Real estate cycles do not move uniformly across geographies, and 2025 was a clear illustration of that reality. Within our portfolio, we experienced strength in coastal and university-driven markets, softness in oversupplied Sunbelt metros, and gradual healing in markets that have absorbed substantial new construction over the past several years.
Throughout our half century history, our objective has never been to predict these cycles perfectly. Rather, it is to structure our capital prudently, operate assets actively, and maintain the flexibility to endure the weaker phases while positioning for the stronger ones that inevitably follow.
Operating Performance
Overall, fourth quarter operations were stable, though uneven by market.
Our Orange County and Bay Area assets continue to perform at high occupancy levels with strong collections and modest but steady rent growth. Vacancy in the broader submarkets remains near 4%, roughly half the national average. Supply remains constrained due to entitlement barriers and high development costs, limiting competitive pressure. In this environment, revenue growth is not dramatic, but it is durable.
Our student housing properties near the University of Florida, Texas A&M, and Chico State remain fundamentally strong and outstanding performance reflects that. Enrollment growth and institutional investment at these universities continue to support leasing velocity. Pre-leasing for the upcoming academic year is materially ahead of prior-year pacing, suggesting demand remains solid. Purpose-built student housing supply in these markets remains structurally undersized relative to enrollment.
Denver and Dallas–Fort Worth present a different picture. Both markets are still working through historically large supply waves. In Denver’s Lakewood submarket, rents declined year-over-year and concessions remain present, though construction activity has slowed meaningfully and absorption has improved. In Dallas–Fort Worth, vacancy remains elevated and rent growth has been negative for multiple consecutive quarters — a rare occurrence for that metro outside of the Great Financial Crisis.
At the property level in DFW, we experienced elevated evictions and some retail tenant disruption during the quarter. We addressed these issues directly and have since re-leased affected retail spaces. While operating conditions remain challenging, new multifamily construction in several of our submarkets has slowed sharply, which should allow fundamentals to gradually rebalance over time.
Portland continues to recover from its own supply surge. Absorption over the trailing twelve months has exceeded long-term averages, the construction pipeline has declined dramatically from its peak, and vacancy is trending lower. Institutional capital has begun to re-enter selectively as forward supply pressure eases. Performance at our asset Vercanta Riverfront was excellent.
Across the portfolio, collections generally remained strong.
Capital Structure and Refinancing
In a year that saw other sponsors losing buildings or making capital calls on their investors, we successfully executed accretive, cash out refinancings at 4 of our properties.
In Denver, we secured three-year, interest-only fixed-rate loans at 5.47% for two properties. These refinancings were cash positive, eliminated amortization, improved near-term cash flow, and provided prepayment flexibility. At one asset, we were able to make a $4,000,000 distribution to investors while simultaneously strengthening the balance sheet.
In Dallas, we implemented a swapped loan tied to the three-year swap rate to create payment stability while preserving optionality at the end of the term.
Across the portfolio, all loans are now either fixed, hedged, or short-to-intermediate duration with prepayment flexibility. We view this optionality as particularly valuable given the uncertainty surrounding interest rate trajectories.
Renovation and Asset Management
Where appropriate, we continued to invest in physical improvements to enhance long-term positioning.
At our 276-unit Newport Village in Costa Mesa, we are underway on a massive facelift which includes architectural upgrades, taking units down to the studs and rebuilding to a Class A spec (replete with washer/dryers and HVAC mini-splits), and adding a state of the art fitness center and 8 additional units. Our team was successful in submitting the interior renovation plans prior to year-end, avoiding building code changes that would have increased construction costs materially. Roofing, electrical upgrades, and unit enhancements are underway. At Vercanta Newport Beach, we continue to enjoy the fruits of a recent renovation of similar magnitude and rebranding, which have contributed to strong occupancy, operating performance and significantly higher investor distributions.
Operationally, several teams executed well in competitive environments. At our 618 bed Alsander GNV, at the University of Florida, marketing initiatives and brand visibility have dramatically accelerated leasing velocity and resulting rent increases. In Denver and DFW, management teams focused on reducing delinquency, managing expenses, and maintaining occupancy in the face of softer demand.
Expense control remained challenging at certain assets due to legal costs, turnover expenses, and higher bad debt in weaker markets. Nevertheless, in several cases net operating income improved quarter-over-quarter due to stronger occupancy and reduced concessions. Further, we are benefiting from our second straight year of ~15% reduction in our portfolio insurance program, which is helping us bring expenses down across all Jacobson assets.
Market Outlook
Nationally, multifamily construction has slowed materially as development economics remain challenged by high costs and financing constraints. This reduction in new starts should gradually relieve supply pressure in markets that experienced elevated deliveries over the past several years.
Orange County and the Bay Area remain structurally supply constrained. Flagship university markets continue to demonstrate strong demand drivers. Denver and Dallas are still absorbing excess inventory but appear to be moving through the later stages of the supply cycle, with new construction declining significantly. Portland’s forward supply pipeline is now at its lowest level in over a decade.
We do not expect uniform rent growth in 2026 but we do expect to see positive rent growth return across even the most supply impacted markets by the end of this year, or early 2027. What is clearer today than it was eighteen months ago is that new supply nationally is falling sharply. Real estate markets tend to heal not because demand surges dramatically, but because supply eventually recedes.
Closing Thoughts
2025 was not a year defined by rapid rent growth. It was a year defined by capital discipline.
We refinanced thoughtfully, protected downside risk, preserved liquidity, continued strategic renovations, and maintained operational focus in weaker markets.
Real estate rewards those who remain solvent and laser focused on operations. Our objective remains unchanged: protect capital first, grow it prudently over time, and maintain the flexibility to act when opportunities arise.
The Emerging Opportunity Set
We are beginning to see more compelling acquisition opportunities than at any point in recent years. As interest rates have remained elevated and operating pressures have exposed overly aggressive capital structures, lenders are increasingly choosing to enforce loan terms rather than continue the “extend and pretend” approach that characterized the earlier stages of this cycle. Distress is not widespread, but discipline is returning to the lending environment, and that creates opportunity for well-capitalized buyers. With the national construction pipeline contracting sharply and new starts at multi-year lows, forward supply pressure is diminishing just as capital structures across the industry are being reset.
Our recent acquisition of Haven Poway reflects this emerging dynamic. The offering was oversubscribed, as has been the case with every offering we have made since the 1980s. We do not take that consistency for granted, particularly in a period when portions of the industry are contending with capital calls and stressed capital structures. We believe that improving entry prices, combined with a sharply reduced construction pipeline, create conditions favorable for disciplined acquisitions in the near term and over the next several years.
