As we continue deeper into our business plan, we are encouraged with this quarter’s overall financials. We have been able to achieve higher than budgeted revenue, while maintaining lower than budgeted expenses. We are still early on in the business plan, and are comfortable with a continued short term decline in revenue as we turn more units, as well as anticipating an uptick in expenses as we continue to renovate. 

However, we are maintaining the trajectory of our initial business plan to renovate and stabilize 5-8 units per month. This should allow us to maintain stronger total revenue, while still achieving our renovation timeline at, or below, budget.

We are encouraged with this quarter's financial report, and believe that you will be as well.

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Explanations and Commentary:

As you view this quarter's financial reports, we have provided commentary on a few important things to pay attention to:

• (-$47) variance on Average Rent Per Unit:  Our revenue is higher than budgeted, although the average rent per unit is slightly below our projections. This is because when we acquired the property in late 2023, it had a high occupancy rate of 98%. During the initial months, we chose not to force vacancies due to the seasonally low leasing period around the holidays and cold weather. Consequently, we maintained higher occupancy with existing rents, delaying our planned rent increases until the leasing season picked up. This strategy, while temporarily impacting average rent levels, optimized overall revenue by reducing projected vacancy.
• OPEX: Currently, our Operating Expense budget includes some of our unit renovation costs- such as unit turn costs. As we progress through the business plan, our intention is to further separate our reporting on those expenses for even greater visibility to our investors. This is partially why OPEX, although below budget, is overall “higher than normal” for a property like this. Additionally, our accounting for Q1 has been on a “cash-basis” rather than an “accrual-basis.” Consequently, the accrued property tax and insurance is not accounted for in this report, as those are annual expenses not paid during Q1. Lastly, we have in our OPEX budget some contingencies for various unexpected expenses. Having fewer unexpected expenses (a good thing) contributes as well to OPEX favorability for Q1.
• Overall Positive Variances: As previously mentioned, our strategic choice to take a more conservative approach toward vacancy creation in the holiday/colder months has led to lower than budgeted OPEX and CapEX, and higher than budgeted revenue and NOI. Even with a less aggressive first few months, we remain optimistic in achieving our overall timelines for renovations and rent increases.
• Conclusion: We believe that our commitment to remaining highly active and “hands on” in our business plan is reflected in these financial reports. Rather than forcing vacancy on a more aggressive timeline, the team is working with a balanced approach to maintain strong revenue while continuing to enhance the value of the property. 

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