1, we have seen -- to your point, we have seen the continued rollout of WiFi that we saw a little bit there, but not much, not really driving that in the quarter itself. What we would expect to begin to really begin to see that benefit showing itself in the numbers would be as we move into the spring and summer leasing seasons and we start having those leases turn and that would be the time that we would push the WiFi revenue to the residents and along with the expense that we have for that as well. So that should come towards -- in the middle and towards the latter part of the year.

Yes. And I'll just add one point to that, it's Tim. We're expecting somewhere in the neighborhood of $3 million or so of revenue in 2026 related to those WiFi projects, which is certainly backloaded, as Clay mentioned. Most of those projects got completed late Q4, early Q1, and we price those out as the leases expire and the units turn. So expect a lot more impact from those as we get through the year, and then it will compound certainly in 2027 and beyond.

Our next question will come from the line of Nick Yulico with Scotiabank.

This is Elmer Chang on with Nick. I just wanted to go back on the concession topic and just ask how is concession burn-off trending in some of your maybe underperforming markets of late, like Charlotte, Austin, Nashville, et cetera? And when do you expect you'll reach a normalized level of concessions in those markets this year? I know you mentioned concession usage ticking down through April and that you expect new lease rates will improve throughout the year. But I was just wondering whether that outlook is mostly driven by your stronger markets like Atlanta, Dallas, Orlando.

Yes, Elmer, this is Tim. I mean we have started to see in some of those weaker markets, concessions come down a little bit. I've talked a few times about some of the more urban submarkets where -- and that have a lot of lease-ups where they were averaging closer to 3 months. And I would say now that's more in the 8- to 10-week type of concession environment so come down a little bit there. Market like Austin, we have started to see it come down a little bit. We were pushing across the entire market, close to almost 2 months broadly, and that started to tick down slowly. We're particularly seeing better performance in the Southern part of Austin, Northern Austin, Georgetown and that area is still seeing a lot of pressure and not seeing much relief there.

Phoenix is probably another one where we've started to see concessions come down a little bit. Occupancy in that market stabilized, at least for us over the last couple of quarters and now starting to see still underperforming broadly, but starting to see some good momentum out of Phoenix. You mentioned Charlotte, that's one that it's still right in the mix of it. It got double-digit percent of inventory delivered over the last couple of years. So I think that one is going to be a struggle, I think, through 2026, and that one is probably more of a 2027 recovery story in Charlotte, but feel great about that market long term, tons of demand, tons of jobs coming there, but just a whole lot of supply there right now.

We have no further questions. I'll return the call to MAA for closing comments.

All right. We appreciate everyone joining. We'll see you soon in various conferences. Thank you.

This concludes today's program. Thank you for your participation. You may disconnect at any time.

Welcome to Citi's 2026 Global Property CEO Conference. I'm Nick Joseph here with Eric Wolfe with Citi Research. We're pleased to have with us MAA and CEO, Brad Hill.

This session is for Citi clients only and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go to liveqa.com and enter code GPC26 to submit any questions.

Brad, we'll turn it over to you to introduce the company and team, provide any opening remarks, tell the audience the top reason investors should buy your stock today, and then we'll get into Q&A. Just hit the red button there.

Are we live now? Okay. Good. Thank you. So I'm Brad Hill, President and Chief Executive Officer. To my left, I have Clay Holder, our CFO. And to my right, I have Tim Argo, who's our Chief Strategy Officer. And to his right, we have Andrew Schaffer, who's our Head of IR and Investor Relations. So I appreciate the opportunity to be here today. Just a quick intro on MAA, and then I'll get into some specifics about why I think now is a good time to be investing in MAA stock.

So MAA is a multifamily exclusive multifamily REIT, where we focus in the Sunbelt predominant region of the U.S. We're in other high-growth markets as well outside of the Sunbelt, but predominantly, we are in the Sunbelt of the U.S. We have an over 30-year history of investing and carrying on activities in that region of the country specifically. We are a well-diversified multifamily REIT. We focus in both large and mid-tier markets and diversification is a key component of our operating strategy and our investment strategy.

So key reasons why I think now is a good time for investors to be investing in MAA. Number one is it's a great value. Certainly, if you have access to the package that's in front of you, I'd call your attention to Slide 6 and 7 of that deck. By investing in our stock today, investors get access to a portfolio that has consistently delivered strong core FFO and TSR performance as indicated there on that slide at lower volatility than what we've seen by others in the space. You get a portfolio with the largest exposure to the high-demand, high-growth region of the country, as I mentioned a moment ago, and one of the best operating platforms that we continue to invest in to continue to strengthen and to improve margins in terms of our performance. And all of that today at one of the lowest multiples, higher -- highest cap rates that we've seen in quite a long time.

And then with that, we're also delivering a strong current income for investors through a very strong dividend yield that's well supported by an A- rated balance sheet. But not only are you getting great value, you're also getting growth prospects. If you look at Slides 9 and 12, we lay that out a little bit where if you look at our region of the country, we're seeing the largest reduction in new supply across the country. And if you look at the demand dynamics, whether it's job growth, population growth, household formation, wage growth, all of those demand fundamentals continue to be significantly stronger than what we're seeing in other regions of the country. And so those 2 dynamics really come together to support what we believe will be strong growth prospects for our existing portfolio.

And then the final point is the other investments that we're making to not only drive growth out of our existing platform, but to make accretive investments. You look at our redevelopment, our repositioning, where we continue to invest in our existing assets to help them compete better with the new supply that's coming into the market where we're able to get close to 20% cash-on-cash returns, new development that we continue to invest in as well through driving accretive returns and then tech investments, as I was mentioned a moment ago, to drive margin expansion opportunities.

So those are the reasons that we think investing in MAA now is a good path for investors.

Great. On the call, you mentioned that you expect to see a pretty significant year-over-year change in your rental rate growth this year. So I think it's -- if you look at sort of 2025 versus 2026, you're expecting that to go up, call it, 130 basis points or so. I guess maybe can you just talk about sort of what you've seen thus far? I know it's early, but just sort of what you've seen thus far through January and February, what the sort of forward indicators are telling you about the early strength of the peak leasing season and why you have confidence that you're going to be able to achieve that target?

Yes, I'll touch on that. And I would say, so far, pretty much in line with expectations as we sit here in early March with January and February results. I mean the way we think about it, as you said, kind of 1% to 1.5% is the expectation for blended pricing for 2026. And our expectation would be relatively normal seasonality on the new lease side, where we start to see some momentum from now into late July or so and then start to see it trend down a little bit with normal seasonality. But I would expect the latter part of the year for that moderation to be a little bit less than what we typically see as we continue to see supply -- the impact of supply continue to moderate, expect steady demand as well.

And then on the renewal side, where we expect pretty consistent 5-plus type renewal lease-over-lease rates. We've now sent out through May, and we're seeing that hold up pretty well. So we feel good about what that means not only for the year, but what that means for demand expectations, what that means for new lease pricing. we're starting to see the momentum. We saw a little bit of a slowdown in late January with winter storm firm, particularly in our portfolio with a lot of our markets impacted at some level by that. But then we saw that demand kind of pick right back up 10 days or so after that. So kind of back to normal there.

But when you think about the supply drops, 30% fewer deliveries in 2026 than last year, continuing to get further away from that peak of 2024 in terms of units in lease-up in our markets and then the expectation of some of the demand fundamentals Brad mentioned, that's what gives us confidence in kind of as we sit here today and where we see the rest of the year.

And you mentioned demand is steady thus far. I guess what do you mean by demand? I guess how are you defining demand internally? What do you guys talk about when you have your weekly or daily meetings about like how demand is trending? What are the indicators? And what are they doing on a year-over-year basis?

Yes. I mean, lead volume is what we look at a lot, and it's essentially traffic coming through the door, coming on our website, coming in through various marketing sources and then looking at that as a percentage or as a per exposed unit, if you will. So we look a lot at exposure, which is our current vacancy plus units that are on notice to move out over the next 60 days. So our leads for exposed or actual exposure are significantly better than they were this time last year. The closing ratio. So ultimately, we're looking to take a lead, turn that lead into a visit, turn that visit into an application and then ultimately into an approved lease.

So that closing ratio of lead to gross lease, we've seen that pick up over the last few weeks. So that's more a near-term demand scenario than we look at renewals. As we said, we have that information starting to get into May as well. So exposure, lead volume, those are more of the near-term things that we're looking at that look pretty positive right now.

And can you maybe just talk about that specifically the lease exposure and tell people exactly sort of what that means? And I guess, what is the implication of the fact? I think you said it was significantly better than at this time last year. So when you see your lease exposure come down to a certain level, is that when you get a bit more aggressive on new lease rates? Like what is the sort of implication of seeing your lease exposure getting better?

Yes. So if you think about exposure, and we have tolerances throughout the year, we would tolerate, if you will, a little more exposure in the summer because you have more people coming in the front door. So it ranges anywhere, I'd say, from 6% to 8% throughout the year. And that's -- like I said, that's your current vacancy and then that's notices that people that have let us know that they plan to move out. Right now, we're somewhere in around a 7% range, which is 30, 40 basis points better than where we were this time last year.

And so it does play into our pricing occupancy mix, but it's still target. It's going to be a submarket. It's going to be a property even to a unit type level. We look at those exposure metrics all the way down to a unit type level. So there could be certain unit types. We're pushing pricing a little more even on the same property. So it's going to be macro factors certainly play into it, but a lot of these micro factors impact our decision-making as well.

And you talked about lease-ups earlier. I think if you look back at the last sort of 2 years, one of the things that's been the most difficult to judge is sort of this changing demand patterns that we've had and then how that impacts the lease-up of supply that is already delivered. We have the statistics on sort of what's delivering this year. I think you've sort of framed what you expect this year and next year. But can you maybe just help us understand what's happening real time in your markets in terms of leasing up that sort of excess inventory that delivered, call it, over the last year or so, sort of where that is in the process and sort of what the likelihood it is that we're going to see some pricing power when we get into the peak leasing season.

Yes. I mean if we look at in our markets, this market level occupancy stabilized plus units in lease-up. The overall average occupancy is about 200 basis points higher than it was kind of at the trough, if you will. And then we look at the number of -- we take a look at number of units in lease-up. And so how we define that is just all of the units for being delivered in lease-up, but in our markets, it's down about 120,000 units today from what it was at the peak, and we've continued to see positive net absorption.

There's still some concessions out in the market. I mean the average about month, a quarter or so is kind of what we're seeing broadly. Some of the lease-up submarkets are still in that 2, 2.5-month range in targeted areas. But that creates some of the opportunity as well. When those concessions burn off creates significant opportunity to grow leases. 1 month represents 8% rent growth right there. So when we look at just market level occupancies, absorption, where we were relative to the peak and combine that with the demand factors, that's kind of what drives our expectations.

And I guess, again, early in the year, but are you seeing any sort of markets sort of standing out? Anything can change sort of on a month-to-month basis? It seems like Atlanta maybe is finding its footing a little bit, maybe Dallas. Can you just talk about the markets where you think you might see that pricing power the earliest versus those that you expect might take some time?

Yes. I mean you called out 2 for sure, Dallas and Atlanta, and we have a slide in there that talks about some of our market expectations and ones that are trending up, and those are 2. And the way we've sort of looked at that is what has pricing power been in the last 5, 6 months in those markets relative to where it was a year ago. And Atlanta and Dallas are 2 that when you combine pricing and occupancy gains are significantly better than they were this time last year.

Austin and Phoenix are ones that you asked about more laggard markets. Those would be ones that are probably later '26 into '27 recovery. Now they are doing better on a relative basis than they were this time last year, but that's coming off some pretty anemic numbers. So we're seeing a little bit of momentum, but don't expect those to outperform. I think some of our mid-tier markets we talked about are Richmond, Greenville, Charleston, we would to continue to have pretty good performance out of those. Houston is a larger market that's holding up well. We expect good things.

And then on the flip side, probably Raleigh and Charlotte are 2 that we're keeping an eye on, on the trending down. They've gotten a lot of supply over the last 2 years have held up pretty well, but it's starting to impact there. Raleigh, I would almost put in a little bit of an Austin light where it's got some of the best demand fundamentals of any of our markets, but just gotten a ton of supply. And so those are a couple that probably fall on the longer end of recovery as well.

And when you see your renewals are going out at over 5%, I guess, can you tell us what the take rate has been on that? And then when we think about sort of the variability in that across markets, is that just very consistent like if you take a weaker market, is it also 5%? Or is it like you're getting 1% in a weaker market and 8% in some of the stronger ones that just averages 5%?

I mean it varies a bit. It's not quite as extreme as that. I mean a tougher market, we're probably in the 1% to 2% range and then the stronger markets more in the 6% to 7% range. But we're -- as far as retention, we're seeing pretty similar retention to what we had last year. Last year was a record low turnover close to 40%, 41%. We're seeing something similar so far. So not really -- certainly not seeing any degradation in the retention rates and the speed in which people are making decisions is pretty consistent. We're not really seeing that. get delayed. So all positive on that front.

And I guess one of the more common questions I get, I think you have people that are bullish on the stock, you have people that are bearish, always a healthy balance. But those that are bearish sometimes bring up this idea that you're renewing tenants at a rate that is higher than market. And I think there's this sort of fear that as you move forward that, that sort of premium, if you will, kind of just comes down to 0, comes down to market and it's an inhibitor even as market rent growth presumably grows. I mean, can you talk about -- I assume you don't agree with that, so just tell people why you don't agree with that, sort of why you think the sort of renewal premium, if you will, is sustainable?

Yes, I can start, and Tim can jump in. I mean I think it's obviously a question we get a lot. If you look back at our historical renewal performance, I mean, we've been in the 4% to 5% range for years. And normally, what you see is the renewal to new spread gaps out in the first quarter and the fourth quarter. So it's always a little bit wider in those quarters, and it narrows as we get into the summer.

I think today, we're probably at the widest range that we've been in quite some time. But that spread today is only $180. So it's not like folks that are renewing are paying $200, $300, $400 more than what the new leases are paying. And then we continue to monitor the reason that folks are moving out. And the reason for moving out because they don't want to pay the rent increase continues to decline. It's down 10% in the fourth quarter year-over-year. So that continues to decline for us.

And so what I think you would generally see for renewals to really pick up, the single-family home market has to get a little bit stronger than where it is today. And I think if you look back at the historical performance that we've had when the single-family market is doing well and folks are moving out to buy homes, the economy is doing well. And certainly, in that instance where we would expect that to occur, we would expect new lease rates to be -- and the gap certainly to be a lot smaller. So we certainly don't see a risk of the gain-to-lease scenario that folks keep talking about. I mean, in fact, we're seeing our retention continue to increase. We focus a lot on customer service. And the reason why folks are renting with us, the #1 reason is because they don't want to pay -- they don't want to maintenance requirements by living in a home. And so we focus a lot on the service side of things that we're doing.

So we're not seeing anything to indicate to us that there's pushback on the renewal side. In fact, our renewals this year so far are 75 basis points or so better than they were last year, and the move-outs continue to decline. So...

Anything you'd add to that, Tim?

No, I think that's right. I mean -- and the other point is we still are at 40%, 41% turnover. So we still have people turning and our average stay is about 22 months or so. So there's not a lot of scenarios where you keep stacking renewal on top of renewals where it continues to gap out significantly. So there's a little bit of a natural governor with that low turn rate, but still that turn rate is still there.

And I think the other fear, and you just talked about it a second ago, is that you've had this great retention, very low turnover. It seems like quite a bit of it is associated with affordability gap on the for-sale side, just the fact that it costs considerably more to purchase something today than to rent. I think the fear is that, that sort of retention goes down as President Trump and sort of housing policies get initiated. Is there anything that you can see based on what he's announced thus far or what's in the pipeline? I know you have -- keep on top of what's going on in the regulatory side. Like is there anything that you see that you think is going to change that dynamic? Is there any risk out there where you say, I really hope we don't see this legislation because that's really going to ignite housing demand.

Well, certainly, there's been a lot of proposals that have put out, and I think there is a lot of focus on affordability and single-family affordability is a big part of that. And I do think the thing that we have to strive to start is we've got to have more supply of single-family and multifamily. That's what's going to ultimately solve the issue that we have. And to date, there's been 3 or 4 proposals that have been kind of floated out there. I haven't seen anything in any of the proposals to date that really stimulate supply. And that's really what we need.

To date, we've not seen anything that would indicate to us that there's going to be a material change in the turnover numbers associated with the single-family side. The drop in move-outs for single-family is something that has been going on for 10 years now. It started 10 years ago where our turnover was about 50% and a big portion of that at the time was moving out to buy a home, and that's down significantly. So that's a trend that started 10 years ago. It's not a COVID-related phenomenon. It's something that's been there. So I think it's a secular trend as well. We're seeing folks move out or pardon me, get married later, have kids later. And normally, the #1 driver of folks moving out is because of a change in their family dynamics. And so as we see those things occur later in life, then we would expect to see retention continue to hold in there.

The other thing is if you look at some of the new supply on single-family that's come to the market, a lot of times, it's located further out than where we're located. And so we're just not seeing our renter dynamic looking to own a home. We lose just a few percentage of our residents every year to that, certainly only 3% to rent a home. So we're not seeing a big portion of our dynamic of our demographic looking to go out and to own or to rent a home. So the ideas that have been floated so far, we don't see those having a material impact in the near term.

And have your demographics changed? You mentioned this is something that's a process that started 10 years ago. I mean if you think about your average customer today versus what that customer was like 10 years ago, is that different? And then maybe also layer on top of that sort of how you think about affordability of your products or where rent to income is today versus history? And as the cycle hopefully turns, right, as supply comes down, demand stays steady, you get rent increases, the ability of that tenant to absorb further price increases, rent increases.

Yes. I mean the first one I'll hit there is your affordability piece. I mean if you look at the rent to income in our portfolio today is at 20% 2 or 3 years ago, it was up to 23%. So certainly, we have a highly affordable product. That's part of the reason why we focus on the region that we focus on and the product that we focus on is because of that affordability piece.

In terms of the demographic shifts that we've seen, I mean, I think our residents have gotten maybe a year or 2 older. We're a little bit more female than what we have been historically. I think 80% of our residents today are single. So we've seen some demographic shifts associated with that. Certainly, a lot of dog owners in our communities today. But I think all of that has shifted to the renter for longer scenario that we're seeing. I think we've seen a slight uptick over the last couple of years in terms of the residents per unit has gone up just slightly, but no material shifts in that regard.

But the demographics that we see are strong. They're certainly financially stable, able to afford the product that we've seen. And I think you got to keep in mind, too, in our region of the country over the last year, we've seen tremendous wage growth, over 5% wage growth, which is really helping support the affordability of our product.

You mentioned that supply is ultimately the solution on both sides, whether it's for sale or multifamily. I mean one thing that we've heard at least so far from certain people is that construction costs seem to be coming down. There seem to be some savings. Can you maybe talk about what kind of savings you're seeing on your side? How much construction costs are coming down? And if that ultimately is going to result in seeing more supply starts this year? I know rents probably need to rise a little bit more, but is the construction cost coming down enough to get more supply coming in like a year or 2?

Yes. I mean I think we -- as part of our development platform, we look at a lot of equity packages for new developments that are out in the market. We probably underwrite write 50 or so projects a year. And predominantly, all of the projects are still not financially feasible. They're generally showing yields in the mid-5% range. So we need to see a substantial improvement. And as you just mentioned, the rents as well as construction costs coming down, somewhere in the probably 12% to 15% range combined between those 2 before you really see most of these deals start making sense.

What we're seeing today is probably a 5% reduction on the construction cost. We're generally seeing a couple of percent on the front end. And then where the other savings is materializing generally is in the buyout. So after you go under contract, the contractor goes out to buy out the contract from the subcontractor. So you're not generally seeing all of that on the front end. Some of that materializes during the project. But we need to see still a substantial combined reduction of either rent increases or construction costs coming down before we see a majority of the projects that are out there today begin to pencil.

And I do think it's important to keep in mind, what we're seeing more of, though, is developers unable to find equity for projects. We're also seeing developers not willing to spend predevelopment dollars to get projects going at this point in the cycle. And it still takes 1 year to 1.5 years from when you start pursuing a project before you're able to get permits and ready to start construction in the Sunbelt. So I do continue to believe that there is going to be a material window of where the supply numbers are well below long-term averages before the pipeline again continues to pick up.

And I think it's also important to remember that the peak supply that we saw delivering in 2023 and '24, that is directly correlated with the interest rates that we saw that were effectively 0 2 years before that. So I don't think we go back to a situation where we have the supply levels that were 6% of inventory in our markets. I mean if you look at long-term averages are around 3%. Today, the trailing 12-month starts are somewhere in the 1.8% to 1.9% range. So we're well below that and have been for the last 3 years. So I could see a situation where the supply over the next 1.5 years, 2 years starts to tick up a little bit or new starts start to tick up, but it takes time for that to start manifesting itself into deliveries.

And sorry, did you just say that starts as a percentage of inventory is kind of like around sub 2%, like 1.8%. Just trying to think through like 2 years from now, like what's the level of sort of inventory we'll be seeing?

Yes, it's the 1.8%. I think we have a slide in our deck that forecasts out for the next couple of years based on third-party data that we have in our region, again, the long-term averages are 3-ish, 3 to slightly above that. And the projections we have for the next couple of years are in the 1.8%, 1.9% range.

Any questions on sort of -- from the audience before I switch to capital allocation. just jump in. I guess keeping with development, you've had a growing but relatively consistent development pipeline. I think for the last 2 years, you sort of said the earnings contribution from the development pipeline is coming. I think you said on the call that you're going to see this contribution next year. Can you just talk about sort of what gives you confidence in that?

Yes. I mean I think number one is when we underwrite developments, we're pretty conservative in how we look at those developments. And if you look at what we've done historically -- well, let me back up. So today, what we're underwriting, yields are in the 6% to 6.5% range. So still very strong yield contributions from -- stabilized yield contributions from these developments. And if you go back and look at what we've developed over the last 5 or 10 years, on average, our developments have delivered stabilized NOI yields 90 basis points higher than what our expectations are. They've delivered costs that were 3% below and rents on average have been 8% above what our expectations are. So we are very conservative in how we underwrite projects.

What we're seeing today, though, is the new deliveries that are delivering into the market right now are leasing up slower, just given all the supply that's in the market. And we've also seen increased concession usage. Most developments you underwrite a month free. We're seeing 2 months free or so on those developments. So the concession usage is taking longer to burn off. And so what we've said is the full earnings contribution from the developments that are delivering today is pushed off about a year. The good news is the recurring rents that we're seeing on those projects every month are still above pro forma. But again, concessions are higher, but we are burning those off.

If you look at our renewals on lease-ups, we're getting low double-digit rent growth or lease-over-lease rent growth on renewals. So we're burning the concessions off. So again, we believe in the long-term earnings contribution from our development pipeline and from those deals. It's just taking a little bit longer to get there than what we originally anticipated.

And then on the buybacks, some of your peers have been quite a bit more aggressive in repurchasing stock. Can you just talk about why you haven't done the same? And obviously, we've seen one of your closer peers selling a large portfolio to potentially fund some buybacks. And maybe just talk about your strategy around buybacks versus dispositions and sort of why you haven't been quite as aggressive as some of your peers?

Yes. Well, I think as we look at really all of our capital allocation options in front of us, really, what we're trying to do is deliver long-term TSR performance that leads the space. And certainly, we believe that the best way to deliver long-term TSR performance is through development, where we're able to consistently deliver yields, again, aside from the supply environment that we're in right now, we're able to deliver yields and NOI and NOI growth that exceeds what our existing portfolio delivers. And particularly, if you look at that on an after-CapEx basis, the growth rate that we're getting from development delivering into our portfolio is a lot higher than what our existing portfolio is. So that's point number one.

Number two is we do think that we need to have a balanced approach. We need to be able to take advantage of short-term opportunities, but we also don't want to do that to the extent that it restricts us from carrying on investments in a way that we think will deliver that long-term TSR performance. And so we are balanced. You saw in our package there that we have purchased about $61 million worth of shares to date, and we will continue to be opportunistic in that way. But again, we believe that development is the way for us to be able to deliver TSR performance going forward that is certainly stronger than what the sector average is able to do.

I guess kind of a random question, but like where do you think like the bottom end of your portfolio would trade today? Like if you were to sell your dogs, the worst stuff that you have, I don't know what percentage that is of what you own, but where do you think that would trade on a cap rate basis?

That's hard to say. We don't own any dogs. But some of our assets that are in smaller markets where we just have a couple of assets that are a little bit older, they're probably in the, call it, a 6 cap range.

I guess the question is, I understand what you're saying about development and why it's better over the long term, but it's not necessarily like an either/or type of analysis, right? If you're able to do that plus maybe sell some of your worst assets at an accretive spread to where your actual stock is trading, it seems like you're improving the growth profile. You're getting rid of some of your lower quality assets. Again, it doesn't have to be either/or. So I guess that's really my question is why not approach it that way?

Yes. Well, believe me, we've analyzed it every different way. I think for us, broadly speaking, we do not have a lot of assets that we need to cycle out of. We like the broad diversification of our portfolio. We like where we're generally located. So we don't have a large portfolio of properties that we could sell and reallocate that capital. But what I would say on some of the examples that you just gave, I mean, I think you have to keep in mind, there are tax implications associated with this as well. And our portfolio on average, what we've sold over the last 5 years, the depreciated basis, which is creating certainly a tax gain for us is somewhere in the 80% to 90% range.

So when you take that into account, the best opportunity for shareholders through that is if we sell that is then to 1031 that into new properties. which we wouldn't have a lot at that point left to buy shares back. So that's not the strategy that number one, we don't need to sell a whole lot of properties and to reallocate capital from one area of the country to another. So we're not -- that's just not a situation that we're in.

Brad, one thing we're focusing on all these sessions is just efficiencies internally from AI deployment. How is MAA thinking about finding those efficiencies? How are you deploying AI? And what's the mix of build versus buy or partner?

Yes. Well, we've been using AI now for a few years. Certainly, in lead management, AI is a key component of what we're doing in that area. We've also used internally have built some AI capabilities to help us with things like bill reading, bill payment, things of that nature, where we've got some AI readers to help in that regard. So we've been active in that space for quite some time. I'd say where we are right now in terms of build, buy, partner, generally, it's mostly we're partnering with AI providers just generally because the AI is mostly siloed today in whatever third-party software that we're using in our tech stack. We are looking at building our own kind of AI capability that sits on top of our data warehouse, where we're able to mine our own data through AI capabilities. So we're certainly very active in that space.

Do you think it will drive meaningful efficiencies either on the G&A side or operating margin? Where do you see the opportunity?

Yes. No, absolutely. I think the industry is probably on the front end of that. And I do think that's probably the next probably 2 to 3 years as the industry continues to specialize and centralize, which is certainly an area of the business that we're focused on. I think what you'll see is some efficiencies and scalability in the operating side of the business, which will drive G&A expense and property expense reductions as well.

Now we have a few more seconds here. So just rapid fire. Same-store NOI growth for the apartment sector overall next year in 2027?

1%.

And then will the apartment sector have more, fewer or the same number of companies a year from now?

Fewer.

You said 4%, right?

Did you say '26 or '27.

'27.

'27. I thought you said '26. '26, 1%; '27, I'm going to say 3%.

I was about to get concerned.

That's funny. I think I was like I think you said '27.

Thank you.

Thank you.

Good morning, ladies and gentlemen, and welcome to the MAA Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, February 5, 2026. [Operator Instructions]

I will now turn the call over to Andrew Schaeffer, Senior Vice President, Treasurer and Director of Capital Markets of MAA for opening comments.

Thank you, Julian, and good morning, everyone. This is Andrew Schaeffer, Treasurer and Director of Capital Markets for MAA. Members of the management team participating on the call this morning are Brad Hill; Tim Argo; Clay Holder; and Rob DelPriore.

Before we begin with prepared comments this morning, I want to point out that as part of this discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statements section in yesterday's earnings release and our 34-Act filings with the SEC, which describe risk factors that may impact future results. During this call, we will also discuss certain non-GAAP financial measures. A presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial data.

Our earnings release and supplement are currently available on the For Investors page of our website at www maac.com. A copy of our prepared comments and audio recording of this call will also be available on our website later today. After some brief prepared comments, the management team will be available to answer questions. When we get to Q&A, please be respectful of everyone's time and an attempt to complete our call within 1 hour due to other earnings calls today, we will limit questions to one per analyst. We ask that you rejoin the queue if you have any follow-up questions or additional items to discuss.

I will now turn the call over to Brad.

Thank you, Andrew, and good morning, everyone. As highlighted in our release, our fourth quarter core FFO results met expectations despite continued elevated supply levels. With occupancy up 10 basis points in same-store blended lease of release performance 40 basis points stronger year-over-year, the recovery in fundamentals is underway. As we look ahead, we are entering 2026 in a stronger position with a higher earn-in and more top line revenue momentum that we expect to build throughout the year. particularly in new lease rates, driving an anticipated 110 to 160 basis point improvement in blended lease rates and an 85 basis point improvement in effective rent growth compared to 2025.

While uncertainty remains in the broader economy, the level of uncertainty appears lower than what we navigated in 2025, supported by expectations for sustained GDP growth. Several of last year's major headwinds are showing signs of easing. At the same time, the economy should benefit from the working families tax cut, easing inflationary pressure and improving consumer sentiment, which is showing signs of recovering from multi-decade lows. Looking at our portfolio, rent-to-income ratios have improved, making rents more affordable. New deliveries are decelerating sharply down over 60% in 2026 from the peak and new starts are muted and have been for nearly 3 years, down nearly 70% from peak levels.

Against this improving backdrop, we anticipate demand across our markets to remain solid and broad-based supported by stable job growth, continued in-migration, healthy wage gains and record levels of resident retention. These trends point to a financially healthy resident base, supporting our consistently strong collections, reinforcing the durability of our revenue profile and suggesting that Absent a meaningful shift in the broader economy, underlying demand conditions remain well supported. Building on this foundation, our long-term earnings growth will benefit from numerous strategic investments we're making. This includes expanding our technology initiatives, such as community-wide WiFi and other enhancements designed to elevate the resident experience and improve operational efficiency.

Our residents value our communities and the exceptional service our teams provide reflected in record retention levels, strong renewal rates in sector-leading resident Google scores, averaging 4.7 out of 5 for the year. Persistent single-family affordability challenges combined with favorable demographic trends continue to support renter demand and keep move-outs to purchase a home near historical lows. These trends, along with fewer competitive units and lease-up, support strong returns from our repositioning and redevelopment projects. As a result, we're expanding our capital investments in these areas by more than 10% in 2026. Beyond these investments, we continue to grow our development pipeline by leveraging our strong balance sheet and development capabilities to invest early to take advantage of growth opportunities at a time when access to capital is more limited for others.

As such, during the fourth quarter, we purchased a shovel-ready project in Scottsdale, Arizona, from a developer I was not able to line up equity for their project after 3 years of due diligence, bringing our active development pipeline to $932 million. Additionally, during the first quarter of 2026, we purchased a land parcel in the Clinton neighborhood of Arlington, Virginia, and expect to start construction on a 287 unit apartment community later this year. As demand remains robust, new delivery slow and new starts track fell below historical levels across our region, our development should continue to generate strong returns and earnings growth with stabilized NOI yield between 6% and 6.5%, well above current market cap rates. Subject to market conditions, we expect to begin construction on 5 to 7 new development projects in 2026 that should deliver into a much stronger operating environment than the one experienced over this past year.

Additionally, our balance sheet provides the flexibility to pursue compelling acquisition opportunities as they materialize. We remain encouraged by the progress we're seeing across our portfolio. With more than 30 years of navigating economic cycles, we believe we are well positioned to serve our residents and to deliver compounded earnings growth over the full cycle. As market conditions continue to strengthen, improving fundamentals, coupled with our strategic investments, should provide meaningful opportunities to enhance performance support a stronger revenue trajectory over the next few years to all our associates across our properties and corporate offices, thank you for your continued commitment to customer service.

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

Thank you, Brad, and good morning, everyone. For the fourth quarter, the key operating fundamentals of pricing and occupancy combined were in line with expectations. New lease growth continues to be muted due to the moderating but still elevated supply picture combined with the normal seasonal slowdown in the fourth quarter. We did, however, continue to have strong retention and renewal lease rates and achieved sequentially improved average physical occupancy. As compared to the fourth quarter of 2024, blended rates improved 40 basis points, supported by a 50 basis point improvement in renewal rates and flat new lease rates.

Average physical occupancy was 95.7%, which was a 10 basis point improvement from both the fourth quarter in the third quarter of 2025. Additionally, we had another quarter of strong collections with net delinquency representing just 0.3% of bill rents, in line with the collection performance for the full year. While we broadly saw normal seasonality in pricing during the fourth quarter, many of our mid-tier markets, particularly in Virginia and South Carolina continue to be outperformers relative to the portfolio. Charleston, Greenville, Richmond and the D.C. area markets all demonstrated strong pricing power and strong occupancy in the quarter. Encouragingly, our 2 highest concentration markets, Atlanta and Dallas continue to show improvement as compared to the prior year.

Of our top 20 largest markets, these 2, along with Denver had the largest year-over-year improvement and blended pricing as compared to the fourth quarter of last year. Austin continues to be our weakest market in terms of pricing as it continues to work through the 25% of inventory that has been delivered cumulatively over the last 4 years. In our lease-up portfolio, M&A Vale in the Raleigh-Durham market reached stabilization in the fourth quarter. We now have 3 properties remaining in lease-up with a combined occupancy of 65.7% as of the end of the fourth quarter and an additional 3 development properties that are actively leasing units. Elevated concessions and longer lease-up periods continue to have a greater impact on the lease-up properties and have pushed the full earnings [indiscernible] out about a year.

However, these projects are still expected to achieve our underwritten yield as markets continue to improve and retain long-term value creation opportunity despite the overall leasing velocity being behind original expectations. We continue to progress on our various targeted redevelopment and repositioning initiatives in the fourth quarter, and as Brad mentioned, expect to accelerate each of these programs in 2026 with improving fundamentals. During the fourth quarter of 2025, we completed 1,227 interior unit upgrades, bringing the total for the year to 5,995 units renovated with rent increases of $95 above nonupgraded units and a cash-on-cash return of 19%.

Despite this more competitive supply environment for the full year, these units leased on average 11 days faster than nonrenovated units when adjusted for the additional turn time. For our common area and amenity repositioning program, we are on average over 70% repriced at 6 recent projects with an average NOI yield above 10% and rent both far exceeding peer MAA properties. Five additional projects are well underway with anticipated repricing in mid-2026, during the prime leasing season. We have targeted an additional 6 properties to begin later this year that will reprice in 2027. While vendor challenges and equipment delivery delays have slowed progress on our community-wide WiFi retrofit project, we are live on 14 of the 23 projects started in 2025 with the remaining 9 expected to go live in the first quarter. Similar to our redevelopment plans, we expect to expand this initiative in 2026 offset.

Looking forward to 2026, we are well positioned. While winter store burn did impact about 70% of our portfolio and slow traffic for several days. We ended January with physical occupancy of 95.6% and 60-day exposure of 7.1%, both in line with this time last year. As Brad referenced, new supply pressures continue to moderate and demand remains strong with market-level occupancies, including lease ups in our markets, well above where they were this time last year. Strong renewal performance continued in the first quarter with higher retention rates and lease-over-lease growth rates on renewals accepted for January, February and March, all above 5%. This compares to the 4.5% we achieved in the first quarter of 2025. We expect gradual seasonal improvement in new lease rates along with consistent renewal growth, will drive improved performance in 2026 and be particularly impactful to 2027 as pressure from the supply subside throughout the year. [indiscernible] in the way of prepared comments.

Now I'll turn the call over to Clay.

Thank you, Tim, and good morning, everyone. We reported core for the quarter of $2.23 per diluted share, which was in line with the midpoint of our fourth quarter guidance and contributed to core EBITDA for the full year of $8.74 per share. Fourth quarter same-store NOI was in line with our guidance of same-store revenues were $0.01 unfavorable due to other revenues and pricing, offset by same-store expenses favorable by $0.01 due to Altice operations, repair and maintenance and real estate taxes. Favorable interest expense was offset by overhead expenses and operating performance from our non-same-store portfolio. During the quarter, we funded approximately $81 million in developed costs for our current $932 million pipeline, leaving an expected $306 million to be funded on the current pipeline over the next 3 years.

As Brad noted, our balance sheet remains well positioned to support these and other future growth opportunities. At the end of the quarter, we had $880 million in combined cash and borrowing capacity under our revolving credit facility, and our net debt-to-EBITDA ratio was 4.3x. At quarter end, our outstanding debt was approximately 87% fixed with an average maturity of 6.4 years at an effective rate of 3.8%. During November, we issued $400 million of 7-year public bonds at an effective rate of just over 4.75%, using proceeds to repay borrowings under our commercial paper program which were used to repay the November 2025 bond maturity. During the quarter, we repurchased 207,000 shares at a weighted average share price of $131.6 our first repurchase since 2001.

Finally, we provided initial earnings guidance for 2026 in our release, which is detailed in the supplemental information package. For 2026 is projected to be $8.35 to $8.71 or $8.53 per share at the midpoint as was outlined in the prior comments with continuing improvement in supply impacting our markets, coupled with solid demand fundamentals, we expect rental pricing to grow during the year and to drive improving earnings performance as we progress throughout the year. Projected 2026 same-store revenue growth midpoint of 0.55% results from a rental pricing earn-out of negative 0.2%, an improvement compared to 2025 earn-in combined with a blended rental pricing expectation in the range of 1% to 1.5% for the year. New lease pricing is expected to show improvement over last year. We expect supply levels to continue to impact new lease pricing, particularly in the first half of the year, but believe the impact will increasingly improve over the course of the year as the effect from new supply continues to decline.

Renewable prices expected to remain strong and in the 5% to 5.5% range throughout the year. For the same-store portfolio, we expect effective rent growth to be approximately 0.35% to the midpoint of our range. Occupancy averaged 95.6% at the midpoint and other revenue items, primarily from reimbursement and fee income to grow just over 2%. Same-store operating expenses are projected to grow at a midpoint of 2.65% for the year. Personnel costs are expected to grow by less than 2% and while we expect some continued pressure on utilities, marketing costs and office operations. These expense projections, combined with a revenue growth of 0.55% results in a projected decline in same-store NOI of 0.75% at the midpoint. As outlined in our release, we expect our non-same-store portfolio to contribute $0.19 in NOI during 2026. With the related interest carry, along with the slower leasing velocity and higher lease-up concessions that Tim mentioned, we anticipate the recently completed developments and acquisitions will be slightly accrued to 2026 core FFO and moved closer to the expected yields in 2027 and beyond.

We expect continued external growth in 2026 consisting of our current development pipeline and the projected new starts that Brad noted, with funding between $350 million to $450 million coming from debt financing and internal cash flow. We also expect to match fund $250 million in acquisition opportunities with dispositions. This external growth is expected to be slightly dilutive to core FFO in 2026 and then turn accretive to core FFO after stabilization. We project total overhead expenses, a combination of property management expenses and G&A expenses to be $136 million, a 5% increase over 2025 results, bringing our 3-year average increase to 2.5%. We also expect to refinance $300 million in bonds maturing in September 2026, which had an effective rate of 1.2%.

Further, we plan to redeem the outstanding preferred shares in the second half of the year. These anticipated transactions, coupled with our 2025 refinancing activities will result in incremental interest expense of over $0.05 and combined with financing to support our 2025 development deliveries and the expected deliveries in 2026, we project interest expense to increase by over 15% for the year. We are still early in the assessment of the impact of on a storm firm, but based on initial assessments, we anticipate excluding the impact from our core FFO results as we expect to receive insurance proceeds to cover a portion of the cost of the damages. That is all that we have in the way of prepared comments. So Julian, we will now turn it back to you for questions.

[Operator Instructions] Our first question comes from Jamie Feldman from Wells Fargo.

I apologize that you went really quickly through the new renewal and blend outlook. Can you just run through those numbers again? And maybe just talk us through your level of confidence in each your cadence on each throughout the quarters and just where you think -- if you think about your markets where you're most confident and most concerned about hitting those numbers.

Yes. Jamie, this is Tim. I can walk you through that and then Clay has something to add as well. As Clay mentioned, our blended balance is about 1% to 1.5% for 2026. On the renewal side, I mentioned in my comments that we're seeing a little bit above 5% so far this year. So we would expect renewals to be in the in-quarter range and then start to slowly see momentum on the new lease signing kind of the math on the new lease side with those components. And I would say, generally, we expect a normal seasonal curve where we see strength into the summer and then start to moderate into the late summer and fall but see less of that moderation in way Q3 and Q4 than we typically do, again, as we get further away from the peak of the supply and expected demand to solidify as well.

So normal seasonality, but less steep declines as we get late in the year. As far as markets, I mentioned a few of those on the prepared comments. We continue to see strength out of the markets that have been strong, some of the Carolinas and Virginia encouraged with what we're seeing in Atlanta and Dallas are obviously largest markets, we continue to see steady progress there, both on the pricing front and the occupancy front. The year-over-year improvement in Q4 pricing for both of those was significant and to our highest -- I think we'll start to see a little bit of momentum in Tampa. That's one where occupancy has stabilized and we expect to see a decent amount of demand there. But other than that, I think the ones that have been pretty solid for us this year, I expect those to continue to be solid for us in 2026.

Our next question comes from Jana Galan from Bank of America.

I was curious if you could comment a little more on the transaction market. We're hearing there's more variance and cap rates between core and value add. And then maybe on your decision to add to the development pipeline rather than buying assets or buying back more stock?

Yes. Thanks. This is Brad. I'll kick that one off. I mean in terms of the transaction market, it continues to be pretty aggressive on those core assets, as you mentioned. What we looked at in the fourth quarter, we continue to see cap rates in the, call it, 4.6% range. In terms of the spread between core and value add, I would say you're probably seeing a 50 to 75 basis point spread, all depending on certainly the markets that the value adds located in, what that upside opportunity looks like. But those can trade somewhere in the 5.25% to call it, 5.5% range, again, depending on the market that, that's located in.

But I don't think that spread has changed. That spread has been there for the last couple of years. So I wouldn't say there's a material change in that at the moment. In terms of our capital allocation, yes, I mean, development continues to be a big focus of ours. If we can as I indicated in my comments, when we're in an environment where demand continues to be solid, the supply pipeline over the next few years. continues to be muted. We've got the past 3 years now of start have been below long-term averages in our region of the country. This is a good time for us to be able to use our balance sheet capacity to invest in new assets that will deliver into a much stronger operating environment, the development yields that we're still able to achieve today selectively, not on everything that we look at, but on the deals that we move forward with, and we're in the 6% to 6.5% range.

So we continue to believe that that's a good use of our capital to drive long-term earnings growth out of our portfolio. In terms of share repurchases, again, we look at all opportunities for capital allocation, whether that's external growth, internal growth developing or investing in our existing platform. We talked about the redevelopment repositioning the WiFi initiatives, various initiatives we have to drive margin expansion opportunities. Those continue to be very, very compelling for us. And when we look at our opportunity set there, that does leave us with limited capacity for share repurchases. One of the things that -- we're not really targeting is a big disposition portfolio of properties to dispose of, and we generally like where we're located. And we don't need to reallocate capital between markets.

So you're generally not going to see us move forward with a big disposition plan to support share repurchase, rather, what we'll do on the disposition side is continue to cycle out of older assets, redeploy that capital into newer assets. And if you look at what we've done over the last 5 years, we've taken capital off of dispositions. We've earned almost a 20% IRR on those and redeploy them into new assets, driving 1,000 basis points better NOI margins and a 1,500 basis points better after-CapEx NOI margin. So we think that's the best opportunity for us on dispositions moving forward.

Our next question comes from Nick Yulico from Scotiabank.

So in terms of development, I was hoping you could talk some more about why that you have a focus on development right now when -- clearly, you have a view there's value creation that we had over time. You're building it higher yield than where you think assets are trading. But from an FFO and accretion growth standpoint, it's not helping right now? I mean you've talked about slower developing these up periods. You have an issue like others, where capitalized interest benefit is lower than where you're borrowing. So can you just maybe talk about how this make sense to be picking up development right now if you are having all these near-term FFO impact because of that?

Yes. Thanks, Nick. This is Brad. No, I think that's a good question, fair question. I think it's important to keep in mind with our development pipeline that we are delivering currently at a time where that those particular properties are under more pressure than they ever have been. I mean keep in mind that if you look at the amount of supply that's delivered on our markets from '23 to '25. We delivered 5 years' worth of supply over a 3-year period. So those properties are facing much more pressure which we are seeing right now in terms of their ability to lease up the velocity of their lease-up and certainly the use of concessions right now.

But that's temporary. If you look at the lease-over-lease return rents we're getting on renewals on our new lease-up properties, we're getting low double-digit returns. So the concessions that we're offering are burning off. If you look at the recurring rents that are in place on those development projects right now, they're 2% above pro forma. So again, this is a temporary issue with our developments. If you look at what we've developed over the last 5 years, we have delivered developments on average that have exceeded our underwritten yields by 90 basis points. So you're right, we're under pressure right now on that development pipeline, and we do think that that's temporary. And as the market firms and concessions burn off, we will, as Tim mentioned in his comments, capture the value proposition associated with those.

And then in terms of starting new developments today, they'll be delivering in '28, '29. And as I mentioned in my comments, we've had 3 years now of below long-term average supply in our starts in our market, which will support a stronger operating environment when those new developments come online. So we very much believe in the merits of continuing to allocate capital to development despite the pressure that we're under currently.

Our next question comes from Eric Wolfe from Citi.

You mentioned that renewals are being accepted above 5% so far this year. Could you just talk about what the dollar premium is on renewals versus new leases right now, how that premium compares versus history? And just any thoughts on and how sustainable you think this 5% renewal rate is?

Yes, Eric, this is Tim. As far as the gap, Q4 it was around $180, $185 or so new leases versus renewal. Now that's after the renewal increase and the renewal increase is about $80 or so. That's certainly higher than our long-term averages, but not too much different. Q4 is when it always tends to gap out as we see, obviously, more moderation in new lease rates and traffic patterns, that sort of thing. So if I went back to the last couple of Q4, that's not too much different than what we've seen there. So -- but we've now seen that. There's been 8 or 9 quarters now where it's been a little bit wider than normal, but still been able to maintain the growth that we did on the renewals.

And I think there's a lot of reasons for that. We've talked about this in the past. I mean, I think there isn't -- there's a cost, there's a hassle of moving as our residents get a little bit older, the cost of that and the willingness to go through that hassle and it's not money and take that time because people are less willing to do that with the resident base that we have, and we're very thoughtful of how we go about our renewal increases. It's based on where our residents are relative to market and we scale that higher or lower based on that. And we're looking at it on a very strategic basis. And there's a customer service factor there as well, brands in the Google scores that we have, which are highest in the sectors of customer service component. And I think when you factor all those things there, the service you're getting, the cost, the hassle, the everything that goes into booting, it's just not worth it for a lot of our residents when they consider the value that they're getting with us.

And particularly in this environment, when you think about the concessions on lease-ups and some of the 8 to 10 weeks free that they're saying, that's a short-term pay and you're going to get that big increase when you try to renew if you are willing to move. So we expect -- we've got visibility really out into April now and seeing consistent take rates and consistent performance of renewals. So feel confident and comfortable about where we are on the renewal side.

Our next question comes from Michael Goldsmith from UBS.

This is Ami on with Michael. What gives you the confidence that you can see an acceleration in new lease through and maybe a little bit past the typical lease season given the softer macro? I know you mentioned some tailwinds, but is in your markets, what are you seeing in terms of job growth that really gives you confidence that the remaining supply can be absorbed and rents can accelerate? And maybe if you could talk about the new lease growth from trough to peak and how that would compare to historical?

Yes, Ami, this is Brad. I'll kick off and Tim can certainly give you some details. But I think the pace of recovery and the expectation for a recovery to accelerate this year for us is really, as I mentioned in my comments, really anchored in the fact that we do think some of the headwinds that we had last year are a little bit less than what we or less this year than what we expected last year. And we're seeing the momentum. If you look at our fundamentals, as we talked about, they're improving the operating fundamentals are. Now it takes time for that to make its way into the revenue and earnings portion as the rent roll turns.

But we've had 4 straight quarters now of blends improving year-over-year, which really indicates that we're turning the corner, certainly less uncertainty as I talked about. And then I think as you look out into the next year and the cadence of new deliveries declining this year where they'll be down by more than 60% from the peak and down 35% year-over-year. And then I think, as Tim mentioned earlier, with the backdrop of market level occupancies continuing to firm up in less units and lease-up, the sustained demand that we're seeing across our portfolio right now should have a more and impact on fundamentals. And certainly as we get into and particularly on the new lease rate side. And as we get into the spring and summer leasing season, we would expect that to continue to manifest itself to a larger degree.

Yes. I'll just add one point. I mean, I think important to keep in mind on the new lease side is typically in Q4 and Q1 we historically see negative de-lease rates, even in a good environment, even in a more historically favorable supply-demand environment, you see negative new lease rates in those 2 quarters just from normal seasonality from traffic declining. So that's not unusual to see that. But we would expect some good acceleration, as I mentioned, into the summer and then start to moderate fall. But all the things Brad mentioned, and think about it when we get to the back half of 2026, how far we are from the peak, continuing to see those units absorbed.

We think the demand picture will continue to solidify all the various factors in our region of the country. There's job growth, migration, household formation, population growth, the health of our renters in terms of income, rent to income are all extremely strong, particularly compared to other areas of the country. So all of those factors are combined. We give the confidence that we think 2026 was better than 2025.

Our next question comes from Haendel St. Juste from Mizuho.

Just wanted to come back to the point on Blends one more time. Just doing a quick math by our numbers, it looks like there's about a 200 basis point ramp implied into the back half of the year versus the first half, which is similar to what you saw or what we saw at this point last year and you [indiscernible] had to cut a few times. So first, I guess, if my math is correct. And it sounds like secondly, that it's little bit of lower supply. You had some optimism in the demand picture here. But what about turnover? I'm curious kind of what you're factoring as well for turnover into that math?

No, I'll hit that last point. I might let Clay talk a little bit about the first part. As far as turnover, we're expecting pretty consistent turnover there's nothing that suggests that we think it will pick up. So we've effectively dialed in consistent turnover from what we did last year. So certainly, the renewal performance and the impact of renewals versus new leases is helping in that win as we expect turnover to stay alone. We're not necessarily dialing it in to be lower, but not [indiscernible] to be any higher either.

Just on the new lease side, I mean, so far, [indiscernible]that the pace of that plays itself out to be. I mean it's -- as Tim has mentioned earlier, it's increasing over the first half of the year and then subsiding over the back half of the year, kind of following the typical seasonal curves. But we do expect there to be continued improvement versus what we've seen in 2024. And so as that ramps up over the course of over the course of the year. we see that playing itself out into the splitted rates that we were describing.

Our next question comes from Brad Heffern from RBC Capital Markets.

Can you talk through what the path is back to positive new lease growth? Obviously, it was originally expected in mid-'25. It doesn't look like the guidance would suggest that we would see it in '26? And then if renewals are a little higher than normal, I don't think you've done anything in the $0.023. So it feels like that would put pressure on new lease in '27 as well. So I'm just wondering your best guess on when we would see positive new lease growth and then when new lease growth in general could kind of go back to normal?

Well, I'm not going to put a target on a positive new lease growth. I mean we don't necessarily have that dialed in to our expectations, as you noted, in 2026, we do expect it to continue to accelerate from where we are now. And then I have mentioned seeing the steady renewals. But I think as we get into 2027, I mean I think one thing to be clear about on what we found in 2026 because of the acceleration of new lease rates, and I mentioned in my comments, less of the normal seasonality as we get into August, September and beyond. More of that impact in the lease rates is going to impact 2027 more so on the revenue side than 2026 because of it being a little more back loaded. And so part of that leads then to where we expect 2027 to be.

And again, we're even further from the supply peak consistently starts are continuing to go down. we think demand will be solidified. So as we get into 2027, I think that's when you see real sustained momentum and starting to see potentially where we get into some of those positive new lease rate ranges.

Our next question comes from John Kim from BMO.

I wanted to follow up on your disposition guidance of $250 million, which is following a year in which you had just a couple of assets. But just given the strong demand from institutions for your product, I'm wondering what's holding you back from selling more into the strength?

John, this is Brad. I mean, I think what's holding us back from selling more is, one, what we've always talked about, we want to protect the earnings quality and capability of our portfolio without introducing a lot of volatility into our earnings performance. And I think for us to go out and sell a large part of our portfolio, they could potentially introduce some earnings volatility. Second, we like where we're located. We like the diversification of our portfolio in both large and mid-tier markets and there's really not a portion of our portfolio that we are really targeting moving out of and reallocating that capital to another region of the country. So we don't really have the need to do that.

And if you look, again, as I said earlier, what we've been selling over the last couple of years, it's a 30-year-old [indiscernible] and I think that really fits nicely into our overall strategy of improving the earnings quality of the portfolio versus going out and selling a big portion of our portfolio. And in trying to determine what to do with that capital. I think you also have to remember that the fact that we are selling assets that are 30 years old, the taxable gains associated with that are sizable. And for us to really protect that from having to pay some type of packs on that, we want to be able to 1031 exchange that, and that's harder to do at a large scale in this market without paying cap rates that we think are very aggressive at the 4.5% range or so. And we think our opportunity is better to be measured in to deploy capital into other avenues.

Our next question comes from Austin Wurschmidt from KeyBanc Capital Markets.

Recognize it's still pretty early in the year, but just wondering if the pace of improvement in new lease rate growth from the fourth quarter in January, February and any future visibility you have into future months, how does that compare versus last year? And do you expect just that gap or improvement to just gradually widen through the year? Is that what's in that new lease rate growth assumption?

Yes, Austin, this is Tim. I think you characterized it well in the last part of your question. We would expect that variance, if you will, the prior year to continue to get a little bit wider as we get later in the year for all the reasons we've talked about with moderating supply right now, particularly on the blended side, we're seeing -- we would expect pricing in Q1 will end to be better than what it was this time last year. And then we start to see it accelerate from there. So far as expected. And as I mentioned, I think the way you characterize it is the right way to think about it.

Our next question comes from Rich Hightower from Barclays.

Just to maybe follow on Austin and even Jamie earlier. Just to confirm, you guys wouldn't want to put a number on what new lease growth in the first quarter is going to be. And that's not even my real question. My real question is just on share repurchases. It seems like the philosophy, it was always there as a possibility, but maybe it changed later in the fourth quarter. And just wondering what the math around sort of sources and uses how that changed kind of later in the fourth quarter that led to repurchases for the first time in a long time.

Rich, this is Brad. I'll pick that off and others can jump in if I need to. I wouldn't say it's been a material change in terms of our outlook there. I mean, honestly, we've always had the position that if we -- if our shares traded at a persistent a sizable discount to our underlying value, and we felt that investing in our existing shares provided an opportunity to drive earnings growth and value proposition for our shareholders, then we would do that. And I'd say what's unique right now versus historical is that we're trading at a sizable discount persistently. We really have not done that -- if you go back and look at our history in a long, long time, hence, why we haven't repurchased shares since 2001.

So not a position that we have found ourselves in historically and certainly think it's unique given the supply pressures that we are under right now that are dissipating. So we do think that it is a temporary item given where we continue to see private market pricing relative to the public market. So as I mentioned, we have a limited appetite to do that. And so we have an authorization that's in place, remains in place. And so if we continue to find that be the case, and we think that's the best opportunity for our capital to drive long-term shareholder returns. We'll continue to monitor that and execute in that way.

Our next question comes from Steve Sakwa from Evercore ISI.

I just was curious if you had sort of an overarching kind of macro view that you're laying on top of your expectations? I mean you're talking very positively about renewal pricing obviously, job growth kind of slowed in the back half of last year. And I'm just curious if there's an underpinning or kind of broad assumption that you guys have about job growth kind of in other absolute terms or percentage growth because obviously, job growth slowed pretty meaningfully from '24 into 25 things.

Steve, this is Brad. I'll kick off and Tim can add any details if he wants. I would say the broad view is that, as I mentioned in my comments, that GDP continues to be relatively strong this year. I think from a job growth number perspective, what we're looking at the numbers we're looking at for our markets showed absolute job growth going up slightly versus last year. The other demand metrics that we're looking at continue to remain positive, as Tim mentioned earlier, household formation, population growth, in migration. Our migration trends continue to be positive in our region of the country. And then just wage growth. We continue to see very strong wage growth in our resident base, supporting declining rent-income ratio.

So I think all of those things really support just the broad view that we have the things -- the demand side are holding up quite well in our region of the country and should continue to hold up quite well this year with the supply-demand dynamics improving as we progress through the year.

Just one thing I'll add to put some numbers on. We're projecting somewhere in the 340,000, 350,000 jobs in our markets in 2026 and then about half of that in terms of number of completions, so you think about that John, the completion ratio is certainly improving in a lot better position than we've been in the last few years.

Our next question comes from Linda Tsai from Jefferies.

For the markets where you're seeing higher concessions, where would you expect to see the concessions burn off the soonest and then alternatively, markets where the concessions might persist?

Yes, this is Tim. I mean I would say at a broad level, concessions have been pretty consistent. There's probably about or so of our direct comps are offering concessions and they're averaging somewhere in the 5-week range. That's kind of a broad assessment, which is pretty consistent with what it's been the lease-up properties, as we mentioned, if there's a lot of lease-up have been a little bit higher, more in the 8 to 10 weeks. We're starting to -- we've seen a little bit of increase in downtown Nashville, a little bit Raleigh and Charlotte. Those are the ones where we've seen concessions pick up a little bit. We've seen them drop a little bit in Tampa and some in Houston.

We've seen a lot of good stability in Phoenix where occupancy has stabilized and we're not seeing the concession pick up. But broadly, where we've seen some improvement over the last few quarters as a couple of markets I mentioned earlier, Dallas and Atlanta are really starting to see those inter-loop and urban areas across the portfolio. work through that level of supply. So we've seen concessions in some of the more urban areas come down, which again is encouraging that they see a lot of supply broadly concession is pretty consistent and then it's some increasing, some decreasing depending on certain pockets in certain markets.

Next question comes from Alexander Goldfarb from Piper Sandler.

Just thinking about concessions. Is there a risk of all the supply that was delivered in the past 2 years presumably had a lot of concessions in that and those existing renters got the benefit of whatever, 1, 2, 3 months free. As those leases roll and those renters face market rents, are you expecting a lot of churn where once again, even though supply is coming down, there's suddenly a lot of competitive supply, if you will, because those units now are looking for full freight renters versus the concessionary ones that were currently in the lease up? I'm just trying to understand how the first year anniversary of all that supply roles, how that's going to impact you guys in the overall market.

Yes, Alex, this is Tim. I mean, certainly, relative to where we've been over the last couple of years, I don't consider that to be 2 months of a risk. I mean because it still comes down to just how many units are out there that are available. We think there's probably 110,000, 120,000 less units and lease-up in our markets than there were at the peak. And then you combine the lower turnover, that's helping as well, where there's just fewer units of existing assets. So I don't consider that. I think it still just comes down to more of a supply-demand picture of how many units to lease up, and that really drives it more than anything else. I think where it has helped us more, honestly, is on the retention side where people knowing those concessions are going to burn off, and I think that's helped us more on the renewal side, but we don't see that as a real risk.

Our next question comes from Buck Horne from Raymond James.

I was wondering if you could help us stratify maybe the recent performance between your Class A units versus Class B and however you want to describe it, new lease rates occupancy, any sort of metric between As and Bs and just wondering if we're starting to see any sort of incremental pressure from kind of the vacancy increases and the Class C units if that's starting to filter upwards or not? .

This is Tim. As far as AB and you can think about AB or you think about urban suburban depend on how you're going to find it. But the way we define A and B, I haven't seen a real differentiation and performance there. But I did -- I mentioned this a little bit earlier, where we had some differentiation over the last couple of quarters as more of the urban versus suburban, more of the central business district and urban areas. Particularly, we don't have a ton of that, but we have a fair amount in Dallas and Atlanta, and we've seen that performance start to differentiate both on the occupancy side and the pricing side we're seeing pricing about 40 points better on blended pricing and probably 10 basis points or so higher occupancy. So I think that's encouraging given where supply was occurring in those markets, but not a big mix on the AB side.

Our next question comes from Mason Guell from Baird.

On the acquisition side, are you seeing more opportunities to acquire lease-ups with the cycle taking longer to term?

Yes, this is Brad. I wouldn't say that we're seeing more opportunities. I mean, certainly, there are a lot of lease-ups that are out there right now. But honestly, I think we've seen less lease-ups actually being marketed than what we have historically. And I think that's because the valuation is more impact right now because there's just more uncertainty about the timing of the lease-up, the roll-off of concessions and things of that nature. So I think from a buyer's perspective, there's a little bit more hesitancy on lease-ups versus and so therefore, the valuation could be impacted.

So some sellers are really holding on to those assets a little bit longer right now, trying to lease those up before they really bring them to market. So we've seen -- there's lease-ups out there that certainly being marketed, but there's -- I think there's less of those today than there have been in the years past.

Our next question comes from Ann Chan from Green Street.

Could you share how renewable and lease rates in Atlanta have trended late last year and into early this year?

Yes. As far as the land and I touched on this a little bit earlier, we've continued to see pretty good performance, continually increasing performance, both in terms of really blended pricing and occupancy. If I look at 2025 full year blended pricing for Atlanta is where was in 2024, it was about 260 basis points higher blended pricing for the full year in 2025 and occupancy, about 70 basis points higher for the full year. So continue to see steady improvement there. when it isolated to just the fourth quarter saw that improvement as well. So that's a market that I talked about, but we're starting to see some stability from we've seen delinquency go down to just about the portfolio average as well. So I don't see any concerns there. And on a relative basis, [indiscernible] has had less supply than some of our markets. So broadly pretty encouraged with what we've seen from Atlanta.

Our next question comes from Alexander Kim from Zelman & Associates.

I wanted to dive into the transaction market a bit more here. Pricing power overall has been relatively soft, particularly on the new move-in side. And at the same time, you cited market cap rates in the 6% range with investor demand still obvious. Can you talk about what you're seeing in the transaction market for a stabilized product, I guess? And what you expect moving forward for transaction volumes with this particular dynamic in play?

Yes. I mean we continue to see very robust investor appetite for assets in our region of the country. I think the volume of properties that have come to market have increased steadily during '25 certainly as interest rates stabilized and were more attractive for folks. So I do think that, that is likely to continue in '26. I think the appetite for as in our region of the country will continue to be very, very strong. There's a lot of capital out there. Interest rates, spreads have decreased overall. The cost of capital has decreased.

So I do think that the transaction market could be pretty healthy with healthy cap rates as we go forward. I don't really see those changing at this point. I think from a -- as I mentioned a moment ago, I think from an underwriting perspective, there's a little bit of more uncertainty and has been for the past year of what happens on the new lease rate side. And since these lease-ups are generally leasing predominantly for the most part, at least in the first year to new lease rates, there's more pressure there. So then it comes down to the ability to earn those concessions off. So I think the market is certainly optimistic about what that looks like going forward and hence the low cap rates. And so I see the transaction market picking up in activity as we go through '26.

Our next question comes from Haendel St. Juste from Mizuho.

I might have missed it, but can you tell us what the new lease rate was for January specifically? And then would you also comment or can you comment on the pending settlement of the RealPage multi-district lawsuit? And then maybe remind us what other litigation there is on that front outstanding?

Yes, Haendel, it's Tim. I'll answer the first part. We're not going to get into individual months on the new lease side. It's just pretty granular in a small population, but I will say I think the -- when you think about new lease pricing compared to last year, we expect a small delta between those 2 in Q1 and then to get larger for all the reasons we've talked about and then blended basis to broadly, we expect that we would have better pricing in Q1 versus what we did this time last year.

Haendel, it's Rob. On the real base settlement, I think, first and foremost, I would say the settlement has no admission of wrongdoing or liability and remain confident that we've acted lawfully and responsibly and secondly, it does not require any material changes to how we operate the business. The prospective commitments are all ones that we believe are consistent with that we conduct operations today. So we don't really expect any significant disruptions there. And then finally, it really is just about removing distraction and uncertainty in a complex and evolving legal environment. where this is really an attack on the entire industry and not just MAA, the resolution deal allow us to eliminate significant cost and complexity and distraction of the continued and prolonged litigation and keep the focus of leadership where we really want it, which is a strong resident operations and value creation.

And then the 2 ongoing attorney general matters that are disclosed in our financial reports are still continuing, and we will continue to defend those.

And our last question will come from Julien Blouin from Goldman Sachs.

I just wanted to check on maybe just the trend of absorption volumes in your markets. It seemed to maybe normalize somewhat in the fourth quarter, certainly lower than it was in the fourth quarter do you worry at all that maybe absorption is starting to slow amidst the job environment that Steve alluded to and maybe in this sort of slower migration environment. you're still dealing with elevated levels of vacant units in your markets, but just wondering how you feel about absorption?

Yes. Julien, this is Tim. We did see absorption slow a little bit in the back part of the year in Q4 but not really surprisingly. I mean, one, just there's a seasonal component to that, that is not unexpected. And then frankly, there's just a supply start to continue as we continue to further from that peak. We would expect absorption to go down and just fewer units to be absorbed. But -- so we didn't necessarily need to stay at those extremely high levels that we've seen over the last few quarters. But as we look forward, just given the fact that there are so many fewer units and lease-up than there were 12, 15, 18 months ago, continued study demand scenario, not side of supply picking back up. We would expect absorption to be pretty intensive demand to be pretty consistent and not concerned overall [indiscernible]

Julien, this is Brad. I'll just add one thing to that. As Tim mentioned, as new deliveries continue to decline. The absorption numbers, the way they're calculated are going to by nature continue to decline. And so one of the things that we're also focused on is what our market level occupancies look like in our markets. And certainly, we look at that on a total basis as well as just the stabilized occupancy. And as Tim mentioned, I think, in his opening comments, I mean, we've seen significant improvement in those market level occupancies over the past year. And the numbers are -- continue to show that the lease-ups that are in the market continue to be filled up and therefore, the market level occupancies are freeing, which is one of the components of our strengthening -- belief of the strengthening performance throughout the year. So occupancies appear to continue to improve.

We have no further questions. I will return the call to MAA for closing remarks.

All right. Thanks for joining the call today. If you've got any follow-ups, don't hesitate to reach out. Thanks.

This concludes today's program. Thank you for your participation. You may disconnect at any time.

Good morning, ladies and gentlemen, and welcome to the MAA Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, October 30, 2025. [Operator Instructions]

I will now turn the call over to Andrew Schaeffer, Senior Vice President, Treasurer and Director of Capital Markets of MAA for opening comments.

Thank you, Regina, and good morning, everyone. This is Andrew Schaeffer, Treasurer and Director of Capital Markets for MAA. Members of the management team participating on the call this morning are Brad Hill, Tim Argo, Clay Holder and Rob DelPriore.

Before we begin with prepared comments this morning, I want to point out that as part of this discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statements section in yesterday's earnings release and our 34-F filings with the SEC, which describe risk factors that may impact future results.

During this call, we will also discuss certain non-GAAP financial measures. A presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial data. Our earnings release and supplement are currently available on the For Investors page of our website at www.maac.com.

A copy of our prepared comments and an audio recording of this call will also be available on our website later today. After some brief prepared comments, the management team will be available to answer questions.

I will now turn the call over to Brad.

Thank you, Andrew, and good morning, everyone. As highlighted in our earnings release, our third quarter core FFO results met our expectations, reinforcing the resilience of our platform and strategy. While the broader economic environment has introduced some challenges, including slower job growth and tempered pricing power in new leases, we are still seeing recovery. Strong occupancy, solid collections and year-over-year improvements in new renewal and blended lease rates in the third quarter demonstrate our momentum.

Demand across our markets remains healthy and we are encouraged that the record level of lease-ups in our region are being absorbed with occupancy levels increasing 450 basis points over the past 5 quarters and now approaching pre-COVID levels. Supply levels in our markets, though elevated historically, are trending down at a faster pace than many other regions. As new deliveries continue to decline each quarter, we anticipate a strengthening recovery in pricing power and operating performance.

Importantly, new starts remain below long-term averages and have for the past 10 quarters, and we see no indication of an acceleration in starts. In fact, per our third-party data provider, our markets saw just 0.2% of inventory in new starts in the third quarter. And starts over the trailing 4 quarters were just 1.8% of inventory, roughly half the historical norm, positioning us for sustained improvement.

Our diversified presence across high-growth markets and more affordable price point provides access to a broader segment of the rental market that is financially strong, supporting continued strong collections. Additionally, our region continues to capture one of the highest levels of annual wage growth, as evidenced by the increasing incomes of our new residents, driving favorable rent-to-income ratios, which remain at a healthy low of 20%.

Improving leasing conditions also bolster our redevelopment pipeline and offering residents a newly renovated unit at a more affordable price as compared to the higher-priced new multifamily supply. Due to persistent single-family affordability challenges, our strong customer service and demographic trends that support renting, residents are choosing to stay longer with only 10.8% of our move-outs occurring due to home purchases.

Our balance sheet remains a key strength with our recent credit facility expansion, which Clay will discuss in a moment, providing exceptional flexibility. While the transaction market has been active at sub-5% cap rates, we continue to identify select accretive opportunities such as our recent Kansas City acquisition, a stabilized suburban 318-unit property that we purchased for approximately $96 million and is expected to deliver a year 1 NOI yield of 5.8%.

Subsequent to quarter end, we purchased an adjacent land parcel for an 88-unit Phase 2 that will expand the stabilized NOI yield on our total investment to nearly 6.5% after capturing additional scale and efficiencies from the Phase 2 development. We are also advancing our development pipeline and securing additional attractive long-term investment opportunities.

In today's equity-constrained environment, our access to capital and development expertise remain competitive advantages. Following quarter end, we acquired land, plans and permits for a shovel-ready project in Scottsdale, Arizona scheduled to begin construction in the fourth quarter. This project, like others, we've recently launched, reflects our ability to capitalize on situations where developers face equity challenges, allowing us to secure projects at a compelling basis. The Scottsdale development is expected to deliver a stabilized NOI yield of 6.1%.

In total, we now own or control 15 development sites with approvals for over 4,200 units. And if market conditions remain supportive, we anticipate starting construction on 6 to 8 projects over the next 6 quarters driving meaningful earnings contribution in the years ahead.

With a 30-year track record of delivering through economic cycles, we remain confident in our ability to execute during this transition. Our focus on high-demand, high-growth markets, significant redevelopment opportunities, efficiency gains from technology initiatives rolling out in '26 and beyond and a growing external growth strategy position us for stronger earnings growth.

Our portfolio will continue to benefit from job growth, wage growth, household formation and migration and population trends that outpace other regions. We are encouraged by the building blocks that are in place in what we expect will be an acceleration of the recovery cycle in 2026 leading to sustained revenue and earnings growth, as new deliveries continue to decline and the recovery advances.

To all our associates across our properties and corporate offices, thank you for your unwavering dedication and commitment during this busy leasing season. Your efforts continue to drive our success.

So with that, I'll turn the call over to Tim.

Thank you, Brad, and good morning, everyone. For the third quarter, we saw increasing occupancy and strong retention and renewal lease rates but experienced continued lack of traction and the ability to push on new lease rates. We believe broad economic uncertainty and slower job growth, as evidenced by a downward revision to the job growth numbers, contributed to prospects being more cautious about making decisions to move and to operators prioritizing occupancy over new lease rents.

Despite the challenging environment for new leases, we continue to see new lease-over-lease pricing improve over the prior year at minus 5.2%, up 20 basis points as compared to the third quarter of 2024, combined with the strong renewal lease-over-lease performance of plus 4.5%, which was up 40 basis points over the prior year. Blended pricing for the quarter was positive 0.3%, improving 50 basis points from the third quarter of last year.

As mentioned, average physical occupancy sequentially improved to 95.6% in the third quarter, representing a 20 basis point increase from the second quarter. Additionally, we had another quarter of strong collections with net delinquency representing just 0.3% of billed rents.

A number of our mid-tier markets, particularly in the Mid-Atlantic region continue to be outperformers relative to the portfolio. Richmond and the D.C. area markets remain strong and other markets such as Savannah, Charleston and Greenville all demonstrated strong pricing power in the quarter. Of our larger markets, Houston continue to be steady and we are seeing encouraging progress in Atlanta and the Dallas-Fort Worth area properties, where blended pricing in both of these markets improved sequentially from the second quarter and outperformed the same-store portfolio.

The lagging markets we have noted for the past few quarters remain consistent with Austin continuing to work through its record supply pressure, resulting in weak new lease pricing and Nashville facing significant pricing pressure as well.

In our lease-up portfolio, we had three properties: West Midtown, Daybreak and Milepost 35 reach stabilization in the third quarter. We continue to make progress with our other 4 lease-up properties, which have a combined occupancy of 66.1% as of the end of the third quarter and the 2 development properties that are currently leasing units. We have seen the uncertainty and higher leasing price impacted a portion of our lease-up portfolio and pushed the stabilization date by 1 quarter for Valvest and Phoenix. While Liberty Road just started leasing the other 5 properties with units delivered are well into the lease-up process and rents are in line with the original performance. This helps preserve the long-term value creation opportunity despite the overall leasing velocity being a little bit behind original expectations.

Our various targeted redevelopment and repositioning initiatives continued in the third quarter, and we still expect to accelerate these programs into 2026. During the third quarter of 2025, we completed 2,090 interior unit upgrades, achieving rent increases of $99 above non-upgraded units and a cash-on-cash return in excess of 20%. This was an acceleration of both volume of completed units and rent growth achieved from the second quarter.

Despite this more competitive supply environment, these units leased on average 10 days faster than non-renovated units when adjusted for the additional turn time. We still expect to renovate approximately 6,000 units in 2025. And for our common area and amenity repositioning program, we continue the repricing phase at 6 recent projects with 5 of the 6 past the halfway point in repricing. So far, the results are encouraging with double-digit NOI yields and rent growth far exceeding peer MAA properties. Five additional projects are now underway with the anticipated repricing to coincide with the prime 2026 leasing season.

We are live on five 2025 retrofit projects for community-wide WiFi with go live base planned through the remainder of 2025 at an additional 15 communities.

As we approach the end of October, our current occupancy is 95.6% and 60-day exposure at 6.1%, 20 basis points and 30 basis points, respectively, better than this time last year, which keeps us in a position for stable occupancy heading into the slower traffic season.

As Brad referenced, new supply pressure continues to moderate and absorption remains strong with market-level occupancies including lease-ups at the highest level since mid-2019. Our theme of strong renewal performance continued in the fourth quarter with higher retention rates and lease-over-lease growth rates on renewals accepted for October, November, December, ranging between plus 4.5% and plus 4.9%. Moderating construction starts, Sunbelt market, demand dynamics and high retention rates underlie our optimism for an improving leasing environment, particularly as we get into the spring and summer leasing season of 2026.

That's all I have in the way of prepared comments. Now I'll turn the call over to Clay.

Thank you, Tim, and good morning, everyone. We reported core FFO for the quarter of $2.16 per diluted share, which was in line with the midpoint of our third quarter guidance. Favorable overhead expenses of $0.01 and same-store expenses of $0.05 and were offset by unfavorable same-store revenues of $0.05 and non-same-store expenses of $0.01.

As Tim alluded to in his comments, our occupancy and renewal lease performance remained strong and were in line with our projections for the quarter while new lease rates performed below our expectations. During the quarter, we funded approximately $78 million in development cost for our current $797 million pipeline, leaving an expected $254 million to be funded on the current pipeline over the next 3 years.

Our balance sheet remains well positioned to support these and other future growth opportunities.

At the end of the quarter, we had $815 million in combined cash and borrowing capacity under our revolving credit facility and our net debt-to-EBITDA ratio was 4.2x. At quarter end, our outstanding debt was approximately 91% fixed with an average maturity of 6.3 years at an effective rate of 3.8%. Subsequent to quarter end, we amended our revolving credit facility, increasing the capacity of the facility from $1.25 billion to $1.5 billion and extending the maturity of the facility to January 2030. In addition, we amended our commercial paper program to increase the maximum amount of outstanding commercial paper borrowings to $750 million. We have an upcoming $400 million bond maturity in November that we expect to refinance in the fourth quarter.

Finally, we have adjusted our core FFO and same-store guidance for the year as well as revised other areas of our detailed guidance previously provided. Primarily due to the lower recovery trajectory on new lease rents as the broader economy and employment markets moderated over the summer months, we are making slight adjustments to our guidance associated with same-store rent growth. We are lowering the midpoint of effective rent growth guidance to negative 0.4% while maintaining average fiscal occupancy guidance at 95.6% for the year.

Total same-store revenue guidance for the year is revised to negative 0.05%. We are also lowering our same-store property operating expense growth projections for the year to 2.2% at the midpoint. The lower guidance is primarily due to favorable third quarter property tax valuations as compared to our original expectations. The changes to our same-store revenue and property operating expense projections resulted us adjusting our same-store NOI expectation to negative 1.35%.

In addition to updating our same-store operating projections, we are revising our 2025 guidance to reflect favorable trends in overhead expenses, along with adjusting our acquisition and disposition volume for the year given the current transactions market. The impact of these adjustments, combined with the updated expectations for our non-same-store portfolio, resulted in us adjusting the midpoint of our full year core FFO guidance to $8.74 per share and narrowing the range of $8.68 to $8.80 per share.

That is all that we have in the way of prepared comments. So Regina, we will now turn the call back to you for questions.

[Operator Instructions] Our first question will come from the line of Eric Wolfe with Citi.

A number of your peers have talked about the worsening trends in late September and into October, specifically on new leases beyond just the sort of normal seasonal curve. Can you maybe talk about recent pricing trends that you're seeing on new leases? And are there any markets that are moving abnormally at this time of year? And just sort of any thoughts on sort of how that could trend through the rest of the quarter?

Yes, Eric. This is Tim. I would say broadly, we've seen generally pretty typical seasonality. Actually on the new lease side, saw our new lease decline a little bit less than normal from Q2 to Q3. It's normally in the 60 to 70 basis point moderation. We moderated 40 basis points and then even did better on the renewal side. So I think broadly we're seeing normal seasonality. We typically see pricing kind of peak in July and then slowly moderate from there for the rest of the year as the traffic starts to die down and that's pretty much what we've seen. The trend was a little bit less seasonal, as I mentioned, but broadly happening as we would typically expect.

In terms of markets, I mean the DC market we talked about is still on a relative basis doing well but certainly moderated a little on the new lease side. The other -- some of the laggards that I talked about have been similar. The encouraging ones have been Dallas and Atlanta both. We saw actually new lease acceleration from Q2 to Q3. And those are combined our two largest markets and seeing some encouraging trends there. But broadly normal seasonality.

That's helpful. And then could you maybe talk about any early thoughts on 2026 in terms of earning and contribution from other income? Essentially the more sort of predictable items for next year. Obviously, if you want to give your view of market rent growth, we'll take it, but I realize it's a dynamic environment.

Hey, Eric. This is Brad. I'll start and Tim can certainly jump in here. But I think as we look at and start thinking about what '26 is likely to look like just big picture, I mean, I think really for us to start with, we talk about the demand fundamentals. And for us, everything ultimately boils down to what the demand side of the equation ultimately looks like long term. And as we look at 2026 today, we really think that the demand fundamentals look pretty similar in '26 to the way they looked this year. Whether you're looking at migration trends, population growth, household formation or just single-family affordability headwinds, we really think all of those look very, very similar next year. Clearly, the unknown for us is the job market and really what that looks like next year. The early projections that we see for next year show the job market looking a little bit softer than it does this year. But I think one thing to keep in mind is next year is an election year. So I do think the administration is going to be very focused on getting the tariffs kind of behind them and then really focused on job growth the balance of the year, which we think could certainly help on the job growth side. And then I think, certainly from a supply perspective, we know the supply pipeline next year is set to decline considerably from where it is this year, where next year's deliveries will be about close to a 50% drop from the peak that we had in 2024. So certainly, the picture looks a lot better on that front.

So despite our recovery certainly not being quite as robust as what we had hoped for this year, we are making progress. And I think that progress will continue to manifest itself as we get into 2026. Tim, what would you add on the earning piece?

Yes. On the earning piece, I mean, I think based on where we see rents at the end of this year, you're probably somewhere around flat to slightly negative, which is a little bit of improvement on where we were heading into 2025. And then last point I'll make, you asked about the other income, it will be the WiFi projects that will drive that. They've been slow to materialize this year as we wait on circuit deliveries and other things, but we've got 20 or so that we think will be live by the end of this year. And that that group as a whole, once fully rolled out, is about a $5 million NOI piece. So we'll get a piece of that. So that will be the biggest thing sort of above and beyond our normal run rate on fee and other income.

And then just to follow up on the point on the earning. As Tim mentioned, for next year, flattish going into 2026. And just as a reminder, coming into 2025, it was a negative 40 basis points headwind. So a significant improvement going into 2026 as we sit here today.

Our next question will come from the line of Jamie Feldman with Wells Fargo.

I guess following up on the guidance line of questioning. On the expense side, anything, as we think about year-over-year comparisons, anything in 2016 that we should be aware of?

James, this is Clay. The one thing -- a couple of things that I would call out. I think starting with real estate taxes. We saw some very good favorability in our original projections for real estate taxes at this point in the year. A lot of that is due to some prior year adjustments -- some onetime prior year adjustments that we realized this year. So we'll have to anniversary that. But also thinking about the fact that we are projecting negative NOI growth for the year, so we would expect property valuations to significantly increase going into next year. So all said, we would expect real estate taxes to grow at a relatively normal rate of somewhere between 2.5%, 3.5%.

And I'm not giving guidance at this point, but just kind of where we think that's where we're probably headed at this point. Other than that, I think insurance will continue to get some tailwind from that given our recent renewal. So that will benefit us in the front half of the year and then we'll have to go through that process again next year. But I would expect, at this point any significant increases in that line, just probably normal typical run rates.

And then personnel, R&M costs, things of that nature. I mean, Brad mentioned the tariffs and expectation that, that gets settled here over the course of the next several months. We would think that those would typically grow in line with just typical inflationary trends. So nothing really outside of the norm for those. Should get a little bit of a benefit in marketing expenses next year as we get past the levels of supply that we've been facing this past year. And so that should tail off a bit as well.

So all in all, I don't want to speak to overall guidance, but that's kind of how we're thinking about those items.

I might add one point real quick just on the utility side. We talked about the WiFi projects a minute ago. There is an expense component that hits in that utilities line. It's obviously a much larger revenue component, but that will impact utilities a little bit as well.

Okay. Great. Super helpful color. And then just thinking about concessions in some of your bigger development markets or heavier supply markets. How would you -- what's the scorecard on the pace of concessions today? Is it getting better? Is it getting worse? Anything you'd call out there?

Yes. I would say, broadly, concessions in Q3 were a little bit higher than what we were in Q2. When we look at our comps there is probably 55%, 60% or so of our comps have some sort of specials, and that's up a little bit from what it was in Q2 but not significantly. I think the level of concessions at a given property is pretty similar. You're seeing anywhere from half a month to a month free is pretty typical with a little bit higher in some of the highest supplied submarkets.

We've seen a couple of submarkets really came down. I mentioned Atlanta earlier. We've seen a little bit lower concessions in Buckhead. Uptown Dallas, we're seeing a little bit lower concessions. So it's actually some of the more urban submarkets we've seen concessions come down a little bit. And then we've seen it up a little bit in Phoenix, a little bit in suburban Orlando, a little bit in downtown Nashville, but broadly ticked up a little bit but not hugely different than what we've been seeing.

Our next question will come from the line of Adam Kramer with Morgan Stanley.

Maybe I just wanted to ask about sort of lease up for your development properties and maybe just how the cadence of that today compares to lease-up cadence maybe 6 months ago or the same time a year ago.

Yes. This is Tim. I mean, the leasing velocity broadly has been a little bit slower. I don't think it's necessarily gotten slower than what it has been over the last couple of quarters. I mean, we've seen obviously with the supply over the last couple of years that, that velocity has been a little bit slower to occur than what we originally underwrote. But broadly, rents are in line.

When you think about the overall lease-up portfolio, we're holding tight there and keeping, as I mentioned in the comments, just keeping our value proposition in line. So broadly, leasing velocity a little bit slower than what we expected. And we pushed back one of the stabilization dates on one of our lease-up properties. But broadly, the rents are intact and feeling good. Particularly as we move into the spring and summer, we expect that as it really starts to increase on that velocity.

Great. And then maybe -- I know you touched on it a little bit earlier, but maybe just the specific new renewal and blended lease growth for October, if you're able to provide?

We're not going to get into the details of the monthly. But I would say, generally, what we're expecting for Q4, and I mentioned this earlier, is pretty normal seasonality, perhaps a little bit less than what we typically see is as supply continues to moderate. I mentioned in the comments the renewals are holding up really well. So I think on a blended basis could be a little bit better than last year. And new lease probably trending somewhere maybe slightly better than where we were last year. But typically a normal seasonality with a little bit better performance on the renewal side.

Our next question will come from the line of Steve Sakwa with Evercore ISI.

I guess I wanted to circle up on the Scottsdale project. I think you mentioned that the initial yield on that was 6.1% and maybe with the new piece of land that would go to 6.5%. But your stock is kind of trading sort of in that mid-6s right now. So just how are you thinking about capital allocation, development yields? And what kind of hurdles do you need on projects going forward, given the changing cost of capital?

Yes. Steve, this is Brad. A couple of things that I'll mention. One, just a clarification. What I mentioned in my comments was the Kansas City deal was about -- that was an acquisition, was at 5.8%. We went under contract and that back when our stock price was in the 150s. So certainly, cost of capital is a little bit different at that point. For that project, when we add the Phase 2 component to it, that will bring the total investment yield on that one to about 6.5%.

You're correct. The Scottsdale development is about a 6.1% NOI yield. So that part is correct. But in terms of capital allocation, when we're looking to make really any decision a couple of things that we're considering. One is where is our capital coming from? What's the cost of that capital? And really what's the potential long-term impact of that investment on our business? And our primary focus in all of our decisions that we make is on generating compounded earnings growth to support a steady and growing dividend over the long term.

I mean that's really what we, at our heart, really focused on. And if you look at the performance that we've put up in terms of dividend performance over the last 10 years, I think we've been very successful in hitting those goals. We have probably one of the highest, if not the highest 10-year CAGRs on dividend growth performance in the space, where it's at 7%. So earnings and dividends are really the best ways for us to deliver TSR on a REIT platform.

But when we're looking to invest capital, we can deploy it through external growth as we were just talking about, be it development or acquisitions. We can invest in various internal opportunities that include technology investments, really geared towards strengthening our platform in driving efficiencies, improving margins of our existing portfolio or we can reinvest in our existing shares. Those are really the options that we have. And certainly, at the moment, scaling our platform from acquisitions has really gotten materially more difficult given the dislocation that we see right now between private and public markets.

But again, as I mentioned with the Kansas City, we were able to find select acquisition opportunities, but that's probably going to be even more difficult. But as I mentioned in my opening comments, we do continue to find what we believe are compelling development opportunities where we're able to achieve yields in the 6% to 6.5% range, which, if you look at that compared to our current cost of capital, it's still accretive. And if you look at it on an after-CapEx basis, it produces similar returns to what we would get if we were investing in our existing portfolio right now.

But importantly, I think you have to remember that by selectively determining where we're putting some of this capital in developments, we think we're able to drive better long-term growth prospects through that capital. And certainly, with 6 to 8 projects that we think we can start over the next 6 quarters at a cost of $850 million, we have a pretty good runway for continued growth. We'll continue to lean into some of these numerous internal investment opportunities in 2026. And as Tim talked about, we're looking to expand our renovation and repositioning platforms. And so you'll continue to see us do that.

But having said all that, our focus is on driving long-term earnings growth and higher share value. And if we find that our best investment opportunity to do that is to invest in our existing portfolio via share repurchases, we have an authorization in place. We've done it before. And we wouldn't hesitate to do that again if conditions warranted it. So it's something that we continue to monitor in every one of our investment opportunities and we'll continue to do so.

Okay. Maybe just as a second and maybe a follow-up. Just, I guess, taking that and maybe stretching it out a bit. Just would accelerating dispositions kind of be part of the philosophy maybe to fund both the development and potential share buybacks? It seems like pricing is pretty good in the apartment market despite some of the slowdowns we all talked about here on the leasing side. So would you lean into dispositions at this point?

Yes. I mean, we definitely could. I mean, frankly, our disposition strategy is really based on trying to improve the overall quality of the portfolio while not introducing earnings volatility. So we wouldn't want to significantly scale up dispositions to take the advantage of some market level arbitrage and introduce earnings volatility. But as part of our annual strategy, we're generally looking to dispose of around $300 million worth of assets. And if we find that we can continue to do that and when we dispose of those assets, the best use of that capital is to go into share repurchases, then I think we would continue to look to do that.

From my perspective, the share buyback is really an alternative based on current cost of capital. Current returns is an alternative to what we would do with that disposition capital, where normally we would roll it back into the acquisition market. And that's just not a broad opportunity for us at the moment.

Our next question will come from the line of Jana Galan with Bank of America.

Following up on your comments on the transaction market and seeing assets trading at sub-5 cap rates. Can you help us understand how investors are underwriting the rent growth at this point in the Sunbelt recovery and maybe the types of financing they have available to them to get them there?

Sure. I think the #1 driver right now from the deals that we're looking at of those cap rates is the cost of capital. I think if you look today where folks are generally able to get 5-year money today from the agencies is probably in the maybe 5.25% range, maybe just under that. And most folks are able to buy down the rate by 25, 30 basis points. And so by the time they do that, they're at a sub-5% interest rate.

And then at that point, they're generally underwriting a couple of years of a little bit more aggressive rent growth to get their returns to make sense. But I would say the #1 driver is, just given where the cost of capital is today, it's really supporting cap rates to be sub-5% and especially when you layer on to that the buy down of the rate.

And then kind of a different topic, but you guys have always been very strong in your Google scores and reviews. I'm curious kind of how you're implementing AI and looking at different ways as search moves more over to those types of platforms to kind of continue this reputation that you have out there.

This is Tim. Yes, I'm glad you brought the reviews. We continue to do really well there. We're #1 in the sector, 4.7 or so is our average with a lot of volume. So we put a lot of emphasis on that. I mean, in terms of our use of AI, I mean, we're using it obviously in multiple areas of the company, and it's something that we're expanding more now as we think about leasing and some of the communications. And we'll have some more pilots and tests on that as we get into next year. So obviously, a key part of our go-forward platform is to continue to look at all the various pieces of that.

Our next question will come from the line of Austin Wurschmidt with KeyBanc Capital Markets.

You talked about how 2026 could look a lot like '25 from a demand perspective and supply obviously coming down pretty meaningfully. I guess should we just continue to see lease rate growth improve versus the prior year? Or I guess, asked a little bit differently, should schedule rent continue to accelerate from here into 2026?

Austin, it's Tim. Yes. I mean, I think we're back in terms of the normal seasonality. I think this year has been the most seasonal that we've seen in the last few years. And I think generally that seasonality will hold as you strengthen through the spring and summer and then moderate a little bit into the fall and winter. So I mean, I think -- we're obviously not giving guidance right now.

But when you think about how much supply is moderating and what the construction starts and we're expecting deliveries next year to be significantly down from where they were this year and with a similar demand environment that we have right now, which is significant, if you look at any of the demand variables, whether it's job growth, household formation, immigration, our region in the country, while perhaps a little bit weaker than it was earlier this year and expectations for next year a little bit weaker, is materially stronger than the rest of the country.

So when you balance that relative demand with rapidly decreasing supply, I think you see a normal seasonal curve but a much steeper curve to where we see some new lease rents start to accelerate. Would expect our renewals to hang in where they are. We can see how for the next 3 months or so, that those are continuing to holding strong. So yes. I continue to expect that strength is what we'd expect, enhanced strength, if you will, as we get into 2026.

Helpful. And then just going back to the sequential improvement you flagged around Atlanta and Dallas. I guess was this just as simple as less competition from supply? Was there a comp issue? And then are there any markets that you'd highlight that are on the cusp of seeing kind of a similar dynamic that you referenced in Atlanta and Dallas, that sort of sequential acceleration from 2Q to 3Q and new lease rate growth?

Yes. For Atlanta and Dallas, what we saw particularly was some improved performance in the more urban in town. So we obviously have several properties in uptown Dallas that we sold, did better. And then we have a fair amount of exposure in Midtown, Downtown and Buckhead, Atlanta, and that's where we're really starting to see some -- that inflection point where those are the submarkets they got most of the supply. They're starting to work through that. Concessions are coming down.

So certainly there's a comp issue there but there's just a general performance improvement there as well as they absorb that supply. Atlanta is one of our highest absorption markets over the last 4 quarters of any of them. So those are the 2 that I would call out. There's not any others at the moment where we're seeing. Obviously, Q2 to Q3, [ operation ] is a little bit opposite of normal seasonalities. So we're not seeing a lot that completely booked that trend like Dallas and Atlanta did, but the ones that have continued to be strong, have done that, the markets I mentioned. And the Carolinas continue to be strong. But Dallas and Atlanta are certainly the standouts.

Our next question will come from the line of Nick Yulico with Scotiabank.

So I guess, first off, on the negative 5% new lease rate growth in the quarter, how much is that number being impacted by concessions, meaning like if you just lifted all concessions? Is there any way to give a feel for what that number would look like?

Well, I'll tell you this, Nick. In terms of cash concessions this quarter, ours was about 0.6%, 0.7% of rents for our portfolio. So that can give you some idea. Obviously, we spread concessions throughout the term of the lease, but that can give you a little bit of insight into that.

Okay. And then second question is, if I go back to the original guidance for the year. And you had that bridge of FFO per share benefit and there's that bucket of development lease-up and other non-same-store NOI, which was originally said to be a $0.20 benefit this year. I wanted to see if that's still the same number in the new guidance.

And then secondly, if there's any way to give a feel for if you just stabilized all the developments or lease-up assets in that pool, like how much extra annual FFO per share benefit would that be from that entire pool?

Yes. Nick, this is Clay. To your point, we introduced the guidance coming into the year with that pool of the portfolio of benefiting about $0.20 for the full year. Going back to the discussion that Tim had with just the longer leasing velocity that we've seen with those properties, and it hasn't been quite that strong but it has been a positive benefit to us over the course of the year.

Now where you think about those and when they fully stabilize and are generating ongoing NOI growth, those properties on a year-to-year basis, we expect to be anywhere between $0.10 and $0.12 of earnings growth after considering what the cost of capital is running. So that's kind of what we would see on a long-term basis. And I'm talking specifically about sort of $0.10 to $0.12, really our development and lease-up portfolio itself.

Keep in mind, there are some other things in that non-same-store pool that our stabilized properties, properties that haven't moved into the same-store pool. But when I mentioned the $0.10 to $0.12 kind of our current development lease-up pipeline, that's going to contribute another $0.10 to $0.12 in a given year.

Our next question will come from the line of Michael Goldsmith with UBS.

This is Ami on with Michael. I was wondering, was there any change in your fourth quarter forecast? Or do the updated same-store revenue guide mainly bake in just the softer third quarter?

Yes. This is Tim. We brought down -- I mean, we adjusted the new lease rates for Q4 forecast based on what we saw in Q3, actually brought up our rates a little bit but brought down the new lease rates. But in terms of forecast, it's really carrying through the Q3 new lease rates as have more of an impact, obviously, but broadly just brought down the new lease run rate a little bit.

Got it. And then where do you ultimately see the balance between your large and mid-tier markets? Are there any other markets that you're targeting for acquisitions? And how do cap rates broadly across these markets compared with some of the larger markets?

Tim, do you want to hit on the performance between those two markets?

Yes. Yes. In terms of what we're seeing in the performance between the two, I mean the mid-tier markets broadly have done a little bit better and they continue to do slightly better. I mentioned several of them in the prepared comments. But we are starting to see that dynamic narrow a little bit, as I mentioned, with Dallas and Atlanta and some other. We're starting to see that performance narrow a bit and would expect that to continue to squeeze as we saw most of the supply over the last couple of years or more of the supply focused on some of those larger markets and some of those more urban submarkets.

Yes. And in terms of where we're looking to deploy capital, I mean, I think it's both the large and mid-tier markets. I mean we like our current exposure between those markets where we are, I think, we have 70% or so of our allocation to large markets and about 30% to the mid-tier markets. So you'll see us continue to try to maintain that by deploying capital similar to that in the large and mid-tier markets.

But clearly, as we talked about a moment ago, acquisitions, it's tough for us right now. So mainly focused on doing that through development. But in terms of pricing differentials between those markets, really not much. I mean, we're really seeing similar cap rates for similar quality assets across those markets.

Our next question will come from the line of Haendel St. Juste with Mizuho.

Let's see what I got left here. So maybe one on -- I think you mentioned earlier that you're seeing new starts on an LTM basis now around 1.8% of stock, I think you mentioned, which is half the long-term average. But I'm curious how that figure is trending. It sounds like it's picking up from where we were earlier this year. So I guess my question is, what's your sense of private developers' ability to obtain financing, get underwriting, getting their underwriting to clear their hurdles and if that's getting any better with the lower cost of debt we've seen here.

Haendel, this is Brad. In terms of the trend of starts per quarter that we're seeing is, I mean, that trend actually just continues to come down. The trailing 12-month starts in our region, as I mentioned, was [ 1.8% ] which implies 45 basis points or so per quarter. Last quarter, third quarter, it was [ 0.2% ]. So we're seeing that trend generally come down. And I think that those numbers really track with the anecdotal evidence and information that we get from our partners, from the developers that we partner with.

I mean, what we continue to hear from them is it is getting more difficult to raise capital than it is. It's certainly not getting easier. It's getting more and more difficult. Even with the backdrop of interest rates coming down, we're certainly hearing some of the smaller developers are having trouble even getting bank financing at this point. The large developers can get bank financing but they're having a hard time getting equity in the current environment.

And then just based on the results that we're seeing on the deals like the Scottsdale, Arizona project, the Richmond project we started last year, I mean, we continue to see opportunities for us to step into developments where someone bought the land, achieved entitlements, sometimes got plans but then could not get their financing lined up. We just continue to see more and more opportunities in that area. Some of those still don't underwrite for us but some do. So just broadly speaking, it seems like it's getting more difficult to put a shovel in the ground than it has been.

Got it. I appreciate the color there, Brad. And then one more, maybe. Just also a bit of a follow-up from last quarter. I think you mentioned where you said you'd be willing to lean into debt a bit more given the lower cost that you had about $1 billion of buying power with your leverage down around 4x debt to EBITDA. I guess I'm curious if that view might be changing, evolving at all given the softer macro, the pricing that you're seeing out there, I don't think cap rates to budge at all really and maybe other opportunities you might be considering. So I guess I'm curious, that view on leaning into leverage to acquire assets, how that might be different today versus maybe 90 days ago.

Yes. I mean, I think, yes, I think based on our current cost of capital, you generally won't see us much at current pricing. So I mean, the pricing that we would have to be able to achieve on an acquisition would have to be substantially different than it was just a few months ago. And so you probably won't see us lean into acquisitions in any way, shape or form at the moment.

But I do think from a funding perspective, what you'll see us do is lean into debt funding for our development pipeline. We'll continue to fund that as we talked about generally through our commercial paper program. And then once we get our debt to a certain level, we'll then look to go and issue bonds to clear that up. So that's generally how we'll continue to look to finance the business right now at 4.2x. We could continue to expand the balance sheet to somewhere in the 4.5%, 5% range, keep it in that range and be completely fine with our credit rating agencies.

So we'll continue to move forward with that type of strategy.

Our next question will come from the line of Brad Heffern with RBC Capital Markets.

One of your peers talked on their call about how Sunbelt lease ups are seeing challenges removing concessions when it comes time for the first renewal. Just curious if that's a dynamic that you've seen in your own lease ups and is that a source of any broader pressure.

I mean certainly, when you start having those renewals turn, that is the most difficult part of the lease-up where you're trying to keep the back door shut and have more people coming in the front door. So we have seen that a little bit. I mean, I think more broadly, we're just seeing the concession environment stay elevated, if you will, despite -- I made this comment in my prepared comments that despite continuing increasing occupancies we've seen 5 straight quarters where market level occupancy has increased in our markets. The concession environment stays pretty elevated. And I think that just speaks to the uncertainty that is out there right now. So it is impacting the lease ups a little bit as well and driving that slower leasing velocity that we talked about.

Brad, this is Brad. Just one point that I would add with regard to our lease ups. In terms of our renewals on our lease ups, they're performing in line with our existing portfolio generally in terms of retention rates. But the renewal rates that we've been able to get is about 11% in the third quarter on our lease-up properties. So we are getting really good traction there on the renewal side. So I wouldn't think that the hangover of the concession side of things on our renewals has been impacting us, especially in the third quarter.

Okay. And then maybe I missed it, but can you give the current gain or loss lease?

Yes. We're at a gain to lease of around 1% right now, which is not too unusual given this time of the year.

Our next question will come from the line of Connor Mitchell with Piper Sandler.

I appreciate all the commentary on the pricing in the markets. I guess we kind of would have thought that maybe the smaller markets would have been insulated from some of the pressure that the larger markets are facing, but it sounds like that's kind of dwindling. On the other side of the equation, could you just talk about what you're seeing, any differentiations between the demand factors for some of those mid-tier markets versus the larger markets and how that's impacting performance?

Not really anything different. I mean, our strongest markets for several quarters now have been markets like Charleston and Greenville and Richmond, which still on a relative basis have gotten a fair amount of supply. But there's huge demand drivers there as well. And some of our best job growth -- I think Charleston right now is our best job growth market that we have. So there's still a ton of demand there even with the supply scenarios.

But as I mentioned, I think we're starting to see -- I don't think it's a lack of strength in the secondary or mid-tier. It's more of some strengthening in some of the larger markets where they've started to work through some of those concessions. They started to get the net absorption. And I think it's more a function of like Dallas and Atlanta, as I mentioned, on the way up versus some of the mid-tiers coming down.

Okay. That makes sense. And then maybe following kind of the same line but again switching to the supply side of it. It does seem like the supply will be coming down compared to this year and past couple of years. But it's just kind of dragging out from what we expected earlier in the year, even in the mid-summer.

Do you see kind of the extending of supply just dragging out having more of an impact on some of the larger markets than you expected earlier this year? Or just what kind of supply pressure are you kind of expecting now versus earlier in the year, especially from the larger markets, but overall as well?

Yes. I mean on the supply side, I don't think it's moved a ton in terms of our expectations on what that impact is going to be. I mean, I think some of the weakening we've seen in new lease pricing has been more a function of some of the job growth numbers and what we talked about before. So a little bit weaker demand, but certainly much stronger in our region in the country. So the absorption continues to be great.

I mean, we've got 5 straight quarters I mentioned of increasing occupancies in our markets. There's been about 300,000 apartments absorbed over the last 5 quarters in our markets. So that continues to hold up strong. So assuming demand kind of hangs in where it is now, we would expect this to continue to get better and strengthen particularly as we get to the spring and the summer of next year.

Our next question will come from the line of Rich Hightower with Barclays.

Covered a lot of ground, so just one for me. But I'm going to go back to the stat on, I guess, all-time low move-out for home purchases. And I think we all understand the dynamic driving that. But I guess, in your opinion, is affordability the only gating factor to that number kind of moving up back towards historical averages going forward? And it just sort of feels like there's this massive, massive pent-up demand to buy houses. And so how would that affect your business? What are your thoughts?

Rich, this is Brad. I mean, I think in general, that's certainly a component but I don't think that's the only component. I think if you look at the demographics of our renters, where 80% are single. If you look at the average income for us now is approaching $100,000 given where current home prices are. Yes, I mean, there is definitely an affordability issue there. But I think just given the demographics, we're seeing certainly more single-person households being formed, which definitely, I think, leans more into the rental market than it does the for-sale market.

But there are demographic shifts. I think what folks are looking for, one of the #1 reasons why folks are renting is because they want a maintenance-free lifestyle, which you can't get in the single-family market but you can in the multifamily market. So I think there are other things going on that are driving some of the retention rates. We've seen that trend declining for the last 10-plus years. Certainly, it's as low as it is today partly because of the single-family affordability, but there are other trends that were in place years ago that started that trend. And I think it will continue to be in the ballpark of where it is today for the foreseeable future.

Our next question will come from the line of Wes Golladay with Baird.

I just want to see if there's any early indicators of a demand slowdown. Is your exposure in line with normal levels? And you did call out Atlanta as having high absorption. Are there any markets that are having a deceleration in absorption?

Wes, this is Tim. On your first question, exposure, we're at 6.1%, which is about 30 basis points lower than it was this time last year. And as I mentioned, we're around 95.6% occupancy, which is a good 20 basis points or so higher than it was this time last year. So I think as we head into the slower leasing season, we're certainly in a good shape in terms of those metrics.

But no, I mean, broadly there's not any markets where we're seeing a material slowdown in absorption. I mean, Q3 absorption wasn't quite as high as Q2, but Q2 is sort of a record of anything that we've ever seen but did still see market level occupancies from Q2 to Q3 moved up about 30 basis points. So outside of some of the weaker markets that are still below, even Austin still at a 91%, 92% occupancy level market-wide, we're much better than that but including the entire market.

Huntsville is one that it's a smaller market, but it is at a record ton of supply there. That's another one that's struggled a little bit with absorption, but broadly continuing to see uptick in that absorption level and occupancy levels.

Our next question will come from the line of Linda Tsai with Jefferies.

On '26 earn-in being flat to slightly down. What was this like 90 days ago and from an internal reporting standpoint, how frequently do you update earning expectations? Do you always have a point in time metric available? Just wondering if this could change quickly as supply drops further in '26.

I mean, we look at it typically when we look at our forecast and look at that every month and every quarter. So it certainly came down a little bit just based on our new lease growth expectations. So the way we look at earn-ins is all the leases that we expect to be in place at December 31, you just sort of assume that rent roll carried through to next year. So it's going to be dependent on where those new lease rates head. But right now, that's kind of what we're thinking is that somewhere around flat for next year.

Our next question will come from the line of Alex Kim with Zelman & Associates.

Just a quick follow-up on the retention question from Rich earlier and ask, just how do you think turnover should trend during the recovery portion of the cycle?

Yes. Right now, we don't expect material changes in turnover. I mean, it's hard to believe it gets a lot lower from here, but I don't think there's a lot of signs pointing to it getting much higher either. I mean, for all the reasons Brad talked about on single-family homes, don't expect that to move much.

I mean, job changes, job transfers are always our #1 reason for turnover. If that starts to tick up, it's probably a sign that the economy is doing pretty well. So even though turnover could pick up a little bit in that scenario, it's probably good more broadly and we're getting better rent growth as well. But nothing we see would suggest that turnover changes a lot from where it is right now.

Our next question will come from the line of Ann Chan with Green Street.

Just one for me. So you noted earlier that migration and household formation trends should remain pretty stable in '26 relative to what we see in '25. So just given that and following up on a comment from a few months ago, do you still anticipate new lease rate growth possibly turning positive by next summer? Or is job growth enough of a wild card in '26 that might cause a slower pace of supply absorption that might push out the new lease recovery time line up further?

Well, as we said, we're not giving guidance for 2026. But I do think if the demand side remains kind of where it is right now, where we're thinking that -- we expect to see acceleration in new lease rates. I mean, it's difficult to know exactly where it's going to be several months from now. And lease is obviously the most volatile in terms of how your competitors are behaving and all that.

But given what we know today with the demand trends, we know what supply is doing, and we're in a great position in sort of all the other metrics, I would just leave it as we expect to see new lease rates to continue to get better on a year-over-year basis as they have this year.

Our next question will come from the line of Omotayo Okusanya with Deutsche Bank.

While your market generally tend not to be prone to any kind of rent control type provisions, just kind of curious as we're kind of going through the current election cycle if there's anything on any ballot in any of the key states that you're kind of watching that could have implications for your operating performance going forward?

It's Rob. As we've talked about before and as you indicated, our markets, 90% of our NOI is in states that have a state level prohibition preventing local governments from passing rent control rules. We're not really seeing anything on rent control in any of our markets that's going on. There are a few out there in the country, but there are also a lot of pushback really saying that rent control is not really the answer to the affordability issue. And so I think we're keeping an eye on it but nothing that we're really concerned about right now.

Our final question will come from the line of JP Flangos with BNP.

Just one given the time. [Technical Difficulty] has been weaker [Technical Difficulty] appeared to fall and just have lower annual income relative to the private industry as a whole. Earlier, you mentioned that the projection...

[Technical Difficulty]

JP, you're breaking up bad. Maybe you can try again. We are having a hard time hearing you.

Now?

No, not getting you. Are you on -- maybe try one more time.

Now?

Try repeating your question.

Can you hear me?

Yes, you're kind of coming in and out.

All right. Well, we'll just leave it there.

We can follow up with you off-line, JP.

With that, I'll return the call back to MAA for any closing comments.

All right. We appreciate everybody joining today, and we'll see you guys all in the upcoming conference season. If you got any questions, don't hesitate to reach out. Thanks.

This concludes today's program. Thank you for your participation. You may disconnect now at any time.

Thanks for joining our next roundtable session with Mid-America Apartments. Looking forward to hearing more about MAA's strategic plans and positioning and Sunbelt markets. It's been a hot topic. I think you guys had a very strong demand. So if there's any insights from some of the meetings you've had, we could talk about that as well.

So I just want to introduce the company. Straight to my left, Clay Holder, EVP and CFO; to his left, Brad Hill, President and CEO; and then to his left, Andrew Schaeffer, SVP, Treasurer and Director of Capital Markets.

Same as the other roundtables, we want to make this as interactive as possible. I know it's day 2 afternoon, but I know everyone's had a lot of good questions incoming on MAA and then at the conference. So please participate. I will first turn it over, though, to Brad to introduce the company just in case there are some people in the room that maybe aren't as familiar with MAA, your strategic plans, maybe a little bit. And then I think you did put out an operating update. So let's go through that, and then we could get into Q&A. Thank you.

Well, thanks, Jeff. I appreciate the opportunity to be here. As Jeff said, I'll give a brief update of who we are as a company, what our focus is and certainly go through the update a little bit here. MAA is an S&P 500 multifamily-focused REIT. We have a 30-plus year history as a public company. We do have a unique focus, as Jeff said, of focusing our capital on the highest demand region of the country, and that overlaps generally with the Sunbelt as well as some of the Southwestern markets in the U.S., where we've seen, as Jeff said, some tremendously high absorption in demand over the last year or so.

Certainly, as most are aware, with that region of the country, we've experienced a very high level of supply over the last couple of years. Last year, in particular, we peaked with a 50-year high level of supply delivering into our markets. But at this point, we're certainly past that peak and new deliveries are rapidly declining. There's some third-party data that is out there that certainly shows fourth quarter deliveries across the country are dropping materially from third quarter, down well over 50%, and we're certainly see that and expect to continue to see that decline as we get into next year.

But as we talked about, demand in our region is very strong. If you look at the trailing 12-month absorption numbers that we see in our markets, it's the highest absorption that we've seen in the last 25 years. So demand is really robust. And really, what that's leading to is stabilizing and strengthening market level occupancies really across the board. If you look at the average occupancy in our markets today, kind of weighted average for our portfolio, we're only 30 basis points below where we were pre-COVID.

So occupancies have really stabilized, and that's up about 190 basis points year-over-year. So all of that absorption that we've seen coming into the market has really absorbed a lot of this new supply that's being delivered, and those occupancy levels are really stabilizing. And I think that's a really good place for us to be in our markets today. We did put out an update in the packet. Certainly, not a lot has changed over the past 30 days since we had an earnings call. We -- as we sit here today, demand is robust, both broadly in the market as well as in our portfolio. We're seeing good traffic trends. Our exposure is below where it was this time last year.

And I think that's reflective of that strong demand that we continue to see. As we mentioned in our packet, our occupancy trends are slightly higher than what we expected here in the third quarter. Renewal strength continues to be strong. We continue to see out through October, very strong renewals, high retention rates. We're not seeing any change in move-out behavior really supporting our renewals that we continue to get. And as we mentioned in the packet, our new lease rates are -- continue to remain under pressure, particularly in some of our higher supplied markets.

Austin, for sure, has been a high supply market for us where new lease rates have been most pressured. Phoenix, Nashville and then Jacksonville, we're seeing also a lot of supply in those markets, which is impacting new lease rate performance versus our expectations. The good news is in all of those high supply markets, really, we're seeing the benefit of occupancy stabilizing. All of those markets, we've been fighting not just the new lease rates over the last year, 1.5 years, but we've also been struggling and pushing really hard to try to stabilize occupancy in those markets. But today, all 4 of those markets have occupancies that are at or above our portfolio average. So we do believe that, that puts us in a pretty good spot to continue to be able to push on that -- the new lease rates.

The other thing I'd mention is it's also important to remember that our renewal rates and our new lease rates are better than they were this time last year. So we do continue to see improvements in our markets, and I do think that's reflective of the strong demand that we continue to see, coupled with supply that continues to decline and that we expect to continue to decline from here. So things are unfolding in line with our expectations. We feel like our forecast for the back half of the year from an earnings perspective is pretty good, and we're in a good spot for that as we sit here today. And we're looking forward to certainly what the trajectory of that looks like over the coming years.

Thank you. Great. Let's first dive into the demand side given that's clearly been a concern. And with the revised job numbers. It's a little bit more heightened right now. We did meet with one of your peers earlier who had a very optimistic view on that downward job revision. But what are your thoughts? And again, tied into maybe some of your comments on the most recent trends you're seeing?

Yes. Well, as I mentioned earlier, absorption, despite what the actual job number showed has been very strong. If you look at the gap between the trailing 12-month absorption and supply that gap is at a level that is approaching the COVID level. So we are over absorbing the supply that's coming into the market. And as I mentioned earlier, with the occupancy numbers, we're not -- as new supply comes into the market, I mean, we're not creating a situation where we have a lot of unoccupied units that we have to fill. Those are all being occupied, which I think really sets the market up quite well for the recovery as we get into next year.

And I think it's also important to remember that there's multiple components of demand. Job growth clearly is a big component of demand, but you also have migration trends. You've got population growth, and you also have the single-family affordability concerns that we have in our region of the country. Migration trends have been strong. They continue to run strong. They're about positive 7% -- net 7%, meaning 7% more people coming into our region and moving into our communities than moving out. And that is in line with pre-COVID levels. It's down from the peak of COVID, where it was 10% or 11%, but it is in line with pre-COVID levels. We still continue to see good trends there. Population growth in our region of the country continues to be really strong. We continue to see high population growth transferring again to the Sunbelt region. And then the single-family affordability, I think, is a newer phenomenon to the Sunbelt. If you certainly look at the coastal regions of the country. New York, California, it's always been unaffordable to own a home and buy a home, but that is a phenomenon that has really picked up speed in the last 5 years or so within the Sunbelt region.

And if you look at just the average medium price of a home over the last 5 years in the Sunbelt, it's up over 50%. The mortgage payment cost to own a home is up over 100% over the last 5 years, while our rents are only up about 30%. So the relative unaffordability of single-family market has really grown more of a headwind for folks wanting to buy a home in the Sunbelt. And I don't think that, that's something that's going to change anytime soon.

Our retention rates are up basis points or 10 percentage points over the last 10 years. Part of that certainly is associated with single-family market. Part of that is our focus on customer service, where we're really focused on retaining customers. And given where that affordability component is, we're not seeing any indication from our demographics or from the demands of our residents that they're really out looking to buy a home. They just can't afford it. We're not seeing that, we're seeing it's a lifestyle choice for them to live in an apartment community. They want the low maintenance lifestyle. So we continue to see those factors in our portfolio.

Thank you. So I know, again, you're in a unique position that you're -- as you mentioned, in the Sunbelt, you've had great in migration and job growth in other parts of the country. So these latest job numbers, these downward revisions just kind of the concern over employment in the coming months. I moderated our economist yesterday and BofA's call is to muddle through a decent job market. I guess from your seat, are you any more concerned? Or again, based on some of these recent trends, you talked about good traffic, renewal strength. You mentioned still the word recovery in '26. Just to confirm, you're still feeling good.

Yes, still feeling good about that because I think as we look at '26, I think we're more optimistic about what the job growth outlook could look like for next year. Certainly, the uncertainty around the tariffs that I think really slowed down new lease progress as we got into May, past Liberation Day, we saw new lease rate growth that was really progressing quite well month-over-month into April, really kind of stall out after that point. And I think today, the tariff uncertainty is decreasing. We have -- the tax bill is now behind us. We seem to be moving closer to a point where the Fed is going to lower interest rates.

And we think that all of that certainly should spur economic growth as we get into next year. And from a corporation standpoint, I think it relieves a little bit of the uncertainty that we saw this year that maybe caused many to hesitate in terms of outlaying capital making hiring decisions. And we think that outlook looks a little better next year.

Thank you. In fact, our economist talked about in '26, one of the things maybe people are underestimating is some of the tax benefits from the bill that passed and the consumer actually seeing more income than people expect. So that could be another positive. So let's just dive in again to the word recovery. I think on the call, you talked about momentum into '26. I know, again, focusing a lot on demand here, but that's been a key incoming question that we've received, I assume a big topic in your meetings as well. So could you just talk about, again, the fact it's now September, and you're still comfortable using the words recovery momentum. This leasing season has been a little bit different than some in the past. But again, what gives you that comfort to say are you still seeing that momentum?

Yes. I mean I think we are -- our forecast for the back half of the year, certainly expected new lease seasonality to be less of a decel going into the fourth -- third and fourth quarter than we've seen in previous year. And we still expect that to be the case. As I mentioned in my opening comments, our both renewal and new lease rates are better than they were this time last year. And certainly, as we continue to see the supply picture improved rapidly over the last quarter of this year and going into next year, we would expect performance than what we saw last year. And if you think about it, just from an earn-in perspective, coming into this year, we had a negative 40 basis points earn-in coming into the year.

And based on our forecast, we would expect our earn-in going into next year to be somewhere in the 20 to 30 basis points range. So that's a 60 to 70 basis point swing versus where we were last year. So again, we think -- we do believe the momentum is shifting. The supply outlook as we get into next year is 30% to 40% below what we had in deliveries this year. So yes, demand is a big part of the equation for us. We do think demand and demand drivers, that's why we allocate capital based on demand. We think that's the factor that has the most correlation with long-term performance, we think the demand is going to be strong. But on top of that, we have a 30% to 40% decline in supply next year, which will take the deliveries in our markets below long-term averages. So we're in an environment where we think the demand outlook is better than long-term average and the supply is getting below long-term average and that speaks pretty well for our ability to generate improving performance as we go throughout next year.

Thank you. And I think you just answered it, but just to clarify, the down 30% to 40%, that's your specific markets. Is that do you measure not only within your markets, but competition near your assets?

We do. I mean, certainly, when new supply comes in, we're monitoring that new supply. And one of the things that the new supply does in our markets, while it can moderate performance to some degree. A couple of things that help support. One is our repositioning and our redevelopment initiatives. The average supply that's coming into the market is on average, $360 a unit higher in rent than our units that we have that compete with that. So what that does is it really supports our ability to come in and renovate our units raise the rents $100, $150, whatever it may be and still come in lower than that new supply, but our units are practically brand new units for our communities.

And what we find is that initiative for us performs quite well as the new supply coming in begins to stabilize that's an initiative that we're doing about 6,000 units or so this year, and we've been as high as 8,000 units, and we'll continue to monitor the market and as that new supply comes in and stabilizes, it will be an opportunity for us to expand that. The other opportunity for us based on the new supply coming into the market is it provides acquisition opportunities for us.

So as those opportunities maybe do not achieve the rents or the performance that some developers expected, maybe the developers are not operators, and they're not able to achieve what they expected. We're able to come in and use our balance sheet capacity and be able to execute on some of these acquisitions. And we've done that considerably in the past after the GFC over a 3-year period, we bought 10,000 units. And so we'll be pretty opportunistic on the acquisition side if we're able to find some pretty compelling opportunities.

Thank you. Please.

Just looking at the [indiscernible] buy a house. Do you expect that we continue to see [ work rates ] by central [indiscernible] and housing value. Maybe we don't inaction normalized levels maybe are somewhere between the 10% to 20%.

Yes. Well, that's a good question. I do think we have seen -- if you look at that chart, it's on Slide 16 for those of you looking at it. We have seen our turnover. We were seeing that decrease prior to -- certainly prior to COVID and prior to where we are today, that trend had already started. What I would say is when we started this year, we were at 43%, 42% turnover. We start ticking up a little bit, and it continued to decline down from here.

But if you look at the 2022 period, we were at 45% turnover. My sense is that if we did see the housing market really pick up mortgage rates would have to decline meaningfully. You could see a couple of percentage points change in that retention rate and move out to buy a home. But again, just keep in mind that our demographic generally is not a demographic that's looking to do that. 80% of our residents are single. The average incomes are $90,000, $95,000 and what we have found is the reason why people generally are renting with us is because they want a low maintenance lifestyle.

And that really contradicts owning a home. And so could there be, again, a couple of percentage they want to move out to buy a home because it becomes more affordable, there could be, but we don't see a massive shift in that -- in those percentages to do that.

In terms of the supply, just to clarify, I think we're seeing new supply down 30%, 40% in 2026 in terms of supply pressure because I think the new supply that's come online in '25 is getting leased up, it's lower than expected. Do you expect the supply pressure to be down 30%, 40% in '26 or the supply pressure may be, again, it's still helpful down more like 5%, 10%, and then the bigger benefit is '27.

No, I don't think that. I think that the pressure will decrease similarly if the amount of supply that's coming on to the market next year. Again, because if you think about market level occupancies, we're kind of in a stable mode at the moment, again, being 30 basis points below where we were pre-COVID. The market focused on occupancy earlier this year. And that's really what we saw after the liberation Day. The market was really focused on getting occupancy given the uncertain environment. And back to my original point, we saw occupancies in the market increase almost 200 basis points versus where we were in August of last year.

So again, I think as the supply is coming to market and we already -- based on the numbers, see that fourth quarter deliveries are down 50% the market is absorbing the supply as it comes in. So I don't think there's going to be an overhang of unabsorbed new deliveries that come into the market. Certainly, there could be a little bit as if you're -- if it's delivered in December or January because that's a slower traffic month. But I think from a structural standpoint, I don't see an overhang from some of that supply coming into the market.

Please.

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Yes. I mean the concession behavior that we're seeing today is -- hasn't really changed. There hasn't been a change in behavior of that. It's been pretty consistent. And that's in those high supply markets. We still see 2 to 3 months free in the pockets where there's a lot of supply. For us, concession, we're a net price shop. So concessions are pretty small. They're about 60 basis points of our revenue. But we haven't seen a lot of change in that behavior. Two years ago, we saw a big change in the concession behavior as we -- at that point as the supply wave was coming at us. But now where we sit here today and we see that the supply is declining, materially next year. I think the motivations from a merchant developer perspective to offer those concessions is a little different than it was a couple of years ago. So we're not really seeing that right now.

To finalize the topic on supply what are your thoughts as -- on '27 and beyond, like -- and then I'll share that what I heard previously from one of your peers.

Yes. I mean, our view on '27 supply is -- you could basically see what that is today. If you go back and you look at the trailing 12-month starts, Normally, it takes about 2 years for that those starts to manifest into deliveries. The trailing 12-month starts that we're seeing are about 1.7% of inventory. So I think as you get into 2027, you're seeing about half of the long-term average in terms of deliveries coming into our market. And to put that in perspective to go back and look at a time where we saw starts that low, you would have to go back to -- after the GFC, it's around 2011 or so, we started a cycle given the restriction on the financing side where starts were low for a number of quarters.

And if you look around that time, we had a 4- to 5-year period of time where NOIs grew 5% to 6%. And so we're not seeing anything on the horizon from the developers we talk to, partnerships through our prepurchase development platform with a lot of the largest developers in the country. We're hearing from them that they have a number of projects that they are ready to start. So we're not hearing anything from our partners and anything in the market that indicates to us that the pipeline is going to ramp up from here.

So how far out are into say we'll see this decrease in supply. It sounds like definitely at least through '27, how far do you think -- how long do you think that will last?

Well, I think it's -- we're kind of range bound, I think, for the next year or so in terms of starts kind of in this level, call it, 1% to 2%, a long-term average is 3.5%. But I think it's important to recognize that in the Sunbelt I think folks think that you can find a piece of property and be under construction within 3 months, 6 months. And that's just not the case. It takes a good 12 to 15 months, you find a piece of property to when you're able to put a shovel in the ground. And back to my previous comment, we're not seeing these developers sitting on permitted deals, they're not pursuing a lot of deals.

So it seems like there's going to be a good year to 1.5 years before we a ramp up in that pipeline at all. And when I say ramp up, I'm certainly not saying we're going to ramp up to where we were 2 years ago at 6%, where that was a result of almost free money. But the pipeline naturally will increase, but I think it's I think you've got some runway for that.

One of your peers said he wouldn't expect supply to really return until maybe 2030. It's nothing like you said, just given that how long it now takes to get entitlements and in the process.

Well, I would say that if you go back to that 2011 period where you look at the starts in our region of the country, you'll see there's a -- it's a couple of year period, maybe 3 years of very low starts to that point where it does take time to ramp up the pipeline. And this is the first time in the cycle since 2010, where we have seen some of the development shops let go some of their development partners. We haven't seen that in the past. And I think as that happens, certainly, the ability for some of these shops to ramp up production is diminished. .

We've been worried about the U.S. consumer for 3-plus years. We continue to talk about the resiliency, but new renters. You've talked about they're more price sensitive. Is it -- are you seeing anything new and different as we've entered September that they're truly price sensitive, meaning there's an issue and/or is it because of all that supply, they're shopping around, they're seeing the concessions? How would you characterize what's happening with the new renter?

Well, we're only 9, 10 days in September, so hard to draw hard conclusions from September, but we're not seeing a difference in any of our forward-looking trends in terms of traffic patterns, behaviors from customer resident or prospect perspective. So I don't think there's any changes immediately on that topic. One of the things we look at is our rent-to-income ratios for our -- and that's on our new residents. And if you look at that, that continues to decline. Today, our rent-to-income ratios are at 20%. Our incomes continue to increase, and that rent to income ratio compares with 3 years ago, it was at 23%.

So I think our rents are more affordable today than they have been. Our residents are stronger than they have been. If you look at -- our collections continues to be really strong, and we're not having any issues in that category. So we're not seeing anything that indicates to us that there's -- that our residents' finances are struggling in any way.

Great. So most recently, nothing as you mentioned.

Late payments bunking up, none of the signposts you would typically see for -- again, BofA's view is muddle through talk of recession has come up again. You're not seeing any of the typical signposts you would see ahead of, let's say, if there were real issues.

No. No, we're not seeing anything.

Okay. Let's talk about -- let's get a little bit deeper into some of the markets. I think we talked in generalities around the portfolio. I guess, can you talk about maybe strongest to weakest as we enter the fall here in '26.

I'll jump in there, Jeff. I think when you think about the strongest markets that we're seeing right now and as we do next year, we've talked a lot about the Northern Virginia markets that we're in, and we're continuing to see some good performance in those markets they've been rather resilient throughout this period of high supply and they're partially have been somewhat insulated from it. But nonetheless, they have been performing very well across the board. And then we're also seeing that strength almost on kind of our eastern coastal markets, especially in our mid-tier markets, and I'm thinking of the Charlestons, the Savannahs of the world, the Richmonds, Greenville, South Carolina.

Those markets similar to the Northern Virginia, just been very resilient. They've been protected a little bit from the supply maybe not in Charleston, but some of these other markets definitely have been protected a little bit by supply versus what we've seen in some of the larger tier markets in our portfolio. And when you kind of come down the ladder there, come down of the scale, markets like Atlanta, Dallas, Tampa, we're seeing some good recovery in those markets at this point. It's still got to -- last year, they may have been on the lower part of the list, maybe not down to the Austin level, but still in the lower part of the list. They're moving back towards the middle of the portfolio average. And so excited to see some of those types of markets where we have a larger footprint, beginning to show some real signs of recovery there. Brad mentioned occupancy earlier in his opening remarks, and that's kind of where we're seeing at first in those markets and then expecting pricing power to come back as those markets stabilize.

And then when you think about kind of the lower end of those markets of where the performance is, the Austins, the Nashvilles, the Phoenix, Jacksonvilles, those are probably the 4, I would say, of our worst-performing markets. And all of those have a little bit of a different perspective on the -- it's all supply driven, but how the supply is impacting them is all dependent on the market. The supply is everywhere. And we're still feeling a lot of that pressure even today. Just over the past 3 years, the percent of inventory of deliveries is 30%.

So again, just a ton of units that they're having to devourer. But the good news is, we are seeing occupancy in Austin move similar to what we were talking about Dallas and Atlanta, move back closer to that average of the portfolio. So again, we should begin to start seeing some pricing power here. Phoenix, Nashville, both seeing a lot of supply, and those are going to continue on just for a little bit longer, but again, the demand dynamics that we see in those markets are very, very strong, and we expect those to kind of the back end of the recovery, but still recovering and being a good performer for us.

Any comments on urban versus suburban or A versus B?

Yes. So from our urban versus suburban those are pretty tight with one another. And so we're -- I'm sorry, those are a little bit spread from one another. The suburban is probably outperforming urban by about 50 basis points on both a pricing and occupancy standpoint. The As versus Bs, those are much tighter. And so we're just seeing about a 10 basis points difference in both occupancy and pricing across the portfolio.

Please?

What do you need to see like -- we're hearing a lot of optimism, obviously, if [indiscernible] demand and supply balance affordability is not there for [indiscernible] so what will see for [indiscernible] what are your concerns, let's say prior to in terms of like [indiscernible] balance sheet [indiscernible] portfolio [indiscernible] what should we be thinking about for [indiscernible].

Yes. I mean, I think first and foremost is the performance of our existing portfolio. I mean that's concern, number one, or focus, number one, not concern. And I think what we're watching there mostly, first and foremost, is the performance of our renewals. Renewals when we're retaining 60% of our residents, we've got a lot of focus in that area. And so a lot of what we're doing on the customer service side is really focused on taking care of those residents so that they will continue to renew with us, how we do work orders, how we do various customer service and touch points is really focused on that. We monitor our Google scores, which today are the highest in the space because we believe that if we're able to provide good service, that's going to lead to renewals. So that's number one. We're really focused on that area of the business. .

And then I think number two, we've got to really focus on the new lease side. What's happening? Are we getting traction with new lease folks traffic-wise, are they converting? Is there everything in our ecosystem? Is it really helping get that prospect into our system into leasing with us and at what rates. And so that's really what we're focusing on from a first priority perspective. I think second to that, we continue to focus on building our future earnings growth through development. We've got a big focus on the development capability.

We've put a lot of effort into that area. We've grown from about $450 million over the last couple of years in our pipeline to today, we're just under $1 billion. We believe today, the developments that we're starting and that we started last year are set to deliver stabilized yields in the mid-6s given where cap rates are, still sub-5% that's an area we want to continue to allocate capital as aggressively as we can, recognizing when these assets deliver in 2026 and '27and '28, like we were just talking about, where the supply picture is going to look a lot better. We're not trending rents like we expect rents to perform over that period of time.

Those will be some pretty strong performers for us and earnings contributors for us. So that's generally what we're focusing on. The balance sheet is in great place at this point, low leverage at the moment at 4x and anything that we fund on the development acquisition side will be through debt. So we'll maintain our capacity to really help us grow and lever up as we do that.

Maybe just one quick question, then we do have 3 rapid fire on risk. I think this time of the year, your tax assessments come through anything to note on that or insurance?

Yes. Yes. So we -- in our second quarter update in our earnings release, we updated kind of where we are with property taxes for the year. And essentially, I expect those to be flat year-over-year. We've got the majority -- well over the majority of our valuations at this point in the year and have seen some really good results from that standpoint. We expect that to actually carry through into next year. I'm not necessarily saying that we're going to see roughly flat growth in property taxes, but just given where operating performance has been over the past couple of years and the fact we're looking a perspective that, that brings, wish you could still see some -- nothing like we saw probably 2, 3 years ago when you saw really outsized growth in property taxes.

Okay. Great. So rapid fire, just choose one. When the Fed starts to cut, do you expect borrowing rates for long-term debt to decline, stay flat or potentially rise, choose one.

That's a great question.

Long-term debt.

It stays flat.

Okay. Number two, last year, the majority of companies stated they're ramping up spending on AI initiatives, how would you characterize your plans over this next year, higher, flat or lower?

Higher.

Last, and this is for the industry, do you believe same-store NOI for the industry will be higher, lower or same next year?

Higher.

Thank you. Fantastic. Thank you so much.