BSR Real Estate Investment Trust (REIT) showcased a positive start to 2024 in its Q1 earnings call, with an increase in key financial metrics and a strong market position. The company reported a 1% rise in same community revenues and a 4.4% increase in same community net operating income (NOI).
Funds from operations (FFO) per unit stood at $0.25, and adjusted funds from operations (AFFO) per unit were $0.24. BSR REIT, which trades under the ticker symbol, highlighted its second-place ranking in online reputation among US multifamily REITs for 2023, and expects continued revenue and FFO growth through the year.
Key Takeaways
- Same community revenues and NOI grew by 1% and 4.4%, respectively.
- FFO and AFFO per unit were reported at $0.25 and $0.24.
- Weighted average rent increased to $15.02, with occupancy at 95.3%.
- Debt to gross book value stood at 46.5%, with total liquidity of $107.4 million.
- Ranked second in online reputation score among US multifamily REITs.
- Anticipated growth in same community revenue up to 3% and FFO per unit between $0.91 and $0.97 for 2024.
- Confidence in competitive advantage and future performance despite new apartment supply.
Company Outlook
- BSR REIT projects same community revenue growth up to 3% for 2024.
- FFO per unit expected to range from $0.91 to $0.97.
- Portfolio occupancy forecast to remain around 95%.
Bearish Highlights
- High apartment supply in Austin presents a challenging leasing market.
- New developments are not expected to compete with BSR until late 2027.
- Lease-up for new project anticipated to be slower than in 2021, with a stabilization period of 12 to 15 months.
Bullish Highlights
- BSR REIT maintains a competitive edge with superior quality and lower-priced products.
- Rent growth of 3% to 4% is underwritten for 2025, with potential for higher rates in subsequent years.
- Strong population growth and absorption rates in Austin signal high growth potential.
Misses
- No specific misses were reported in the earnings call.
Q&A Highlights
- Adjusted guidance range for revenue with the midpoint remaining at 1.5%, due to favorable insurance renewal.
- Market rents for new products in their markets are estimated at $2,200 to $2,400 per month.
- Development lease-up effective asking rates are around $1,750 to $1,850 per month.
- CoStar projects rent growth of 3% to 4% in 2025, with potential for high-single-digit growth in 2026 and 2027.
- Houston's population growth is creating a strong demand for housing.
BSR REIT's Q1 2024 financial results indicate a robust and growing operation with a positive outlook for the remainder of the year. Despite the challenges posed by a saturated market, particularly in Austin, the company's competitive pricing and quality offerings position it well for future success.
The management's confidence in maintaining high occupancy rates and achieving projected rent growth reflects a strong belief in the REIT's strategic positioning and market dynamics. Investors and stakeholders can look forward to the second-quarter results in the summer for further insights into the company's performance.
Full transcript - BSR REIT (HOMu) Q1 2024:
Operator: Good afternoon. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the BSR REIT’s Q1 2024 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Mr. Oberste, you may begin your conference.
Daniel Oberste: Thank you, Joanna, and good day, everyone. Welcome to BSR REIT’s conference call to discuss our financial results for the first quarter ended March 31, 2024. I’m joined on the call by Susie Rosenbaum, the REIT’s COO and Interim Chief Financial Officer. I will begin the call with an overview of our Q1 performance and highlights, and Susie will then review the financials in detail, and I will conclude by discussing our business outlook. After that, we will be pleased to take your questions. To begin, I want to remind listeners that certain statements about future events made on this conference call are forward-looking in nature. Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially. Please refer to the cautionary statements on forward-looking information in our news release and MD and A dated May 8, 2024 for more information. During the call, we will reference certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance. They are not recognized measures and do not have standardized meetings under IFRS. Please see our MD and A for additional information regarding non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Also, please note that all dollar amounts are denominated in U.S. Currency. We generated continued growth in all of our key financial metrics in the first quarter. This performance was supported by higher average monthly rent and relatively stable occupancy compared to Q1 last year, despite the short-term increase in apartment deliveries in our core Texas markets. For the quarter, same community revenues increased 1%, same community NOI rose 4.4%, FFO per unit was $0.25 compared to $0.23 last year, and AFFO per unit was $0.24 compared to $0.22 last year. The results reflect the continued solid demand for rental housing in our markets, which continue to have very strong underlying fundamentals. They also reflect the tremendous efforts of our community management teams and the strength of our operating platform. Weighted average rent at quarter end was $15.02 a month, an increase of 0.9% from $14.89 a month a year earlier. Weighted average occupancy was 95.3% compared to 95.9% at the end of Q1 2023. Blended rental rates in the first quarter declined less than 1% compared to the prior quarter, excluding short-term leases. Suburban Class A apartment rental rates, as evidenced by our portfolio, have been slightly impacted by new apartment deliveries, an expected phenomenon that we discussed in our last conference call. We still firmly believe that this impact is temporary. One benefit of a higher rate environment is fewer construction starts and a future strong rent growth trajectory. I will speak more about this later on in the call. In addition to our solid financial performance, we were delighted to have recently been ranked second in online reputation score among U.S. Multifamily REIT for 2023. The ORA score, which is published by J Turner Research, measures online review sentiment across major websites and is the industry standard measurement of resident satisfaction. We also rank first overall in the subcategories of customer service, communication, cleanliness and security. This is a very strong endorsement of our team, our product and our operating platform. We take the questions and concerns of our residents very seriously and move quickly to address them. Our strong online reputation is an important tool to help us maintain strong occupancy and drive rent growth over time. We continue to be in a strong financial position with good liquidity, a conservative payout ratio and 100% of our interest rate exposure effectively hedged. We will continue to focus on prudent capital allocation as we pursue growth. I will now invite Susie to review our Q1 financials in more detail. Susie.
Susie Rosenbaum: Thank you, Dan. To begin, I want to note that I will reference same community performance only as all properties were owned in Q1 of both periods. Same community revenue increased 1% in Q1 2024 to $42 million compared to $41.6 million in Q1 last year. This improvement reflects a 0.9% increase in average rental rates from $14.89 per apartment unit as of March 31, 2023 to $1,502 as of March 31, 2024, as well as year-over-year increases in other rental income and utility reimbursement. Same community NOI increased 4.4% to $23.8 million, compared to $22.8 million in Q1 last year, reflecting the higher revenue and a reduction of $1 million in real estate taxes, primarily due to tax refunds received during Q1 of 2024 and the change in Texas tax legislation during Q4 of 2023. This was partially offset by a $0.4 million increase in property operating expenses due to higher insurance costs. As about for first quarter 2024 was $13.6 million or $0.25 per unit, an increase of 4.6% compared to $13 million or $0.23 per unit last year. The increase reflected higher NOI, partially offset by higher interest costs. The repurchase of approximately 3.5 million units during 2023 also positively impacted FFO per unit this year. AFFO for Q1 2024 increased 3% to $12.9 million or $0.24 per unit compared to $12.5 million or $0.22 per unit in Q1 last year. The improvement was primarily due to the higher FFO partially offset by higher maintenance capital expenditures due to the timing of projects in the first quarter. The REIT paid quarterly cash distributions of $0.13 per unit in Q1 of both years, representing an AFFO payout ratio of 53.9% in Q1 2024 and 59.1% in Q1 of 2023. All distributions were classified as a return of capital. Turning to our balance sheet. The REIT is debt to gross book value as of March 31, 2024 was 46.5% or 44.3% excluding the convertible debentures. Total liquidity was $107.4 million including cash and cash equivalents of $7.7 million and $99.7 million available under our revolving credit facility. We have the ability to obtain additional liquidity by adding properties to the current borrowing base of the facility. As of March 31st, we had total mortgage notes payable of $458.8 million with a weighted average contractual interest rate of 3.5% and a weighted average term to maturity of 4.1 years. Those figures exclude the credit facility and a construction loan for an investment property under development. In total, the mortgage notes payable and revolving credit facility totaled $779.9 million at quarter end with a weighted average contractual interest rate of 3.4%, excluding the debentures and the construction loan and 100% of our debt was fixed or economically hedged to fixed rates at a weighted average contractual interest rate of 3.5% excluding the construction loan. The outstanding convertible debentures were valued at $39.8 million as of March 31st at a contractual interest rate of 5%, maturing on September 30, 2025 with a conversion price of $14.40 per unit. The major increase in the fixed component of our debt reflects the impact of the 8 interest rate swaps we have entered into since July 2022 as well as other debt management activity. The last of those swaps took effect in February of this year. I will now turn it back over to Dan for closing comments. Dan.
Daniel Oberste: Thanks, Susie. Our business outlook remains very robust. While we recognize the impact of short-term increase in apartment supply in our markets, it is important to recall that this is a natural response to a surge in housing demand, and that demand reflects extremely strong fundamentals of our core Texas Triangle markets. Those fundamentals have not changed in the least. We continue to see very strong population and economic growth in our markets. And despite that growth, rental rates as a percentage of household income remain below the national level and far below the major gateway markets. As I noted last quarter, we fully expect that 2024 will be the peak year for apartment deliveries. The pace of development slowed sharply last year due to the impact of rising interest rates on developers. The pipeline of new supply is very thin beyond this year. And with migration into our markets continuing, we expect new supply to be absorbed by early 2025. We therefore believe that 2025, 2026, 2027 and beyond will be significantly stronger years for our rental markets. I would now like to review our guidance for 2024, which we updated yesterday. We currently expect growth in same community revenue of up to 3%, growth in same community NOI of 1% to 3%, growth in property operating expenses and real estate taxes of 0% to 2%, FFO per unit of $0.91 to $0.97, compared to $0.93 in 2023, AFFO per unit of $0.84 to $0.90, compared to $0.85 in 2023. While our revenue forecast was slightly lower compared to our previous guidance in March, we also reduced the forecasted growth in property operating expenses and real estate taxes due to lower insurance costs. As a result, there were no changes to our forecast for NOI, FFO per unit and AFFO per unit. So we expect to continue generating solid financial performance despite the more challenging near term environment. We continue to patiently surveil our markets for investment opportunities. However, we have no interest in nation building. As we have discussed previously, we will only look to capitalize on opportunities for accretive growth on a per unit basis. We are seeing positive momentum in acquisition spreads year-to-date, and we are poised to quickly pounce when we see an opportunity. But for now, the most accretive investment is our stock price. So long as the price of our equity remains vastly different from the actual cost of our real estate, we will continue to explore opportunities to repurchase shares on behalf of our investors when able. Overall, we are pleased with the current competitive with our current competitive position. We are generating solid financial performance and maintaining strong liquidity and a conservative balance sheet. And we look forward to even stronger performance as the temporary impact of new apartment supply in our markets dissipates. That concludes our prepared remarks this morning. Susie and I would now be pleased to answer your questions. We would like to respect everybody’s time and complete our call within an hour, giving all of our analysts the opportunity to ask a question. So please limit your initial questions to one and then rejoin the queue if you have additional items to discuss. If we don’t have the time to address everything, we can respond to additional questions by phone or e mail afterwards. Joanna, please open the line.
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question comes from Jonathan Kelcher at TD Cowen. Please go ahead.
Jonathan Kelcher: Just on the cadence of revenue growth, I guess, we are kind of at or just past peak deliveries, but those assets obviously are still at lease up. When would you expect your blended rents to turn back positive? And then do you see that sort of accelerating as we go through the end of this year and into 2025?
Susie Rosenbaum: Yes, Jonathan. So April looks a little bit it is trending positive right now. So it looks a little bit better than Q1, though we are not quite out of this period of stabilization yet. So with that being said, I would say just like I said last quarter, right now, Q1 was pretty much in line with Q4. Right now, it looks positive, but I still wouldn’t expect things to turn up, to where we are seeing a trend that lasts longer that is more positive towards the latter half of the year in 2025.
Operator: Next question comes from Brad Sturges at Raymond James.
Brad Sturges: Just on the guidance range, I guess, the lower end of the range was adjusted a little bit, but the midpoint is roughly the same. Just wonder if you could elaborate a little bit more in terms of what might be driving the lower end of the range?
Susie Rosenbaum: Yes. So what we did with the guidance is we reduced the midpoint, for revenue from 2% to 1.5%, as I just alluded to because I don’t think we are going to be out of this period of stabilization, right, as quickly as we initially thought. But then that was offset by a very favorable insurance renewal that happened in April. So the impact of the insurance renewal, which is actually was a 15% decrease over the prior year, has basically outweigh or is it right in line with the revenue decrease projection that we already had, which is why NOI didn’t change nor FFO or AFFO.
Brad Sturges: It is just the moving parts on those two sorts of moving those two main assumption changes, but overall it is just a slight adjustment?
Susie Rosenbaum: That is right.
Operator: Next question comes from Kyle Stanley at Desjardins.
Kyle Stanley: It looks like the just sticking with the new leasing side of things; it looks like the new leasing spread in Austin actually improved versus the fourth quarter. Just wondering, was there seasonality there or is this now, we are starting to see the stabilization of the kind of elevated supply and this is kind of how we expect can expect things to trend in the other markets as we move forward?
Susie Rosenbaum: We are still bouncing around in Austin. It is still pretty close, right, and the blended rates, in Austin, in April at this point or around like a negative 3%. So that is obviously the toughest market right now when it comes to product coming online. However, but keep in mind too, right, that is just Austin. We have got that is only 25% of our portfolio.
Daniel Oberste: This is Dan. I mean, in particular to Austin, Susie hit the nail on the head. That is about 20% to 25% of our portfolio. And within Austin, I really think of two markets that we are somewhat paying attention and defending against some supply. And that would be up in North Austin and Buda and Georgetown. I think what we are seeing; we are a little bit hesitant in Austin to call peak deliveries. We have seen peaks in Q4 of 2023 and Q1 of 2024. We do see some early peaks in April on deliveries in Austin, but it generally takes about three to six-months for a market to pick up the slack generated by peak deliveries. So I will contrast that with the other 75% of our company. In Houston and Dallas, where we have 50% of our company, we saw peak deliveries really in Q4 to Q1 of 2024. So we are coming out of the back end of Dallas sooner than we are coming out of Austin. Now moving back to Austin, let’s take Georgetown. Georgetown looks to be one of the, I would say, the highest culprits of deliveries in 2023 and moving into 2024. So last year, that Georgetown submarket, where we have one property, that market delivered 28% of its overall inventory. Now an average that we you want to see for a healthy market is about 6% to 5% in the United States. So 28% I think we can all agree is pretty high number of deliveries. What is fascinating about that market is it is also the fastest growing county in the United States and has been for two years. So last year, that market absorbed 17% of its overall inventory, right. So it is not I mean, we are seeing those same absorption ratios throughout the country. In a small market with no supply to speak of, we are seeing no net absorption to speak of. And in markets where we are seeing a lot of supply being delivered, I would say about nine out of 10 of those markets, including all of ours, we are seeing more absorption than we have ever seen in that submarket. And that just goes back to your real estate thesis. Do you want to be in the population growth game, which I think is the long term bet, BSR wants to be in that population growth game or do you want to be in a declining and a degrading operating environment. And I will tell you what, one out of 10-years, that latter market looks good, man. The other nine, it favors population growth.
Operator: The next question comes from Mike Markidis at BMO.
Mike Markidis: With respect to, I guess, you got the favorable impact on the insurance. I think you booked a tax refund fairly significant this quarter as well. And I know, Dan, you think characterized your appeals process as being a contact sport. But, with all that being said, is there an element of additional refunds that you expect that would be significant, for the rest of this year embedded in your guidance or no?
Susie Rosenbaum: Okay. So let’s be very clear about this. In our original guidance, it included having those tax refunds. They just happened faster than we anticipated. So we received 1.1 million in tax refunds in Q1. And of all of that, for our 2024 guidance, we had predicted all but about 100,000 of it that is extra. So you can’t extrapolate that to future quarters.
Mike Markidis: And if you do benefit from any others then that would be upside potential upside to your guys. Not saying you are expecting it, but if it were to happen?
Daniel Oberste: Yes. It is similar to the others. I think as in past years, we will kind of we will have a closer bead. We will be able to hunt with a rifle and not a shotgun on our tax assessment for the year, closer to August and September. So look for any adjustment to guidance related to tax appeals to occur in that second quarter review in August. As it stands right now, we had 31 active prior year lawsuits, 13 were settled and we have 18 remaining. At any given time, those 18 could settle. We are not in control of that. What we are assuming in our guidance is a typical year, where a certain percentage of those active that contact sport is addressed. If we see an accelerant in one year, we would expect to see a decelerant in the following years. So it is a balancing act of it is still good quality NOI, because it occurs every year. To the extent we see something happen faster in a year that is blended into our guidance. And if we expected 20 lawsuits to be settled this year and we got 2022, we would probably account for that and communicate that to the market that next year we might see 2018, not 2020.
Mike Markidis: I would be interested in your guys’ thoughts. We can, you have done a great job holding the line on your revenue and we can all argue about whether we are there in peak supply or not or if it is Q2 or Q3 when we start to get leasing spreads to improve again. But I would be more interested in your thoughts, Dan, just with respect to knowing that you have got strong population growth, in the markets that you have chosen, knowing that it will take a while for the supply to come back online. But what I’m really more interested in is just, like, where you think, all else equal, rents on new supply have to be to make development economic and sort of what is the limiter in terms of market rent growth where or what is the threshold where you start to see developers get back in the game? Not saying that that supply comes on and limits your growth, but just trying to get a sense of what the potential runway for future rent growth is in the next up cycle.
Daniel Oberste: Well, yes, that is a great question. And forgive me, I’m going to throw a dart at a dartboard in the dark here on rent. I just, I don’t have my calculator in front of me, but I would ballpark it right now. It is something that competes with us in a 7% developer interest environment with debt and equity needing somewhere similar of a return, you need to build something that makes about $2,900 a month in effective rent. You need to lease it up in 14-months before you can generate the kind of returns that we are seeing at $1.500 a month. So that is impossible in Dallas and Austin and Houston. And what that means is there is no development. So you are seeing year-over-year new permits, new deliveries, I mean new starts just fall off a cliff, right.
Mike Markidis: So you are saying versus the $1,500, that is rents for your products. So where would rents today in the market be for new product? And knowing there is incentives to get it done, where would the rents be?
Daniel Oberste: Yes, new product just generally in Texas or in a growth market in the U.S.
Mike Markidis: Where would the market rents be today versus that $2,900 for new product?
Daniel Oberste: Yes. So I think market ask right now on a development lease up is probably sitting at $2,200 to $2,400 a month assessed by one to two-months, so call it 15%. So that puts effective asking rates on a lease up at about $1,800, $1,750 to $1,850 a month and balanced against our effective rates in those markets still puts us at a competitive advantage. And I do want to - it would be one thing if we had older properties, that $300 a month rent Spread, we would probably be in a different position. But right now, the product that is delivering in our markets, I would say, in our submarkets that we own is borderline the same, if not slightly inferior in quality and amenities to the products that BSR owns. So we have a better product and a lower price, which is why we would expect retention rates to increase throughout the rest of this year to continue to see positive renewal momentum. If you have got the fundamental advantage on product and price, and then you happen to place the best team in America as the operator, I will take those odds.
Mike Markidis: So if I put words in your mouth and I’m going to risk it, but unless we see the cost of capital improve dramatically, I guess floating rates go down for construction debt, and or construction costs come down on the other side. The runway for future rent growth would have to be significant to evoke a new resupply cycle.
Daniel Oberste: Yes, without question, and you can put those words in my mouth and I would add on to them and say that if interest rates drop to 0% next month, we still wouldn’t see any meaningful supply based on those new starts competing with us until late 2027, right. So those interest rates have been increasing exponentially, I don’t know, it is parabolic ally, right, from a low. And I would say, it is more than chilled out new development. It is created new development just stopped. The existing development is the supply has been peaking and what you are seeing is typical of owning in a high growth market. Instead of rent climbing up on a mountain and then falling off, the rent climbs up, plateaus, bounces around for a period of quarters and then continues to grow. That is what the graph looks like to us. We don’t see any supply coming in and remind everybody it takes two to three years to compete.
Operator: Next question comes from Jimmy Shan at RBC Capital Markets.
Jimmy Shan: So just to follow-up along the lines of questioning on future rent growth. If you were an acquirer of assets today, how are you underwriting rent growth in 2025, 2026 and 2027?
Daniel Oberste: If I’m a smart acquirer, I’m using RealPage, CoStar to help support my rent growth estimates. And CoStar in Texas is floating that up to, I will call it, 3% to 4% in 2025.
Jimmy Shan: What about the years further out? Because the picture that you have kind of projected is that supply dropped automatically absorption super strong. And so that is a pretty good setup. And so are we thinking higher single digit growth or?
Daniel Oberste: I mean, that is what I’m looking at. I’m seeing that short-term Austin is going to be a quarter or two behind Houston and Dallas, right. And Houston is going to it is going to do what it is done, which is, I think it is one of the five markets in the Sunbelt that is projected to have overall rate increase this year. The other one being Oklahoma City and then there is three more that we don’t own, so they don’t matter. Now, so Houston is out of the woods early, but there is going to be a lid on rent growth, because the price of single family housing is so low, even though incomes in Houston are rising rapidly. So I think Houston recovers early, levels off at four next year and then probably bounces up a bit the year after that. Now Dallas looks to stabilize as Susie mentioned, call it somewhere between third and first quarter of this year. When it does, I just want to remind everybody, you got 159,000 people that moved to Dallas last year and they are looking for a home. You saw 21,000 units absorbed and there is not a lot of new home building and new apartment deliveries taking place. So if that rapid landlord favoring migration continues, then Dallas looks to balance out into this year produce similar 3.8 to four next year on rate growth. And I think CoStar is having a tough time running those numbers for 2026 or 2027. You would have to talk to them, but the numbers look pretty compelling to me, high-single-digits. And then Austin, Austin is your speed demon. So it is going to oversupply. It is got peak deliveries in Q1 of this year followed by peak deliveries right now. And it is got 2.5 million people, right. But Austin seems to be absorbing per pound more units than any other market in the country and it has for a couple of years now. So if that absorption continues to take place, then Austin should absorb the slack in the first quarter of next year, but it will be running a lot faster because it is got a whole lot, it is got a higher relative population growth metric for housing. So it could be put right back in the position and elevated rent growth towards the middle or I will say, second quarter to the latter half of next year, exceeding that of Dallas or Houston, and then continue to rev up in 2025 or 2026 and 2027. So single digits is not out of the question and probably true to form in 2026 and 2027.
Operator: The next question comes from David Chrystal at Echelon.
David Chrystal: Lot of talk about development and supply and what is going on around you and with your peers. But in terms of the active development you have got at the moment, is there any change to expected economics given shifts in market rent and obviously shifts in supply and kind of hitting peak supply as you are close to delivery?
Daniel Oberste: So the project we are talking about that David asked about is a development project that is set to open in June. We will begin leasing in late June. What we are going to tinker with there is the pace of absorption. We are anticipating roughly 15 to 18 leases per month on that 238 unit property. That gets us about, I will say, stabilized occupancy over the course of about 12 to 13-months. If we underwrite yield to total cost on that deal, I think originally we were looking at 6.5. I think right now, our range is 5.75 to 6.75 dependent. Now 5.75 would assume that rents dropped 6% in Austin. 6.75 assumes our original underwriting and that is that rents went up and kind of new rents kind of bounced down about 6% and they go flat line for the next two years. So I feel comfortable with that original 6.5% number. And I would say that our bottom end estimate is 5.75.
David Chrystal: And just to be clear, 6.5 is flat on today’s market rent or on the kind of early 2022 market rent?
Daniel Oberste: Yes, 6.5 would be the based on today’s effective rent. So if we see a rent decline during lease up, then that is going to impact our stabilization number and we look at 5.75.
Operator: [Operator Instructions] Next question comes from Sairam Srinivas at Cormark Securities.
Sairam Srinivas: Just looking at SP&I margins across markets, if I look at Austin and I look at Houston, I do see that margins actually expanded quite a bit year-over-year. I’m not sure if I’m missing something here, but is there something to do with onetime costs over here or is it generally a more efficient cost structure in these markets?
Susie Rosenbaum: No, the reason the margins expanded is that is based on the tax refund that I just previously spoke about.
Operator: And the next question comes from Himanshu Gupta at Scotiabank.
Himanshu Gupta: So just on the portfolio occupancy at around 95%, so what are your thoughts of your portfolio occupancy by end of the year? And how do you think the market occupancy is likely to trend by the end of the year?
Daniel Oberste: Yes, sure. So Himanshu, I think we are looking we continue to estimate about a 95% occupancy rate for the portfolio throughout the rest of the year. And what we are seeing on news and renewals is not impacting our confidence in that occupancy rate whatsoever. I think that is just due to the suburban Class A style garden style property that we own. It is new. It is a superior product. So we are able to maintain occupancy and defend with rate. I think the further you get away from suburban A, the more likely you are to have to defend with both occupancy declines and rate declines. Now as it relates to, I will say, overall, our stabilized occupancy by market this year, I think the expectations are stabilized occupancy in Austin of 90.9% and Dallas of 1.6% and Houston of 90.5%. That compares to the U.S. stabilized vacancy or occupancy number of about 93.9%. So as you, these Houston in particular is what shoots out. Houston delivered, I think about 16,300 units in change last year and absorbed 16,100 units. That is about average delivery for Houston. And it is some healthy absorption numbers that we saw and we were expecting that on a year-over-year basis. Now if you look back at Houston over a period of decades, the average stabilized occupancy in Houston that you would underwrite to would be about 89.5% to 90%, depending on class. Now what we have seen over the last three to four years is a pullback in average deliveries in Houston. And as a result, I mean, it is just simple arithmetic. You continue to have I mean, Houston grew population by 120,000 people last year. I mean, those people need a home. If Houston continues to pull back on its deliveries, then you would expect the overall market occupancy to creep up over time. That is exactly what has happened is, is an expectation of occupancy in Houston of about 1% higher on a look forward than it is historically been. So we continue to remain pretty bullish on it.
Himanshu Gupta: So clearly, stable occupancy for BSR portfolio for the year, but market occupancy can still decline for the year. And then if I look out 2025, kind of follow-up to Jimmy’s question, you said you will underwrite through the focus on market rent growth in 2025, if I heard correctly. What occupancy is losing or gains will you underwrite in 2025?
Daniel Oberste: Occupancy for the portfolio?
Himanshu Gupta: For the portfolio, that is right. Yes. Or maybe the question was more around the new acquisition. What about that? Will you be underwriting like further occupancy erosion or occupancy gains into a unified?
Daniel Oberste: On the new development?
Himanshu Gupta: On the new development. That is correct.
Daniel Oberste: Yes. I think you can look at the back half of the year on that new development of a range 95% effective occupancy. That is fair. To the extent it is 85% and our average leases per month were about 12% to 13% to the extent it is 95 and our average leases were 15 to 18 a month. We are estimating 15 to 18 a month. And I would say, let’s compare that lease up to what we experienced in 2021. So 2021, you saw more lease ups or quicker lease ups than you have ever seen, right? And in that environment, on this project apples-to-apples, we would underwrite 25 to 28 leases a month and a stabilized occupancy number about eight to 8.5-months from initiation of lease up. That was not our assumption in this project. We actually did assume a much slower pace. I will call it a 12 to 15 month stabilization process. And even with the, I would say, the above the fold supply concerns, just given pent up demand and continued migration into Austin, 15% to 18% looks to be a per month looks to be the number. And the answer to that is back half of the year, 85% to 95% probably closer to 95% for the developed project.
Operator: Thank you. As we have no further questions, I will turn the call back over for closing comments.
Daniel Oberste: Thanks, Joanna. That concludes our call today. Thanks for joining us. We look forward to speaking with you again this summer when we report our second quarter results. Thank you all.
Operator: Ladies and gentlemen, this concludes your conference for today. We thank you for participating and we ask that you please disconnect your lines.
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