Financial Data and Key Metrics Changes - The company reported a solid second quarter with core FFO per share exceeding the midpoint of guidance by $0.07, driven by better same property operations and lower operating expenses [11][12] - The full year core FFO per share guidance was increased by $0.10 to $15.91, reflecting a 3.15% same property revenue growth and a 3.25% same property expense growth [12][14] - Year-to-date, the company has received approximately $30 million in preferred equity redemptions, with an additional $175 million expected before year-end [14][16] Business Line Data and Key Metrics Changes - The second quarter saw a 3% blended rate growth for the same store portfolio, with Northern California and Seattle leading at 3.8% and 3.7% respectively, while Southern California lagged at 2% [4][5] - Los Angeles experienced a challenging environment with only 1.3% blended rent growth due to elevated supply deliveries and legacy delinquency issues [5][20] - The suburban markets of San Mateo and San Jose outperformed with blended rate growth of 5.6% and 4.4% respectively, attributed to limited housing supply and better job growth [4][5] Market Data and Key Metrics Changes - The investor appetite for West Coast multifamily properties remains healthy, with deal volumes slightly higher in the second quarter compared to the previous year [8] - Average cap rates for institutional quality assets have remained in the mid-4% range, with some transactions in Northern California occurring in the low 4% range [8][72] - The company has been able to generate average yields in the mid to high 4% from approximately $1 billion of acquisitions in Northern California over the last twelve months [9] Company Strategy and Development Direction - The company plans to maintain disciplined capital allocation by funding acquisitions with select dispositions, aiming to optimize risk-adjusted returns and drive NAV and core FFO per share accretion [10] - The focus is shifting towards fee simple acquisitions and stabilized multifamily assets, with a reduced emphasis on the mezzanine finance book due to its volatility [40][82] - The company is tracking several large infrastructure investments related to the World Cup and Olympics in Los Angeles, which are expected to improve economic activities in the market [5][36] Management's Comments on Operating Environment and Future Outlook - Management expects modest U.S. GDP and job growth, with a stable job environment on the West Coast [6] - The outlook for the second half of the year assumes market rents will moderate consistent with normal seasonality, with a potential for higher outcomes driven by increased hiring and a favorable operating environment [7][8] - Management noted that the softness in the macro economy is impacting demand, particularly in Southern California, which mirrors the broader U.S. economy [20][21] Other Important Information - The company has executed several transactions to enhance balance sheet flexibility, including a $300 million delayed draw term loan and an expanded line of credit [15][16] - The structured finance book is expected to decline significantly, with projections of being less than 4% of core FFO by year-end [14][98] Q&A Session Summary Question: What drove the weaker blended pricing in Los Angeles? - Management indicated that the underperformance in Los Angeles was due to heavier supply in the first half, slow delinquency recovery, and a soft demand environment [18][19] Question: Is there strength in Northern California that is not being fully appreciated? - Management confirmed strength in Northern California, with job postings gradually increasing and performance slightly better than expected [24][25] Question: What are the expectations for concessions in LA? - Concessions in LA remain elevated compared to the rest of the portfolio, slightly higher than the previous year but not dramatically worse [46][47] Question: How does the company view the impact of CEQA reform? - Management views CEQA reform as net positive, although it expects limited near-term impact due to existing economic challenges [102][104] Question: What is the expected cadence of earnings from the structured investment book? - The structured finance investments are expected to decline significantly over the next few quarters, with repayments anticipated to reduce the book size substantially [98][99]

Financial Data and Key Metrics Changes - For Q1 2025, the company reported a net loss of $6.9 million or a loss of $0.27 per diluted share on total revenue of $63.2 million, compared to a net income of $26.4 million or $1 earnings per diluted share for the same period in 2024 on total revenue of $67.6 million [7] - Net Operating Income (NOI) for Q1 2025 was $37.8 million on 35 properties, down from $41.1 million for Q1 2024 on 37 properties, reflecting a decrease in same store revenues of 1% and a decrease in same store NOI of 3.8% compared to Q1 2024 [7][8] - Core Funds from Operations (FFO) for Q1 2025 was $19.1 million or $0.75 per diluted share, compared to $0.74 per diluted share in Q1 2024 [7] Business Line Data and Key Metrics Changes - The company completed two full and partial upgrades during the first quarter, leasing 201 upgraded units with an average monthly rent premium of $62 and a 16.1% return on investment [7] - Since inception, the company has completed 8,558 upgrades, resulting in an average monthly rental increase of $172 and a 20.7% return on investment [8] Market Data and Key Metrics Changes - Occupancy at the end of Q1 2025 was 94.4%, with significant growth in Nashville and Phoenix, which finished at 95.4% and 96.6% respectively [11] - The company noted that national absorption was strong, with over 38,000 units absorbed in Q1, marking a record first quarter leasing performance [13] - Effective rents ended the quarter at $1,495, up 30 basis points from Q4 2024, with six out of ten markets showing flat to positive rent growth [16] Company Strategy and Development Direction - The company is focusing on driving internal growth and recycling capital as supply continues to be absorbed later in the year, with an emphasis on rent growth initiatives in most markets [20] - The management is optimistic about the inflection of new lease growth, which is seen as a positive sign for the company's assets after several quarters of softness [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the leasing environment, noting that same store NOI is expected to improve over the remainder of the year despite a 3.8% decline in Q1 [12] - The company is monitoring the impacts of tariffs but has not seen a material effect on operations thus far, with most suppliers maintaining stable prices [18][19] Other Important Information - The company declared a quarterly dividend of $0.51 per share, which was 1.4 times covered by core FFO with a 68.3% payout ratio [8] - The company has initiated a share buyback program, purchasing 223,109 shares totaling approximately $7.6 million at an average price of $34.29 per share [10] Q&A Session Summary Question: Are there markets where cap rates are softer? - Management indicated that Atlanta and some areas in DFW are on the weaker side of the NAV guidance due to ongoing supply [25][26] Question: Could the company sell more assets to repurchase stock? - Management confirmed the intention to maintain a steady buyback program while being opportunistic in recycling capital [28] Question: Is the increase in core FFO guidance driven by share buybacks and swaps? - Management confirmed that the increase is primarily due to favorable swap rates and share buybacks [31][32] Question: What is the outlook for new lease growth? - Management expressed optimism about achieving a 2% growth in new leases for the year, driven by strong demand and limited supply [50][51] Question: What is the CapEx guidance for the year? - Management indicated a stable run rate for recurring and nonrecurring CapEx, with a target of around 300 interior upgrades in Q2 and Q3 [53][54]