IRT - NYSE

Thank you for standing by. My name is Dee, and I will be your conference operator today. At this time, I would like to welcome everyone to the Independence Realty Trust First Quarter 2024 Earnings Conference Call. [Operator Instruction] Thank you. I would now like to turn the call over to Lauren Torres. Please go ahead.

Thank you, and good morning, everyone. Thank you for joining us to review Independence Realty Trust's First Quarter 2024 Financial Results. On the call with me today are Scott Schaeffer, Chief Executive Officer; Mike Daley, EVP of Operations and People; Jim Sebra, Chief Financial Officer; and Janice Richards, SVP of Operations. We also have a special guest joining us today, Lilly Schaeffer, Scott's grandchild as it's Bring Your Child to Work day. Welcome, Lilly. Today's call is being webcast on our website at irtliving.com. There will be a replay of the call available via webcast on our Investor Relations' website and telephonically beginning at approximately 12:00 p.m. Eastern Time today. Before I turn the call over to Scott, I'd like to remind everyone that there may be forward-looking statements made on this call. These forward-looking statements reflect IRT's current views with respect to future events and financial performance. Actual results could differ substantially and materially from what IRT has projected. Such statements are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please refer to IRT's press release, supplemental information and filings with the SEC for factors that could affect the accuracy of our expectations or cause our future results to differ materially from those expectations. Participants may discuss non-GAAP financial measures during this call. A copy of IRT's earnings press release and supplemental information containing financial information other statistical information and the reconciliation of non-GAAP financial measures to the most direct comparable GAAP financial measure is attached to IRT's current report on the Form 8-K available at IRT's website under Investor Relations. IRT's other SEC filings are also available through this link. IRT does not undertake to update forward-looking statements on this call or with respect to matters described herein, except as may be required by law. With that, it's my pleasure to turn the call over to Scott Schaeffer.

Thanks, Lauren, and thank you all for joining us this morning. During the first quarter, we made notable progress on our initiatives to grow occupancy and increase resident retention, execute our portfolio optimization and deleveraging strategy, and deliver on our planned value add improvements. We are pleased with the results of our efforts in the first quarter as we delivered an increase of 120 basis points in average occupancy to 94.4%, lease renewal at 65.4%, and resident retention at 54.3%, all above first quarter of 2023. And we continue to see sequential improvements in April, with same-store occupancy today at 95.4%, with lease renewal at 66.7%, and total resident retention at 55.7%. Year-to-date, our lead volume is up approximately 17.4% year-over-year due to our enhanced marketing initiatives. This lead volume along with the improvement in occupancy puts us in a position of strength to drive growth in the coming months and keeps us on track to deliver our full-year operating guidance. Last October, with the view that interest rates would stay higher for longer, we announced our portfolio optimization and deleveraging strategy, in which we identified 10 non-core properties for sale. I'm pleased to report we have closed on the sale of 9 of these properties, exited 4 single asset markets, and paid off $489 million of debt, thereby extending our maturity profile and eliminating all of our exposure to floating rate debt. The 10th and final property targeted for sale under this program is currently under contract with a hard deposit and we expect it to close on April 30th. This puts us on track to achieve our 6x net debt-to-EBITDA target in the fourth quarter of this year. To that end, we received an investment grade credit rating from Fitch Ratings in early March. This is a significant milestone for IRT and reflects our efforts to fundamentally reset our leverage profile through profitable growth with lower leverage. With this rating, we can further improve our cost of capital and gain access to additional capital sources to implement our business plan and invest in our portfolio. Additionally, as part of our regular capital recycling initiatives, we have identified an asset in Birmingham, Alabama as held-for-sale and may use the proceeds to purchase one of our new construction joint venture assets in Nashville. Jim will discuss this in more detail during his remarks. But the Birmingham property is now under contract and is expected to close in the third quarter of 2024. With respect to value add renovations, our program is well received by both current and prospective residents as we seek to improve the quality and value of their rental experience. We now continue to see significant premiums as compared to unrenovated comparable units despite current market dynamics that are impacting new lease rates. With that, we completed renovations on 320 units during the first quarter and achieved a weighted average return on investment of 18% when compared to unrenovated comps. Throughout the rest of 2024, we expect to complete renovations at approximately 2,100 additional units. Please note this number could vary depending on resident retention. In addition, we currently own over 12,000 additional units that are appropriate for renovation over the long term. We believe these efforts to drive strong demand and attract value-driven residents seeking an effective alternative to newer class A communities at a lower price point. We continue to believe in the strength of our portfolio and our team's ability to manage through difficult operating environment in 2024. While the Sunbelt region continues to see elevated levels of new supply, IRT's predominantly B class portfolio is somewhat insulated from the resulting effects and we are confident in our ability to navigate these headwinds. Before I wrap up my remarks, I also wanted to highlight that we recently published our 2023 sustainability report, which details the progress we have made on our sustainability strategy over the last year and the initiatives we have in place to continue building a sustainable and inclusive future for our business and all of our stakeholders. We see continuing opportunities to further enhance our sustainability practice and look forward to continuing these initiatives, which will support our long-term success. In conclusion, our results demonstrate the strength and resiliency of our portfolio and the ability of our team during a challenging economic climate. I'm confident these results will drive further growth throughout 2024, and we look forward to continuing to build on these successes going forward. And I'll now turn the call over to Mike.

Thanks, Scott. The priority of IRT heading into this year was to increase retention and reduce unit vacancies. We accomplished this in the first quarter, delivering a resident retention rate of 54.3%, which represented 610 basis point improvement versus a year ago and a 330 basis point increase on a sequential basis. Similarly, our same-store average occupancy rate increased 120 basis points year-over-year to 94.4% for the quarter. For April to date, same-store average occupancy is 95%, improving another 60 basis points on a sequential basis as compared to the first quarter, which reflects our ongoing efforts to drive occupancy. At our non-value add communities, average occupancy was 94.6% in the first quarter and is 95.2% for April to date. Our same-store portfolio average rental rate increased 1.5% in Q1, contributing to 3.4% year-over-year property revenue growth for the quarter. As mentioned on last quarter's call, we are reducing the use of concessions. In the first quarter, 15% of leases signed had a concession and the average concession was 2 weeks. For April to date, concessions are even lower at 10% of leases signed, again, with an average concession of 2 weeks. While new lease spreads remain negative in the first quarter due to lower seasonal demand and supply pressure, we are seeing a pickup in April, improving 190 basis points on a sequential basis due to more favorable demand and the reduced use of concessions. The benefit of higher occupancy is helping to mitigate the pressure on rents from the impact of new supply mentioned earlier. Also renting continues to be more attractive than owning for many people, with persistently high interest rates and inflation continuing to make home ownership less affordable. In our top 10 markets, owning a home is approximately 104% more expensive than renting when factoring in all the costs of homeownership, including a mortgage payment, property taxes and insurance. Lease over lease effective rent growth for renewals in the first quarter was 4.4%, and for April today it's 3%. We've also signed 86% of our expected May and June renewals with an effective rental rate increase of 3.5%. I've mentioned on our prior calls we continue to utilize technology to increase our operational efficiency and performance. One example of this is enhanced ID screening, which was fully implemented across the portfolio earlier this year. We've seen a meaningful positive improvement in our ability to identify potential fraud. This technology in addition to the enhanced income verification technology currently being rolled out will not only improve business results, but also deliver a better applicant experience and help drive efficiencies for our teams on site. These technologies are key drivers to improve our bad debt this year from about 2.1% last year to our interim goal of 1.5% by year-end 2024. Before handing it to Jim, I would like to thank our team for driving these results and progress on our key initiatives. We've made notable advancements over the past year despite the industry pressure we've described. Improvements we've made are systemic and sustainable, and we expect to continue driving strong results and high efficiency for 2024 and into the future. I will now turn the call over to Jim.

Thanks, Mike, and good morning, everyone. Beginning with our first quarter performance update, net income available to common shareholders was $17.6 million dollars, up from $8.6 million in the first quarter of 2023 primarily due to gains on the sale of real estate during this quarter. Core FFO was $61.5 million and core FFO per share was $0.27 per share. IRT's same-store NOI growth in the first quarter was 2.4%, driven by a revenue growth of 3.4%. This growth was led by a 1.5% increase in average monthly rental rates to $1,551 per month and a 120 basis point increase in average occupancy to 94.4% both as compared to Q1 of 2023. On the operating expense side, IRT same-store operating expenses increased 5% during this quarter. This increase was primarily driven by higher property insurance expenses due to the notable increase last year, as well as higher advertising and personnel expenses as we increased our efforts to drive occupancy. Contract service expense was flat in the quarter, while repairs and maintenance expenses decreased 11% due to timing of repair and maintenance projects and a continual focus on managing expenses. Regarding property management expenses and G&A, our Q1 results were in line with the guidance we previously provided. Turning to the balance sheet, as of March 31, our liquidity position was $412 million, an increase of approximately $124 million from year-end 2023. We had approximately $21 million of unrestricted cash and $391 million of available capacity through our unsecured credit facility. As noted earlier, we're pleased to have received our investment grade credit rating from Fitch, assigning IRT a long-term issuer default rating of BBB flat with a stable outlook. This is yet another example of our strong underlying fundamentals, and as Scott mentioned, opens up additional sources of capital for IRT as we seek to operate, grow and be a leading apartment company in the United States. For Q1 2024, our leverage was 6.7x on a net debt to adjusted EBITDA basis. This is down from 7.3x in Q1 of last year. Clearly, we are beginning to see the impact of our portfolio optimization and deleveraging strategy. On a trailing 12-month basis, our leverage is 6.5x and we are still on target to be closer to 6x net debt to adjusted EBITA in Q4 of this year. We still have only about 7% of our pro forma debt maturing through year-end 2025, with only $20 million of maturities in 2024. We also have adequate hedges in place that have effectively converted our floating rate debt to fixed rate debt such that our debt as of March 31 is 100% fixed and/or hedged. Before I discuss our 2024 guidance, I'd like to provide an update on our portfolio optimization and deleveraging strategy. During the first quarter, we sold 5 properties that were included in our portfolio optimization plan for a combined sales price of $296.1 million and we recognized a net gain of $25.6 million. In total, and as of the end of the first quarter, we sold 9 of the 10 properties which were part of our plan for a gross sales price of $496.8 million. The proceeds from these sales were used to repay $488.9 million of debt, including $218 million paid back on our credit facility to date from this plan. As part of our initial plan, we have one remaining asset to sell in Chattanooga, Tennessee, which we expect to close next week. The sales price for that asset is $28.5 million, which when aggregated with the other 9 sales, achieves our targeted gross sales proceeds of approximately $525 million. As mentioned by Scott, in connection with our capital recycling program, we have also identified a legacy steadfast asset in Birmingham, Alabama as held-for-sale and recognized a loss on impairment of $15.1 million. This property is now under contract at an economic cap rate of 5.2%. The sale is expected to close during Q3 2024 and the proceeds may be used to acquire one of our properties developed by our joint venture partner in Nashville, Tennessee. This capital recycling transaction will reduce our exposure in Birmingham while adding to our Nashville portfolio and allows us to realize the benefits of our joint venture and preferred equity investment strategy. With respect to our full year 2024 outlook, we are reaffirming our FFO and core FFO per share guidance that we provided on our year-end conference call in February. But we are updating our EPS guidance range given the planned sale of the Birmingham community and the associated impairment loss we recorded in Q1 2024. Our revised EPS range is $0.34 to $0.38 per share. Relatedly, we also updated our same-store portfolio to be 108 properties, down from 109 properties as we updated our transaction volume guidance. The midpoint of our 2024 core FFO per share guidance remains at $1.14 per share. As mentioned last quarter, when thinking about our core FFO per share guidance for this year, the bridge from our $1.15 per share starting point at the year-end 2023 would include $0.04 of accretion from additional NOI growth in 2024, offset by dilution of $0.03 from our portfolio optimization strategy and $0.02 from increased expenses, bringing us to our guided midpoint of $1.14 per share for 2024. While our same-store portfolio has changed, there is no impact to our operating guidance as we are reiterating our previous outlook for same-store revenue and operating expenses. Our guidance range for same-store revenue growth in 2024 remains at 3% to 4.5%. And on the expense side, our guidance range for full year 2024 total operating expense growth continues to be between 5.4% and 6.4%. Controllable operating expenses are expected to be up 5.4% at the midpoint, with non-controllable operating expenses for real estate taxes and insurance to be up 6.6% at the midpoint. As a result, for 2024, we continue to expect that property NOI growth will be between 1% and 4% or 2.5% at the midpoint. New to our full year guidance is acquisition volume, which reflects our potential plan to acquire a property in Nashville that was developed by our joint venture partner and where we exercised our right of first offer. We are also increasing our disposition volume guidance to reflect the additional asset held-for-sale in Birmingham. Scott, that's it. Back to you.

Thanks, Jim. Our performance in the first quarter gives us a solid foundation to drive further growth of our business in 2024, which includes supporting increased occupancy, which in turn will give us the ability to drive rent growth in the coming quarters and allows us to remain confident in delivering our full year guidance, and completing our portfolio optimization and deleveraging strategy by selling the 10th and final property, fundamentally resetting our leverage profile and reducing our exposure to noncore markets. As we focus on these initiatives throughout the organization, we also maintain our commitment to delivering shareholder value and returning capital to our shareholders. We thank you for joining us today, and look forward to seeing many of you at BMO's Annual Real Estate Conference in May and Nareit's REITWeek conference in June. Operator, you can now open the call for questions.

[Operator Instructions] And your first question comes from the line of Austin Wurschmidt from KeyBanc Capital Markets.

Mike, you highlighted in your prepared remarks that you've signed, I believe, 85% of the renewals for May and June at 3.5% increase. What's the retention related to that 85% figure? And what sort of the thinking on the remaining 15% as it relates to what you think you can achieve on the renewal rate growth. Just wondering how that changes the 3.5% figure?

Retention, 55%, and we are continuing to focus very consistently on retention. In terms of our renewal rent growth, we do have, as I mentioned, some pickup in April in terms of our momentum on retention. And I expect our -- based on the renewals that are going out now, we've got our first batch of renewals for July have gone out at about 3.5%. So I do feel good about the strength of those renewals.

So based on then the month-to-date for April, what you achieved in May and June, I mean, it feels like you think you can achieve that 55% retention target with renewals holding around the 3% to 3.5% range. Do you think that this gets offset by softer-than-expected new lease rate growth? Or could blended rate growth exceed the 2.1 that you assumed in your initial same-store revenue growth guidance?

I don't think we wanted to -- we would want to say that blended rate growth is going to exceed the guidance. I think the guidance is solid, the balance that we have taken between the 2 really is the way that we approached it was a balance between our retention focus and the renewal rates for retained, renewed leases as opposed to the new leases. So overall, our focus on retention is just that our focus on occupancy is just that. And I think that we're comfortable with the guidance that is out there now.

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

It's actually Nick Joseph here with Eric. I just want to dive in on some of the capital allocation, the additional asset sale. How are you thinking about additional asset sales from here? Just trying to understand kind of the framework of what would make you want to transact. I don't know if it's either further deleveraging or kind of noncore markets use of proceeds, kind of how you're thinking about additional asset sales beyond what's announced thus far?

So I think nothing planned at this point, Nick. It's -- the additional asset sale in Birmingham was part of our recycling strategy. We're looking at our markets in the portfolio long term and where does it make sense for us to be growing and/or contracting. And we do have now 2 assets in our joint venture program in Nashville that are completed and our purchase options are in play. So we decided that we would sell the asset in Birmingham. We are happy with the price at a 5.2% cap rate and reallocate that money if we can reach an agreeable price on the national asset. And when I say that a great price, it's because the way the program is set up is that we exercise our right and then we get an appraiser, the developer gets an appraiser, those 2 appraisers pick a third appraiser, and then it's the average of those we then will decide we're not committed if whether or not we want to buy it. And if we don't, the developer can sell up to anyone else for less than what that number was, what that appraised number was. And we have -- and if he does, or wants to, then we have a last look. So this is all part of our strategy of focusing the portfolio where we want it to be long term. And frankly, we would rather be in Nashville and Birmingham.

And then just from that portfolio strategy perspective, which other markets would you look to gain exposure to? It doesn't sound like in the near term, but as you look over the next few years, either from a job growth or population growth expectation, where could we expect you to kind of rotate in and out of?

Yes. I'm still a believer in the Sunbelt long term. I think that's where you will see above-average population and job growth. And we're coming through a bit of a rough patch here because of all the new supply, but that's coming to an end. And I believe you'll see continued above-average growth in the Sunbelt markets. So that's where our focus will be. And we have a couple of markets where we have only 1 or 2 assets in the Sunbelt, and we would look to expand there.

Our next question comes from the line of Anthony Powell from Barclays.

I guess a question in terms of your Midwest versus Sunbelt performance in the quarter. I guess, how much higher were Midwest, I guess, lease spreads on the new side, both in the quarter and April kind of given the lower supply growth there?

This is Janice. Overall, we've seen probably relatively a 2% spread between the Midwest and the Sunbelt area. We continue to see sustainable opportunity in the Sunbelt now that we've stabilized occupancy at 95.4%, we will continue to maintain. But ultimately, it's all about that balanced approach will be rationing the levers of new lease and renewal to ensure that we're able to maintain that occupancy through the rest of the year.

And Anthony, this is Jim. On the NOI growth kind of between the Sunbelt and the Midwest, the Midwest certainly outperformed a roughly 4.5% NOI growth in Q1 with the Sunbelt roughly 2%.

Got it. And maybe on value add, I mean there's a pretty good results for lease spreads there. How are costs trending in the value-add program? And what do you think about maybe adding more or less as you go forward this year and next to the program?

Yes. So I mean we've given guidance that we were kind of targeting roughly 2,500 because retention has been a little bit stronger there so far. That kind of number is roughly about 2,400 and it will continue to kind of moderate again, depending on what the ultimate retention is. We love the value-add program. We think it continues to provide great long-term value to IRT shareholders, and we'll continue to add there as appropriate. As we kind of talked about in our investor decks, we have 12,000 plus or minus additional units that are right for value add that will continue to give us many years of runway.

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

Maybe a follow-up to Austin on the new and renewal. So it was a little bit surprising to see that new and renewal spread compressed during April and signing a 3.5% renewal would imply, I would think, maybe minus 200 basis points or so on new leases. But I just wanted to ask how you view new leases trending during the year and what you've seen so far at leases signed.

Yes. I mean I think it's a good question. I think as kind of Mike was kind of highlighting, we're very focused on driving occupancy and prioritizing occupancy. And depending on how that retention rate comes out, 55%, maybe a little more, we'll continue to moderate that. If that means that we're able to kind of get a little more renewal growth and give us that pricing power to begin to push new leases. We're certainly going to be doing that. But I think what we've kind of given in terms of guidance in terms of midpoint, we're still very comfortable with the midpoint guidance as we continue to operate in a very balanced fashion throughout the year.

Okay. And I think you guys mentioned that you're looking to get bad debt down to 1.5% by year-end. I just wanted to clarify that 175 was still your guidance for the year.

Yes. The midpoint of -- our guidance has a 1.75% average throughout the year. That's right.

Our next question comes from the line of Wes Golladay from Baird.

Regarding the Nashville asset, would that be both Views of Music City and the Crockett? And if you were to acquire it, would you pay down the debt as well?

It's just the -- the deal that we've exercised our right of first offer is the Crockett as part of the Nashville portfolio. We have not done Views of Music City, Music II yet. And then our expectation would be that, again, given the proceeds from the sale of the Birmingham asset, there would be a little extra that we'd be able to pay out some debt.

So Wes, we have until October of this year to exercise the option on Mus -- Music City, excuse me. So we're just going to continue to monitor the property's lease-up performance and the market, and we'll make that decision when we have to.

Okay. And then regarding the value-add program, are there any particular quarters where the value-add new leases will be a bigger part of the program? Maybe -- I know there's seasonality on new leasing, but maybe a higher percentage of new leasing would be the first-generation leases in any particular quarter.

Yes, mainly second and third quarter. That's where the vast majority of the volume that will renovate will happen. And specifically between those 2, the third quarter, July and August are very heavy months.

It tracks our lease expiration schedule, and the lease expiration curve is heavier or higher, if you will, in the second -- later second and third quarters.

Our next question comes from the line of John Pawlowski from Green Street.

I just have a few questions on the Atlanta market. The market saw a pretty large sequential decline in revenue this past quarter. Just curious if you look at the full year 2024, what range of revenue growth do you think is reasonable to underwrite in your Atlanta portfolio this year?

So we -- this is Janice again. We've seen some benefits in March and April where we're starting to see progress in the Atlanta market, even with the softening. I think the implementation of the complement as well as the ID verification will help us offset some of the fraud that we were absorbing in '23, and we'll continue to see that benefit as it takes 3 to 6 months throughout the year that will help us increase that NOI for '24.

Okay. You exceeded about 50 basis points year-over-year revenue growth in the quarter. What do you think is roughly reasonable this year in Atlanta?

I think based on new lease rent growth, we'll still see some challenge for going towards the flat and the upside of the new lease. And it's really going to all be dependent upon that retention that we're able to achieve in Atlanta and whether we're going to have the pricing power as we see occupancy stabilize. So I think we'll come in line with guidance that we presented holistically, and we'll see how it goes.

Okay. Final question for me. Can you just give me a sense how bad debt in Atlanta portfolio has trended in recent quarters? What is it running as a percentage of revenue? And has it gotten worse or has it gotten better?

Sure. Great question. Last year, for all of 2023, bad debt in Atlanta was about 5% of the Atlanta market revenue. And that is certainly trend better so far in the first quarter. We're down about 4% in the first quarter and getting better as the eviction process is kind of accelerating as well as our other things or ID verification, income verification tools are speeding up.

Our next question comes from the line of Barry Oxford from Colliers.

You mentioned the Nashville asset as -- with the option as possible acquisitions. What else are you seeing in the acquisition market? And are cap rates at a point where you guys feel comfortable transacting.

So I'll take the last part of your question first. And succinctly, no, there still is a disconnect between public valuations and private market valuations. So the cap rates, for example, in Birmingham at 5.2%, that only -- that would make no sense for us to buy an asset at a 5.2% cap rate with our current cost of capital. We're constantly looking at the portfolio as a whole and where we want to position it, and we will continue to recycle some -- out of some assets and into some newer ones. But that is -- then you're matching the cost of capital on the buy and the sell. So we're looking to continue, as I said, to manage the portfolio for the long term, but we're not out there just seeking to acquire unless it's part of the recycling strategy.

Right. Perfect. Then going to the different markets and absorption, you feel like most of the markets should be firming up as net absorption happens on the deliveries. Are there any markets that you're concerned about when it comes to net absorption and maybe free rent might start to seep into the market?

This is Janice again. So we've definitely seen some softening in the Raleigh, Charlotte and Charleston. Luckily for us, these are some of our smaller NOI markets. But definitely have seen an impact of the concessions on our assets in those markets. Based on the new supply that's going to be delivered in '24 and '25, Raleigh seems to subside. Charlotte is going to continue for a little bit, but we've been able to really maintain a good NOI there as well as Charleston. So we'll be continuing to utilize those levers to make sure that we're prioritizing occupancy and maximizing revenue we can.

Our next question comes from the line of Omotayo Okusanya from Deutsche Bank.

My question is specifically about the Sunbelt market. There seems to be some commentary regarding feeling that maybe some of the supply issues maybe kind of pick up -- moving more towards the rear view mirror in due time. Curious specifically how you're thinking through supply in the Sunbelt in terms of deliveries, ultimately, absorption and when we may start to see things turn or inflect in those markets?

Yes. Great question. We have some stuff in our investor deck, and we've kind of talked about it, I think, on our year-end earnings call and certainly in our Citi presentation back in March that the expectation we have is that the vast majority of the new supply should be through by mid-part of this year. There'll still be a little bit of lagging until the back half of the year, for sure, such that we'll have pricing power as we head into the back part of the year. The other thing that we expect, again, given some of the data we've seen and tunes modeling, is absorption this year should be much better relative to kind of the new supply growth, whereas last year, the absorption wasn't as strong. As Scott had mentioned earlier, we're still very bullish for the long term on the Sunbelt. And that we think that job growth and population growth will continue to be very bullish there and outpace the United States. And we're quite excited about kind of how the new supply is trending this year so far and kind of how to -- our more Class B product is more insulated.

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

Yes. I can't remember if you track this, but how many of your residents moved out to buy a house a year ago versus in 1Q, '24?

A great question. Last -- in the first quarter of last year, the reasons for move out was -- of the people that moved out, 16% moved out to buy a home. In the first quarter of this year, for those that moved out, 15% have moved out to buy a home.

And then on new leases, would you expect to see new lease growth stay volatile? Or should we expect to see continued improvement for the rest of the year?

As we continue to maintain occupancy as we go into leasing season, we'll start to see some pricing power over the next few quarters, again, still prioritizing occupancy within that pricing tower.

So volatile?

No. Our goal is to obviously sustain and to drive revenue where we can, and that would include pricing power and really working through that on a monthly basis.

And then I know you expected expenses to be higher this year. Is there a longer-term NOI margin you'd like to target?

There's no -- we don't necessarily target obviously an NOI margin. I think we continue to focus on maximizing that margin through time, which is we've talked about in the past using technology to become more efficient, continue to obviously drive rent growth and occupancy. And we won't be satisfied with any number and said that it's going to keep going up.

There are no more questions. I will now turn the conference back over to Scott Schaeffer for closing remarks.

Thank you for joining us this morning, and we look forward to seeing many of you at the upcoming conferences and then speaking again with you next quarter. Have a good day.