- Jay Parsons' Rental Housing Economics
- Posts
- 10 Themes & Highlights from Q2'25 REIT Earnings Calls
10 Themes & Highlights from Q2'25 REIT Earnings Calls
It's another mixed bag: Improvement in expense pressures, rental affordability, retention and renovation ROI ... but continued challenges in new lease rents and in deploying capital
Jay Parsons
August 15, 2025
Earnings call season wrapped up earlier this month for the apartment and SFR REITs, so let’s recap the biggest themes, highlights and takeaways covering 15 different REITs … and sadly that number will soon come down to 14 with Elme Communities’ planned liquidation.
It wasn’t long ago we had 20+ rental housing REITs! Do you know the last time we added a publicly traded rental housing REIT in the U.S.? It was back in 2017. I shared the answer on this week’s Rental Housing Trivia on The Rent Roll podcast.
And speaking of the pod (which the readers of CRE Daily just ranked as the #3 podcast in all commercial real estate… pretty cool!), the latest episode covers my Top 5 takeaways from the apartment REIT earnings calls alongside special guest Rich Hightower, managing director of U.S. REIT research at Barclays. For those on the single-family rental side, last week’s episode covered highlights from the SFR REITs. It also features a conversation with Sean Dobson of Amherst, which is privately held but Sean offers some fascinating insight on the market today – and also pontificates on how/when/why the narrative around institutional SFR went off the rails.
Back to today’s topic. I’m going to do things a little different than in past REIT earnings recap newsletter (hopefully for the better!). I’ll share my top 10 highlights and themes (with REIT exec quotes to add color), and you’ll see some more/different details to supplement what we covered on the podcast.
REMINDER: None of this is investment advice whatsoever, so please don’t interpret it as such. I’m just sharing things from earnings calls that I find interesting.
ALSO: If you’re interested in extended highlights from the 15 individual REITs, I’ve posted those on X (i.e. Twitter), and you can find those here (listed by market cap):
AvalonBay (AVB)
Equity Residential (EQR)
Invitation Homes (INVH)
Essex (ESS)
MAA (MAA)
AMH (AMH)
UDR (UDR)
Camden (CPT)
Elme Communities (ELME)
Veris Residential (VRE)
Centerspace (CSR)
NexPoint (NXRT)
BSR (BSR)
Clipper Realty (CLPR)
Ten Themes & Highlights from Q2’25 Earnings Calls
(CONTINUED BELOW…)
#1 - Expenses are coming in below budget – especially for property taxes and property insurance
Finally, right? This is the reverse of the storyline for most of the past few years. If there’s one silver lining to valuations dinged by higher debt costs, it’s the bills for property taxes and insurance. That isn’t to say tax appraisals are falling, but the rate of growth has slowed significantly … and in many cases, insurance premiums are indeed declining materially. I wrote more on this topic on LinkedIn for those interested.
“Year-over-year same-store expense growth of only 1.7% in the second quarter came in much better than expectations. These positive results were primarily driven by favorable real estate taxes and insurance savings, which collectively account for nearly 45% of total expenses.”
“We are lowering our same-store property and operating expense growth projections for the year to 2.25% at the midpoint … The lower guidance is primarily due to favorable property valuations in certain jurisdictions as compared to our original expectations. Also, we recently renewed our property and casualty insurance program on July 1 and achieved an overall premium decrease on our property and casualty lines.”
#2 - SFR REITs are seeing opportunities to buy newly built homes at a discount from homebuilders
We’ve all seen the articles about homebuilders offering generous incentives to individual homebuyers. Well, they’re now getting more generous with SFR operators, too – offering discounted prices on newly built homes.
“We're getting pretty significant discounts going in, which allows us to be really conservative on our underwritten rents.”
“We see a little bit of a change of late … from some of the large national builders and some of the markets that have maybe a little bit of extra supply, we're seeing an expanded willingness to negotiate on price. And it gives us a lot of optimism as we get into the back half of the year on that particular acquisition channels potential.”
#3 - Sun Belt apartment REITs still finding opportunities in value-add renovations … despite new supply headwinds
Do value-add renovations still work amidst high supply, high concessions and high rates? Apparently so ... if done right. It's yet another data point that -- in the market-rate apartment sector -- we're in more of a "flight to quality" environment than a "flight to affordability" one. MAA, Camden, IRT and NexPoint all reported meaningful rent premiums and ROI for newly renovated units, and plan to keep renovating. (I wrote about this in more detail on LinkedIn this week for those curious.)
“We continue to go after repositions. It just makes a ton of sense to us ... It makes sense no matter where you are in the cycle, but when you're in the point of cycle where you've got a lot of excess supply, realize that if you can go in and you can do a kitchens and bathrooms program, you can effectively make an asset that's 15 years old look like it's brand new. And that is a huge competitive advantage when we've got brand-new assets directly next door to us because that brand-new asset has got a much higher basis than we have, and therefore, they've got to charge much higher rent. Our asset has a lower basis, but it looks just like a brand-new asset because we've gone in, we've refreshed that kitchen, we've refreshed the bathroom.”
“Despite this more competitive supply environment, these units leased on average 9.5 days faster that non- renovated units when adjusted for the additional turn time. We still expect to renovate approximately 6,000 units in 2025 with more expected in 2026.”
#4 - REITs continue to favor capital recycling strategies
In both the SFR and apartment space, REITs continue to talk about recycling capital – selling older assets and using the proceeds to buy newer assets, often in high-growth markets with longer-term upside as supply pressures wane. Getting a bit tougher to do in some cases due to rates and pricing, but still the priority.
“We have a number of pending transactions expected to close in the third quarter. This includes almost $600 million currently under contract for sale... This increased trading activity further advances our long-standing portfolio allocation goals as we reallocate capital within our portfolio from older urban assets in our established regions to younger suburban assets in our expansion regions.”
“It’s a great way to continue to recycle and to also offset risk in the portfolio. So if (Invitation) sells a 45-year-old home in Southern California and reinvest in a brand-new home in Atlanta, we definitely like that as part of our capital recycling strategy.”
#5 - REITs want to build … but it’s tough to get deals to pencil out
REITs often boast about their lower cost of capital versus their private sector peers, and how that empowers them to stay active building and buying when most industry players are sidelined. And everyone (public and private) seems bullish on the upside of starting projects now that deliver into a low-supply environment in 2027-28. BUT despite that upside, deals still have to pencil out. And the tone seems to have soured just a touch in this last round of calls, given rates haven’t yet fallen and rents haven’t yet rebounded.
Also worth noting that there are some exceptions, as AvalonBay, MAA and AMH continue to be probably the most active REITs in terms of new development.
“We have some opportunities in the pipeline that we're working on. And in terms of yields, like everyone else, we're chasing a 6% yield on current rents on current costs. And that -- if you're honest about rents and you can work to deal hard, but it's hard to get to that 6%. So that's why the opportunities are scarce. It's not for a lack of trying on our part. We do think it will be a good opportunity to deliver in a couple of years. But to get those numbers to really underwrite and pay you for that risk is a challenge right now.”
“Developers are typically looking for 6.25%, 6.5% current yields, which are tough to attain with rents not having moved up as much as we would have liked to see in the last year while construction costs still typically moving up +/- 3 percent … We're trying to activate some of our development pipeline. We've got a land pipeline that supports a number of developments on a go-forward basis. And so in the next probably 9 to 12 months, we'll have a couple of additional starts as we get those teed up and ready to go.”
#6 - REITs remain active buyers … but maybe not quite as active as hoped
It’s a similar theme on acquisitions as it is on development: REITs are active buyers, but (broadly speaking) maybe not as active as they’d like to be. While we did see a number of transactions announced in Q2, we also heard some challenges about low cap rates – often below the cost of debt, even for REITs – for deals in the buy box.
“The transaction market is not as active as we had hoped it would be at the beginning of the year. As a result, pricing has become very competitive with cap rates for desirable assets we wish to acquire, often in the high 4% range, significantly lower than the cost of debt even for us with our highly rated balance sheet. As you saw in our release, we have lowered our acquisition expectations for the full year to $1 billion from $1.5 billion and expect to match sales and acquisitions this year.”
“There are instances of deals transacting in some cases, below 4 cap … I remain optimistic that we're going to be able to continue to source opportunities at better yields where we can generate accretion and allocate to the highest risk-adjusted returns. But it has gotten more competitive in Northern California.”
#7 - Contrary to headlines, the SFR REITs remain NET SELLERS of existing single-family homes
Wall Street is buying all the houses! This is one of the myths that never goes away, maybe because reporters have given scant attention to the fact that the biggest SFR players (including AMH and Invitation) are selling far more homes than they’re buying off the MLS. The REITs continue to sell older homes and redeploy capital into new construction (which, for them, tends to be more efficient use of capital) and portfolio acquisitions.
“During the quarter, our team reviewed tens of thousands of potential acquisition properties. The vast majority of these properties still do not meet our disciplined buy box criteria and we ultimately acquired a total of just five homes during the quarter. On the other hand, we continue to be active on the portfolio optimization front. Selling 370 properties in the second quarter for approximately $120 million of net proceeds at an average economic disposition yield in the high 3%.”
#8 - Market-rate renters remain in strong financial shape
As more data comes in, I continue to believe that improved affordability trends is one of the biggest tailwinds we don’t talk about enough. We’re seeing this across the board, with reported rent-to-income ratios among the REITs ranging from upper teens to low 20s.
It’s a good reminder that rental affordability is FAR MORE BIFURCATED than most housing researchers and policymakers realize or want to acknowledge. Yes, we have a severe shortage of affordable housing for lower-income households. But there’s also ample qualified demand for high-quality, market-rate rentals among households who can easily afford the rent.
“Our new lease rent-to-income ratio is 18.9%... And on a relative basis, since the consumers are getting a really good deal today on apartments because of supply and demand dynamics, they have a capacity to pay more in rent… You’re talking about a small amount of money on a relative basis to a very, very well-heeled consumer.”
“Our ratios are still very strong – income-to-rent in excess of 5x. And we've seen stated household income for move-ins in Q2 accelerate past the $150,000 household mark... And at the same time, credit scores are still remaining strong.”
And the wildest example of them all: Veris Residential (a small REIT operating in New York City area and in Boston area) reported rent-to-income ratios of just 10.6% with renter household incomes of $445k. I tend to think we throw around terms like “lifestyle renter” too loosely, but THAT is probably a true lifestyle renter.
“Many of our residents also work in Manhattan and have Manhattan salaries, around just under 10% of our residents have 7-figure incomes and the average household income is over $400,000 ($445,334). And so I think that figure is really reflective of the tenant profile and creditworthiness, if you like, of our residents and the income that underpins our properties.”
#9 - Retention and renewal rent growth remain strong, but new lease rent growth lags
For much of the past couple years, we’ve seen slowed new lease rent growth across both the SFR sector and especially the apartment market – primarily in higher-supplied markets across the Sun Belt and Mountain regions. One big theme from Q2 earnings calls: New lease apartment rents did not accelerate as much as expected across much of the industry … even in lower-supplied markets. (SFR new lease rent growth outperformed apartments.) But that impact to the bottom line continues to be partially offset by continued historically low turnover plus strong renewal rent growth. (For those wanting to dive into this topic in more depth, I wrote extensively about it last month.)
“We finished the quarter modestly ahead of expectations on renewal leasing due to another quarter of strong retention… However, … lingering supply pressures in some markets and potential residents being more discerning due to continuing macroeconomic uncertainties pressured market rents to a greater degree than we originally anticipated as we sought to continue to maintain occupancy during this time frame.”
“In late June and July, we have seen new lease growth slow modestly as operators remain defensive amid economic uncertainty and soft consumer sentiment. Renewal rent growth has been the strongest we've seen over the past 12 months and will remain a focus for the second half of the year.”
Worth noting some caveats here: First, while most markets have seen some deceleration in new lease rent growth, there are some clear exceptions – especially the San Francisco Bay Area. After an extended stay in the doldrums, San Francisco is arguably the hottest market in the country right now thanks to very little supply plus recovering demand drivers. (It was a similar story in New York City, as well.)
“The real standout market for this year is San Francisco.” – Michael Manelis, Equity Residential
“San Francisco continues to lead the region with almost 97% occupancy during Q2 and strong rent change of 8%.” – Sean Breslin, AvalonBay
“There’s nothing better when you start to see your new lease growth exceed your renewal growth that you sent out. And I will tell you, San Francisco is probably the one that's leading the pack for us.” – Mike Lacy, UDR
“We are seeing strength in Northern California.” – Angela Kleiman, Essex
Second: There were some split opinions on whether the rent trends are shifting so far in Q3, with BSR being one reporting a possible inflection point.
“Perhaps most importantly, in July, our same-community blended trade-outs actually turned positive for the first time since Q3 of '24, growing 1.1% — a very exciting development.”
#10 - Another rental housing REIT exit
The big news, of course, is the announced liquidation plans for Elme Communities, the apartment REIT formerly known as WASH REIT – further reducing the number of publicly traded rental housing REITs. Elme had in recent years diversified away from being a mixed-sector D.C. operator to one almost entirely focused on multifamily – and expanding into Atlanta as a second market. But Wall Street never really rewarded that shift, and it appears investors found better value in the private market. Elme announced the sale of 19 properties to Cortland, including (what appears to be) most of Elme’s most attractive assets. Elme said it plans to sell its remaining assets over the next 12 months.
For more thoughts on this deal if interested, you can read my LinkedIn post.
“Despite the success we've had in transforming our company into a focused multifamily platform with strong operating capabilities, the current market environment has made it difficult to lower our cost of capital in a way that supports our ability to scale accretively.”
— Now Spinning on The Rent Roll Podcast —
The Rent Roll with Jay Parsons podcast continues to frequently rank in the Top 100 podcasts on Apple’s charts for investing-themed podcasts. Thank you for helping us grow so quickly. New episodes are released every Thursday morning (though we did take a vacation last week – our first off week since Christmas. Back at it this week!).
Episode 46: Five Takeaways From Apartment REIT Calls with Barclays’ Rich Hightower
Episode 45: Five Takeaways From SFR REIT Calls + a Conversation with Amherst's Chairman & CEO, Sean Dobson
Episode 44: Q3’25 Apartment Market Update & Outlook with CBRE’s Matt Vance
Episode 43: Where Are Apartment & SFR Values? with Cushman & Wakefield’s Zach Bowyer
Episode 42: Rental Housing and The Media with Ten31’s Hiten Samtani
Episode 41: A Conversation with AMH’s New CEO, Bryan Smith
Episode 40: Contrarian Apartment Investing 101 with Waterton’s David Schwartz
