The Rent Roll with Jay Parsons

EP#46: Rich Hightower | 5 Takeaways From Apartment REIT Calls

Date: August 14, 2025
Host: Jay Parsons
Guest: Rich Hightower, Managing Director, US REIT Equity Research, Barclays

Episode Overview

In this episode, host Jay Parsons unpacks the top five takeaways from Q2 2025 Apartment REIT earnings calls, distilling crucial operational and strategic insights from some of the U.S.'s largest publicly-traded apartment owners. Jay explores how REITs are navigating today's compressed rent growth, operational strategies, expense control, investment activity, and more. The episode also features an in-depth interview with Rich Hightower, a seasoned REIT analyst, who shares Wall Street's perspective on apartment REITs, public vs. private market valuations, portfolio strategies, and trends impacting the rental housing sector.

Key Discussion Points & Insights

1. Market Health: Retention, Renter Strength, and Strong Portfolio Fundamentals

[03:20 – 08:00]

• Operational Strength: REITs report strong renewal rates, high occupancy, low turnover, and healthy renter financial profiles, even as new lease rent growth slows.
  • Camden's rent-to-income ratio is just 18.9% (well below national averages).
  • Equity Residential's new renter incomes are up 8.5%, with rent-to-income ratios down to 20%.
  • REIT executives emphasize the importance of resident satisfaction and retaining existing tenants for cash flow stability.
  • Camden’s internal customer satisfaction is at record highs.

"Occupancy is cash flow. Apartments and SFR, contrary to conspiracy theories, are no different than any other business. You want happy customers who want to stay with you." — Jay Parsons [06:10]

• Premiums for Renewals: Renters are staying even with renewal rates above market, with UDR and EQR pushing higher renewal rents while keeping high occupancy.

“UDR shared an interesting stat: they’re seeing very high retention, in fact it’s gone up, while still pushing renewal rents that they said are often about $100 more per month above market rents.” — Jay Parsons [07:15]

• But… Despite strength, new lease rent growth is flat or negative in many markets, influenced by defensive postures and an uncertain economic climate.

2. The Soft New Lease Environment: Defensive Posture & Regional Dynamics

[08:00 – 13:00]

• Uncertainty & Competition: Softening new lease rent growth is driven by:

  • Nervous market sentiment and economic uncertainty.
  • Historic new supply, especially in Sunbelt markets, intensifying competition (more concessions, even on stabilized assets).
  • Even in resilient markets like D.C., renters exhibit nervousness, leading to defensive pricing actions, not mass move-outs.

• Regional Standouts:

  • New York City and San Francisco are now surging, with San Francisco having a standout recovery.
    • Equity Residential: “The real standout...is San Francisco. Our blended rate growth of 5.8% here is the best in our portfolio...” — Michael Manella, EQR [11:01]
    • AvalonBay & UDR also report 97%+ occupancy and blended rent growth above 5% in San Francisco.
    • Suburban markets around San Jose, San Mateo, and Silicon Valley also report notable performance.

• Return to Office: Growth linked to tech jobs and increased office presence pulling people back to urban cores.

3. Renovations Remain Attractive Despite Supply Headwinds

[13:00 – 17:30]

• Value-Add Still Delivers: Contrary to expectations in high-supply markets, value-add renovation projects are yielding significant ROI—a “flight to quality” rather than affordability.
  • Camden: 3,000 unit renovations yielding 8–10% returns (~$150/month increases)
  • MAA: 2,678 upgrades, $95/month rent increase, 19% cash-on-cash return
  • IRT: 16.2% ROI on value-adds
  • Next Point: 26% ROI on upgrades

"If you can do that value add and deliver into that sweet spot...while still having rents comfortably below the effective rents for new units...that could be a sweet spot." — Jay Parsons [15:42]

• Faster Leasing: Renovated units lease faster than non-renovated—a sign of strong demand for higher-quality apartments.

4. Expense Growth Cooling—AI and PropTech Playing a Role

[17:35 – 22:45]

• Lower Than Expected Expense Growth: Largely due to favorable property tax and insurance outcomes across the U.S.
• AI Impact: Increasing focus on AI and PropTech for efficiency gains in leasing, fraud detection, underwriting, and delinquency management.
  • EQR: AI leasing pilots reduced application time by 50%, improved fraud detection, better satisfaction. Full AI rollout expected by year end.
  • UDR: $150M invested in PropTech, leading to margin, cash flow, and income growth.

“AI won’t necessarily cut your expenses, but it does slow down your rate of expense growth.” — Mark Perrell, EQR [18:55]

"These automation and conversational AI initiatives are set up to dramatically improve both our customer experience and operational efficiency." — Michael Manelis, EQR [19:47]

5. Investment Activity: Buying, Building—But Cautiously

[22:50 – 30:00]

• Acquisitions & Development Continue (but at reduced pace):
  • Most REITs lowered acquisition targets as transaction volume stays muted, pricing remains competitive, and bid-ask spreads linger.
  • EQR: Lowered full-year acquisition goal to $1B (from $1.5B). “The transaction market is not as active as we had hoped... pricing has become very competitive...” — Mark Perrell, EQR [24:10]
  • AvalonBay and MAA: Remain notably bullish on development, with AvalonBay increasing new development target to $1.7B.
  • Camden: Buying newer assets, selling older ones, proceeding cautiously with new developments.
  • Other active players: BSR in Texas, CenterSpace expanding into Salt Lake City, IRT active with planned acquisitions.

Industry News & Policy Highlights

[30:00 – 34:00]

• Elm Communities Liquidation: Elm Communities (formerly Wash REIT) to liquidate after selling core assets to Cortland, citing frustrations with public market valuation and growing aversion to regulated markets (e.g., Montgomery County’s rent control).
• New Rochelle Case Study: New Rochelle, NY keeps rents stable (+1.6% since 2020) by encouraging apartment development, offering incentives, and streamlining regulations: “Novel concept. So kudos to New Rochelle for doing it the right way, trusting the science...it’s just supply. So build, build, build.” — Jay Parsons [32:00]
• Montgomery County, MD: Rent control leads to sharp decline in multifamily construction permits, “redlining” the area for market-rate investors.
• International Note: Egypt plans to end “$1/month” rent controls, with Jay reiterating: “The most efficient technique presently known to destroy a city except for bombing is rent control.”

Trivia Segment

[33:30]

• Q: What was the last apartment REIT to IPO in the US?
• A: Clipper Realty (2017), focused on Manhattan and Brooklyn.

(INTERVIEW) Rich Hightower: Wall Street’s Apartment REIT Pulse

Introduction to Rich Hightower

[35:18 – 37:20]

• 20+ years' experience in REIT research and investment banking.
• Covered multiple REIT sectors, with deep knowledge of multifamily since 2015.

Takeaways from Q2 Earnings Calls & Market Differentiators

[44:45 – 50:00]

• Decelerating Trends: Rent growth and seasonal rent acceleration peaked earlier than usual; softening demand in some spots.
• Supply & Demand: Markets are supply-heavy, but long-term demand/absorption is key—Wall Street already looks ahead to 2026–2027, when supply drops “off a cliff.”
• Forward Focus: Investors care less about this quarter, more about the forward outlook.

“Trends are slowing… The supply response function kicks in and the debt markets are amenable to construction. And I think, that’s what those [Sunbelt] markets are living through now.” — Rich Hightower [45:04]

• Investment Analysis: Rich values apartment REITs like private equity—modeling 7–10 year cash flow trajectories, overlaying supply/demand at the market level, and pegging valuations accordingly.

Sunbelt vs. Coastal Markets & Portfolio Strategy

[53:18 – 55:41]

• Diversification Drives Strategy: Coastal REITs are raising Sunbelt exposure to reduce regulatory risk and chase job growth, but overwriting portfolios dulls investor choices.

“Diversification can be, just like a stock portfolio, an answer to [managing volatility].” — Rich Hightower [54:33]

• Investor Perspective: If all portfolios converge, “it’s going to be very hard” for investors to generate outperformance (“idiosyncratic risk”).

REIT Consolidation & Shrinking Public Universe

[57:41 – 61:28]

• Numerous rental housing REITs have gone private or merged (Tricon, ACC, Post, Forest City, etc.), with little new IPO activity.
• Rich’s Take: As long as there are 6–10 differentiated, liquid REITs, the sector remains viable.
  • “M&A can be a good thing. Some companies really shouldn’t exist separately as a public company.”

“If a company is perpetually trading at a discount to a reasonable valuation...it’s going to have a bad cost of capital, it’s going to have a tough time growing, it’s going to have a tough time getting attention from ... high quality investors...” — Rich Hightower [60:41]

Public vs. Private NAV (Net Asset Value) Debate

[61:28 – 64:11]

• It’s a “legitimate gripe” that public REITs may trade below private NAV, but deltas are tighter in multifamily than other real estate sectors.
• Stock buybacks, asset sales, or entire-company sales are tools to close the gap; investors expect action, not just complaints.

Investor Outlook: Key Questions & Metrics That Matter

[64:20 – 67:21]

• Hedge Funds Want to Know: How are peers positioned? What are model assumptions? Where’s there “crowded trade” risk?
• Macro vs. Micro: Some investors care about quarterly “beat or miss,” others focus on multi-year growth from development pipelines; both drive stock price movement.

“Depending on who you’re having the conversation with, it can be really granular...or much bigger picture.” — Rich Hightower [66:20]

What Will Drive REIT Investor Optimism?

[69:07 – 70:44]

• Re-acceleration in Rent Growth: Above all, what would trigger bullishness is a clear upturn in monthly blended rent growth (renewals + new leases).
  • Seasonal slowdowns mean the next window to see this is likely March–June 2026.

“If you start to see sort of an inflection positive in new lease growth and still pretty good renewals and the blends, you know, start to accelerate, I think that's probably what gets the stocks moving again...” — Rich Hightower [69:17]

Notable Quotes & Moments

• On AI’s Real Impact:
  “AI won’t necessarily cut your expenses, but it does slow down your rate of expense growth.”
  — Mark Perrell, EQR [18:55]

• On San Francisco’s Comeback:
  “Our blended rate growth of 5.8% here is the best in our portfolio ... this is a great example of where we saw a recovery in full force.”
  — Michael Manella, EQR [11:01]

• On Renovation ROI:
  “If you go in and you can do the kitchens and bathrooms program, you can effectively make an asset that’s 15 years old look like it’s brand new...and that is huge.”
  — Alex Jesset, Camden [14:40]

• On Portfolio Convergence:
  “If everybody’s portfolio in the sector melded into the same set of markets...it’s going to be very, very hard [for investors]....”
  — Rich Hightower [56:55]

Timestamps for Key Segments

• [03:20] — Takeaway 1: Resilient Retention, Renewals, Occupancy
• [08:00] — Takeaway 2: Soft New Lease Growth, Defensive Posture
• [13:00] — Takeaway 3: Renovations & Value-Add ROI
• [17:35] — Takeaway 4: Expense Growth Cooling, AI’s Role
• [22:50] — Takeaway 5: Investment Activity Update
• [30:00] — Industry/Policy News & Trivia
• [35:18] — Interview: Rich Hightower Intro & Career
• [44:45] — Q2 Call Themes: Slowing Trends, Forward Outlook
• [53:18] — Sunbelt vs. Coastal Strategy Discussion
• [57:41] — REIT Consolidation Trend
• [61:28] — Public vs. Private NAV Debate
• [64:20] — What Investors Want to Know
• [69:07] — What Could Make Investors Bullish Again?

Episode Tone & Style

The episode balances data-driven analysis and a conversational, accessible tone. Jay Parsons presents rich industry specifics with an appreciation for operational nuance, while the interview with Rich Hightower is frank, detail-oriented, and offers both high-level market context and practical, actionable insight.

For More

Full newsletter and additional written takeaways: jparsons.com

A must-listen for anyone who wants to stay current on apartment REIT performance, Wall Street sentiment, and the strategies shaping tomorrow’s rental housing landscape.