BSR REIT Q3 2026 Earnings Call Transcript
BSR REIT (TSX:BSRT) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
BSR REIT reported a strong Q3 2026, with occupancy at 94% and non-same community occupancy rising to 93.6%, reflecting progress in property stabilization.
The company’s NOI from non-same community properties increased by 36.5%, and FFO grew by 3.5% from Q2, while blended lease trade-offs were nearly flat.
Strategic initiatives included SEC registration, NYSE listing, and expansion of resident amenity programs like bulk internet, expected to enhance other income.
Platform efficiencies contributed to annualized expense savings, with confidence in achieving incremental growth targets by early 2028.
Guidance remains unchanged, with expectations of continued revenue growth through both rate and occupancy management, despite market challenges.
Management highlighted progress in stabilizing recently acquired properties and expects the margin differential between same and non-same community properties to compress.
The call noted macroeconomic factors, including interest rate volatility affecting property valuations, but no immediate changes in Texas’s business environment were anticipated.
Full Transcript
Jim (Operator)
Good morning everyone and welcome. My name is Jim and I will be your conference coordinator today. It is my pleasure to welcome everyone to the BSR REIT Q3 2026 financial results conference call. All lines have been placed on mute to prevent any background noise. After management’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press STAR and the number one on your telephone keypad.
If you would like to withdraw your question, repeat the steps of STAR and ONE. Thank you. Now my pleasure to turn the conference over to Spencer Andrews, Vice President of Investor Relations and Marketing. Please go ahead, sir.
Spencer Andrews (Vice President of Investor Relations and Marketing)
Thank you, Jim, and good day everyone. Welcome to BSR REIT’s conference call to discuss our financial results for the third quarter ending September 30, 2026. I am joined on the call today by our Chief Executive Officer Dan Oberstey, our Chief Financial Officer Tom Service, and our Chief Operating Officer Susie Rosenbaum, who are all available to answer your questions after our prepared remarks. Before we begin, I want to remind listeners that certain statements made on this conference call about future events are forward-looking in nature. Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially. In addition, we will reference certain non-GAAP financial measures that we believe are useful supplemental information about our financial performance. For more information, please refer to the cautionary statements on forward-looking information and a description of our non-GAAP financial measures in our news release and MD&A dated November 11, 2026.
Dan, over to you.
Dan Oberstey (Chief Executive Officer)
Thanks, Spencer. It was an exciting third quarter here at BSR REIT. Our financial results reflect the continued progress towards our long-term goals we set out in December of 2025. Our operations continue to fire on all cylinders and have now made tangible progress across each of our key initiatives. Our platform took the next logical step by registering with the SEC and subsequently listing on the New York Stock Exchange, and we ultimately streamlined our trading dynamics, all in an effort to make BSR a more attractive investment to more people and institutions.
To put specifics to a few of our third quarter numbers, occupancy finished the quarter at a healthy 94%. Non-same community occupancy increased to 93.6% from 83.6% one year ago, reflecting the progress we’re making towards stabilization of those properties. NOI from these properties increased 36.5%. Our retention rate in Q3 was a record 60.3%, an increase of 210 basis points from last year and up 20 basis points from Q2. FFO grew 3.5% from Q2 2026 and blended lease trade-offs finished Q3 nearly flat at minus 0.2% with renewal rates higher across all markets.
Sequentially, we generated expected growth in FFO and AFFO on both an absolute dollar and per unit basis. We continue to make steady progress in our organic growth initiatives including both the stabilization of new communities and our high-return resident amenities program. To that end, let me provide an update on our three initiatives we laid out in December of last year. First, the lease-up of our 2025 acquisition class. Current results reflect the concessed but occupied revenue potential of those assets. Future results will reflect the maximization of NOI from this cohort of assets.
You saw the first hint of what’s to come in our Q3 non-same community NOI margin which was 49.2% compared with 44.7% last year. On a to-date basis, non-same community NOI margin sits approximately 400 basis points behind our same community level. This is low-hanging fruit that we expect to harvest in the short to medium term. Between collecting rent on physically occupied assets for an entire year, burning off concessions and normalizing the expense level at each of these five assets, we expect the margin differential to compress and drive sustained NOI growth.
Second, our resident amenity programs currently highlighted by our bulk internet and valet trash initiatives. Bulk internet continues to expand across our portfolio. We are live on seven of our 26 properties and ramping ahead of schedule in the ground at five additional properties, all of which we expect to be delivered and begin their ramp-up by year end. The balance of the properties will have accelerated timelines and should be live by Q1 of 2027.
As new properties continue to come online, we expect material benefits to our other income line. Third, platform efficiencies. As I reported in our last call, we implemented our centralization effort in Q2 and I’m pleased to report that this initiative is meeting its target of generating annualized expense savings of $0.02 of FFO per unit while concurrently enhancing our operating efficiency. We remain highly confident that these initiatives will meet our target of generating incremental growth of $0.13 to $0.22 per unit by early 2028.
There is no change to our operational growth story. We have an outstanding property portfolio in top-tier markets that performed at a high level through very challenging times and is now positioned for renewed growth as market dynamics turn, and we are adding further value through high-return organic growth initiatives across the portfolio. Accordingly, we continue to be very confident that the REIT will produce strong, sustained returns for unitholders.
I’ll now invite Tom to review our third quarter financial results in more detail.
Tom Service (Chief Financial Officer)
Thanks, Dan. Our financial performance in the third quarter was in line with internal expectations and continued to primarily reflect our progress in stabilizing the cohort of properties that we acquired in 2025, as revenue from non-same community properties increased 23.9% year over year and 4.4% sequentially from Q2. As Dan highlighted, we expect margins in this portfolio to steadily expand and to eventually exceed those in our same community portfolio.
Beginning with leasing, effective rates on new leases declined by 4.4% in the quarter while renewals increased 2.6%, resulting in a 0.2% decrease in blended rates. The trade-out data reflects a concerted effort by management in the third quarter to maximize revenue through pushing rate while maintaining occupancy. For the first two months of the quarter, we were able to successfully push rates on new leases while generally maintaining occupancy. In September, concurrent with the seasonal slowdown that always occurs in September, the market clearly dictated that we had maxed out on rate and thus we shifted focus to occupancy.
I say all that to remind everyone of two key points. First, our ability to dictate rate in the third quarter is an extremely positive sign of overall market health. Second, we will continue to maximize earnings through fluidly moving our two primary drivers of revenue, i.e., occupancy and rate, based on whatever the market dictates is possible. Ultimately, same community revenue finished Q3 at $26.4 million, down slightly compared to last year and essentially flat to Q2. The year-over-year decline was primarily due to a decrease of lower average occupancy of 94.1% versus 94.3% last year and lower average monthly in-place rent of $1,434 versus $1,449 last year. These revenue declines were partially offset by an increase in other property income, primarily related to the continued ramp of our bulk internet initiative.
Total portfolio revenue of $34.5 million increased 4.3% from last year and 90 basis points from Q2. The increases were primarily the result of the well-telegraphed continued lease-up of our 2025 acquisitions class as occupancy in the non-same community portfolio increased 10 percentage points year over year. This trend will continue into the fourth quarter. Same community NOI in Q3 2026 was $13.7 million, a 4.5% decrease from last year. The decline was attributable to the timing of real estate tax refunds, the slowdown in same community revenue I just described, and higher overhead and administrative expenses. Sequentially, same community NOI decreased 1.5%, reflecting high repair and maintenance expenses, primarily due to timing and seasonality. More importantly to the overall trend in the business, total portfolio NOI of $17.7 million in Q3 increased 2.4% from last year.
Similar to revenue, the increase was primarily attributable to the lease-up of our non-same community portfolio. As Dan indicated in his remarks, total portfolio NOI will continue to improve as we have now graduated from a focus on physical occupancy to a focus on full economic stabilization of our non-same community properties, as reflected in the opportunity to materially enhance our non-same community NOI margin. Below NOI, G&A was down 20 basis points excluding the one-time costs incurred associated with our U.S. listing, and net finance costs increased 8.3% year over year driven by rate resets in the derivative portfolio and slightly higher relative leverage levels. All in all, FFO in Q3 was $0.19 per unit, flat to the $0.19 per unit last year and steadily accelerating from the $0.18 per unit in the second quarter. G&A savings drove the sequential increase in FFO.
AFFO in Q3 was $0.16 per unit compared to $0.17 per unit last year and $0.15 per unit in Q2. The variations in AFFO primarily related to small notional shifts in absolute FFO and timing related to capex expenditures and straight-line rental adjustments on the balance sheet. The REIT’s debt to gross book value as of September 30 was 52.2%. Our debt carries an average interest rate of 4.1% and a weighted average term to maturity of 3.2 years. Total liquidity at quarter end was $59.9 million. Finally, you will note that our guidance is unchanged from the revised level we provided in Q2. We remain confident in that range and look forward to delivering our full year results in March. I will now turn it back to Dan for his closing remarks.
Dan Oberstey (Chief Executive Officer)
Thanks, Tom. The volume of new housing supply that was delivered into our core markets from 2022 to 2024 was unprecedented. Two years on from those deliveries, the market still has not completely finished absorbing it all. The process has taken longer than in past cycles and the volume to be absorbed this time was far greater. As we look ahead, we do so with full confidence that the unmatched economic growth fundamentals of the Texas economy combined with a return to supply-demand balance will drive a return to superior rental rate growth.
In the meantime, we’re already achieving steady growth through significant momentum down the P&L. Our non-same community properties are stabilizing nicely. The resident amenity programs are fueling expected growth in other income and centralization efforts are saving operating and personnel costs. Our platform efficiency initiatives are taking hold. So even before the top line improvement kicks in, we are as well or better positioned than anyone else in our peer group.
And when market forces turn positive, our operating leverage is substantial. We demonstrated that in the 2021 and 2022 period. Accordingly, we remain very well positioned to generate consistent superior returns for unitholders. That concludes our prepared remarks. Tom, Susie and I would now be pleased to answer your questions. Please open the line for questions.
Jim (Operator)
And a quick reminder to our phone audience today that it is STAR and ONE on your telephone keypad if you would like to ask a question. We’ll hear first from Kyle Stanley at Desjardins.
Kyle Stanley (Analyst at Desjardins)
Thanks. Morning everyone. Just going to your guidance and the maintenance of the guidance. I think you just said it towards the end of your remarks there, Tom. You know, maintaining the 0 to 1% growth, yet on a year-to-date basis, I mean same property NOI is running in the negative territory. So I’m just wondering what is it you’re seeing in the fourth quarter that’s allowing you to kind of hold firm on the outlook, and would there be any change to the same property pool that might also be helping a little bit?
Tom Service (Chief Financial Officer)
Yeah, Kyle, sure, I’ll take that. So I’ll remind everyone of the anomaly that was the fourth quarter of 2025, which we discussed at length at the time and in the months following that. So just to kind of put it clearly, if same community NOI was flat to Q3 in Q4, that’s already, call it, 9-ish percent growth year over year. So the vast majority is largely related to the anomaly that was 2025 Q4. So the question really is the sequential improvement that our guidance assumes.
And here’s what I’d say on that: The guidance assumes that revenue continues at our expected climb higher through a function of both rate and occupancy. We’re confident in the early reports of what we’re seeing in October and November, particularly on the occupancy side, as I’m sure Suzy will get into. And we also obviously have our bulk Internet initiative that’s ramping and will continue to take outsized share and growth on the other income. So we feel good on the total revenue side.
And then, as you work down the P&L, there’s a bunch of green shoots we’re seeing. My prepared remarks talked to the timing in Q2 related to R&M expenses. There’ll be some normalization of that in the fourth quarter. Payroll taxes, turn costs, all have various green shoots that, when we looked at guidance in totality, we were confident with keeping it flat kind of across the board as it relates to the same property pool. Look, we look at the performance of same property pool on the comparable basis and adhere to our policies.
There’s not an immediate initiative to change the same property pool, though we are very close on a couple of properties making their way into the same property pool — if not in the fourth quarter, certainly looking into next year.
Kyle Stanley (Analyst at Desjardins)
Okay, that’s clear. Thank you. Looking at maybe the non-same property pool for a second. Obviously great progress over year basis reported are still relatively flat, and I think last quarter you’d noted the stabilization OHMSV more specifically taking a bit longer than expected. Can we just get an update on how that stabilization process has gone, and is it to plan at this point?
Susie Rosenbaum (Chief Operating Officer)
Yeah. Hey Kyle. So the North Dallas submarket continues to be a bit of a challenge when it comes to absorption. So we have two submarkets actually with absorption issues — that’s Northwest Houston and North Dallas. We were able to continue to try to push rents in those markets and others all the way through the end of August, which I think points to the health of our markets. Then we pivoted in September and started to push on occupancy versus rental rates.
At this point we saw a decline in rental rates as we pushed on occupancy, and that’s continued through October. However, I’m happy to report that today now occupancy has gone up in all of our markets to where we’re at 96.1% in Austin, 94.9% in Dallas, and 94.6% in Houston. So now that we’re back to an occupancy level that I’m comfortable with, we’ll start pushing on rates again. I’d also like to highlight here that Austin now, which also has a non-same community property in it, seems to be out of the woods at this point. Their trade-outs improved quarter over quarter and we continue to expect to see that going forward.
Kyle Stanley (Analyst at Desjardins)
Okay, thank you for that. And then just last one as it relates to kind of the run-rate G&A, obviously you highlighted some of the efficiencies realized, the $0.02 of FFO. Obviously the transition over the New York Stock Exchange comes with a cost. What are you expecting in terms of incremental run-rate for your G&A?
Tom Service (Chief Financial Officer)
Yeah, Kyle, I think expected run-rate G&A will be relatively similar to where we’re at for a whole host of reasons. The New York Stock Exchange itself will add, call it, 1 to 3 cents depending on how everything ultimately shakes out in 2027. I think there’s a bunch of other initiatives. Dan talked to the centralization initiatives. There’s a whole host of others. We’re obviously not rolling out 27 guidance today where I would expect that to maybe not be fully impacted.
But the G&A associated with the stock exchange alone is probably, call it, 1 to 3 cents of a headwind in 27.
Jim (Operator)
Thank you for that. I will turn it back. Our next question will come from Jonathan Kelcher at TD Cowen.
Jonathan Kelcher (Analyst at TD Cowen)
Thanks. Good morning. Just going back to the blended rent growth and what we can expect for the cadence on that. It looks like you took a step back in Q3, and it sounds like that was mostly September-related. How should we think about that in Q4 and into 2027?
Susie Rosenbaum (Chief Operating Officer)
Yeah, Jonathan, it’s hard to tell right now. September and October we focused more on occupancy, and now that occupancy is in a place that I like, we’re going to start pushing on rates again. But it’s hard for me to say how much we’ll be able to push through the remainder of the quarter and into 2027.
Jonathan Kelcher (Analyst at TD Cowen)
Okay, fair enough. And then just secondly, one of your levers you talked about was incentives burning off on the non-stabilized portfolio. How would incentives on the non-stabilized compare to incentives on the stabilized portfolio or same property portfolio?
Susie Rosenbaum (Chief Operating Officer)
So our concessions are pretty much the same between Q2 and Q3, so I don’t think that they had that big of a bearing on the differences between the quarter. I do see though in our properties, as we get closer and closer to stabilization, that we’re using them less and less. And as of November we’ve all but eliminated them on both the same property and the non-same property.
Tom Service (Chief Financial Officer)
Yeah, they’re sparse on the same property and the non-same property as well at this point today.
Jonathan Kelcher (Analyst at TD Cowen)
Okay, that’s helpful. I’ll turn it back. Thanks.
Jim (Operator)
Our next question today comes from Brad Sturges at Raymond James.
Brad Sturges (Analyst at Raymond James)
Hey there. Just on, I guess you highlighted the difference in margin between same store and non-same store. There’s still, I think, a 400 basis point gap. What’s the timeline at this stage to kind of further close that gap? Are we looking at kind of throughout 2027 before you think that gap kind of fully closes, or how should we think about that?
Dan Oberstey (Chief Executive Officer)
Yeah. Hey Brad, this is Dan. I think I’d go back to our 2025 kind of strategic deck on operating strategy. You know, it’s always been our experience, outside of probably a year or two in 2020 and 21, that the stabilization process of a lease-up takes anywhere between 18 and 36 months. I think what we’re seeing in this market is probably somewhere in the middle of that, right? So I think, as Tom hit on and I hit on earlier, we would expect that NOI margin to begin compressing between non-same store and same store.
We’ve seen it compress quarter over quarter sequential. It’ll drive more of our FFO growth in the fourth quarter, and we’ll just continue to start seeing it stabilize into that 54% range that we like to see throughout the course of 27, ending 27 and walking into 28 at probably the traditional margin that we see over on stabilized assets.
Brad Sturges (Analyst at Raymond James)
That’s perfect. And just on the occupancy front, you highlighted that as a green shoot. Just kind of where do you think that trends over the next quarter or two in terms of same store occupancy? And obviously you’ve still got a bit more upside on the non-same store side.
Susie Rosenbaum (Chief Operating Officer)
Yeah. So as I just said, you know, right now we’re at a same store occupancy of around 94.7%. And the total portfolio — well, the non-same store is at 94.1%. So it’s also up from where we ended the third quarter. I like that level, and so when we start pushing rates, we’ll have to watch it to make sure it doesn’t dip too much further down, or then we let our foot off the gas there. As I’ve said on our calls before though, I think anywhere between 94 and 96% physical occupancy is good.
Brad Sturges (Analyst at Raymond James)
Other questions, just maybe switching gears. We’ve seen interest rate volatility, borrowing costs are up. I think just in terms of what you’re seeing in the direct property market from other players in the space, are you seeing any pressure on valuations, whether it’s cap rates, price per door, and any signs of distress in the market right now from developers or other owners that might be over-levered?
Dan Oberstey (Chief Executive Officer)
Yeah, through the quarter, Brad, in Q3, we didn’t see many significant trades to speak of. I think there were a few outliers on the low and the high cap rate zone that, when we looked into them, there were some value-add components to them. There were some lender workouts. There were unique circumstances that probably drove those outliers. I think since then, in the third quarter — or I guess in the fourth quarter — what we’ve seen in October in particular is, I mean, we’ve all seen a massive run-up in Treasury yields and borrowing costs.
I think that’s reflected, anecdotally, in probably a 5% decrease in bid-ask spread, favoring the bidder and not the seller. So we haven’t seen many of those transactions close yet. I think we’ve seen an attempt very publicly by a buyer to retrade on value. And to the seller’s chagrin — I’m speaking about one of our public competitors — the seller refused to negotiate and the buyer dropped three or four of those purchases in the Sunbelt. So if that pricing holds, then we would expect cap rates to slightly tick up in the back half of the year.
But we don’t see any evidence of that in closings as of November 12th.
Brad Sturges (Analyst at Raymond James)
Okay. Appreciate the color and alternative path. Thank you.
Jim (Operator)
Our next question will come from Himanshu Gupta at Scotiabank. Thank you and
Himanshu Gupta (Analyst at Scotiabank)
Good morning. So on Houston market, Houston was supposed to be the most stable market out of the Texas triangle. Are you surprised by the further weakness or softness you’ve seen in new raising spreads in the Houston market?
Dan Oberstey (Chief Executive Officer)
I’m not. I’m not really, Himanshu. I think what we talked about is that Houston had held up best for us to the supply wave between 2022 and 2024. I’d note that it had our strongest Q2 blends at plus 1.5% and occupancy of 94.7. I think that’s what we meant when we said it probably recovers first and before Dallas and Austin. I think it did exactly that. I think our viewpoint on Houston is that it wouldn’t be as heavily impacted by the supply wave in 2022, 2024, 2025 and then year to date, 2026 as Dallas and Austin. And I think we’ve seen just that. Now we come out of this and it looks like, I’ll quote CoStar, Houston’s expected growth rate for revenues over the next two years is probably somewhere between 0.5% and 1%. And that would compare somewhat unfavorably to our other two portfolios in Dallas and Austin, who are expected to grow by 2.6% in effective rate next year and 2.2% in Dallas, respectively.
So what we thought and what we expected out of Houston is exactly what we got, which is probably not as violent of a drop in effective rates as you saw in, for example, Austin. Right. Just purely a function of supply and demand. Now, because it didn’t have that big of a supply hit coming in 2022 through 2024, 2025, we didn’t see a big drop off in rate, but it still had some supply. And that supply is continuing to be absorbed. Right where you look over at Austin and you saw that supply deliver rather significantly in 2024 and 2025, you saw a rapid drop off in rates.
So if we’re sitting here last year, I haven’t looked at the transcripts, but I’m pretty sure we probably talked about the concern with Austin quite a bit. It was probably the worst performing market in 2025 as it relates to rental. Now we look at 2026, deliveries fell off a cliff. It’s a supply and demand story. And what has Austin done? Austin has massively decelerated its rent decrease and we’re starting to see it. We have our highest occupancy in.
We maintain that through this cycle and it looks like next year we’re going to have a role reversal with Austin. So we’re pretty bullish on our expectations for Austin and we expect Houston to continue doing what it’s historically done, which is kind of produce revenue growth just a bit below Dallas and Austin.
Himanshu Gupta (Analyst at Scotiabank)
Super detailed. And thank you so much, Dan, for all the color. And I turn back.
Jim (Operator)
Next, we’ll hear from Matt Corneck at National Bank of Canada.
Matt Corneck (Analyst at National Bank of Canada)
Hey guys, just wanted to quickly go back to Kyle’s question on the G&A and confirm. When you talk about the run rate being similar to Q3, is that net of the 1.1 million one-time charge or just… yeah, is it net?
Tom Service (Chief Financial Officer)
No, not net.
Matt Corneck (Analyst at National Bank of Canada)
So 3.0, call it low 3 millions quarterly going forward.
Tom Service (Chief Financial Officer)
Yeah, sorry, I don’t have the notional in front of me. I think, yeah, it was like 3.2 or something. Yeah.
Matt Corneck (Analyst at National Bank of Canada)
Okay, fair enough. And then just on the ancillary revenue opportunity, can you give us a sense? I mean there was a nice uptick in ancillary revenues this quarter, but how we should think about kind of that on a dollar basis and how it will evolve.
Susie Rosenbaum (Chief Operating Officer)
Excuse me. Sure. So I don’t have the dollars in front of me, Matt. I can come back to you on that. I would think of it this way. On the five properties that began… so the ancillary revenue is almost exclusively bulk Internet. And the gains at bulk Internet on the five properties that started beginning of this year—call it January, February of this year—they’re currently, call it, high 60s, low 70s penetrated. From a ramp up perspective of bulk Internet, as a reminder, we don’t push it all day one, we have to let the rent roll turn. It’ll take, when one comes online, it takes whatever 12 to 14 months to ramp. So the change in ancillary revenue over the last nine months has reflected, call it, 70% ramp in bulk Internet on five properties. Dan mentioned that another, if you will, seven are going to come online in early 2027 and another five will come online shortly thereafter.
So you can kind of extrapolate a per property assumpt there and I can come back to you on the specific dollars. But that’s how I would think about the ramp heading into 2027 and it’ll probably leak into 2028, early 2028, before it’s fully quote, unquote stabilized.
Matt Corneck (Analyst at National Bank of Canada)
Okay, perfect, that’s helpful. And then on the property tax refunds, you’ve provided the detail, I think only for the year and well, and then half of two years. But is the 3.1 million that you got in refunds last year kind of what we should expect on a regular basis? I know it’s hard to predict, but like on a regular basis or is this quarter, the first two quarters of the year, kind of what you’d expect on a quarterly basis from a property tax refund standpoint?
Tom Service (Chief Financial Officer)
Yeah, again, impossible to prognosticate. I think we’ve tried to make a concerted effort, as best as you can when dealing with state and local municipalities, to smooth tax refunds for the purposes of not making it as volatile as it has been historically. I don’t necessarily see a massive step up or step down from, say, Q3 and Q4 as it relates to real estate tax refunds. And so I don’t see a material change there any given year. Where appraisals come in, where we’re able to appeal them—impossible for me to prognosticate whether the 3.1 or whatever you referenced is high, low or the right outlook.
So I’ll punt on that one. But that’s how I’m thinking about taxes for at least the rest of this year.
Matt Corneck (Analyst at National Bank of Canada)
That’s helpful and fair enough. And then maybe last macro one, politically, Texas has given Massachusetts a run for its money in terms of how it voted in these midterm elections. Does that, you think, change any of the dynamics within the state in terms of business friendliness, et cetera?
Dan Oberstey (Chief Executive Officer)
No, Matt, we don’t expect a material change in the near term. You know, I would say that for the most part state law preempts a lot of local municipalities on, say, any positives or negatives to our business related to politics. And the state legislature of Texas remains divided with the Republicans holding the Senate. I think what’s important is that Texas growth story rests on jobs, affordability, migration. The leaders of both sides of the aisles has said they intend to protect that growth story.
So in the near term we wouldn’t expect any massive moves in housing policy that would affect our 2027 outlook or, to that end, our strategic outlook for being owners and operators in the state of Texas. Yeah, we would agree with you, Matt, that it would be a bit more immigration friendly from last Tuesday on in the state of Texas with the national elections for a lot of reasons I think that our investors can understand as well. I mean you’re now going to have somewhat of a check on a unilateral enforcement of no immigration laws in the United States. I think that’s probably created some headwinds in housing in parts of the country, Arizona, Texas, Houston and South Florida notwithstanding.
We would expect, on a look forward, a bit more of a measured approach. I think President Trump and the Republicans have openly acknowledged that they might have gone too far on that. When I look forward, I don’t think I would expect—you wouldn’t, if they acknowledge they went too far and they’re at almost a 60/40 minority on a look forward—that immigration policy may favor those same markets that it has harmed in the past year and a half.
Matt Corneck (Analyst at National Bank of Canada)
Fair enough. Thanks guys.
Jim (Operator)
We’ll move forward to Jimmy Shan at RBC Capital Markets.
Jimmy Shan (Analyst at RBC Capital Markets)
Yeah, hi. I just have one follow up question on Houston. Just specific to the quarter though, Houston did weaken a decent amount in terms of occupancy and spreads. So was there anything specific within the portfolio, specific assets that may have contributed to that?
Dan Oberstey (Chief Executive Officer)
Yeah. Hey Jimmy, that’s specifically related to the Northwest Houston submarket that I previously referenced that has non-same-store and same-store properties in it where absorption has frankly just been much lower than we originally anticipated.
Jimmy Shan (Analyst at RBC Capital Markets)
Do you expect that—like what’s your expectation then in terms of that improving in the next little while?
Dan Oberstey (Chief Executive Officer)
Yep, we’re going to continue to try and push occupancy there versus rate in 2027. I think at this point, it looks like things should certainly shape up thereafter with nothing new coming online in that market as of now.
Jimmy Shan (Analyst at RBC Capital Markets)
Okay. Okay. And then in terms of Austin, it sounds like, you know, your comment is a little bit more bullish on Austin. What are you seeing on the concession sides just broadly in the market with respect to that market?
Susie Rosenbaum (Chief Operating Officer)
Well, for the properties in Austin that are still in lease up, they’re still offering some pretty big concessions. We’ve pretty much reached stabilization with our development property there and we’re no longer offering concessions and we’re continuing to see our occupancy and rental rates improve there. I’m excited about the Austin market.
Jimmy Shan (Analyst at RBC Capital Markets)
That’s it for me. Thanks.
Jim (Operator)
And a quick reminder to our audience that is star and one today. For questions, we’ll hear from Sairam Srinivas at ATB Capital Markets.
Sairam Srinivas (Analyst at ATB Capital Markets)
Thank you, operator. Good afternoon, everybody. Suzy, just going back to the Austin discussion. Both Austin and Dallas saw a sequential improvement in same property occupancy. But I guess how much of that is coming from incentives versus general improvement that you’ve been referencing to.
Susie Rosenbaum (Chief Operating Officer)
Yeah, concessions were pretty much the same in Q2 versus Q3. So none of the change that you’re referencing has anything to do with concessions. I think it has to do with the overall health of the markets.
Sairam Srinivas (Analyst at ATB Capital Markets)
That is good to hear, Suzy. And then maybe just looking at SPNY between Houston and Austin, there’s a bit of a diverging trend over there. Is that primarily the function of the tax refunds over there?
Susie Rosenbaum (Chief Operating Officer)
So I don’t have the breakdown of where the tax refunds came from in front of me, which assets it was. So I can follow up with you there. Astute question. I’m not 100% sure in front of me.
Sairam Srinivas (Analyst at ATB Capital Markets)
All right. And maybe just finally this probably is for you, Tom. Looking at the swaps into next year, I noticed a bunch of them have optional termination dates in 2027. How should we think about that as we head into the year?
Tom Service (Chief Financial Officer)
Yeah, if the swap interest rate market doesn’t move from where we are today, we expect to get called out of both. There’s a 175 and a 150 that have a call option in July of 2027. We’re obviously closely monitoring that market and looking to potentially re-hedge those swaps in the relative near term, depending on the tenor we wanted to take. In today’s market, if we took six months of term, it’s probably in the 320s and if we took, call it, 18 months of term, it’s probably in the 350s, 360.
So that’s the bell curve of where the market is. I tell you, four days ago those numbers were 10 to 20 basis points inside of what I just referenced. So obviously the curve has been a little volatile here. We’ll continue to see where we shape and where we ultimately execute on continuing those hedges.
Sairam Srinivas (Analyst at ATB Capital Markets)
All right, thanks, everybody. I’ll turn back.
Jim (Operator)
And we have no further signals from our phone audience today. Mr. Oberstey, I’m happy to turn it back to you, sir, for additional or closing remarks.
Dan Oberstey (Chief Executive Officer)
Thank you for that. That concludes our call today. Thank you all for joining us. We look forward to speaking with you again following the release of our Q4 results in early March.
Jim (Operator)
Ladies and gentlemen, this does conclude today’s BSR REIT Q3 2026 financial results call. We thank you all for your participation. You may now disconnect your lines. Have a great day.
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