← The Rent Roll with Jay Parsons
The Rent Roll with Jay Parsons
EP#73 Rich Hill | 7 Takeaways From SRF REIT Calls + Finding Opportunities in Rental Housing
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Foreign welcome. It's the Rent Roll, your podcast on all things rental housing, apartments, SFR and BTR. It's episode number 73 and when I think of 73, I think of the great offense, alignment and football. That's a great lineman number, isn't it? 73 that was mourned by guys like Larry Allen of the Cowboys, Joe Thomas and the Cleveland Browns, John Hannah of the Patriots, all Hall of Fame lineman. But anyway, enough of that. Let's talk about today's topic, which is seven takeaways from the single family rental rates earnings calls that just wrapped up last week. These are always interesting and they take on some increased importance this quarter given the parade of attacks on their businesses now come from both sides of the aisle in D.C. aMH and Invitation Homes, the two big SFR REITs. Of course, you know they've generally avoided the spotlight or even doing much public commenting at all since President Trump first came out with his proposed ban on investors. Large investors buying single family homes. But thanks to the quarterly earnings calls cadence, we can hear from now, what are they saying? We're cut through all the formalities of it. What are they saying, how are they reacting and what do they think might play out? So we'll get into all that. And as well as just what's going on the SFR business today, a little bit slower leasing right now, we'll get into a little bit of that. And what does that mean for 2026? By the way, if you missed it, we covered our takeaways in the apartment REIT calls a couple of weeks ago and you can find that on your streaming platform of choice. It's episode number 71. All right, our guest today also is going to be a good one. It's Rich Hill. He is the global head of real estate research and strategy for a major institutional investor, Principal Asset Management. And Rich is also a former REIT analyst himself. So we'll get his take a little bit on the REITs, but also a more broad conversation about where Rich sees opportunities in rental housing today. From SFR and BTR to apartments to senior student housing, manufactured housing, etc. So stick with us for that. Rich always puts out some really thoughtful research and I think you're going to enjoy his perspective. All right, before we jump in, let's give a big shout out to our sponsors. First and foremost, big thank you to jpi, a leading Hartman developer. The state of purpose to transform, building, enhance communities and improve lives. Check them out. J jpi.com Also, big thank you to Madera Residential leading Harmon owner and operator based in Texas and expanding into the Southeast. Check them out@madera residential.com all right, so we're gonna kick off with a section we call here's a chart and today it's going to be, here's a list. We got seven takeaways from those SFR REITs. And this segment is going to be presented by Mason Joseph Multifamily Finance, the number one FHA construction lender in the Southwest for a reason. Since 2016, Mason Joseph has closed as many FHA construction loans in Texas and surrounding states as the second and third place lenders combined, according to my friends there. So check em out. Mason Joseph all right, so let's jump in. Top 7 takeaways from the SFR REITs Q4 2025 earnings calls which just wrapped up last week. Obviously, the big news is President Trump's proposed ban on large investors buying homes. We had the tweet, or rather the truth social post followed by an executive order and then some proposed legislation. The executive appears to have limited reach. I've talked about that previously. But Congress of course could have a bigger impact through potential legislation. It's unclear, I think at this point what congressional leadership, what kind of appetite congressional leadership has for a ban. But it, obviously it's, it's, I've mentioned this a lot. It's, it's uniting some unlikely bedfellows, the populist wings of both parties, the MAGA Republicans and progressive Democrats. And I've noted the irony before, but it's worth repeating the intellectual hypocrisy of both sides. For Republicans, it's anti free market and they know that. For progressive Democrats, it's anti diversity and they certainly know that most renters don't have the credit scores or they certainly should know that most renters don't have the credit scores or the cash to buy a house. So rentals obviously play an important role in diversifying neighborhoods with families who couldn't otherwise afford to live there. So it baffles me why progressives are taking a regressive approach here. And I'll talk about that a little bit when we get into the Democrats proposed plan. But it is what it is. And so the question really right now is what are the REITs saying about all this? So our first three takeaways will relate back to the policy topics as well as company strategies. There's going to be some clear overlap, but here's the first one. Number one, REITs are taking a cautious, non aggressive response to proposed legislation. So if you thought they'd come out guns a blazing. You're wrong. They've. They're taking a very cautious, measured approach here. In fact, as I mentioned earlier, they've not even offered up any real public comment at all until the earnings calls this week. I'm sure they're active behind the scenes, but their response has been publicly as their response has been, like I said, very measured. Not panicky, more of a wait and see. And there are probably a lot of reasons for that, but I think a big one is that this ban, while obviously not helpful, doesn't really impact the core business strategies of either AMH or Invitation. But let's just set that aside for a moment. I want to tell you what they actually said. Here's Dallas Tanner. An invitation. He said this. I think it's a little too early to speculate on what we do or don't want to see from legislation in some regards. I think the industry is hoping for clarity. I think we like the idea of having some clarity of what you're able to do versus maybe what you're not able to do. It certainly feels like BTR and the production of new product is something that feels pretty favorable based on the conversations we've been having. So we view that as a positive. And then Brian Smith at amh, he said this, he said we've been actively engaged with policymakers at the state, local and federal level. There's still a lot of, there's still a lot moving in the definitions and just on how this is all going to ultimately shake out and the mechanics of how it affects smaller operators versus larger build to rent versus scattered site are all unclear. But the good news is from these meetings there's a clear understanding that supply is not kept up with demand and supply solutions are continuing to be sought. The other piece that we're as an industry with our partners are trying to make sure everyone realizes the importance of single family rentals in the full housing ecosystem. All right, so it's the high level response. Of course, both said they're active behind the scenes. They're trying to get the facts in front of policymakers in D.C. as well as in local markets. But they both seem to favor that approach over a very public campaign. And that takes us to number two, the heightened emphasis on selling existing homes and building new homes. And obviously that's been a strat, if anybody's been paying attention. That's been a strategy of the REITs for years. But again, it takes on heightened importance now. And we saw this in the earnings calls a heightened emphasis on this strategy. Now again, it's not new. It's not just a reaction to policy. This has been going on for a while. It's worth noting though, just a friendly reminder for those listening that the REITs have been net sellers of existing houses for a long time, not net buyers. It's not the early 2010s anymore, when banks were auctioning off millions of vacant foreclosed homes at attractive prices and individual home buyers were largely sideline. Those days are long gone, even if public perception is still rooted in that era. And so both REITs really emphasize this pre existing strategy shift on their calls last week at AMH, Brian Smith said in 2017 made a strategic decision focused on ground up development to meet the growing demand for single rentals. Since then, our in house development program has added over 14,000 newly built homes across the country. For the past few years, MH has not been materially active buyers on the MLS. Instead, we've been an active seller. In 2025 alone we sold over 1800 homes to individual homeowners. In 2026 we expect similar activity. Proceeds from these dispositions continue to provide necessary capital for our development program. In 2026 we plan to deliver around 1900 newly constructed homes in the across the portfolio in the foundation for Future Growth remains centered around adding homes through our in house development program. Also, AMH made the point they'd actually like to sell even more homes if they could, but they're limited. What they call a quote natural governor that limits sales and that's of course active leases. People are living in 95% of these houses and they're probably not going to get evicted just so the Reeds can sell a house. One reason dispositions are attractive though, once there is a move out is that regardless of federal housing policy, it's just simple math. The math is very favorable for being net sellers, amh said. They're selling homes at a cap rate in the high threes and when they're able to redeploy proceeds into new development, they're getting yields in the fives. So that's a very favorable trade there. Not just a mere PR pivot to appease policymakers. It's actually a win win with the addition of that new supply. And by the way, Brian at AMHC said their focus on new development a handful of markets Houston goes out Columbus, Ohio, the Carolinas plus Seattle and Invitation Homes. Similar message Invitation announced the acquisition of a BTR developer and GC Resi Built based in the Southeast. Invitation has been an active buyer of course of new homes, newly built homes and BTR communities buying those from builders in the past. But now they're bringing this in house development arm, which AMH had done previously. So Dallas Tanner Invitation he said one of the most constructive ways we can help is by adding more homes to the markets we serve. While our home builder partnerships have supported that effort for years, our acquisition of Resi Built expands even further and improves our control over cost, product quality and delivery pace. Resi Built is already delivering homes at a pace of over 1000 homes per year in its fee based business. We expect that to grow, we expect we, we expect to grow on that foundation over time to add even more high quality homes for Americans where demand remains strong. So Invitation said they're going to continue RESI builds third party BTR construction business building for their operators while also building for imitation as well. And Imitation also said they're going to focus in Resi Built existing geographic footprint, which is Georgia, Florida and the Carolinas in particular. Scott Eisen at Invitation singled out Charlotte, Atlanta and Orlando. And to fund new development, Invitation will be, you guessed it, selling existing homes. Invitations Jonathan Olson said they're expecting $550 million in dispositions for 2026. So that's presumably somewhere around 1500 homes, give or take a few hundred. I'm just speculating there based on some rough math. So anyway, again, selling a lot of houses. That takes us to our third point and again stemming back to the policy debates. The REITs really emphasize the role of SFR in America's housing fabric. In particular, try and take on the false narratives that all these SFR renters would be homeowners if not for these investors who own these homes. That's just not true. As I've talked about extensively, especially on our Myth Busting podcast episode a while back, most renters do not have the credit scores or the cash to be home buyers, so rentals play an important role in housing families who can't buy a house or maybe just aren't ready to be home buyers for other reasons as well. So a big part of that story is affordability of renting relative to home buying. Brian Smith at AMH said our homes provide access to the same desirable neighborhoods and at a fraction of the estimated monthly cost of homeownership. And that's true. And there's some good academic research that I've shared previously that backs that up, that rental homes give access to neighborhoods into schools that these renters could not otherwise afford to get if renting were not an option if renting weren't an option. And Dallas Tanner Invitation said this. He said, we are committed to providing well maintained, high quality homes. And that commitment matters even more today as higher home prices elevate interest rates and large upfront costs have put buying out of reach for many households. And then he says about 12 $12,000 a year more on average to be a new homeowner versus a renter. And so renting allows him to build savings and access better neighborhoods and schools might be otherwise out of reach. He also emphasizes the rent reporting programs that Invitation is using have helped renters improve their credit scores, hopefully enough to qualify for a mortgage at some point in the future. He said they have. They've seen an average lift of 50 bips in credit scores from those adopting all right, so there you have our key. Those are the three key responses to the proposed bans. We'll see how this plays out. Hopefully science and math end up prevailing over counterproductive policy ideas that only drop the cost of renting for families who can't afford to buy a house. But we'll see. But now let's move on to some other takeaways from the earnings calls. So let's get to number four Slow winter leasing plus competitive supply pressures are impacting rents. So I thought it was interesting that there seemed to be this noticeable shift from the BT, sorry from the SFR REITs regarding the leasing environment even for the winter months which are always seasonally slow for the most part. The vibe on these calls is that the supply pressures are clearly impacting leasing and maybe they're really more blunt about that to some degree than previously. And by the way, when I say new supply, not just build to rent supply build even apartment supply competing with SFR and spots and also an important one from also supply from the increased scattered site SFR supply in some markets, from mom pop owners or from so called accidental landlords who were unable to sell their house for a desired price. They put the house in the rental market instead. So let's read some quotes here at amh. Brian Smith said operationally our teams did a great job navigating a challenging environment in the tail end of 2025, which included seasonal demand, moderation and stubborn supply that put downward pressure on rate and occupancy heading into the beginning of 2026. Brian also said that leasing traffic seems pretty normal, but that quote our prospects have more choice in the marketplace imitation homes. Jonathan Olson mentioned the same thing. He said, I would note that in terms of the top of the funnel demand lead volume feels pretty healthy compared to last year and the challenge for us at the moment, and this was true in the fourth quarter as well, was just the amount of available inventory on our book and in some of the markets where we operate. So again, renters have a lot of choices. Back to amh Lincoln Palmer said this he said as we come into 2026 we're seeing that the start of the leasing season that we normally would see may be slightly delayed from where it was in previous years. We had expected to build a little bit of occupancy coming into end of 2025 and start in the year in a position of strength. Despite some price action. We came in a couple hundred houses behind just to put a context behind where we sit today. So in other words, occupancy wasn't quite as high as they wanted to be going into the new calendar year. And Lincoln singled that handful of markets where supply pressures are notable and he noted some different supply pressures in each of these. He mentioned multifamily supply competition in San Antonio, he mentioned build rent competition in Phoenix and he mentioned mom and pop scattered supply competition in Las Vegas. At the same time he said the Midwest remains far less supplied and performing better, which is of course similar to what here on the apartment side as well. Imitation. They mentioned supply pressures in Florida, Texas and Arizona and again not just new construction but scattered site as well. Tim Loebner said we see slightly higher levels of on POP sfr people choose not to sell, they enter that product into the rental market. All right. Number five retention is still high. No surprise. This has been the case for a while given a number of factors. Most noticeably or most notably I should say the significantly higher cost of owning versus renting right now which has slowed down move us to home purchase. So that's not new. I'm not spend a ton of time on this one. Just a couple quick stats invitations said turnover remained low at 22.8% last year consistent with the prior year. Average length of stay is now over three years. Same store average occupancy for the year is 96.8%. AMH reported their turnover at 26.3% for the year which was down 150 bips year over year. Takeaway number six REITs are presenting measured expectation for 2026 pretty similar to the themes we heard from the apartment REITs. Not a big year, not a bad year. A measured 1 and 1 where revenue growth is expected to come in below 2025 levels. Invitation said they expect revenue growth of 1.9% at the midpoint compared to 4 actuals in 2025. They also expect a bit more revenue, I'm sorry, a bit more expense growth in 26 than they saw in 25. So that would bring same store NOI growth from 2.3% in 25 to 1.15% in 2026. Amate said they're expecting revenue growth of 2.25% and revenue growth, I'm sorry, expense growth of 2.75 for NOI growth of 2% at the midpoint. Now, obviously important caveat, I'm not a cfa, not an investment advisor, just relaying the reporting here, not telling anybody what to do. But to me, the key storyline here is just the continued impact of supply of all types on rents and how that had played a role in 2025. And that's going to in turn impact revenues in 2026. But the affordability advantage for SFR should in theory be a boost to the demand side over time, particularly whenever the job market improves again. So we'll see how that plays out. All right, our seventh and final takeaway, SFR REITs are buying back their stocks Now. Of course, we heard the same theme from a lot of the apartment REITs as well. Stocks are trading at a big discount to net asset value. That makes these buybacks more attractive invitations. John Jonathan Olson said that his company has repurchased 3.6 million shares for about $100 million, planning more stock buybacks so they continue to sell existing homes. He said, we see meaningful value in our shares and expect to continue repurchasing as opportunities permit. At AMH, Chris Lau said, we fully utilized our remaining $265 million share repurchase authorization and repurchased a total of 8.4 million common shares, representing approximately 2% of total shares units outstanding. Chris said AMH will consider additional buybacks and has authorized authorization to do so, but also wants to deploy capital for new development. He said, quote, while the stock price continues to represent an attractive capital deployment opportunity, given the recent tension to our industry and ongoing capital market uncertainty, we plan to take a patient approach to the timing of additional repurchases. All right, so There you go. Seven takeaways from the earnings calls of the two big SFR REITs. I'll have a little more detail coming out in my newsletter@jparsons.com newsletter. So that'll be coming out in the next couple of days if you want to dive in a little more detail next up. It's Time for some rental housing trivia. All right, today's trivia is presented by Authentic. If you've got a property that's underperforming and you can't quite figure out why, check out their multifamily leasing and marketing audit. They'll dig into your pipeline, your leasing funnel and your comps and tell you exactly where things are breaking down, plus strategies on how to fix it. Listeners, the pod get 50 off. So head to authenticff.com click on the banner to learn more and to claim. Claim the offer. All right, so today's question is what share of US Single family homes? These are all homes are owned by the combined SFR REITs. Do they own 0.16% of US single family homes? Is it 0.56%? Is it 1.16? Or is it 3.56? So I know it's a little tricky giving the second decimal, but I'm not trying to trick you here. You got four very different answers. Which one is it? We'll give you the answer here in a bit. But first it's time for in the news. And before we get into this segment, I want to give a shout out to my friends over at CRE Analyst. They are running what I think is going to be the most substantive survey on AI and commercial real estate to date. It's not a vendor survey, it's not sponsored by some random AI startup, just practitioners talking about what's actually happening inside their firms. Obviously, nobody really knows the full effects that AI could have, rather just speculating and letting fear drive us from narrative to narrative. I appreciate that CRE Analyst is really trying to set a benchmark for for the industry and that the benchmark is based on industry depth. So you could find the five minute survey over at creanalyst.com AI and take that survey. If you're anybody in the commercial real estate industry, your perspective matters. And by the way, a little care here. All respondents will get a detailed report before the general findings are publicly released. That's going to be good. That's a good incentive. Again, go to creanalyst.com/AI to take the survey. All right. In the news when we give you headlines impacting the multifamily single family rental space. We got five headlines. I think this week, a lot of big news. First one comes to the Wall Street Journal. It says White House offers new details on its plan to push to ban housing investors. Trump wants to prohibit investors who own more than 100 homes from buying more, potentially banning hundreds of Investment firms. All right, so a couple of quick takeaways here. The we haven't seen this actual legislation, but according to what the copy that the Wall Street Journal saw, they're defining large investors or institutional investors as those with 100 plus homes, which of course that means that in fact that this ban would impact a lot more local and regional groups and it would impact institutions. In fact, I think it may be more than 100. The articles speculate, hundreds. I think we actually could be in the thousands of different investment groups at impacts. Number two, it exempts build to rent construction and homes needing heavy repair, which obviously most individual buyers can't. More complicated mortgages, more cash required. So that's an important exemption. Number three, it does not require mass evictions as some of the crazies have proposed. Of course, by mass evictions they'll really be enforcing investors to sell their homes, which would result in evictions, people who are currently renting in those homes. Fourth thing is that this legislation goes to Congress for potential legislation. The Journal says that's no sure thing it would pass, but we'll see. As I mentioned multiple times, it does bring together a unique alliance of progressive Democrats and populist Republicans. So we'll see where that ends up, even if it ironically violates both of their core principles, like I mentioned earlier, anti free market, anti diversification neighborhoods. So we'll see where that goes. Now, after Trump put out his plan, the Democrats came out and put out their own plan. At least some of them did. Here's the headline from cnbc. Democrats counter Trump's Proposal to limit Institutional Housing Investors. It says, Let me read a little bit this. It says both congressional Democrats and President Donald Trump both want to limit how many homes major corporations can own. But a new proposal from Senator Elizabeth Warren makes it clear that's where the argument, that's where the agreement ends. In a bill released hours before Trump's State of the Union speech, Warren and 17 other Senate Democrats propose ending some housing related tax benefits for major corporations. The bill would prevent companies with more than 50 single single family homes for rent for taking deductions for housing value depreciation and mortgage interest payments. Corporations would also be barred from getting federally backed mortgages. All right, so this is just wild to me. It's like Twilight Zone stuff. We have this race between the White House and some progressive Democrats to see who could be the most anti science, most groveling, populist approach to housing even. It means hurting families who rely on single family rentals because they can't afford to buy a house. And this piece from CNBC, it reads like a press release even suggesting that companies 50 houses are somehow a major corporation. And no mention of the real facts of the matter. So come on, let's do better disappointing coverage here. But you know, you know, obviously the other thing to point out here is that the Democrats proposal would obviously just drive the cost of operating rentals which in turn is going to wrap the cost of renting for renters. The higher the cost of managing rentals, that cost will eventually be passed down to renters. It may take time, it may take time to play out, but it's not complicated. It'll happen. So if you're a progressive Democrat, why are you advocating regressive policy that would backfire on families who don't have the credit scores or the cash to buy a house? You know, I think some of these people are unfortunately so blinded by their distrust of business that they aren't considering the reality of who they're hurting most, which are the families who rent these single family homes. So here's my take. Why don't we trust the science and the research over opinion polls? I think that'd be a better approach to housing policy. But that's just me. All right, headline number three Varys residential to be acquired by Phineas Capital led Investor consortium for $3.4 billion in cash. So here we go. Another apartment REIT bites the dust. Varys Residential becoming the latest apartment REIT to be sold or liquidated. And by my count that's at least 18 or 19 in the last 15 years since the great financial crisis. Still have about 12 left verus. They're about 6,600 units. They're northern New Jersey and Boston. They're best known for really remarkably high renter incomes. They report every quarter and they're well until now reporting every quarter there some of their data, they show their most recently average renter incomes. Renter incomes were $480,000 or 10 to 12% rent income ratios. So whenever I share that on on social media I always get some disbelief like what? How could these numbers be that high? So pretty impressive numbers. Anyway, Veris said the $3.4 billion sales price marks a 27.5% premium to the company's 30 day volume weighted average price. And so that's yet another sign that the private market thinks the public market is a very poor measure of apartment values. And hence this wave of take privates. All right, next headline. This goes back to the Wall Street Journal. Once America's most affordable rental city. Austin is about to get more expensive. Rents in the Texas capital look poised to rise as the backlog of newly built apartments starts to run dry and people keep moving to the city. All right, so as soon as I saw this, I thought, man, I know every multifamily GP investing in Austin is probably sharing this article with their LPs. And so the question is, is Austin really about to boom again? Well, I do think it'll happen eventually, yes. But I will say, you know, I hate to say this for my Austin friends, but I feel like this article is a tad early. So let me share with you a wild stat. One in four Austin apartment units were built just in the last five years. I mean that, that's just a crazy stat. One in four of all the apartments were built just in the last five years. And that supply impact has yet to really mitigate now. So deliveries are coming down, but we're still seeing the impact. As of, as of here in February, Austin rents were still down 8% year over year. It's been hovering around that mark since early 2024 and that followed a cut of 6% in 2023. Still a lot of concessions. We've. So we've not yet really turned the corner in Austin and I think it's probably going to be a later one to recover versus some other ones. I could be wrong, but I still feel like that could be the case. That being said, in the longer run, Austin's going to be fine. You know, it may take some time for the right rebound kicks in again, but it'll happen. Austin's still attractive for all the reasons Austin's been attractive. Those things haven't gone away. And affordability is going to be a key driver now that rents have been growing much slower than. Well, rent's been falling while income has been rising for the last three plus years. So rent income ratios for new lease lease liners are now 20%, which is really low. So again, Austin's going to be a continue to be a magnet for people and for jobs, especially once the broader macro economy starts to regain its footing. All right, one more headline for you. This one comes from the Atlantic. It says high end construction really does help everyone. A new rung at the top of the housing ladder permits people lower down to climb up. All right, let me read a little bit from this. It says one well worn refrain of progressive urban politics is that new luxury housing will not solve the housing shortage. A 2024 survey of U S voters found that 30 to 40% believe more housing would instead increase prices. Another 30 believe that it would have no effect. But the research generally points in the other direction. More housing supply of all kinds leads to lower prices. And in general terms, a new study lays out exactly how a brand new building could open up more housing and other lower income areas gr the conditions that enable prices to fall. And so researchers found in one property I believe is in Honolulu. If I remember correctly, it said new housing freed up older cheaper apartments, which in turn became occupied people, leaving behind still cheaper homes elsewhere in the city. And so on. The paper estimates the tower is 512 units created at least 557 vacancies across the city. That's pretty amazing. So again, once again, friendly reminder, next time someone tells you we don't need more luxury apartments, we just need affordable, tell them absolutely wrong. We need all of the above. We need both because when we build even higher end units there is a benefit to those at lower end of the market as new supply brings people up from higher income renters up from lower priced units into those higher priced units opening availability at the lower and more moderate price points. All right, next up, it's time for our newest segment Good News. And that's to highlight the good news happening across the multif family and single family rental space. Because there is plenty of good news happening too, even if the good news rarely gets as much attention. And good news is presented by my friends at Apartment Life. Apartment Life coordinators help apartments owners care for residents by connecting them in meaningful relationships. This in turn benefits everybody from residents well being to the satisfaction of the on site staff to the apartment community's bottom line. If you own or operate apartments and aren't partnering Apartment Life already, check them out@apartmentlife.org it's a faith based nonprofit. It's been around for nearly three decades. And this week's good news comes from Community Dad Partners. Community is of course run by my friend and past podcast guest on the show, Antonio Marquez. Community has a unique model of providing affordable housing coupled with a nonprofit services arm which providing a number of services to help lower income renters. And Antonio talked about this in this podcast a while back. One of those programs they offer is telehealth, the opportunity to have a doctor's appointment over zoom or a phone call. And recently Community Impact Coordinator was talking with a resident who needed help getting to a doctor and the coordinator helped connect them with connect faster with a doctor via telephone. And that flexibility meant that they didn't have to rearrange their work week to visit a doctor. And that's a big deal, especially where families with kids where the parent doesn't necessarily always have the flexible work schedule and may miss out on a paycheck when the kid needs to see a doctor. So instead they can see a doctor virtually around their own schedule of when they're not working. So that's a huge, huge value. And sure enough, 33% of Cunidad's residents have adopted telehealth services. So that's a fantastic impact. Well done, community partners. By the way, if you have a good news story to share, email it to info parsons.com and we may feature it in a future podcast. All right, let's get back to today's trivia question. The question was what share of US single family homes are owned by the combined SFR REITs? Was it 0.6%? I'm sorry, rephrase that. Was it 0.16%, 0.56, 1.16 or 3.56? And the correct answer was a just 0.16% of homes are owned by one of the single family rental REITs. They own a combined 137,000 or so homes among the nation's 87 and a half million single family homes. All right, next up, it's time for today's interview sponsored by funnel, the AI and CRM software trusted by four of the six major REITs and many more leading operators like BH and Cortland. To learn how Funnel can help your properties centralize operations and automate everyday tasks that visit funnelle leasing.com and one more reminder for you, the Funnel forum is coming up in a few weeks. It's going to be March 23rd to 26th. Check them out@funnel leasing.com forum. It's going to be a great event. Big focus on operations, AI centralization, the human side operation as well the mix between AI and people power. So it's going to be in Scottsdale at a five star resort. I'll be speaking there. So I'd love to hopefully see some of you there and hopefully you can take some ideas back to your team from this event. It's gonna be a good one. All right. Our guest today is a former REIT analyst who still knows the REIT market well, but now has a much broader purview on housing, on commercial real estate more broadly. Rich Hill, senior managing director and global head of real estate research and strategy for Principal Asset Management. We'll talk with Rich a little about the REITs, but more broadly about what he's seeing for in terms of opportunities in the rental housing space at large. By the way, Rich is one of my favorite real estate researchers on LinkedIn, always pushing, pushing out, putting out some really thoughtful research that's grounded in reality and in data. So I'm really honored that he's able to join. So let's jump in. All right, now we enter the interview portion of today's podcast and I am absolutely honored to welcome in Rich Hill. So, Rich, thank you so much for being with us today.
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B
Jay, thanks for having me. I guess you would say first time caller, longtime listener.
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Well, hey, I'm honored. I'm a longtime follower of your work and before we get into it, I just want everybody who's not familiar Rich's work to know that, you know, Rich puts out some of the most in depth, interesting stuff on research with more frequency than a lot of people out there. So really appreciate the work you do and I'm excited to pick your brain. Before we get into all that, Rich, tell us your story. How did you get into the wonderful world of real estate research?
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Yeah, it's, it's a good question a lot of people ask me. So I actually grew up in a real estate family. My, my dad was a mall manager. I like to tell people that means he managed malls for people that own malls. My family did not own malls, but I grew up in malls up and down, up and down the East Coast. I had actually no desire to get back into commercial real estate when I graduated undergrad. But as fortunate would have it, I was put on interest rate derivatives desk covering commercial real estate developers and home builders, moved over to the debt capital markets team, had a great ride until 2008 when the world exploded and ultimately had an opportunity to reinvent myself as a research analyst, first on the debt side of the business, then on the macro property research side of the business, then on the re equity side of the business, and more recently on private equity. So I tell people that I've had a little bit of a wandering but intentional path across commercial real estate and now I'm responsible at Principal Asset Management for overseeing research for public and private equity and debt for $100 billion commercial real estate platform.
- [36:20]
A
Yeah, you've definitely had a broader purview of the real estate world than most of us have public and private markets and whatnot. So have a unique take on some of these issues, I'm sure, and we'll get into some of those things related to public versus private later on. But I wanted to start with a Macro question. In Principles 2026 Real Estate Outlook, you listed U.S. residential, specifically rental housing, as a high conviction sector. I believe, correct me if I'm wrong, that it was the only US sector other than data centers marked as high conviction. So what are the factors behind that high conviction for housing?
- [36:58]
B
Yeah, sure. So let me spend just a little bit of time talking about our thesis for our global 2026 outlook because I think it will help frame the debate. First of all, we do think commercial real estate has moved into the recover every stage of the cycle. How the cycles play out. Public REITs trough first, they trough in October 2023 they were up handsomely. Since then private valuations trough second. Private valuations have now been up for six consecutive quarters on a total return basis in the United States. But distress is lagging indicator and does not peak out until 12 to 24 months after private valuation trough. So we think this cycle is playing out in textbook fashion. But this is neither a V shaped recovery or even a U shaped recovery. It's a K shaped recovery. So what that means is that the top quartile of properties across markets are doing really well and the bottom quartile of properties across markets are not doing so well. Why do I say that? Well, I think we have a little bit of an out of consensus view of what we think about the housing market. So when we talk about housing, I'm thinking about housing holistically, I'm thinking about ownership and rentership. And within rentership, while apartments get a tremendous amount of the attention, that is not the totality of the rentership market. There's also things like single family rentals, build to rent, manufactured housing, student housing, and even parts of senior housing as well. So Jay, I'm. I'll tell you our thesis on housing, then I'll stop and see what questions we have because I want to talk about this a little bit more. But you've heard this statement that the US under is under housed by pick your number, 2 million homes, the low end, 8 million homes at the high end. That's probably mathematically true, but we actually don't think it's the right debate. We think we have a housing mismatch in the United States. We've built too many houses of certain types in some markets and not enough housing of other types in other markets. So what does that really mean? Well, I think we might actually have an oversupply of conventional class A apartments in the United States, particularly in high growth markets, but in other markets like the Midwest where we haven't built a tremendous amount of supply in at least a decade, we might be a little bit more balanced. So we think this is a really fascinating market where you need to think about housing and totality. That's one. Number two, it's not so much an undersupply as a housing mismatch. And number three, what does that really mean and how do we play it? Well, you have to be focused on picking the right property types in the right markets. I think it's very difficult to say I'm going to go buy class A apartments in the Sunbelt for instance because that generic opportunity might not exist like it did over the past cycle.
- [39:45]
A
All right, so let's dig into that more then. I like that summary and you've alluded a little bit. Let's get more of the details. So what is your buy box right now in terms of the niches, geographies that you have high conviction about within these sectors? And let's take it sector by sector, starting with apartments.
- [40:03]
B
Yeah, sure. So when you think about a buy box, we try not to exclude anything from, from, from a buy box. There are properties and markets that are attractive. Are we a little bit more cautious on conventional class A apartments than consensus? Probably so. Only because we think it's going to take of quite a long time for the market to digest through the amount of supply in the conventional class A space that has has come through. But there are markets where we do like conventional class A and a lot of people say well if you can buy conventional class A discount or replacement cost, isn't that really attractive? I would say partially. If you can buy something below replacement cost and push rents over time that seems to be really attractive. So like a Seattle, Washington is a market that we happen to be favored in. Are we super bullish on conventional class A in the high growth markets that we've seen previously? Probably not. You have to be a lot more selective. But where we do find conventional class A super interesting and I'm get a little bit nerdy here with you is we don't think the market is pricing like a two bedroom apartments the right way. The market price is two bedroom apartments with a shared wall almost the exact same way as a two bedroom apartment that don't have a shared wall. But if you're a roommate you're going to pay a premium to to not have a shared wall in a two bedroom apartment. So conventional class A we're a lot more selective on than I think some of our peers. I actually think class B value Add light could be really interesting and I think there's going to be a lot more focus on affordable housing with a lowercase A and a capital A in the future as well. It's hard, hard to make attractive profits in the affordable housing side. But I think there's going to be a lot more focus on it from both a public private partnership and maybe even building lowercase A affordable housing in a less expensive way by taking some cues from manufactured housing market.
- [42:15]
A
So just a quick follow up. When you say class B, like are you thinking like, you know, light value adds? This would be, you know, maybe if I'm wrong, It's not the oldest 70s stuff in some of these markets. It's probably good locations, solid, good property, but not the newest class A building. Is that fair?
- [42:31]
B
That's exactly right. And so why do I say class B with light value add? Well, if you think about our thesis for what's going to drive returns over the next cycle, it's net operating income growth.
- [42:42]
A
Growth.
- [42:43]
B
Net operating income growth matters because income is generally the primary driver of total returns across cycles. The market forgot that income return was actually an important driver over the past 10 to 15 years because it flipped on its head and capital returns were the driver. But income is usually the driver of total returns. But in a world where there's not going to be a lot of cap rate compression, especially in the multifamily sector, you're going to get your price appreciation or your capital returns through net operating income growth. And we think doing light value add in a class B, well, well located, you know, not an older 70s or 80s, but a well located class B with light value added, put in a little bit better amenities. That could be a really attractive way to play apartments.
- [43:25]
A
Yeah, that makes sense. All right, let's go to the next one. How about SFR? BTR?
- [43:31]
B
Yeah, look, we're bullish as, as anyone on, on B2B 2R and SFR. I like to tell people, I'm sure we're going to talk about this in the future or coming up in a couple minutes, but single family rentals have always been a really important part of the rentership market. Yeah, at the peak of the housing market in 2007, single family rentals are around 30 and 30.5% of the rentership market. So they are a really important fabric. Why do we like, why do we like single family rentals? Well, a lot of people are renting by choice now and as you age through your rent, your, your, you age through your lifespan. Not wants to rent an apartment as you start having a family. We think single family rentals are a really interesting way to get people into homes by choice. You don't necessarily have to. I wrote a report when I was at Morgan Stanley a long time ago called Renting the American Dream. You don't necessarily have to own a home to have that American dream of a house, a yard, a picket fence, and, you know, a dog. You can, you can rent it and you've always been able to rent it. It's just a much more institutional license asset class. So in terms of build to rent, we do think it is a huge portion of where the single family rental market is going. And if you look at the publicly traded REITs, without naming them by names, they are either building homes on their own balance sheet, that's how they're delivering new homes, or they've recently acquired a builder rent developer to do that. We think it is actually the future of the market. And we get asked all the time, well, can single family rentals and multifamily coexist? Yeah, absolutely. They've coexisted for decades and decades and decades. They actually serve two different types of renters. But I think the major point to you that I would make to you and your listeners is single family rental is an alternative by choice. Now, there are people that are renting single family homes because they want to, not because they necessarily need to.
- [45:36]
A
And are there particular MSAs that you prefer or are you kind of open across the country?
- [45:43]
B
I would say it's very similar to our views on the apartment sector. You have to obviously have land to build, but we think there's been a lot of building in the high growth Sunbelt markets. We like some of those markets. But I would say expanding outside of the high growth Sunbelt markets to the Midwest, for instance, is a really, really fascinating market. If you look at what markets are growing the fastest right now, it's actually the Midwest and the Northeast. The Sunbelt markets are not growing as fast from a rent perspective. So I would say we're expanding our box, not narrowing our box, which is maybe a little bit counterintuitive compared to our peers.
- [46:26]
A
Sure. And I do want to come back to SFR because obviously there's some important policy issues that are impacting that a little bit. But before we do that, let's talk about student housing. What's your take on student housing? Obviously, the demographics are changing a little bit. There's kind of some. I think it's getting maybe a little more nuanced. What's your take?
- [46:41]
B
Yeah, to say it's getting a little bit more nuanced is probably an understatement. The headlines with student housing are not very favorable. High school graduates are declining rather significantly. People are not having kids to the same rate that they were having previously. And the reality is we have built way too many universities and colleges over the past 10, 20, 30 years. I think it's very reasonable to expect that there can be a wave of foreclosures in colleges and universities over the next cycle. You're already seeing that play out. So the headlines headline's challenging, but that does not mean every college and university in the United States is facing those same pressures. You're actually starting to see some colleges and universities actually accelerate their enrollment. So we think there is a home for student housing within portfolios. But you just have to be really, really selective about what universities and what colleges you're investing in. But it goes a step further than that. You need to have a very well located student housing property that's pretty close to the center of campus. As you get further and further away from the center of campus, it becomes much more commoditized and you're dealing with competitive pressures. I used to joke that, that, that the next best thing with, you know, a lazy river, a tanning spa, a wine potter could just take your enrollment away.
- [48:12]
A
Let's come back to SFR and obviously some really timely issues happening right now. We don't know what's going to happen. I mean you and I could pontificate for a long time on, you know, policy changes in D.C. and pento legislation, the executive order. But regardless of how that plays out, you know, my sense is, and I, and feel free to disagree with this, is that the, the mere increased discussion around a ban and really it goes back more than last couple of months. Like there's increasing political pressure around scattered site SFR and the increased risk associated with it. It seems like that's Im going to impact more of the institutional allocations toward scattered site single family rental. Is that a, is that a fair take or how do you see this playing out?
- [48:55]
B
Yeah, so let's, let's, let's first of all step back and try to separate some fact and fiction. As I mentioned to you previously, single family rentals have always been an important part of the rentership market. Even at the peak of the housing market, they have gotten a lot more attention over the past 10 to 15 years because of institutional involvement. But we think institutions own 2 to 5% of the single Family rental markets. Actually a really, really small percentage even or not most single family rentals are owned by mom and pops. So I sort of joke that it's your rich uncle in Kentucky that owns three homes and rents them out as an investment. I want to come back to this whole concept of institute what, what defines an institution because I think this is part of the problem with legislation and maybe why there might be some hiccups on it. But you know, look, the single family rental institutional owners have actually been better sellers of homes versus net buyers over the past years. I don't think that's really, that's, that's really well understood. And they've been very much moving into build to rent. So I, I completely agree with, completely agree with you that the future is probably on the builder rent side rather than the scatter site single family rental. Now we can talk through how legislation might, might be playing out. I don't think legislation wants to limit scattered sites single family rental, but I do think there's something to be said for allowing owner occupied owners to have a first right of buying a home. Now do I think institutional investors are crowding out single family owners? I don't. Not on a nationwide scale. And the reason I say that, and Jay, you and I have chatted about this in the past. When institutional owner comes in, they're an economic animal. They have to make a return on that purchase. When an owner occupied comes in like myself, I'm making a decision based upon the utility of my family. So it's an emotional decision and that's why I think they become better sellers of homes. But to answer your question directly, I do think scattered site single family rental that emerged post 2010 is probably less attractive to institutional investors. And I think building it on your own balance sheet or partnering with home builders is a lot more attractive.
- [51:14]
A
Let's talk about the REITs for a moment. As you mentioned earlier, you spent part of your career as a REIT analyst. So I'm sure this is still near and dear to your heart. One of the big themes I just, you know, went through all the earnings calls, I'm sure you review a lot of that as well is obviously they still are facing big discounts to net asset value. That's true for both apartments and sfr. What do you make of those big discounts? The second part of the question is what do you think is a better gauge of asset values? The private sector sales comps or the public markets REIT valuations?
- [51:44]
B
Oh wow. Easy questions here, Jay. So look, I became a public REIT equity analyst on the sell side in 2015, and I had to reconcile this for myself first. What I'm about to say might be considered sacrilege for most REIT analysts, but I don't think discounts to net asset value in and of themselves is a value of cheapness or not. The reality is the public markets reward companies for their growth. And everything that we saw in 2025 and so far in earnings guidance for 2026 is growth is not going to be rebounding in 2026. It's probably a 2027 story. At a minimum, the market is not going to reward those stocks if growth is not accelerating. So if the second derivative is not really improving, the multiple doesn't expand. That's a long way of saying discounts to NAV can persist for a long period of time. I think you actually need to see asking rents begin to accelerate higher. I think you need renewal rents to have some stability associated with it. And until that happens, you might not see the inflection in, in, in, in REIT multiples that, that the market's hoping for. Does that mean they're not attractive over the medium to long term? Probably not, because discounts to NAV do matter over the medium to long term. But over the short term, I think growth matters a lot more. The second point I would make to you is I had mentioned to you that, hey, look, we, we think that the Midwest is a really interesting portion of the country that has been left behind or not thought of in scale for quite some time. If you look at what the REITs own, with the exception of a few, they primarily own coastal markets in the Sun Belt, there could be just more supply headwinds, both in terms of what's come to market and supply headwinds that haven't fully come through that could just pressure those, be more headwinds to rents. So to me it's really just a growth story. The market's looking for higher growth sectors right now and everything that we're seeing is the story might be a year or two away before that growth begins to re. Accelerate.
- [54:07]
A
So that's interesting. I like the nuanced take on this so that when it gets, when people are arguing, hey, what's a better measure of value? Is your point then that it's to some degree like they're measuring different things? Does it not matter as much we're
- [54:22]
B
talking past each other? If you're going to speak to a generalist investor that invests in stocks and maybe doesn't really understand REITs and detail like you and I do, all they're going to say is what's the growth potential look like? You start bringing up discounts to nav, that doesn't really resonate so much. And the generalist investor does drive incremental demand in the public REIT market right now. So I think they're talking past each other. Two things can be true at the same time. Stocks are trading at significant discounts to NAV based upon a medium to long term view. But over the short term, growth is not inflecting like you need to, to get stocks to really start to rebound from a multiple standpoint.
- [55:05]
A
Yeah, no, that makes sense. Yeah. On the flip side of this, like whenever I've, I've shared some of these topics previously, I get people who are more the generalist investors say, well, we think that, you know, great quality apartments in the private side are going to be, are going to, are going to rebound up to 6% cap rates like reflecting the public markets. And it's like unless there's a big shock, that's a hard sell.
- [55:25]
B
You know, look, I, I think there was a time not too long ago where I probably did anticipate private market valuations would be more in the mid 5 to high 5% range, but private markets haven't gotten there. Private markets are still in this low 5% range or so. And I think that's largely because the private market has the luxury of looking through what's going to happen over the next one years, two years, maybe even three years and say, what's the long term growth potential? And I think a lot of people in the private markets look at the housing market and say this is a really attractive risk adjusted return. Now, does it have to be more nuanced than the headline suggest? I think so. But I understand here and now why there can be a discount between or a disconnect between private and public markets. Public markets are inherently short term, private markets are inherently medium to long term.
- [56:22]
A
Yeah, yeah, that's a good take. All right, so let me ask you, we've been plowing through some hot topics here. SFR policy, REIT values. Let me give you another hot topic, and that's private credit. We've seen a number of institutional groups of these last few years shift heavily from equity to debt strategies. You guys principal put out a paper recently that I thought was very interesting, suggesting there's still some room to run there in terms of debt strategies. And so I want to ask you, what impact is this shift having on the multifamily market in particular. And here's another two part question for you. So what impacts having multifamily? The second part of the question is what would it take to get more capital shifting back toward LP equity, which of course a lot of sponsors are looking for right now.
- [57:03]
B
Yeah. Okay, so let's, there's, there's a lot to unpack here and a lot of different directions go. Why do we like private Siri Credit relative to the four quadrants? It really comes back down to two points. First, the risk adjusted returns are really compelling. Right now. You are deploying new capital at relative Conservative LTVs on property valuations that have already reset significantly over the past two to three years. So I like to tell people if you're originating a new loan at a 50% LTV right now on a valuation that's already declined 20 to 30%, that valuation has to fall significantly further before that loan's going to take loss. There's of course going to be idiosyncratic risks that occur. But by and large you're lending at a pretty conservative valuation. If you have to foreclose on that property, you then own the property at a really attractive basis that either allows you to redevelop the property, allows you to undercut market from a rent perspective, or allows you to sell the property. So it's a really attractive risk adjusted return. But there's another component that I don't think is spent enough time on. Volatility adjusted returns for commercial real estate debt are really compelling because the vast majority of your return is coming through income. And when I say the vast majority of it, I'm not talking about 70%. I'm talking about like 99.9% of your total return is coming through income. It's entirely driven by income because capital returns are plus or minus zero percent. As losses roll through, you don't appreciate in a loan. So we think volatility adjusted returns are really interesting and you didn't ask this question, but I do think if you think about private Siri Credit relative to private corporate credit, this is a really interesting time to be talking about private Siri Credit relative to private corporate credit. Private corporate credit offers higher headline returns, but that's because it has higher risk. If you start to see some of the headlines that are coming through with write downs on portfolios, this could be an interesting time to be putting private Siri Credit into your broader portfolio of private credit, private equity, other alternatives. We think the stability of returns is underappreciated. So I want to stop there, I do want to answer a question about private equity and when does that tide begin to turn? But let me see if you have any questions about what I just said.
- [59:33]
A
No, no, I think that makes sense. I guess one follow up question though is that I think it was Blackstone maybe came out recently and said that, you know, these private credit returns have shrunk. But is your point that because there's so much, you know, now debt in the market and one of the things I shared recently when I was at NMHC a couple weeks ago at the annual meeting was that just, it just felt like debt was everywhere and so everybody's having to compress a little bit on return expectations and terms. So does that. But is your point that even with that compression, the income return is still attractive enough to keep that going?
- [60:04]
B
Yeah. There's two things occurring right now. First of all, I completely agree with you that spreads have compressed on a year over year basis. Competition within the CRE debt markets is quite high. I think two things are going to happen in 2026 and beyond. First of all, lending volumes are likely to accelerate in 2026. Everyone talks about this wall of maturities as a bad thing, but that's actually a really good thing because it keeps origination volumes high. I do think lending standards are going to start to loosen now. Keep in mind those lending standards are loosening from a very tight level.
- [60:38]
A
Yeah, so, so people were in here loosening, but I think it's important caveat.
- [60:43]
B
We're loosening from a very tight level. So we think this is still going to be a banner year for, for loan originations. Yes. Spreads are tighter. That probably brings your income return down slightly. But guess what? We've also worked through the write downs that have occurred in prior portfolios. So you can see a scenario where total returns are relatively stable. Income returns are less, but capital returns are no longer negative like they've been over the past couple of years. So we're still bullish on it. Headline returns look competitive to us. But if you start peeling the onion a little bit, there's not a reason why if you pick the right debt funds, you can't do, you know, low double digit returns, which, which is pretty attractive right now.
- [61:27]
A
Yeah. All right, so let's go back to the question that I think every GP out there wants to know the answer to, which is, hey, I could get debt, I can't get LP equity. So when does that change?
- [61:38]
B
I think we're really close to it. So let me, let me make a statement first and foremost, I think the headline return for private Siri Equity this cycle is going to understate the opportunity that exists on the equity side of the equation. And it's because of this case shaped recovery that I mentioned to you previously. To answer your question from a headline perspective, you need to see capital returns start to increase. In 2025, total returns were driven entirely by income because capital returns were effectively flat. LP equity won't begin to return until those capital returns start to kick into high gear. But we are seeing already equity become much more in vogue than it was six months or 12 months ago. Because you start to peel the onion a little bit and you're starting to see a lot more tiering across funds. Let me give you an example. NF Odyssey Index is a widely followed index that tracks 25 open ended funds that own US core commercial real estate. The headline return for the NCRIF Odyssey Index was relatively muted in 2025 at less than 4% call around 3.8%. But if you actually look at the 25 funds, the top quartile of funds did 6% returns in 2025. The second did around 5, the third did around 4. In the bottom quartile was negative.
- [63:01]
A
Wow.
- [63:02]
B
So we actually think that picking the right funds in this market is starting to get a lot more interest. So I would push back a little bit and say I think LP Equity is starting to return. They were just being a lot more selective and they're focused on picking the right property types in the right markets and the right fund vehicles.
- [63:22]
A
Yeah, that's a good point. I like that. So rich, and with this you put out a lot of great research. Again, if anybody listening hasn't seen your work, you know, find, find rich on LinkedIn, you're generous enough to share a lot of it there. And Principal is one of the groups that actually does share a lot of your research publicly, which is great. So of all the research that you do, is there any topic or thesis that you've studied, you have particularly strong conviction that is contrarian or you think may not generally understood by most investors?
- [63:51]
B
Yeah. So we published a report late last week about how long series cycles last. We called it the CRE Recovery. And there's a whole bunch of academic research on this topic going back to the 1950s almost a decade ago on how much CRE cycles last, how long series cycles last. And there's a whole bunch of differing views. Some people will say it's eight years, some people say it's 10 years, some people say it's 18 years. Some people will say, say it's 30 years. I think we're all sort of saying the right thing but not putting the full picture together. We think series cycles last a really long time of around 18 years or so. And the reason we say that is price return cycles are around 10 years, series cycles inclusive of income. So total returns last 18 years. The market has forgotten how important income is to commercial real estate. It actually smooths out your returns and in periods of drawdowns, it actually makes much more stable total returns. I get asked all the time, well, Rich, you really be including income when you're thinking about commercial real estate. My response is, of course we should be. That would be like thinking. That would be like not factoring in the coupon of a bond when you're thinking about your investment thesis or not thinking about the dividend of a stock. Income is a huge portion of commercial real estate. So. So I'm increasingly really bullish on this environment. And the reason I say that is I think we have just now entered into the recovery stage for private commercial real estate.
- [65:21]
A
That's a great point and a good way to end it. So, Rich, thank you so much for your time. Thank you for letting me pick your brain. Really enjoyed the conversation with you.
- [65:28]
B
Thanks, Jay.
- [65:49]
A
And that's a wrap on episode number 73 of the rent Roll. Big thank you to Rich for being our guest today. And thank you to jpi, Madera, Funnel, Mason, Joseph and Authentic for sponsoring. And thank you to all of you for spending part of your day with us. We'll see you next week.