Hello, everyone. Thank you for joining us and welcome to the NextPoint Residential Trust third quarter 2026 earnings call. I will now hand the conference over to Carly Musser with communications and corporate affairs. Carly, please go ahead.

Thank you, Al. Good morning, everyone, and welcome to NextPoint Residential Trust conference call to review the company's results for the third quarter ended September 30th, 2026. On the call today are Paul Richards, Executive Vice President and Chief Financial Officer, Matt McGraner, Executive Vice President and Chief Investment Officer, and Bonner McDermett, Vice President, Asset and Investment Management. As a reminder, this call is being webcast through the company's website at nxrt.nextpoint.com. Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions, and beliefs. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's most recent annual report on Form 10-K and the company's other filings with the SEC for more complete discussion of risks and other factors that could affect any forward-looking statement. The statements made during this conference call speak only of today's date and accept As required by law, NSRT does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call also includes an analysis of non-GAAP financial measures. For a more complete discussion of these non-GAAP financial measures, see the company's earnings relief that was filed earlier today. I would now like to turn the call over to Paul Richards. Please go ahead, Paul.

Thank you, Carly, and good morning, everyone. I'll walk through our third quarter and year-to-date same-store results, expenses, interest, the Midtown Crossing acquisition, the balance sheet, NAS, the dividend, and changes to our full-year outlook, including how we think about 2027. Then Matt will cover operation and market fundamentals looking forward. I'll start with the headline. Q3 came in below expectations. Corp Info was $0.52 a share, $0.07 below consensus. We're lowering our full-year core FFO midpoint to $2.22 from $2.45 and our same-store NOI midpoint to negative 4.3% and negative 1%. Third quarter core FFO was $13.4 million, or 52 cents per diluted share, compared to 70 cents a year ago. FFO was $11.7 million, or 46 cents a share, and AFFO was $16.2 million, or 63 cents. Net loss was $11.5 million, or 45 cents and others. This compares to a net loss of $7.8 million, or $0.31 a share a year ago. Total revenue was $64.5 million, up from $62.8 million, with Sedona in the numbers. Total NOI was $36.6 million across our 36 properties. On a same-store basis, 35 properties in about 98% of our units, revenue was down 70 basis points. Expenses were up 11.2% and NOI was down 8.2% to $35.6 million. Occupancy ended the quarter at 92.9%, down 70 basis points, and average effective rent was $1,487, down 0.7%. Year-to-date, core info is $1.87 a share, against $2.14 last year. Expenses drove most of the quarter's NOI decline, about $2.7 million of the $3.2 million. Three specific items explain the decrease. First, Nashville real estate taxes. Last year's third quarter carried a one-time real estate tax refund at residences at Glenview Reserve, which equates to a swing of about $854,000 and does not reoccur. Excluding Nashville, real estate taxes were up less than 1%. Second, resident amenity services, which is mostly our bulk fiber internet rollout. That line was up about $640,000 this quarter as we brought fiber online at about a dozen properties in Atlanta, Nashville, Phoenix, and South Florida. Residents pay for that services So most of that cost comes back to us. Amenity fees rose about $387,000, and in Las Vegas, the equivalent fees now sit in rent under all-in pricing. Net, the program costs roughly $100,000 more than last year, which is immaterial. And looking at the full program, including the smart connection fees residents pay, our amenity services brought in about $400,000 more than they cost this past quarter. But the net contributes to NOI. It's not a cost center. Third, controllable expenses. Usually a reliable strength for us ran higher through the quarter. Interior and turnover repairs were up 14.9%, exterior and amenity repairs 13.8%, and landscaping 13.7%. Marketing was up more than 30%, and office operations 14.2%, as properties below target occupancy spent to drive traffic. Lastly, utilities rose 11.8%. Some of what was deliberate choice. Given how soft this year has been, we pulled a lot of work forward into 2026 and spent capital where we think it attracts new residents. Unit turns and readiness, move-in gifts, exterior and amenity projects such as pressure washing, vent and gutter cleaning, and in-unit upgrades like washer and dryers. We'd rather put that money in front of prospects now, even if it keeps expenses elevated for a quarter or two. Other spending didn't earn its keep, and we're cutting it. Net of national real estate tax swing expenses grew about 7.3%. Strip Out Resident Amenity Services, as well, and it's about 5.1%. Part of that is by design, and part of it is noise, and it's seasonally a heavy quarter, but it's more than this revenue environment supports over time. Matt will walk through the specific actions we're taking. The bright spot is insurance, down 11.8% on our April renewal. Moving on to year-to-date same store. A single quarter can carry a lot of noise, so the nine-month view is the better read on the run rate on the portfolio. Year-to-date, same and others. Underneath that, the core cost-based holding. Year-to-date, insurance was down 16.3%. Real estate taxes were down 0.7%, payroll down 0.6%, and property management fees down 1.6%. The pressure is concentrated in repairs and maintenance, up 16.4%, including FIRA program, utilities, up 7.2%, and marketing, up 39.4%. It's important to state clearly that the third quarter's negative 8.2% is not our runway. It carries a prior tax refund that won't reoccur. A FIRA rollout that pays for itself upon penetration and well under half of the third quarter declines. Now to interest expense, which we've played since initial guidance. The step-down landed in September on schedule, swaps tagged to about $717.5 million of debt at a fixed rate near 1.14% research schedule runoff. Today, we have about $192.5 million of swaps at a weighted average of 2.68%, which fixes about 13% of our floating rate mortgage debt. That's $92.5 million We expect about $.6 million in the fourth. Third quarter interest expense was $18.1 million, up from $15.8 million in the second quarter. Full-year interest expense is now projected at about $71.8 million, close to $71.2 million we discussed in August. The Fed raised rates in September to a range of 3.75% to 4.4% held last week, with two members voting for another hike. The 10-year Treasury touched 5.3% early October and sits near 4.9% today. On maturities, our first mortgage maturity is October of 2028, and the rest of our mortgages run to 2031 and beyond. Total indebtedness was about $1.6 billion quarter end. On October 2nd, we acquired Midtown Crossing, a 228-unit 1997 vintage community in Raleigh for $32 million, or about $140,000 a unit. Our all-in cash basis, including $1.9 million in CapEx funding, is about $152,600 a unit. We bought it from an REO lender book, and the seller had already put about $3.1 million of capital into the property, so the upside is operational. Raleigh is a market we all know well. It's our strongest renewal market this quarter, We are starting at a lower occupancy and getting to 93% occupancy takes about 27 net leases and in-place rents set about 10% below the Raleigh 2 to 4 star average, $1,325 versus $1,481. Render right to grow rents to $1,403 by month 36. which grows NOI from $1.44 billion to $2.15 billion by year three, stabilizing north of a 7% cap rate. On returns, we project a 7% NOI CAGR, a mid-teens levered IRR, and a 2.1 times multiple uninvested capital over a seven-year hold. Balance sheet leveraging. Our leverage is too high for the rate environment, and bringing it down is our first capital priority. Here's the order. Disposition proceeds to go to debt reduction first. Share repurchases are funded from sale proceeds with no new borrowing. and we'll measure progress against our leveraged targets. We're planning to pair Midtown with a disposition or two. The proceeds are expected to retire the borrowings we use for Midtown, which keeps that trade roughly leveraged neutral, and any incremental amount creates capacity for buyback. Disposition guidance stays at zero to 200 million with 100 million Bitcoin. Each sale at private market prices also supports our NAV. During the third quarter, we completed value-add initiatives with 708 units and at least 425 upgraded units at an average monthly premium The premium continues to run lower because the NIST's targeted scope has shifted. Most of the quarter's work was lighter, bespoke upgrades, plus washer-dryer installs at lower-performing properties. These upgrades cost less, reduce vacancy time related to the work being completed, and others. Our estimated net asset value at quarter end is $38.33 per share at the midpoint, using a cap rate range of 5.5% to We moved our cap rate range up 25 basis points to reflect higher long-term rates and wider pricing on older assets. That accounts for $4.45 of the decline. The rest comes from lower NOI expectations and other balance sheet changes. Net leverage on our Admin Point is now 62% up from 57%. We think the range is grounded. Walker & Dunlap's third quarter average cap rates in our market Our range sits at or above those markets and in line with the UDR mark on older products. At a price of $18.04, the stock trades about 53% below our midpoint and well below our low end of the range. Matt will cover how we're using the tools that we have to help close that gap. On the dividends, the Board declared a fourth quarter dividend of $0.53 per share, payable December 31st. Third quarter 4FFO covered it almost one time. With the swap repricing now in our run rate, fourth quarter core FFO at about 35 cents implied will fall short of it. In setting the fourth quarter dividend, the board weighed a lot of moving pieces, including the macro backdrop and the Fed pass. It will decide by the next meeting whether to reset the dividend at an appropriately covered level and will announce a decision when it's made. We're lowering full-year core FFO guidance at a range of $2.17 to $2.27 per diluted share, with a midpoint of $2.22. Down from $2.25. Same-store NOI guidance moved to a range of a negative 5.1% to a negative 3.6% with a midpoint of negative 4.3%. Here's the bridge from $2.45 to $2.22 in five pieces. Same-store revenue down $0.10. Vacancy is the largest piece at $0.08, then bad debt at $0.04, and concessions at a penny. Partly offset by a penny from each rent, fiber, and revenue and other income. Same-store expense down $0.10. , and we're seeing fewer appeal settlements. Interest expense, down $0.02 from additional filtering and borrowings, including the financing of Midtown Crossing. Interest income, down $0.10 on a quicker repayment schedule on the DST loan that we had initially modeled. And lastly, corporate G&A brought this up. About $0.09 of that is third quarter actuals, and about $0.11 is the lower fourth quarter forecast. The rest is interest. We'll get 2027 guidance and fourth quarter results, but the pieces are visible today. Financing line is visible in the contractual obligations table in our supplement, and it moves with SOFR because most of our debt now flows. Each 25 basis point move in SOFR is worth about 14 cents a share once the key bank swap ends. NOI is the swing factor, and that's our operating plan. Our expense work and disposition program are built to move. Here's a full set of revised ranges. Earnings lost per diluted share. On the low end, $1.72. $1.68, high end $1.63, with a prior midpoint of above 54. Core FFO per dilute share at a low end of $2.17, midpoint $2.22, the high end $2.27, and prior midpoint of $2.45. Appositions now range from $32 million to $200 million, with a $116 million midpoint that includes Midtown Crossing, which closed October 2nd. Dispositions remain $0 to $200 million, with a $100 million midpoint. And with that, I'll turn it to Matt.

Thank you. Thank you, Paul. On the revenue side, operations are still moving sideways, as you noted.

We're grinding through it and work is starting to show in renewals, retention, and conversion.

In August, our guidance assumed new lease pricing slightly negative in the third quarter and slightly positive in the fourth. We ran the summer to that plan. We held asking rents and set minimum renewal increases of 1% to 3% from June through August for a significant portion of our assets. Turnover suffered and anticipated demand did not sustain our previously strong occupancies. Occupancy slipped from 93.6% at the end of June to 92.5% at the end of August. In September, we cut price and added concessions to win it back. New lease tradeouts went from negative 3.3% in July to negative 6% in September, and concessions for the quarter were $634,000, up 74% from last year. Occupancy recovered to 92.9% by the end of the quarter, became at a cost and effective rent. RealPage puts occupancy on our submarkets at 94.3%. We ended the quarter about 140 basis points below that. The good news is our same-store portfolio is 94.6% leased today, and we expect fiscal occupancy to improve throughout the fourth quarter. Ultimately, the supply picture keeps improving. In the third quarter, our submarkets absorbed 3,650 units against 3,234 units delivered. For the full year, RealPage has our submarkets roughly balanced. Deliveries in our submarkets are 42% below the 2024 peak, and new starts are running 54% below last year's pace. Taking an even closer look, 28 of our 36 properties have fewer than 500 units delivering in 2027, and 2028 deliveries are on track to be the lowest of the cycle. Deliveries are well off the peak, but there are still about twice as many apartments in lease-up as normal. roughly 1.2 million units nationally in August. We believe that as interest rates moved up this summer and into the fall, developers accelerated the depth of their concessions. Modestly fewer properties are offering concessions, but the ones that do are offering the most in 15 years. RealPage has the average discount on stabilized units at 11.1% in September, close to six weeks free. And it's reached the older buildings like ours, about a quarter of units in 1990s vintage buildings now offer concessions up from 18% three years ago. Positives for the quarter were, there were many. Renewals were a bright spot for the quarter. Every market posted positive renewal growth. Outside of Las Vegas, where all in pricing inflates the comparison, Raleigh led at 4.2% and Phoenix followed at 3.5%, both encouraging signs. In October, we lowered renewal increases on purpose to protect occupancy and retention rose to 57.5% from 54.9% in September. We also saw same store blended lease tradeouts rise quarter over quarter by 100 basis points and reached basically equilibrium for the quarter, another positive sign. Conversion improved. Total application conversion was 39.3% up from 34.2% a year ago. and 41% in October. Self-guided tours were almost half of all tours. Fewer people are touring, but more of the ones who tour are signing leases. Credit held steady. Bad debt was 80 basis points of gross potential revenue flat with last year. Rent-to-income across the portfolio is about 21% on average household income of about $86,500. Atlanta's operations are stabilizing and provide a useful roadmap. NOI grew 5% there, with vacancy loss down 43% and concessions down 50% from last year. Regional fundamentals can't be replicated overnight, but the trends in this bellwether sunbelt market are encouraging for the remainder of our portfolio. Insurance, as Paul said, savings suck, and other income grew 29%, most of the fiber fees that offset the new amenity costs. In October, lease occupancy was 95.3% against 92.3% physical, and that gap is sign leases we expect to move in over the coming weeks. Today, we are at 94.6% lease. On the go-forward plan at this point in the year, we're prioritizing occupancy first through the winter. We've reset renewal pricing, and October retention of 57.5% is the early result. New lease pricing continues to target recovery of the 140 basis point gap to submarket occupancies ahead of the spring leasing season. Our fourth quarter guidance assumes average financial occupancy of 92.8% and concessions of 1.9% of gross potential rent. We'd rather spend that now and start 2027 off with positive momentum in occupancy. We decided to pull a lot of expenses forward, as Paul said, into 2026 also. And that spending is aimed at winning new residents, turns, exterior and amenity work, and in-unit upgrades. It will keep expenses elevated for the final months of 2026, and we think that's the right trade in a year this soft. Regarding capital allocation, FIRST will pair Midtown Crossing with a couple of dispositions, as Paul mentioned, and are expected to retire the Midtown borrowings in an incremental amount thereafter creates buyback capacity. Second, we'll buy back stock with sale proceeds while we trade at roughly 7% north of a 7% implied cap rate on our NOI guidance. October 26th, our board authorized up to $150 million of repurchases over the next two years. Our disposition guidance is $0 to $200 million. We're working the market to execute on one or two rifle shot dispos and assets where we made a lot of money and can transact at a healthy spread to our implied cap rate. On the dividend, as Paul said, the board has weighed a lot this fall, including the macro backdrop, recent Fed moves, midterm elections, and real estate fundamentals. By its first meeting in 2027, the board will decide whether to reset the dividend to a level that's appropriately covered. The fourth quarter dividend of 53 cents, already declared and payable by December 31st, is not affected. In closing, operations remain challenged in Q3 as we digest, again, 50-year highs in supply and a 30-year high in interest rates. These subs discounted hard this summer, and we held Ray a little too long into that tape. On expenses, we chose to spend this year to win residents, and you'll see that for another quarter or two. But we're not panicking. We're not going to chase occupancy at any price, sell assets into a weak bid, or make a decision we'd regret when this cycle inevitably turns, which it will. will continue to grind through the supply, operate the properties well, and protect their equity value. After all, the portfolio still throws off enormous cash flow. On capital, we'll be methodical. We'll sell assets one or two at a time when the price reflects private market value and put the proceeds to work in order, fund midtown, reduce debt, and buy back stock at a discount, each sale sized and timed on its own merits. That's because we still believe this is a great business and our portfolio is impossible to replicate at scale. Deliveries in our submarkets are again down 42% from the peak. Starts are down about half, and 2028 is said to be the lightest year of the cycle. Once the lease up backlog clears, price and power comes back to well-located workforce housing and Sunbelt job markets. And the real estate's worth far more than the stock. Our NAV midpoint, $38.33 a share, and the stock trades around $18.00. We believe our largest asset, a bond at Pembroke Pines alone, is worth $8 to $9 per share, about half of our market cap today. We'd now like to open the call up and take your questions. Operator?

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Peter Abramowitz with Deutsche Bank. Your line is now open. Please go ahead.

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

Yeah, hey Peter, thanks for the question. I think the math gives us confidence. We were doing a little work about the supply coming out of GFC, and it's almost the same story coming out of GFC that I think we're seeing coming out of this latest cycle. And what happened after that is we had pricing power for a number of years, and I think we see that same trend today. We've been probably a little bit too optimistic in 2026, as I think the rest of the Sunbelt peers have also. We also didn't forecast the Iranian war, the AI trade becoming what it is today, and then a lot of the other macro factors that I don't think will replicate in 2027. I think we're not done with the budgets, but we're reviewing them now. And I think we see reasons for optimism just from the supply picture alone. We think that migration into the Sunbelt markets will continue. There's certainly still robust job growth in our markets. And so the macro backdrop for us is, I think, as good as it has been in five years going into next year. and then, you know, hopefully the units and the markets will be absorbed. I think, you know, the midterm elections will maybe portend some new net international immigration, which will be, you know, a helpful demand driver. And then I also think affordability continues to be another demand driver for our portfolio that hasn't really mattered. And I think it will. I think it will in 2027. You know, our units have We have great places. We have great assets and places to live. And we've amenitized the assets and now offer a great product at an affordable price. And I think we'll see that next year show up to our benefit.

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

If you strip out, it's a net neutral effect on NOI, but if you strip out the expenses, I don't know, Bonner, what did we say the expense was after 1.9%?

So the noise in terms of the rollout, and we're rolling it out in several of our major markets, so the expense growth is offset, and it's actually and two revenue lines. So it's a little bit more challenging. It's in other revenue and it's also in resident amenity fee income. So the net effect, and we spoke to it on call, our resident amenity service platform provides a margin, I believe, for the third quarter of some $400,000 operating profit on those expenses. The noise of it is just getting through the volume of new lease charges that we're applying to the resident base. So the typical structure is a one gig fiber program at about a $60 to $65 resident charge. So you're seeing that growth in both revenue and expense. There's some noise in the same store year over year comparison because of that. All right.

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

Yeah, well, ultimately, again, it's board decision management. You know, we have a view. I think why not now is because, you know, just literally the last kind of 30, 45 days have been incredibly volatile. So for take up 100 basis points, 10 year up, 116 basis points in 60 days or something like that. So something material. You got midterm elections today. And I think there's a lot of good views on the board that study this for a living. And they appropriately, in my view, wanted to get through this period of time on an annualized basis, the dividends covered. It won't be in the fourth quarter on a one-quarter spot in time, but I think that we'll have a clearer view in the first of the year in January to make a better decision. We're already seeing with the core, we bond issues and all the AI trade and demand and that whole story play out. We're back to 10 years off 40 basis points in a week. Yeah, again, I think it goes back to where we're not panicking. And I think that if you look at the appropriate time to make that decision is when we have more information. And I think that that's why they're not saying, let's do something today. But we are focused on it. Like I said, the portfolio generates a tremendous amount of cash flow, and it's a tool that we'll use to buy us time and not degrade the portfolio by selling assets at a discount that don't make sense in this environment. Because again, we think this is going to be a really good business still, and 2027 is going to be better than 2026, at least for us.

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

Yeah, 100%. I mean, we're... We're looking at every asset every day, getting BOVs from the East Dills, the New Marks, the JLLs, the CBREs, and trying to figure out what the assets are worth. I think right now, as we sit here today, spot cap rates are elevated because you have negative leverage across most value-add deals. Yeah, but I think at the first of the year, we can rifle shot, as I said in my prepared remarks, a couple deals. We've made a ton of money and generate enough cash flow to pay off that debt. It won't be a bond. That thing is a unicorn, so we'll keep that and operate it well. But I think there's two or three deals of some size in markets that are doing well that we're actively getting BOVs on and trailing processes that are already in the market. For example, in Atlanta, there's a deal that Pretty similar to Terrell Mill. Terrell Mill we've owned forever and have made a bunch of money there and can sell and generate a lot of cash and feel good about where that could possibly trade in the near term. So we're not worried about paying down this stub of debt on the facility. And then to the extent that we can generate excess cash, we'll buy the stock aggressively like we have We have in the past. What we're not doing is trying to do something weird like merge, do an off-stock deal or something down here because we protect the equity. Keep in mind, we own 20% of the company as management and board, so we're highly aligned to do the right thing.

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

Yeah, I think we have to, you know, again, give ourselves the grace of getting through this 50-year high of supply. I think we've largely done that. And I think once you see, you know, new lease growth inflect and you get blended lease growth that's positive sequentially for a few quarters, not even a few, just maybe one or two, enough to where the breadth is across the market and everyone's saying the same thing. RealPage is saying the same thing. Witten's saying the same thing. Parsons is saying the same thing. Burns is saying the same thing. Then I think that that's when you would look, you know, to monetize, I think, a portfolio like ours that, you know, again, it's hard to replicate and scale. I don't think we're too far off of that period. I think, you know, again, you know, Call me optimistic or hopeful or whatever, but I think the math in our markets points to absorption and points to better lease pricing in 27 than 28. It was better in 26 than it was in 25. So I think it will happen, and we want to give ourselves a few quarters to bring the buyers back to market. There's not enough depth in the market, as I sit here today, to recommend doing anything in scale, especially given the volatility and the macro backdrop. A Fed hiking into an economy that is really propped up on sort of one trade, and I think interest rates are likely to be You know, potentially broken, you know, if we continue this path. So that's something else we're watching. You know, if you get any more retracement back in the risk-free rate, then that'll help our pricing in the private market and the public market. So I'd say we're, again, not doing anything right now, but looking forward to the back half of 2027. If something, you know, is attractive, we'll consider it.

All right, that's all for me. I appreciate the filler and thank you for the time.

You got it, Peter. You covered a lot. Appreciate you.

Your next question comes from the line of Michael Lewis with Truist Securities. Your line is now open. Please go ahead.

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

Yeah, I think that's right. And I'll hit both. The first is a little easier. So there's really two components that drive, if you just look at the Q3 real estate tax number. So One is that pretty significant real estate tax refund we realized in Nashville last year, right? It was great news then. It's a terrible comp today. So if you exclude that overall, I would say, you know, our real estate tax control has been really good. I think year to date, you know, excluding that, our real estate taxes are about 1% growth year over year. In terms of the full year outlook, you know, there is a little bit of an impact. I think Paul mentioned and kind of the, you know, the bridge to a full year core. There's about a four cents that I would say we were in August a little bit more optimistic for settlement of some appeals, right? Dallas County, Tarrant County in Texas, a couple others. We got Since then, our trim notices for our Florida valuations as well. And so all of that has really informed what we think that the full year expectation is for tax settlement. We're historically very aggressive in terms of fighting the counties with kind of the softness of the market. We feel like we have even more ammunition to go and really drive some better outcomes on taxes. But I think a couple of things we think are either you know slipping into Q1 particularly in Texas right we're not getting to settlement as quickly as we would like you know there could be a little bit of upside maybe in the higher end of our range but I think that you know we took down a couple a couple refund expectations in the Q4 that probably moves into Q1 so it's not not a structurally higher you know tax outlook if anything we feel better about you know this year and next year's taxes and then in terms of the repairs and maintenance so It kind of balances with what we're seeing with occupancy. We've talked about the amount of information we're collecting in terms of the NextPoint Intelligence platform, the AI data points, the funnel. Everything that we're gathering today is really informing. So when we are touring a prospect, we're surveying, we're getting that feedback. And some of what we've seen that we need to be doing a little bit better is You know building building hygiene maintenance right so we spent a little bit more heavily on you know contracted pressure washings making sure that you know the landscaping is top notch right as we compete more directly against some of these you know a minus and new construction deals we've got to make sure that you know our seasonal flowers are top notch our buildings are fully maintained right we're not not encountering you know cobwebs things like that so I do think that as we look to push pricing, we took some of that feedback and spent a little bit more on repair and maintenance. It's largely building and improvements, landscape, and it's kind of chunky in terms of the Q3 timing of it. I don't think that it's necessarily structural, but something that we're focused on, resident and prospect satisfaction, and that goes to address those comments.

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

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

Yeah. You know, a sharp recovery in same-store revenue in 27.

Yeah. A sharp recovery. I guess to what degree? I think we're going to be incrementally positive on on the revenue side and these numbers. We're not at all pleased with the occupancy numbers and the new lease numbers. We were pleased with renewals, but I think it's fair to say perhaps that the analyst community was right, but maybe for the wrong reasons. What I mean by that is The increase in interest rates that we saw over the last 60 days, we did feel concessions start to creep up right as we were basically reporting in Q2. The short-term and the long-end both rallied, and we saw the development community and the ownership community in our markets, particularly in Sunbelt, starting to get really defensive. So maybe you could say that we didn't anticipate that. Not sure that anyone did, but I don't think that's going to be the case in 2027. So I do think not putting a number on what revenue will be right now, but I don't see that happening again. If anything, I think I see the opposite. And we're very, very pleased with the job growth numbers in our markets. And that's to our benefit. And You know, hopefully we can start getting some of the, you know, some of the supply, demand and balance back in our favor, finally.

Okay, thanks. And then lastly from me, I just feel like this needs to be asked and it's really kind of a, you know, how did this happen kind of question. And what I mean is, you know, how were you so exposed to interest rates and so naked to this increase in rates? I think you said every 25 bps in rates is now 14 cents on an FFO number that's expected to be 222. And SOFR is already higher than what you used when you projected your interest expense in the supplemental and forecasted to go higher. So what can you do now? It sounds like maybe some asset sales. And how do you manage leverage going forward now?

Yeah. It's a good armchair quarterback question. The truth is we were focused on swapping a third to half of the portfolio in February and March and didn't hit our targets. Perhaps we were penny-wise at the time, but we were ready to swap out a lot in the range of 3-3 on the SOFR swap rate, which would be basically equilibrium on 53 cent dividend. So that's what happened. And then we weren't going to chase it along the way up and kept getting away from our target. I don't think that we believe the short term is stronger and the market believes, and what I mean by that is, you know, rates have been negative for several years and that's not showing up in the data yet. So, you know, I think we have a lot of intelligent people around the company and around the firm, but we did miss a target that we internally set and that has led to, you know, some unfortunate pain and we feel it As much as anyone. What can we do? Well, I don't think we're going to hedge here. Again, given our outlook that I think it's more likely if the Fed continues to hike into this economy and ignoring the effects on the commercial real estate universe and the credit markets and regional banks. I think credit conditions will continue to get tight, and I think that something is liable to break there. So that's kind of our near-term view. I don't think that there's any appetite to hedge at this point. So the tools in our toolbox are sell assets or reduce the dividend. I don't think we would preferentially take selling assets at a wide discount right now against a backdrop that we think is going to get better for a lot of reasons, even though some are still bearish. So then the source of funds is the dividend. And like I said, we still throw off a lot of cash flow. So I think the plan is to actively monitor the SWOT market You know, do a disposition here or there that makes sense and not panic and throw our arms up and say, you know, well, we lost. We don't think we lost. We think that, you know, this is a spot in time, you know, kind of had a bad quarter, you know, bad quarter or two. But, you know, we also think the windshield is larger than the rearview mirror for a reason. So, you know, we're still optimistic and that'll be the plan.

Thank you. Really appreciate you answering the question.

You got it.

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

Yeah, I'll start. And Bonner, you can add to this. So October is better sequentially. on September, obviously, from new leases, occupancy, ending occupancy, down 50 basis points. But the trend and the renewal retention both are up. And so I think my comment was that the fourth quarter portends 92.8% physical occupancy and maybe 91.8% Financial Occupancy, but I think we feel good about the conversion rates on the least trend going into the fourth quarter. It took a lot of pain in August and September, so I think we liked the last few months. I don't know, Bonner, if you have anything.

Yeah, I think that's prepared remarks. So the full quarter, average financial occupancy, 92.8, that's up a little bit. Obviously, have some work to do from the 930 number to fill that out. As we've mentioned, the portfolio today is about 94, 9455, 946 lease. There's a spread there, right? That's the forward-looking lease assumptions. There are some move-outs. I think that in terms of what we're doing, so closing the back door, right? I think we feel really good about retention, trying to Retention and Q4, really focused on just moving kind of the low payers there and the opportunity, taking a little bit off in a lower demand season on some of the higher payers in that subset. And then in terms of the front door, I mean, we've been heavily focused really for the last 90 days on making sure every asset have been out in the market as part of 2027 budgeting, obviously, but also making sure that we really get back to basics in terms of fundamentals. As much as we've highlighted and discussed the implementation and utilization of AI and the chat functions, the immediate response on an inbound call, what I think we're recognizing and have recognized over the last 120 days is that Just getting a chat response, you may get an instantaneous response that might not be the warmest touch. It's kind of like every political donation text you're getting right now. So we have to be really thoughtful about what that messaging is and making sure that it's followed up by a warm body in our office. So working on really the fundamentals on the front end to make sure that we can close. We feel like the The lead to tour to app conversion ratios are healthy. We've done some incremental things, some special pricing on some units. There's certainly more concession activity in some of our lower end. And that was, I think, reflected in the public commentary. And then really just focusing on moving the needle. I think that it's our goal certainly to finish the year at a much better cliff than 92.8, but starting from the base of 9.30, I think that we work up to probably peak occupancy around the end of the year is our goal. So that's what we're focused on. That's what our teams are focused on. We also referenced a little bit of additional ad spend, marketing, right? That's kind of the other side of the you know concession and pricing right we've got to make sure in the shifting landscape where you know google search was you know the leading driver of so much traffic over the course of the last you know 15 20 years right that's really shifting a lot um where you know some of our younger younger tenants are going to you know chat dbt and asking you know i want this this this and that and you know um this sub market phoenix right we're having to kind of reevaluate really everything that we're doing and making sure that we're top notch, our websites are AI friendly, the photos on the website are attractive, we're capturing that exposure. So there's a little bit of a shift that we're focused on in the marketing side as well. I think that we can certainly do better there, but we're focused really across the board on driving occupancy into what we think will be a better year next year.

We took revenue down 10 cents to Buck, just to state it. It's not like we're maintaining an equilibrium. So revenue guidance, as Paul bridged you from 245 at the midpoint to 222, had 10 cents in that number.

Got it. Okay. That's helpful. Appreciate the call, Eric. And just for clarification, just on this Wi-Fi expense or added Wi-Fi, which line item in same-store expenses, is that going into utilities or is that in the R&M expense line? Kind of where and, you know, how much of the year-over-year increases in either of those lines is driven by the Wi-Fi rollout?

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

Gotcha. So of that, you know, roughly 20% year-over-year increase in R&M is like half of that driven by the Wi-Fi?

Yeah. So our Residential Immunity Services line specifically is up about 37% year-over-year. So, you know, the full year is about 2.4 million of added, you know, the significant majority of that is the bulk fiber.

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