Mid-America Apartment Communities Aktie

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.

[indiscernible]

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.

Good morning, ladies and gentlemen, and welcome to the MAA Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, July 31, 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 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 able to answer questions.

I will now turn the call over to Brad.

Thanks, Andrew, and good morning, everyone.

As detailed in our release, second quarter core FFO results were ahead of our expectations. With the sequential improvement in new renewal and blended lease-over-lease rates all exceeding the prior year's sequential improvement. While the economic uncertainty has caused the pace of recovery in pricing power to slow across the country, the recovery in our portfolio is underway. And as the economic uncertainty stabilizes and deliveries continue to decline, the recovery should accelerate. Demand remains resilient with absorption across our markets, reaching the highest level in over 25 years.

Encouragingly, absorption has now outpaced new deliveries for 4 consecutive quarters, with the gap between the trailing 12-month absorption and new deliveries in our markets approaching the level lasting during COVID. The downward trend in new deliveries is helping market conditions to firm up with market-level occupancies, improving in many of our markets, and we are seeing pockets of decreasing concessions, a combination that should lead to improved pricing power. With a stable employment sector and strong wage growth, our residents are financially healthy, leading to continued good collections and improving rent-to-income ratios.

Our diversified portfolio focus on high-growth markets and operating scale continue to position MAA best to capitalize on these favorable trends to a greater degree as the demand/supply balance moves more in our favor. The resilience of our platform is evident. In the midst of still elevated supply, we have maintained stable occupancy, achieved higher renewal rates and increased our retention, the result of our team's focus on customer service and operational consistency.

On the external growth front, because of our access to capital, we continue to find select compelling development opportunities. We remain committed to the disciplined expansion of our development pipeline, and we are making progress towards that goal. In the second quarter, we started construction on a 336 unit suburban project in Charleston, South Carolina, which is expected to deliver a stabilized NOI yield of 6.1%, bringing our active pipeline to 2,648 units at nearly $1 billion. We own or control 12 additional sites with approvals of nearly 3,300 more units.

Amid record pressure from competitive lease-ups in our markets, we remain patient in our approach to leasing up our new communities and are prioritizing rents and long-term value creation, allowing us to achieve our expected lease-up rents and deliver stabilized NOI yields that continue to trend above our original expectations. Our development projects are well positioned to benefit from the declining new starts and the tightening supply backdrop. The acquisition market remains relatively quiet. Transaction volumes are still muted as bid-ask spreads persist and capital remains cautious given elevated interest rates. That said, we are evaluating several opportunities. We have a stabilized suburban acquisition with a small Phase II development component in the Kansas City market under contract, and we expect it to close upon the completion of our due diligence review during the third quarter.

Our strong balance sheet and liquidity position will allow us to be opportunistic should more attractive acquisition opportunities become available in the second half of the year. With a 30-year track record of navigating economic cycles, we remain confident in our ability to execute through this transition period and that our focus on high demand and high-growth markets will continue to lead to higher earnings and lower volatility over the full cycle. Our markets continue to benefit from higher job growth, wage growth, household formation and demographic tailwinds than the national average. We're encouraged by the building blocks that are in place and the growing momentum heading into the back half of the year and remain confident in our ability to deliver compounding revenue and earnings performance as the recovery continues to accelerate.

To all our associates across our properties and in our corporate and regional offices, thank you for your continued dedication and focus during this pivotal leasing season.

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

Thank you, Brad, and good morning, everyone.

For the second quarter, we saw a steady progression in new lease over lease rates from what was achieved in the first quarter. Though, as Brad mentioned, broad economic uncertainty did slow the pace of new lease pricing recovery that we saw through April and caused May and June new lease pricing to be a bit below our expectations. The uncertainty showed up twofold with prospects being more selective in making decisions and operators continuing to lean toward occupancy despite broadly improving market level occupancies. However, renewal lease performance represented by the high level of renewal acceptance and the rates achieved continue to outperform expectations. As a result, we saw lesser lease pricing improvement from the first to second quarter that exceeded 2024 for new leases and renewals, which manifested into stronger sequential blended pricing growth as compared to the prior year. Blended pricing for the quarter was 0.5%, which represented a 100 basis point improvement from the first quarter. Along with the stronger pricing trend, we had stable average physical occupancy of 95.4% and another quarter of strong collections with net delinquency representing just 0.3% of billed rents. Our strongest performing markets continue to be consistent with what we have seen in the last few quarters, led by many of our mid-tier markets. Our Virginia markets remain strong and other mid-tier markets such as Kansas City, Charleston and Greenville, all demonstrated strong pricing power. Of our larger markets, Tampa continued to show pricing recovery and Houston was steady as well. We also continue to see a slow but steady recovery in Atlanta, which had our largest year-over-year improvement in both blended pricing and occupancy of any of our higher concentration markets. Austin continues to face record supply pressure, resulting in weaker new lease pricing, Phoenix and Nashville are 2 other markets facing significant pricing pressure. We have seen the uncertainty and higher leasing pressure particularly impact the leasing velocity in our lease-up portfolio. And in turn, we pushed the stabilization dates by 1 quarter for 3 of our lease-up properties, West Midtown, Vale and Valvista. However, across our lease-ups, we've achieved rents to date, 2.5% ahead of pro forma. We had 1 property, MAA Boggy Creek, reached stabilization in the quarter, and our 6 remaining lease-up properties ended the quarter with a combined occupancy of 80.7%. Despite supply concerns, we continue to execute various targeted redevelopment and repositioning initiatives in the second quarter, and we expect to accelerate these programs over the remainder of 2025 and into 2026. Through the second quarter of 2025 year-to-date, we completed 2,678 interior unit upgrades, achieving rent increases of $95 above non-upgraded units and a cash-on-cash return in excess of 19%. This was an acceleration above volume and rent growth achieved from the first quarter. Despite this more headed supply environment, these units leased on average 9.5 days faster that non-renovated units when adjusted for the additional turn time. We still expect to renovate approximately 6,000 units in 2025 with more expected in 2026.

For our repositioning program, we began repricing in the second quarter at 5 of our 6 recent repositioning projects with the last slated to begin repricing in August. Early results are encouraging with NOI yields in the low teens based on current pricing. We have identified several additional projects to start later this year with anticipated repricing in time for the [indiscernible] in 2026 leasing season. Work also continues on 23 retrofits for community-wide WiFi with go-live dates planned through the remainder of 2025.

With July closeout in process, we continue to see seasonal pricing and occupancy trends that are aligned with our guidance. July pricing is trending better than the second quarter and our current occupancy at the end of July is 95.7%. Our 60-day exposure for July of 7.1%, 10 basis points lower than last year and keeps us in a position for stable occupancy to allow for pricing power, assuming demand fundamentals remain intact. Brad noted the exceptionally strong absorption with absorption in our markets exceeding new supply for the fourth straight quarter or said another way, the fourth straight quarter with fewer available units for lease in our markets than the prior quarter. [ Strict ] in our renewals continues with the percentage of our residents accepting real offers exceeding last year's record level at least a release growth rates on renewals accepted for July, August and September in the 4.5% range. Strong absorption, declining deliveries and high retention rates underlie our optimism for an expected continuously improving lease environment over the next several quarters.

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 $2.15 per diluted share, which was $0.02 per share ahead of the midline of our second quarter guidance. The favorability to our guidance driven by $0.025 related to favorable overhead expenses, $0.01 of favorable interest expense and other nonoperating income and $0.005 from our same-store NOI performance, partially offset by unfavorable non-same-store NOI of $0.02, which was mostly driven by the impact of elevated supply pressure on the lease-up portfolio.

Our same-store revenue results for the quarter were in line with our expectations as revenues benefited from strong collections during the quarter. Our same-store expense performance was better than expected, primarily driven by real estate tax expense. We now have more information relating to our real estate expense for the year as municipalities have started providing 2025 property valuations, which I'll discuss more with our revised guidance in a moment.

During the quarter, we funded approximately $92 million in development costs for the current $943 million pipeline, leaving an expected $326 million to be funded on our current pipeline over the next 2 to 3 years. Our balance sheet remains well positioned to support future growth opportunities with $1 billion in combined cash and borrowing capacity under our revolving credit facility, and our low debt net to -- debt-to-EBITDA at 4x. At quarter end, our outstanding debt was approximately 94% fixed with an average maturity of 6.7 years at an effective rate of 3.8%. We have an upcoming $400 million bond maturity in November that we plan to refinance later this year.

Finally, we are reaffirming the midpoint of our same-store NOI and Core FFO guidance for the year while revising other areas of our detailed guidance that we've previously provided. Given our operating results achieved in the second quarter, we are making slight adjustments to our guidance associated with same-store growth. We are lowering the midpoint of effective rent growth guidance to negative 0.25% and while maintaining average fiscal occupancy guidance at 95.6% for the year. Total same-store revenue guidance for the year is revised to 0.1%, which also reflects continued [indiscernible] collection performance over the back half of the year. We are lowering our same-store property and operating expense growth projections for the year to 2.25% at the midpoint. We have better insight into our real estate tax expense for 2025 and have lowered the midpoint of our guidance to 0.25%. The lower guidance is primarily due to favorable property valuations in certain jurisdictions as compared to our original expectations. Also, we recently renewed our property and casualty insurance program on July 1 and achieved an overall premium decrease on our property and casualty lines. We now expect our interest expense for the full year to increase by 1.3% as compared to last year. The changes to our property operating expense projections, combined with our updated same-store revenue expectations, resulted in us reaffirming our original expectation for same-store NOI at negative [ 1.15%. ]

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 transaction market. The impact of these adjustments, combined with our continued focus on pricing in our lease-up portfolio resulted in us maintaining the midpoint of our full year Core FFO guidance at $8.77 per share by narrowing the range to $8.65 to $8.89 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 comes from the line of Austin Wurschmidt with KeyBanc.

Tim, you mentioned that July trends are trending better than the second quarter. I was hoping you could expand a little bit on that comment and whether that's new lease rate growth that's driving improvement and exceeding what you've seen in recent months or if it's more of a function of the renewal strength and stronger retention you highlighted.

Yes. I mean it's a little bit of both. I mentioned the renewal trends in the prepared comments, we're continuing to see in that 4.5% range, really through the end -- through the rest of the third quarter and continuing to see the acceptance rates be a little bit higher than what we saw before. So that's certainly playing a part of it. But we are seeing new lease rates so far trend better than what we saw and actually the best new lease rate on a lease-over-lease basis we've had so far this year. So that's what gives us some confidence in what we're expecting to continue to see an improving environment as we get to the last part of the year.

That's really helpful. And I guess how much of the changes to your 2025 lease rate growth assumption reflect kind of what's happened in the first half of the year versus how much was a function of changing sort of the second half projection and just that trajectory of fundamentals from here?

I would say, effectively, the -- what occurred in Q2 was the biggest impact. There's obviously a lot of leases that that expire in Q2, we intentionally obviously move them towards the strongest part of the leasing season. But we revised the total lease-over-lease guidance by roughly 100 basis points. We were somewhere around 1.5% in our prior guidance, roughly around 0.5%. So it's a little bit of a combination of both, but what we saw in the second quarter was the biggest part of the adjustment.

Our next question comes from the line of Cooper Clark with Wells Fargo.

I just wanted to follow up on Austin's question. I'm curious kind of what the expectation for new lease rate growth is in the current embedded guidance? And what gives you confidence in the updated range given continued volatility from the lease-up inventory?

Yes. I mean we're somewhere in the negative 4% range, give or take, for the back half of the year on the new lease side that's driving the the pricing guidance. And then as we mentioned, continue to see renewals play a larger part of the of the combination and continue to see the real rates be strong. I mean, what gives us the confidence is a few things. One, the renewal rate we're seeing. We've got good visibility into September for that and starting to get October as well. Current occupancy where we stand right now, as I mentioned, is 95.7%, expect that to trend through August at similar rate. Our exposure is at a better spot than it was this time last year. And then just a macro level on some of the uncertainty we're seeing consumer sentiment take back up, chances of a recession are lower than they were before. So I think there's less uncertainty in the market as well that helps from a consumer and an operator sentiment standpoint, and then the absorption that Brian and I both mentioned in the prepared comments, continues to be really strong. In fact, there's -- if you look at no absorption we've had over the last 4 quarters, it was about 85,000 fewer units in our [indiscernible] available to lease than there was all months ago with the absorption. And I expect that to continue to grow, be well over $100,000 as we move through the back part of the year. And then the last point I would make is just from a comp standpoint, the last 2 years in Q3, our cumulative new lease rates were down about 8%. And in Q4, cumulative new lease rates were down about 15%. So there's an easier comp component to it as well.

Okay. That's helpful.

Real quick. This is Brad. I agree with everything Tim said. The 1 thing that I would add to that, that gives us confidence as we head into the back half of the year is, in second quarter, we continue to be in a high level of supply situation that continues to decline, yet if you look at our performance in the second quarter, clearly, we saw blended lease pricing turned positive. We saw a pretty good improvement in blended lease pricing second quarter versus first quarter. But if you look at the rate of improvement this year versus what we saw last year, we've seen an acceleration in the midst of an environment where we saw increased uncertainty, and we saw still high levels of supply. So all of that really comes together to give us confidence that the back half of the year should progress in line with what our current expectations are.

Okay. That's super helpful. And then switching to the capital allocation with the Charleston development start and the Kansas City acquisition noted earlier. Is it fair to say your incremental dollar will continue to be away from more of the mature Sunbelt markets and into your Midwest and small-format Sunbelt markets like your Charlestons or Savannah. And then any comments on cap rate or expected yield from the Kansas City acquisition can share would be great.

Yes, sure. I mean I wouldn't read anything into where our incremental dollar is going away from the Sunbelt. I mean that is not our focus at all. We certainly believe in the merits of investing our capital in the highest demand region of the country. If you look over time, performance in earnings growth, dividends performance is most highly correlated with the strength of demand, which we think correlates highly with the Sunbelt markets in the U.S. So we'll continue to invest our capital in those markets. You will see us continue to invest capital, both in our large markets as well as our mid-tier markets, which Charleston and I'd say Kansas City are both more of our mid-tier markets. So you'll see us continue to invest capital in that manner. As I mentioned in my opening comments, the Charleston development is a [ 6 1 ] yield. So the developments that we've executed over the last 12 months or so have been in that 6% to 6.5% range. We're still seeing select opportunities in that range that you can expect us to continue to execute on as we continue to build out that development pipeline. On the acquisition side, the Kansas City acquisition, there's 2 phases there. One to stabilized acquisition. That's probably in the high 5s from an NOI yield perspective. We have a Phase II -- small Phase II development to go along with that, which combined will expand the total development yield to about a [ 6 3 ] or so on the entire development.

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

It's actually Nick [ Carr ] on for Eric this morning.

So I guess the first 1 I have is just on Atlanta. Obviously, minus 40 bps same-store revenue growth quarter-over-quarter. I guess I would have thought that would have been a bit better on a sequential basis given we talked about some improvement there last quarter. So I guess if you could just kind of walk through what's -- what you're seeing on the ground there, that would be helpful.

Yes. I mean we're continuing to see some positive momentum out of Atlanta. I mean it was coming from a pretty low spot with -- if you think back to early '24, there were occupancy and pricing concerns there. So it's -- the revenue growth is trailing looking. So it takes some time for it to really start to show up. I mean it's still at a level below, I would say, the average of our portfolio. But when you think about the improvement from last year, it's 1 of the best. In fact, as I mentioned, when you combine our improvement in blended lease to release in Atlanta compared to last year, in our improvement in occupancy. The combination of those 2 is better than what we saw in any of our other large markets. And then delinquency continues to not be an issue. It's down to almost the portfolio average. And then we've started to see concessions come down a little bit, particularly Midtown Atlanta has been has been a spot where we've seen huge concessions still there, but they've come down a little bit. We've seen it down a little bit in Northwest Atlanta as well. So it will take some time to really show up on the revenue side, but we're encouraged with [indiscernible] trending.

Right. Got it. And then I apologize if I missed it, but did you give like a specific blended lease expectation for the back half of the year if you didn't, could you inform us on that?

Yes. So we're somewhere around 0.8% or so for the back half of the year on a blended basis.

Our next question comes from the line of Nicholas Yulico with Scotiabank.

So I guess first question is as we think about the pricing, and I think your leasing, you said being a little bit slower than expected in the last couple of months. What is the driver of that? Is it -- I know we've all known about supply for a while, but it feels like there's also a general demand problem that's hitting multifamily. And I'm not sure as well for Sunbelt market if you're also facing the opposite of the benefit from in-migration if now you're facing out migration or just other issues in those markets from a demand standpoint. So can you just talk a little bit about what you're seeing on the ground?

Yes. Nick, this is Brad. I would start out by saying that we are certainly not seeing any problems whatsoever on the demand side. If you go back to what we saw going into the second quarter, we were seeing very significant and very strong new lease over lease improvement on a monthly basis. Even going into April, we saw new lease over lease rent growth in the 100, 150 basis point range, which was in line with kind of what our expectations were. We expected that to continue. As we got into May, we saw that market operators began to focus a little bit more on occupancy, which clearly had an impact in terms of the rate of the recovery that we expected. But there's no demand concerns whatsoever in our region of the country. In fact, if you look at the varying demand metrics that are out there, we monitor absorption. As I mentioned in my comments, we're seeing record absorption in our region of the country, the highest that we've seen in the last 25 years. And if you look at the gap between the trailing 12-month absorption and supply, we are approaching COVID levels in terms of the gap between excess supply. And really what that means is that absorption is significantly outpacing new deliveries. And the point that Tim made a moment ago, based on that excess absorption, we have 85,000 fewer units to lease in our market today than we had at this time last year. You couple that with the fact that supply continues to decline significantly from where we are today and demand continues to hold in there. That gap in the reduction of supply that's available to lease will quickly become 100,000 units, 120,000 units, and that will have a significant impact on the acceleration of performance in our region of the country. We're not seeing any slowdown on migration trends. So that's still a net positive of 6% or so. It's down from pre-COVID highs, but it's still in line with -- sorry, it's down from COVID highs, but in line with pre-COVID numbers. So we're not seeing any concerns whatsoever on the various demand metrics that we look at.

Okay. Just second question is, I know you gave some numbers about the back half of the year, new lease rate growth. And you talked about the prior couple of years, and it was down, I think, last year in the back half. I mean, at what point -- can you just explain to us at what point do your comps become easy because we're thought that if you were down substantially a year ago on new lease rate growth in the back half of the year, you would get some comp benefit this year, but it doesn't seem like that from what you talked about with new lease expectations.

Yes, Nick, this is Tim. We do think there is some comp benefit. I mean the biggest drivers are everything we've talked about from a demand standpoint, absorption and all that. But there is a piece of it that's easier comps, particularly, to your point, in the back part of the year and particularly in the fourth quarter, where we've seen it trail off quite a bit in the last 2 years. So if you look at just our new lease rents over the last couple of years, they're down cumulatively 8% in Q3 and 15% in Q4. And so we've obviously got much better supply/demand fundamentals now in a good shape, as I mentioned, with occupancy and exposure. So we do think that plays a component in our expectation for less seasonality than what we would typically see.

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

I think you guys have talked a little bit about sort of pace recovery here. And so maybe sort of piggybacking on that, I wanted to ask about how absorptions that you're seeing today, how does that compare to maybe what your forecast would have been 3 months ago or 6 months ago, recognizing the sort of the pricing is what it is, but I think just to maybe underscore what's happening with demand. I would love to hear just about how absorptions are trending relative to your expectations?

Yes. This is Tim. I mean we expected absorption to continue to be strong. I mean, it's hard to pinpoint exactly what that -- what's dialed into the numbers, but we know to Brad's point a minute ago, the demand factors have continued to be strong, particularly in the Sunbelt and then we know supply deliveries each quarter have been dropping. So we expected a level of absorption. I mean there's a few markets, few spots where -- and we talked about with the lease-up portfolio where leasing velocity has slowed a bit, but it's more in pockets with a lot of supply. But I would say general -- in general, absorption has been really strong. We expected it to be really strong. I think it will be even stronger over the next couple of quarters.

Great. And maybe a similar question on deliveries. What is sort of the forecast, I guess, for 3Q and 4Q for deliveries. How does that compare? I mean the first half of 2025. And whether that's national or in your markets, I think it would be helpful context.

Yes. I mean in our markets, if you compare last year to this year, we're expecting about a 25% or so drop in new supplies as compared to last year. We saw that occur a little bit in the first half, but it was probably down 10% or 15% in the first half of the year compared to what it's been trending. So I would expect it to accelerate a little bit from what we saw in the first part of the year.

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

It's great to see the renewals for the third quarter remain in the mid-4% range, but just kind of curious how long do you feel that they could stay in that range? And is it a function of wage growth? Or is it kind of the churn in the portfolio that it's not the same residents that received a similar increase last year?

Yes, this is Tim. I think it's some of that. I think those points you just made a play in a part of it. I think the service we provide plays a lot of it. We have mentioned this, I think, last quarter that we have the highest Google scores in the sector, and I think that customer service plays a part in it. And we do a very thoughtful analysis when we go out with our renewal offers on tiering it based on where people are relative to market. But we bidded this period for now going on about 8 quarters where new lease pricing has struggled, but we've continued to see renewal rates hold in this 4.5% range. So I think there's a lot of qualitative factors I just mentioned beyond the just straight numbers that help that. And even though turnover is down, we're still turning 40% or so of our portfolio each year. So there's a factor there that plays into it. But no reason to expect that we should see anything different going forward from what we've seen in the last 2 years.

And then maybe just following up on the turnover. Do you expect that in the second half to be similar to '24 or even lower kind of given what's going on with interest rates.

I think so far with what we've seen in Q3 and renewal accept rates that we continue to be a little bit lower than where we were in '24. So I would expect that into Q3. Q4 is always a little bit higher turnover quarter. But again, no reason. We don't see any reason to expect that's going to change. There's not a people aren't leaving us to buy houses, the rent increase turnover due to rate increases down. So we don't see any larger factors that would suggest that, that number would creep back up in the fourth quarter.

Our next question comes from the line of Michael Goldsmith with UBS Financial.

How has the competitive pricing environment across operators in your markets trended? Are other operators pushing occupancy? And if so, how much occupancy improvement do you think they would need in order to be comfortable to return to pushing rate again.

Yes. I mean I do think we have seen operators push more towards occupancy broadly, and I think that was a factor that played into Q2, where even though we saw in our markets, occupancy increase from Q1 to Q2 broadly 40 or 50 basis points. So I think there is still some hesitancy on the operator front to push pricing perhaps when they could have a little more. And we've been pushing pricing where we think we can or where we should. But I mean, with where we sit today, we're at 95.7%, as I mentioned, we'll continue to have a targeted approach where we're where we have exposure and current vacancy in a good position, we'll push price. And where we don't, we'll push occupancy. But I think broadly where the macro environment is and where consumer sentiment is and improving fundamentals, it will become more of a rate pushing environment, particularly as we get into 2026.

Got it. And I recognize it's a small market for you, but Northern Virginia had a material slowdown in same-store revenue growth in the quarter relative to the first quarter. So can you discuss what trends you're seeing in that market in particular?

Yes. I mean we've seen it slow down a little bit. I mean, obviously, that market has been strong for going on 6, 7 quarters now. So I think a little bit is just coming into tougher comps. We did see similar to what we saw more broadly, just a little more choosy on the prospect side and then particularly in our Pentagon area asset. We've seen renewal except rate go down a little bit just with some of the uncertainty on people taking the [indiscernible] and that sort of thing. I don't think there's anything necessarily unique to that market, different than others. I think it's more just naturally slowed a little bit as it's had a really strong 6 or 7 quarters.

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

Two questions. First, just big picture because everyone is asking about new rents, and you guys talk about improving fundamentals, improving demand, 85,000 fewer units this year than last. And yet new rents are still down and things are still lethargic. How much of it do you think is just pure rent fatigue over the past few years that new prospects even if they're relocating within the market or just sort of fed up with the rent increases, and therefore, as they're looking, they're just being much more cautious about what they're going to pay versus someone who's renewing has already made the decision that they're just staying there. So how much of it do you think is that dynamic versus other factors?

Alex, this is Brad. There's nothing that we see that indicates that there's a level of rent fatigue in the market that's causing the rate of recovery to be less than what we expected. I mean, in fact, if you look at the wage growth in our region of the country, it continues to be strongly positive. Our rent-to-income ratios are actually down this quarter versus prior quarters. So we're seeing improvements in that -- in those levels. And we do continue to get the 4% to 5% renewal increases. So from our perspective and from what we see in the market, the consumer confidence readings that we get that really decreased corresponding with some of the uncertainty that came into the market after liberation date. All of that plays into, I think, the psychology of the operators in the market, really getting a bit nervous to performance, what performance looked like and really focusing, as Tim mentioned, on occupancy. To us, everything that we're seeing seems to indicate that, that's the issue that we're facing right now, not rent fatigue or a demand issue or anything on that side of the equation, the demand continues to be very, very strong.

Okay. Second question is, you mentioned that deliveries are taking a little bit longer. In general, I think you guys said some years and I think broader market is, do you have a sense for how much of this year's supply will slip into next year? Just trying to understand the peak supply this last year and this year, trying to understand how much are we going to have to contend with spill over in 2016?

Yes. This is Tim. I don't think it's material. I mean if we look at quarterly supply that's been delivered, I mean it has dropped off pretty good over the last 2 quarters, and I expect it will drop out even more in Q3 and Q4. So I mean, there's certainly some of that, but I think more of the leasing velocity slowdown that we've seen is for the reasons we've been talking about, which is just some of the uncertainty that we saw in Q2 and less units taken longer to be delivered.

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

Could you guys talk about maybe some of the changes that you've made on your underwriting for the developments, either on the revenue side, the cost side, time to lease up? And what maybe changes or cost changes are you seeing on the construction cost side?

Yes, Steve, this is Brad. We have honestly made a whole lot of changes in terms of our underwriting, our development underwriting is pretty conservative. If you look at the yields that we're achieving on our development deals, they're 20% to 30% higher than what we originally underwrote. So we feel pretty good about our underwriting process in our ability to achieve the returns that we have in our development. Yes, the properties that we have in lease up today, we are prioritizing achieving the rents that we expected versus pulling forward some maybe performance from '26 into 2025 by lowering prices to get occupancy, and that has some implications for this year. But our long-term value creation opportunity is still intact with all of our developments. So we still feel really good about our approach to development on the cost side. Honestly, we're not seeing -- costs are pretty flat at the moment. We're not seeing really any increase associated with tariffs or immigration or anything like that at the moment. Certainly something that will continue to keep an eye on the labor market and things of that nature. But feel really good about our development opportunities that we are under construction on right now as well as the -- a few others that we're pursuing at the moment.

Okay. And then second, just maybe on real estate taxes. Maybe just broadly, kind of what are you seeing from the various municipalities? And I know that number is down about 2.5% through the first 6 months. But is that more of just a one-off thing this year, or do you think that's maybe something that could be more of a tailwind on the expense side for the next couple of years?

Yes, Steve, this is Clay. Yes, I do think it could be a bit of a tailwind as we move forward or maybe said it a little differently, maybe not as much of a headwind as it had been in years past. When you think about the environment that at least that we're in our markets and with the negative same-store NOI growth the past couple of years, that should continue to carry through over the next cycle or 2 depending on when some of these municipalities read value, summary value, once a year, summary value once every 4 years. So that will be a little dependent on each respective municipalities timing. But I do think that we can see some potential help there in future years as these -- as they look back to these periods of declining NOI growth. We can take that and we also factor in the cap rates that are out there. Those seem to be relatively stable. We talk about new developments being in mid- to upper 4s, but I think overall, cap rates in general on the average are relatively stable over the past couple of years. So it will probably lean a little bit more towards operating income results.

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

I think I want to sort of follow up and combine a couple of prior questions, but just to dig a little deeper on this peak delivery phenomenon. So there's obviously a kind of a longer tail when it comes to lease-up after properties delivered, and you have talked a little bit about sort of slower leasing velocity that's impacting your numbers. So when does that dynamic do you think peak? And then how does that flow through to when -- again, to sort of echo other people on this call to when new lease pricing would improve and really start to reflect that dynamic tailing off, if that makes sense.

Yes. I mean we saw deliveries in our markets peak around Q2, Q3 of last year, and we've seen it slowly trend down from there. Now it's still obviously at an elevated level in terms of comparing to what historically a normal year may be. So obviously, still seeing the pressure from that. But going back to the absorption point, each quarter, that's gotten greater absorption. We see the excess units that are out there dropped significantly. So I think the challenge for the rest of this year is you also have sort of the normal seasonality and you have less traffic generally looking for apartments in the back part of the year. So it won't show up quite as much as it probably otherwise would if it were the peak leasing season, but I think you'll really start to see that momentum as you get into the spring of next year.

Okay. That's very helpful. And then just on the transaction environment, you did mention, I think, in the prepared comments that there remains a fairly wide bid-ask spread, at least in certain pockets. Anecdotally, you would kind of see that lenders are maybe starting to get a little more aggressive with troubled borrowers, you troubled assets from the the COVID era. So I mean, is that -- does that reflect anything you're seeing? Does that create opportunity? Or is that just more sort of headlines that don't really apply to this situation?

Yes, this is Brad. I mean, I would say, in our markets, we're not really seeing distress in the market. Honestly, we're not seeing that manifest itself in the way of of good buying opportunities. In fact, the cap rates for deals that traded in the second quarter that we tracked were were down from first quarter. They were about a [ 4 7 ] in second quarter. So cap rate -- there's not a lot of transactions. I think they were only maybe 10 or 12 that we track, which is very low. So not a lot of transactions, we're not a lot of distress in the market at this point. We'll continue to certainly keep our eyes on that, but nothing at the moment in that area.

Our next question comes from the line of Bradley Heffern with RBC Capital Markets.

Previously, you expected positive new lease spreads in the third quarter. Obviously, you aren't guiding to that at this point. But I'm curious, when do you think you will see those spreads turn positive.

I mean it's difficult to say, but I do think '26 looks a lot better for all the reasons we've talked about. So I think as you get into the spring and summer of next year is most likely the time.

Okay. Got it. And then do you have a loss lease or gain to lease figure that you can get?

Yes. So if you look at the way we think about loss lease, if you look at all the leases we did in July compared to all of our in-place leases, there's about a 2% loss to lease, but it's always the largest this time of the year. July is kind of the peak of the year typically. So that number tends to gap out a little bit this time of the year, even in a tougher supply-demand year, and then I would expect it to trend back down a little bit as we get to the back part of the year.

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

So a couple of questions here. First one, I guess, I'm curious how long do you think this low supply narrative for Sunbelt plays out? Looks like the low supply window is now being pushed out to 2028. I think a couple of months ago, we're talking about 2027. So can you talk about how difficult it is perhaps for private developers to get equity, debt capital, and how much either rents have to grow or how much their capital costs have to come down for the private side of the business to be able to hit the hurdles and maybe get the development engine starting again.

Haendel, this is Brad. Yes, I mean as part of our development platform. We part with a lot of merchant developers to build through our prepurchase program. So we're looking at 30 to 40 equity packages a quarter. And on average, we might find 1 that really hits our return thresholds above a 6% NOI yield with realistic underwriting. Most of those are falling in the mid to low 5% range on realistic underwriting. So those are going to need -- the returns are have to improve 10% to 20% or so to make those feasible. So that's a combination of construction cost reduction, rent growth improvement in order to make those numbers work on a more broad basis. But I think really the biggest -- the next biggest challenge right now is the availability of capital. Equity capital is very challenged to get in development deals today. So we certainly don't see that on the horizon up. If you look at the development pipeline and the new starts that we're seeing, they are significantly below the last 12 months below historical averages, and we certainly have seen that trend down every single quarter for the last year or so in our region of the country, and we do think that, that continues for the next few quarters to years at this point. The availability of capital is a big challenge at the moment.

That's helpful. And maybe 1 more, you mentioned a few times here your desire to acquire assets, talk about the broader market, but also talked about your lower leverage here. So I guess I'm curious how much you'd be willing to lean into that. What [indiscernible] carries a lower cost? And how much buying power that could allow you to perhaps do more deals. So maybe how much you can lean into debt to fund deals before you kind of get to leverage levels that -- or maybe bump up against some leverage levels?

Haendel, this is Clay. Yes, so we're sitting at 4x levered as we here at the end of the quarter. We'd be happy to take that up to 4.5x to 5x. So that would be additional, call it, $1 billion, maybe a little bit north of $1 billion. So we've got plenty of room there on the balance sheet to really begin to lean into these opportunities that are coming up, whether there are more acquisitions or on the development front.

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

I had a question on seasonality, and how you think that compares versus prior years? I know you mentioned that the July lead pricing is favorable versus the second quarter. But I was wondering if you could discuss how that compares versus June.

Yes. I mean it's trending better than June as well. I mean, on an [indiscernible] basis July, what's to be our best new lease pricing month of the year. And so as mentioned on the seasonality, we're certainly dialing in less seasonality in the back part of the year for all the reasons we mentioned that we still expect that Q4 would be lower on a blended basis than what Q3 is.

Okay. And then you mentioned Atlanta being 1 of your best markets in terms of blended pricing and occupancy. I was wondering if you were surprised on the news that net migration turned slightly negative for the first time in the market? And if that -- if you had seen that in your portfolio and if that changes how you allocate capital to the market?

Well, 1 point of clarification in Atlanta, we saw the most improvement from last year on pricing. It's not -- it's still lagging the portfolio. So there's still a lot of room to run in Atlanta, but we're encouraged by the trends. But broadly not concerned about the migration trend at all. I mean, as Brad mentioned earlier, we're right at where we are at pre-COVID levels, which is having 10%, 11%, 12% of our move-ins come from outside of our footprint, and only 4% to 5% of our move-outs leaving our footprint is still a net 5%, 6%, 7% in migration trend, and that's remained very steady over the last several quarters.

Our next question comes from the line of Rob Stevenson with Jamie.

Tim, you talked about Austin, Phoenix and Nashville as weak given supply. Are you seeing any positive signs in those markets? Or they have enough tough 6 to 9 months ahead of them?

Well, I mean, often, not seeing a lot of positive trends there. I mean, it trended a little bit down in the back part of Q2 in terms of new lease pricing, and it just continues to get -- while supply is on an absolute basis is down a little bit this year compared to last. It's still really high in that market. Now I will say for [indiscernible] -- 1 for also the demand fundamentals remain 1 of our top 1, 2 to 3 markets in terms of all the migration, household formation, job growth. So it will turn around once again is the supply mix. And 1 other point I'll make in [indiscernible] is that, it's actually our lowest rent-to-income ratio market that we have right now. So really healthy resident base there. I think once the supply pressure wins. I think that market is poised to do really well. On Nashville, we have seen concessions come down a little bit in the downtown area. I mean it's really downtown and around that area of Nashville that's been the hardest hit. We're seeing a little bit better performance out in the suburbs. So I think that's a market that could turn around a little quicker. And then Phoenix probably somewhere in the middle. It's still a struggle with a lot of supply, particularly focused in certain submarkets. But the job engine and all the things that are going on there, I expect that probably turns around -- so had to rank it, I'd say probably National Phoenix also in terms of the time of which turns around a little bit quicker.

Okay. That's helpful. And then, Brad, beyond Kansas City, can you talk about which of the 12 owned and controlled development sites are both ready to start and make sense from a return and supply demand perspective over the next sort of 6 to 12 months for you guys?

Yes. I mean over the next 6 to 12 months, we should have a pretty healthy start level. I mean we've got a Phase II site in Raleigh that we're currently working on. It's out to to price at the moment. We've got a site -- actually 2 sites in D.C. that we're working on right now that are still pretty compelling from a return and a long-term value perspective. We have a couple of sites or a site in Orlando with a couple of phases to it that we're working on pricing. So of the 12 sites that we currently have and the Kansas City deal has the Phase II site, which will start in the next, call it, 6 months or so. But of all of the sites that we have control or owned I think it's important to note that they are all approved. We are just waiting for market fundamentals to turn a little bit more in our favor to support our disciplined growth of that pipeline and a return that we think makes sense for us. So over -- I'd say, over the next 6 to 12 months, we will have 4 to 5 starts in that development pipeline.

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

I have just 1 kind of bigger picture, longer-term question. We've obviously had this big wave of new supply, and I saw now there's a bill in the U.S. Senate to try to make adding housing easier across the country. But I read an article that said many southern markets are suddenly starting to look a lot more like California and coastal markets in terms of not in my backyard when it comes to adding new supply. So in other words, maybe every American sales in [indiscernible] it just didn't show up in the South because sprawl was still possible and maybe that's starting to get exhausted. So my question is, are you seeing any changes in any of your markets in terms of local community starting to push back on new supply or raise barriers, so that may be the next supply wave whenever it comes, will be more limited. And does that -- I know you guys are very much focused on demand. But are there kind of lessons learned in the last 2 years in terms of an eye on supply and the way you pick your markets as well?

Yes. I mean, definitely. And this is Brad, by the way. In certain markets, of ours, there is a strong pushback against multifamily. In fact, the city here where our office is located in German town, they've had a moratorium on new multifamily developments. And you see that in a lot of the municipalities of where we're located. Charleston in Mount Pleasant had a moratorium for a while against multifamily development. So there is a lot of pushback against multifamily and a lot of uphill battles and discussions that have to occur. And I think sometimes there's a misnomer that in the Sunbelt it takes you 6 months to start building a project. And the reality is it still takes a year to 2 years from when you identify a project and to be able to put a shovel in the ground. We had a project in Raleigh, I think it took us 5 years from when we started working on it to get project under construction. So I do think there are constraints in terms of these suburban Sunbelt markets that really restrict a significant ramp-up in the supply wave that will impact future supply.

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

Just 1 for me. I think you mentioned 85,000 fewer units over the last 4 quarters in your markets and said it would increase to 100,000 to 125,000 fewer points -- fewer units at some point. Was the time frame for this the second half of this year or the first half of next year?

Yes. So the point we're making is on the absorption front where we've obviously had more units being absorbed in the last 4 quarters and what's supplied. And so that's about 85,000 through Q2. Yes, I would expect this -- later this year, it gets beyond 100,000. I mean, we saw that number go from 45,000 to 85,000 just in Q2. So I think when you combine just the number of units being delivered, continuing to drop with no really changes in demand. I think you get to that number later this year.

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

I just wanted to ask about something that's been asked tangentially by others, but I just wanted to frame it a little differently. Just what if at all, has surprised you about the supply environment so far this year that has materially impacted pricing power?

I don't know that the supply environment in and of itself has been much of a surprise. I mean there's been a few delays here and there. I think it's more some of the leasing velocity. And so the uncertainty that popped up in Q2 has been -- was certainly more of a surprise relative to our expectations. I think particularly on the operator side where, again, the point I was making earlier that occupancies were accelerating from Q1 to Q2, but didn't really see a lot of pricing power. I don't think the nervousness both on the operator side and the prospects side or what was driving that? I think it's less of a change in the supply expectations that we had.

Okay. Yes, that's helpful. And then just a quick one. Just could you talk through what your expectations are for the operating environment in the out years when some of your more recent starts will deliver.

Yes. This is Brad. I'll give you a little sense of that. I mean as we talked about, certainly, our development pipeline is pretty well positioned to deliver on what we think is going to be a very low supply environment. And just for context, kind of the long-term average supply in our market is probably in that 3% to 3.5% range. If you look at the trailing 12-month starts in our region of the country, it's about 1.7%. And for the comment I made earlier, continues to trend down every quarter. So that really speaks to a pretty good operating environment that we have over the next few years. And I think for context, there's a couple of different periods that you can certainly look at. As I mentioned in my earlier comments, if you go back and you look at the T12 gap between demand and supply, where demand is exceeding supply to get to the level that we're at today, you have to go back to the COVID period of '22 and '23. And certainly, during that period of time, average NOIs were pretty high in the low double-digit range. Alternatively, if you just look at the start -- or excuse me, the delivery numbers that are expected in 2026, you really have to go back to the GFC period after GFC period, call it, 11 and 12 to match those supply levels. And of course, we had 4 to 5 years of performance at that point where NOIs were in the 5% to 6% range. So -- and that occurred for, as I mentioned, 4 to 5 years. So we'll see where we go from here. But I think based on the points that we made earlier believe that certainly acceleration in 2026 based on diminishing supply, less uncertainty in the market, certainly are good building blocks for recovery from where we are right now.

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

Just following up on the earlier question from Steve, on the cost side of development economics. Just quickly shifting to the revenue side. Could you walk us through the key assumptions behind your yield targets? Like what kind of rent growth and leasing velocity assumptions are you using to support the mid-single-digit yields that you've mentioned, I think 6% development yields you mentioned recently. And have you made any recent changes to those underwriting assumptions to account for maybe slower lease-up periods or other market trends you're serving?

No, we really haven't, and as I mentioned there, we really haven't made any changes to our assumptions. The [ 6 1 ] yield for the Charleston development. Based on the market comps that we look at, we do a very deep dive in terms of what truly [indiscernible] that our traffic -- we will compete for traffic for. And if you look at that, the difference between our stabilized rents and today's market comps that market is less than 5%. So when we deliver that project in 3 years, we're expecting rents to increase from today's rates less than 5%. And we believe that's pretty conservative given that the market expects cumulative rent growth over the next 3 years to be over 11%. So we feel good about how we underwrite our developments. We're pretty conservative, as I mentioned earlier, with our current development is trending toward a yield that's about 30 basis points higher than what we originally expected. So no major changes in how we look at development. Yes, our lease-up velocity is a little bit less right now. But certainly, when these developments are delivering over the next 2 to 3 years. The operating environment is expected to be quite a bit different than it is right now. So we've not sped up lease-up to take that into account. It's in line with what our kind of historical underwriting standards are.

Our final question will come from the line of Mason Gal with Baird.

Just 1 for me. I appreciate all the development lease-up commentary, but can you provide an update specifically on how your 2 acquisition lease-ups are performing? And are there any changes to those initial yield expectations?

Yes, this is Tim. No real change to the yield assumptions on those. I mean, as we talked about with some of the others, the leasing velocity was a little bit behind. We're doing okay on the rent. So I think broadly, once those are fully stabilized, the yield expectations are intact.

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

No further comments from us. If you got any questions, don't hesitate to reach out. Thank you, everybody.

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

All right. Well, good morning, everyone. I appreciate everybody joining us this morning. My name is Brad Hill. I'm the President and CEO of MAA. To my left, we have Tim Argo, who's our Chief Strategy Officer and to my right, I have Clay Holder, who's our CFO.

What I thought I would do is just go through some high-level highlights this morning for the company, turn it over to the team members to talk about some specific items and then open it up for any questions that you guys may have. So just as a way of just a reminder in terms of MAA, we're an S&P 500 multifamily-focused REIT. We have a 31-year history of operating exclusively in high-demand markets. And generally, those markets overlap with what's known as the Sunbelt in the U.S., but we also have focus in other high-demand markets across the U.S. as well.

And really, our focus is on delivering total shareholder return by growing earnings and dividend. And if you look at our history, we have some slides in the deck. You can see we have a strong, long history of performing in both of those areas and outperforming the sector average. I think as we look forward and what the opportunities are for us, I think there's really 2 areas of opportunity. One, I think, is bridging the gap between the current gap in valuation between the public and private markets.

If you look at the private market and what's transacting in our region of the country, we continue to see good strong pricing on transactions that are occurring. We've seen a few portfolios trade in our market, assets very similar to what we have. And generally, we're seeing cap rates in the 4.5%, 4.75% range consistently across our market. And today, we're trading in the mid- to high 5% cap rate range. So we do think that there's an opportunity for us to continue to be priced similar to what we're seeing transactions occur at in our market. We've seen that cap rates remain in that range for some time now.

And the second focus for us is on growing earnings. And we've got a number of ways that we're looking to do that, that we'll walk through this morning. But clearly, for the past 18 months, we faced a lot of pressure from supply coming into our market. And I think we've really weathered the 50-year high level of supply coming into our market very well. If you would have told us years ago that we were going to face the highest level of supply we've ever seen in our markets, but our NOI was going to go down 1.4%, we wouldn't have believed that. But that's what we've seen, and we've performed quite well in the midst of that.

So as we continue to see high levels of supply this year, especially the first half of the year, we continue to see good trends. The markets demand remains strong. Supply continues to come down from where we are at this point. And we do think that we are on the path to continue to deliver strong earnings growth in the back half of this year and heading into the next few years where the supply-demand dynamics will be materially different than what they are today.

Our packet, we did include an update. I do want to point out that the update that we have in the packet is May year-to-date. We include first quarter information. We also include May year-to-date. I think from conversations we had yesterday, there's a little bit of confusion about whether that information was quarter-to-date or year-to-date, and it's year-to-date. So I do want to point that out. We're not providing monthly information at this point. We do think that, that can be a little bit distracting to the real trends of what we're seeing in the business. And there seems to be a lot of focus on monthly trends, which can be volatile, especially as you have different lease terms month-over-month and especially as you're heading into a different seasonal pattern as we get into the busier summer leasing season.

So we're focused on -- clearly on year-to-date numbers performing in line with our expectations. And as we sit here today, the results that we're seeing and the trends that we're seeing, we believe we're still in a good spot to deliver on the earnings, the revenue, NOI performance that we laid out for the year. The trends continue to track positively as we do see demand holding up very, very well and the supply picture improving. In terms of demand, we've talked about this for some time. I think that's one of the things that surprises a lot of folks from the Sunbelt is the demand continues to be very, very strong, very resilient in our region of the country.

If you look at absorption in the last 3 quarters in our region of the country, it's exceeded supply despite the very high levels of supply that we are seeing. So the units that are being delivered are being absorbed. So the market is not building up an inventory of unoccupied units, we are absorbing. So we think the recovery as we get into a better demand-supply picture will be very constructive for us to be able to push on rent growth.

Migration trends continue to be positive. They're definitely not in line with COVID highs, but they're in line with where we were pre-COVID, where we're seeing Net migration into our region of the country is about positive 7% or so versus what's moving out. So we continue to see very good migration trends. The Sunbelt job growth machine just continues to produce jobs.

The job growth in our region of the country is double what we see in other areas of the country. And we really don't see that slowing down at the moment. Wage growth continues to be strong, again, significantly outperforming other areas of the country. And then the other component of demand that we're really seeing is the single-family affordability and availability is very challenged in our region of the country. And that's a phenomenon that's newer to our region of the country really over the last 5, 6, 7 years.

It's a phenomenon that has always existed on the coastal markets where the single-family market was relatively unaffordable versus multifamily. Well, that phenomenon is newer in our region, and I think it's here to stay. Over the last 5 years, we've seen housing prices go up over 50% in our region of the country and really no indication that, that will decline. So as we retain more and folks stay with us longer, that's clearly a demand factor that we think supports our strong renewals and our strong retention rates. And then on the supply side, clearly, we're seeing declining deliveries occur in our markets.

The numbers that we show for this year, supply will be down about 40% to 50% versus what we saw last year. And that is predominantly second half of the year drop. So we're still in elevated supply now. But as I mentioned a moment ago, we're still seeing very good trends in our performance. And then the other point I would make is that if you look at the trailing 12-month starts in our region of the country, they are down significantly. They're close to where we saw in 2010 and 2011 in terms of starts. So again, the picture for supply and demand improving in our region of the country is very, very positive. And again, we feel very good with that -- with our ability to continue to deliver robust same-store NOI growth associated with that.

The other thing I would mention is that as the supply and demand picture becomes more in our favor, and we're able to push on rent growth a little bit more, our residents are really in a good spot. They're very healthy. If you look at our collections, they're very strong. Rent to income is consistent with what we've seen historically. And as I mentioned a moment ago, the wage growth in our region of the country continues to be very, very strong. So we feel good about our -- where our residents stand and their ability to continue to absorb rent increases as the supply/demand improves.

And then we have an increased focus on growth, both internally and externally. We've talked for a number of quarters now about increasing our development focus, and we continue to do that. Today, our pipeline is about $850 million. We are on track to start another 3 to 4 projects this year, which is well on our path to expanding that development pipeline to $1 billion, $1.2 billion.

And the yields we're able to get on those developments are very accretive given where our cost of capital is and especially very good use of capital given the cap rates that we're seeing in our markets. And the yields we're getting are, call it, in the 6% to 6.5% range. So we feel very good about our ability to continue to drive future earnings especially when anything we start today, we'll be delivering 2 years out where the supply pipeline is going to be less than half what the long-term average is in our region of the country.

So we feel good about that. We're also increasing our investment in our internal portfolio. We're increasing our renovations, interior renovations and redevelopment program. That program does best as the new supply begins to lease up and as we're getting to the point where that is occurring and the rent gap between our average rent and the new supply that's coming is over $300. It really supports our ability to push that program. So we'll certainly be increasing that.

And then the last point I'll make before I turn it over to these guys is we are increasing investments in various innovation and technology initiatives, really with the goal there to drive some efficiencies, improve customer service, increase our centralization and specialization, and we've got some information in the packet about what that looks like. We have achieved to date in terms of incremental NOI from initiatives, about $50 million is in our run rate today. Over the next 5 years, we think we'll add another $50 million to $55 million through other initiatives, predominantly property-wide WiFi.

And then we have about another $20 million, $25 million that we'll look to add over the next few years as we continue to increase our use of various technology initiatives, increase our shared services centralization and specialization across the portfolio. So as we sit here today, we feel good about the trends that we're seeing and the recovery that we're seeing in this transition year. We also feel really, really good about the supply-demand fundamentals and dynamics over the next few years. And then these other initiatives that we have to drive incremental earnings going forward, we feel really, really good about.

So with that, I'll turn it over to Tim first just to hit on a couple of other areas.

Yes. I thought I'd follow on a little bit to the supply-demand points that Brad was making. One of the questions we get in a lot of our meetings and as we've had different meetings over the last several weeks is what gives us confidence that the supply is moderating and the supply-demand balance gets better from here and continues to get better over the next couple of years.

And it's really a few different reasons. One, and Brad touched on a couple of these, but we look at construction starts, and we've done a lot of work over the last couple of years to figure out when does peak supply pressure occur. When -- and the way we define that is when are the most units in lease-up in a given market. And what we've seen and even as some of the lease-up times have sort of gapped out a little bit over the last, call it, 4 to 5 quarters, what we see is peak pressure is about 2 years out from construction start. And there's a chart on Page 11 that goes through peak starts in our markets. And you can see it really peaked in mid- to late 2022. And so you move on 2 years, we're in the, call it, 2 quarters after that period that we're in now.

And we really -- we saw construction starts really drop off after that. In fact, the starts in Q1 of '25 in our markets is about 80% less than it was at that peak and even well below when we saw low development occurring right in the middle of the COVID, we're about half of where we are there. And so if you play out over the next 4 quarters, what supply would look like over the next 2 years, what supply would look like based on starts, well below the 3.5% of inventory that is typically normal for our markets.

So we know the supply picture is getting better. And then you think about on the demand side, all the factors Brad mentioned, job growth, in-migration, household formation, still greatest in our region of the country and much better than the broader country. And I think one of the points that goes a little bit underappreciated is the continuing drop in turnover. And so we've seen turnover drop every quarter, every year for the last several years. And what that effectively does is that's creating more demand. So even though we're having a lot of supply coming into the market, there's 2% or 3% lower turnover across the markets as well. So that's eating into that inventory as fewer units are coming available.

And then the last point I'll make on that is just the absorption piece that Brad touched on a little bit. We've had elevated supply in our markets for the last 2 or 3 years, still remains elevated, but certainly lower than it has been in the last couple of years, but we've seen that inventory get absorbed. The last 3 quarters, Q3, Q4 of last year and Q1 of this year, we saw actually more units absorbed than what were delivered. So not only absorbing the new supply, but going beyond that and seeing occupancies increase. And that -- we haven't seen that level of absorption since going back to early 2021. So there's not a big plug of units sitting there that need to get absorbed or need to get occupied.

We're kind of at a good spot with occupancy. And now as we see supply starting to drop and the demand picture continuing to stay strong and stay steady in our markets, that helps -- gives us confidence. And we're seeing it in pricing. We're seeing new lease pricing continue to accelerate. Our renewals are as good as they've ever been going out for the next 2 or 3 months. So all those things sort of give us confidence that we're in a good spot. And then one thing I'll touch on, too, and then let Clay give a few comments is another question we get a lot in the meeting is just kind of what we're seeing from a market standpoint. Are there any that are outperforming or doing better than we thought they would or worse than we thought?

And generally, I'd say the markets are performing about as we expected. A lot of the markets that have been strong last year, we expected to continue to be strong, have been so, and it's some of our mid-tier markets, Charleston, Savannah, Greenville, Richmond, the D.C. area has been great for us. Houston continues to hold up well. Tampa is probably one that I would point to on the upside that's performed a little bit better. We're starting to see some positive momentum and rent growth out of Tampa, which is encouraging. It's a significant market for us.

And then on the downside, if you will, or some of the struggling markets are -- continue to be the ones we've talked about. It's Austin, it's Phoenix, it's Nashville, with Austin being the biggest laggard. I mean we feel great about that market long term. It has some of the best demand fundamentals of any of our markets, but it has been hit with a ton of supply and particularly throughout the market.

So even though supply in that market is dropping probably 30%, 40% this year from where it was last year, it's still one of our highest supply markets. So -- but the job machine there is great. We're seeing a lot of employers still move there. Population growth is great. So we feel great about that market long term, but it's going to be one of the ones that struggles for us and probably one of the ones that is a little bit of a laggard as we see this recovery over the next several quarters.

So with that, I'll turn it over to Clay.

Yes. I'll touch real quick on our operating expenses for the year and kind of what we're seeing to date. So far this year, we still feel good about our guidance that we've initially set for operating expenses. And you think about some of the discussion we've seen in the headlines around tariffs, and we've been in touch with our vendors, understanding exactly what sort of inventory that they have on hand and feel good that they have enough supply of HVAC systems, appliances, that sort of thing that will get us through the course of this year.

In fact, we have contracts with certain vendors that are locked in through the remainder of this year and even into 2026. So feel good about repair and maintenance expenses and the personnel expenses as well is another one we still feel good about. We've had -- we've seen lower turnover this year, and we likely given some of the uncertainty in some of -- in the economy that's out there. But we're holding tight to our folks, and that's really good because that allows us to be able to perform better serving our residents.

And then just to touch real quick on property taxes and insurance. Both of those, we're getting good information right now on those 2 line items. We'll have more to say on kind of where both of those fall out as we release second quarter earnings in late July. And then just lastly that I'll touch on, and then we'll turn it over to questions is the balance sheet. As you guys see on Page 26 and 27 of the materials that we passed out, we're very well capitalized, very well laddered debt maturity stack. We've got one issuance that will mature in November of this year.

It will mature at an effective rate of 4%. But we feel like we're in a good spot to be able to refinance that whenever the time comes. We're A- rating. So we'll have that benefit as we go through that maturity and get to lean on that credit rating. And then last thing I'll touch on, Brad mentioned the external growth. Our debt-to-EBITDA today is at 4x. We want to move that to 4.5 to 5x. And so that would be about another $1 billion, $1.5 billion of additional dollars that will fund that external growth and that development pipeline that Brad was touching on. So I feel like we're very well set to be able to continue to grow and operate in this environment and for a number of years to come.

With that, we'll turn it over to questions.

Can you explain whether the $300 gap you said between [indiscernible], is that before or after renovation? Is that net effective? Can you expand on that?

Yes. And Tim, you can jump in here as well. Yes. So I mean the $300 that we quote is -- includes concessions for the new properties that are coming online. So if a new property is offering a month or 2 free, that's included in that number. So ultimately, what we're saying is the gap between our current rents and the effective rents for new product is over $300 a unit. It's higher in some markets. That's kind of the average. In some markets, it's as high as $500 or $600, which really supports our ability to go in and renovate the units and rehab the club house to be able to push those rents. So that's one of the things that we look at.

In the program, what we have found is over time, is it works better when that new supply as it stabilizes. So what you'll see with us this year is we'll continue to increase that program. I think our plan for this year is about 5,000 to 6,000 units in that program. And we'll continue to increase that appropriately as the supply around us continues to stabilize.

Yes. And I'll just add that, that is a good gap that we like to see. I mean that's compared to our current in-place rents. And when we do our renovation program, typically, we're raising rents $100 or so on average per unit. And so with that $300 or so gap, we can raise at $100, create what feels like a new unit for the resident and still have a pretty good $200, which is, in most places, a 15%, sometimes 20% gap between the new rents and still fit in nicely and give that give that resident what feels like a new unit without having to pay the price of those brand-new lease-ups.

In your view, what will have to happen with rents or financing costs for developers capital to start coming back into the market...

Yes. I mean we get that question a lot. Last year, the limiting factor on new starts was debt capital. Debt capital wasn't available last year. That is available this year. Really, what we're seeing today is a pullback on the equity side. In fact, we -- there's 2 ways that we develop. We develop in-house and then we develop what we call our prepurchase platform, where we're partnering with some of the largest developers, merchant developers across the country. And what we're doing in that platform is we bring all the capital.

We -- when the property is stabilized, we own the asset 100%. And so what we're seeing in that platform right now with some of the largest developers in the country is that equity is backing out of deals. And in the first quarter, we looked at over 40 deals through our JV platform where, again, we can bring all the capital. And generally, what we're seeing is most deals just don't pencil. The developer, they're very optimistic. They normally show returns that are 6%, 6.5%. But then when we go through the packet and align it more with what our expectations are, they're generally in the 5.5% range or so. So when you're looking at cap rates today that are 4.75%, 5.5% in our region of the country, that's a very small gap, and that's one of the reasons why they're not getting the capital.

So we've got to see a material increase in the underwritten yields for these developments for them to really start making sense. So if you're trying to go from a 5.5% to 6.5%, you've got to get 20% or so improvement in your return. And so that's going to be a combination of things. Interest rates over the last year, 1.5 years are significantly increasing the cost of these developments. Construction costs today are not really moving up, but they're -- they may be in some markets coming down a little bit as the supply pipeline continues to trail off, but they're pretty much flat.

So we do need to see significant rent growth in order to make some of these developments start to pencil. The other thing I think it's important to remember is even in the Sunbelt, I think some folks have the misnomer of thinking that in the Sunbelt, you can go out and find a piece of land and you can be under construction within 6 months. And that's just not the case. It's a year to 1.5 years process minimum from when you go out and find a piece of property, get your permits before you can really start construction. So there is a ramp-up that's needed in the pipeline.

So I think once we start to see better economics in underwriting more broadly, again, in the first quarter, we underwrote 40-plus deals, and we're moving forward with 2 of those. So it's a big miss rate in terms of the economics. And where we're able to find some of these deals that make sense are, one, in-house, where it's a Phase 2 for an existing property we already have, and we're not building amenities. So we have some efficiencies there, lower construction costs, things of that nature that help us hit those returns; and two, where we're partnering with developers or our development partners are also the general contractor. They're able to get better pricing than what we're seeing in the market overall today, which is also helping our returns.

So I think we've got to start seeing some rent growth in the numbers before the capital is going to be more comfortable coming in. And then when that occurs, there's going to be a ramp-up process before you can really start to see a ramp-up in terms of the new starts.

When supply kind of tightened in your market? How you think about [indiscernible]...

Yes. I mean the latter part of your question, no. I mean we don't -- we're not in a lot of markets that has rent control or certain restrictions on that. In fact, I think it's 90% of our NOI comes from states where rent control is prohibited by law. So not a lot of concerns there. But I do think if you consider normal to be 3%, 3.5% rent growth is kind of what we've seen in a normal supply-demand dynamic. I do think we're set up, particularly starting in '26, '27, even into '28 for an above market rent growth sort of scenario with -- for all the reasons we've laid out with construction starts going down and demand being strong.

So if 3%, 3.5% is normal, I think something in the mid- to high single digits is reasonable for a couple of years. And then -- so we've got -- even if development starts pick up over the next couple of quarters, there's a good 2.5, 3-year window where we've got a pretty good operating environment. And so you add that improving supply-demand environment with some of the things Brad mentioned that we're doing internally to improve our internal growth, it sets up for a pretty attractive few years for us in terms of FFO growth.

[indiscernible] How what would that be to the demand side and the supply side [indiscernible]?

Yes. I mean I think if the economy weakens, I mean, I think one of the things you can do is you go back and look at historical performance for us. And part of our strategy has always been to focus on full cycle performance, which includes the up part of the cycle as well as the down part of the cycle, which what you're presenting would presumably be a down part of the cycle. And we're very well equipped to handle those times. If you go back and look at historical performance for us when there was a downturn, you look at 2002, 2008, '09 or COVID 2020. What you'll see is in those slowdowns, the Sunbelt generally outperforms other regions of the country, and there's a couple of reasons for that.

I mean the diversification of jobs within the Sunbelt is much greater than other regions of the country. And you look at our performance, we outperformed the sector average by over 300 basis points during those times. I think what you also see in the Sunbelt and as part of our story is the diversification we have. We're diversified by product, by price point, by submarket. We're also diversified in large markets and mid-tier markets. And I think it's that mid-tier exposure that really helps provide somewhat of a stabilizing contribution to earnings and NOI performance that we like and it provides lower volatility of earnings if you look at our full cycle returns.

So I think that part of our story helps protect us if things get a little bit tougher on the job side. I do think as we go forward, if you look at the demand factors, whether it's job growth, it's migration trends, it's population growth and then it's the single-family affordability and availability, I think the job growth component of that has been less of a component than it has been historically because now you've got these other components that are very strong demand contributors in our region of the country. So again, if we see a little bit of softness in the job market going forward, it's not as big of a factor as it maybe has been historically. And then I think when you couple that with what we're seeing in the decline in the supply, I think the market will still -- our market and our portfolio specifically will continue to perform quite well.

Just sort of a supply side, just to follow up. Is there obviously t [indiscernible]?

Yes. I mean I think definitely it could. To Tim's point, if you see the long-term average is 3.5%. If you look at the job growth within our region of the country over the last few years, it has significantly transformed. So I do think that the market's ability to support -- if equilibrium historically has been 3.5%, I think the market based on demand and job growth that has occurred in the region of the country with new manufacturers moving to the Sunbelt with various companies relocating their headquarters, the job machine in the Sunbelt continues to produce jobs at a rate that I think is higher than what it has done historically. So I think the market could support a higher than long-term average supply.

I do -- to my comments earlier, the Sunbelt or any market is really never going to go to 0 supply. That's not realistic. I think what we do have a setup for the next few years where it's going to be substantially less, maybe less than half of what long-term average has been. But at some point, that will increase. New supply will increase, but the market is very strong to be able to withstand that.

All right. I think that's our time. So we appreciate everybody's time today. If you have any questions, feel free to follow up with us.

Thank you.