IRET - Earnings call transcript Q3 2019

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Operator

Good day, and welcome to the Investors Real Estate Trust Third Quarter 2019 Earnings Conference Call [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Jon Bishop, Vice President of Finance. Please go ahead.

Jon Bishop

Thank you, and good morning. IRET’s Form 10-Q for the third quarter 2019 was filed yesterday with the SEC after the market closed.

release website disclosure yesterday at X-K. earnings posted have on our our on iretapartments.com addition, and package supplemental been Form In and filed

release we about our These to with business need Form and in will and morning, and during Before assumptions. certain statements call, based outlook remarks risks forward-looking on other making discussed you expectations statements the discuss subject remind in events and and that I filings will we be our begin future are our to XX-KT uncertainties recent this SEC. current the

and to on untrue to any to the with respect and forma earnings pro current measures management’s these the inherent update respect With or to statements for pro assumptions call used supplement forward-looking non-GAAP uses supplement no we to limitations. and opinions GAAP, today’s this call, on our measures refer statements obligation please use due to measures reasons including these reconciliation their subsequent a become forma management events. measures, non-GAAP made represent the assumes company Any that

Officer; me John Financial morning With IRET’s as Operating well our Mark President Kirchmann, as this Anne Decker, Officer. Chief our Executive Chief Chief Olson, and is Officer; and

At over turn this the I’d to to time, like call Mark.

Mark Decker

and Thanks, Jon. everyone Good morning, welcome.

company. consider our XXXX base housing for the we off year about focused is XXXX, executing all of and as For which team progress working to demonstrate IRET a

are coming year, in So way. things far very this together a powerful

we and opportunity growth. see the As owners place and for operators are in good business, a of continued

outcomes. on Focusing

are X.X% expenses as management impressive. operations of year-over-year, XX% as FFO of a lower disciplined statistics in cost third equally our Year-to-date, strength quarter, our same-store core driven growth, grew the share For our G&A. well controllable NOI diluted demonstrated corporate as by a debt, by per

we IRET care like financial Thank our team go good you, results. further, to team. delivering of taking before while I’d our for thank customers, outstanding So

Rise by embarked X and focus ago. is a our year half areas largest our a upon we initiative, of One of which

margin For the achieve prior designed third XX.X% quarter, year and good operator initiatives we a picked a investments our IRET of to is on NOI very greater margins. to from take X up are goal being market of of and portfolio than basis to over the points by Rise really a leader. XX track

investments One August since included can this chance occurred work. of succeed. by the of elements ourselves Rise series is and powerful call conference a our managing are X how last of actively The giving that in in transactions example a to have our

read, markets investments made have As from our our Bismarck refined important you two in exited portfolio. core Topeka we well may and as opportunistically as

FreightYard neighborhood Creek Townhomes Cherry Flats of in in and Lugano we and Specifically Denver. Minneapolis at the purchased North

Twin and with is an completely were Cities the years of to the the went years in of assets sold in buildings Here NOI the building XXs. And communities the are past average We that years. renovated redeployed six purchasing XXs, sold while from of one XX just is while homes homes we some The comprised The gained. was high buildings. margin the margin our into NOI age years. over XXX two three two communities we’re efficiencies all portfolio on the in the XX low XXX old,

to average Our from rents $XXX went $X,XXX.

and maturities by average X.X XX our our of cost more were portfolio eliminating those into active able consistency, regions, to debt our to of three operations the efficient existing able points addition, Due maturities. in falling we length activities with – September positions. assets to were by lower from laddering basis XXXX, our new while we the XXXX get and In property management years September activities, to management increasing average portfolio operational

BBB with with Prudential notes on par notably $XXX of Most issuers. million pricing is minus the REIT represents that

we doubly are So pleased.

take private and the notes pricing is also critical being able that that credit our profile. is Accessing First to the work to the inaugural we’ve unsecured of was markets now open long-term for account three to our into a capital market us public. past part over years placement done

into And of so be corporate with program balance strong $XXX today, million metrics, the maintaining a markets offerings We’ll we share proceeds for at-the-market the per entered these using a primary share ATM. or distribution equity cash and from improving purposes goal sheet. general increasing

consistently seen in competence the few the Even months, compression past demonstrates on our several and opportunity. occupancy. to market among transactions leaders strength see see strong metro rate supply, a We of new light in Turning value believe which which we’ve ranks investors, the nations we the Twin investment by markets. particular cap for in in Cities, over level relative are whom of

are has with continues and market-wide fundamentals continues in XX% also Demand outpace Department as Denver and the in strong see supply growth. quarter. occupancy Denver to positive trends population third job in to

XX% over of NOI markets NOI growth will portfolio centered XX around innovation terms balance and that expect government come are our by from top we together driven play that XXXX services. from oriented well will come growth efficient and XXXX, our more The towards instability. education, of in in healthcare, and Looking of a

pricing. primary of capital a in this As the seller than sale we on broad-based pricing multifamily the in closer and been when go to driving This challenges we for mentioned but markets markets the is strategy primarily the big tertiary on offers last interested to proceeds. we believe call, believe are redeploy We’ve is tailwind that focused that is benefits strength our amount ever. a

opportunity it markets growth sell intensive durable oriented opportune time However, when out in assets growth to NorthStar, cash you markets. an growth, of is our slower an consider and is capital less purchase flow – it is which

access our be continue disciplined strong better with sheet improving opportunities sheet and to activities balance a many growth, strong – with any to markets lens forms on to maintaining per We’ll with exposure of opportunistic for and capital. improving around our share results, maintaining balance access focused with a

our to that, the With Anne Olson, Officer. Operating let me pass Chief mic

Anne Olson

you, are NOI same-store growth and as our X.X% results. efficiencies last growth to same-store in we NOI reaching are third quarter operating X.X% thank compared that year-to-date Good year Mark. producing the comparable investment the With are increasing and period demonstrating same in morning, acumen and

Our market NOI driven of by Minneapolis. in in being our increases are revenue, particularly strategic gains

same-store Revenues up portfolio Minneapolis same compared across X.X% year-to-date our are year. to last the period

compared Minnesota our growth strong North when performance markets throughout NOI of our Our has the aggregate entire third Dakota to across with increase remains that exception portfolio portfolio. third at other the maintained XXXX portfolio, the achieved steady quarter X.X% looking XXXX. of an we Revenue in quarter and

the expense management. Grand to market’s increase X.X% X.X% experienced has strong in Forks quarters due performed growth has in revenue Bismarck NOI While lagged, and North our up Dakota year-over-year. is well as year-over-year

in portfolio, the compared framework negative quarter, foundation controllable agile grows as revenue scalable controllable enhancing building focus the These also combined initiatives are XX X.X% same-store the that Our and we operations expansion. points not reduce controllable changes. be an across can a platform only XXXX, but measures ongoing initiatives is expense expense on are basis our over providing growth portfolio expenses year-to-date third our for our margin and growth period These other same advantage strong and for our NOI to to by containment bringing with in XXXX. competitive

period with margin is increase expanding last While, point the basis results producing the on year. year-to-date positive work our same XX over

we and anticipating real expenses. are non-controllable headwinds on Across have tax portfolio, focus estate facing our This X costs. realized and are rising Rise initiatives. our We insurance by and tightens

early of revenue helped capturing expiration a Our of like These on that us few are changed February, more reflect And results to XXXX. new increased controllable strong we are these to expenses are percentage in within year-to-date about while as occupancy. future the I’d we the we basis a demonstrates seasonality have and lease leases our as as portfolio platform. have on rents points strong achieving move changes our lease to talk we changes of accurately our markets management achieving decreased undertaken renewals. implemented initiatives strong performance. our XXX the approach maintaining market have profile revenue have the compared we well revenue where indicating increases to the XXXX, also The In key

May, as our is non-compliance as This In of losses This renters throughout as the XXXX. remainder our institute revenue. insurance fee. we to or costs potential well implemented roll into creates risk obtain change and initiative reduces requirement leases that and residents a our uninsured being XXXX additional pay a related

full As implementation, initiative remaining annual of we XX% of and of Upon XX, this with this the $X our XX% September units subject in requirement, are anticipate insurance providing in of fee. million revenue. non-compliance paying excess generate will residents to evidence the

of Also over the our reimbursement in utility we May, renewal. and communities on upon caps XX for new leases removed

third quarter increase approximately continue compound. X.X% results reimbursements third see this increase to We compared on financial of an our last statements utility will our positive the $XX,XXX have impact and The year. started quarter of showed or in to to just same-store

And additional in are increase achieved annually. month a of unit, resulting per October, October roll, a an we XX.X% or over $XX revenue we in million loan XXXX. anticipating approximately over per lease complete Upon increase $X $XX,XXX of

Another capitalizing same-store portfolio. the is key opportunity to on our margin expansion value-add our within

in Minneapolis, the we approved In began and XX% or units XX we and have units we planned since this in approximately renovated XXX renovations. renovations completed quarter, third of market,

Omaha revenue XXXX, on revenue We renovated contribute through Minneapolis expect premiums and units in pickup the showing year. our growth that third market the to value-add in start quarter rental will investment to from in achieving increases expected with next

the our our team each organic grateful results continue for members prepared that to is evolve residents. efficiency team commitment, serve that to bring operating our quarter’s This to demonstrate and to to flexibility balance growth. work well and day I’m achieve our platform

ready thoroughly and all the to to you turn I’ll FFO. gave John, over he is of it core has numbers all I just verified tell about who you Now

John Kirchmann

Anne. September an Year-to-date, diluted of of same share, $X.XX for share, the diluted the or Thank of core quarter XXXX. compared reported the XX% in nine of increase quarter an FFO night, is Last $X.XX per we $X.XX $X.XX ending XXXX, FFO XX, XX%. $X.XX first over core for per increase or months to you, XXXX

growth, The was weather-related management The the and from due of losses by and refinancing expense administrative higher debt expense increase events. in interest higher from property and to favorable expenses, core primarily increase FFO offset terms. NOI at casualty general was reduced more lower partially

participant ended September expenses, $XXX,XXX the prior legal in general up $XXX,XXX fees year, Looking $XX.X XXXX, severance-related $XX.X due in of land. at result incentive pool a X% of our the recovery related in XX, in and decrease successful period $XXX,XXX from These taxes the estate decreases decrease construction costs, plan. sold nine our in higher total million to and increase the claim of term months partially as to open an $XXX,XXX long in offset were in same G&A and a related real to million incentive our primarily of defect by and parcels for costs, is a pursuit decreased in of to administrative compensation compensation by expanding positions

XXXX is $X.X XX% the experience implementation the to in The period was severance. primarily as nine of expense the and first million resident as management Property months to costs, including solutions to compensation $X.X of for increase million improving new the year. the prior of same due compared increase related well technology

the to of capital SXX Moving expenditures, Page as on presented supplemental.

same-store XXXX, a the third the months compared period $X.X million same-store XXXX, first of $X million, in of XXXX. $X.X which same CapEx in was same was XXXX. For the than of was $X.X to Through million million, the period less CapEx decrease quarter nine

XXXX be expected year in For million. $X.X same-store line million at with to the full to calendar year, $XX is CapEx

had total revolver. Turning million million liquidity, of available as including on to the we XX, $XXX September corporate $XXX XXXX, balance our sheet, in

to sheet quarter, up As this of the for in validation be to during comments, of enhancements by and realization entered of the referenced like agreement promissory the to we Mark a balance of senior have We earlier made to we investment-grade view placement unsecured the debt issuance private goal $XXX obtain into metrics. notes. our million financing his our

of initiatives the with X.XX%. priced a our quarter, has for on the future we interest-only we execute This at fixed flow seen a rate stable $XX.X million cash more and loan of us position stream. a transactions mortgage and into believe that also During team year entered a durable number XX-year

Page on our As of supplemental, presented of are we a updating our these as our result activities in results, operating guidance. SXX

continued to the by strong range $X.XX. to core operations, FFO costs and our target are We year our from by diluted the lower core interest on $X.XX from increasing debt share guidance per The XXXX full of $X.XX redeployment favorable refinancing. increasing and to terms higher from FFO execution disposition $X.XX midpoint results is

the NOI X.XX% same-store X%. be X.X% guidance full between by increasing the of bottom same-store year increasing of from growth expect We are We and X.X% now midpoint our to range. our NOI to guidance

X.XX%, our to X.X%, same-store of XXXX the the range range to X.XX% the the X% year And midpoint growth which unchanged. midpoint full are same-store finally, revenue of left growth narrowing to unchanged. narrowing XXXX full we are We year to expense left which

Please our the note, on we guidance next call, of fourth quarter are planning results discussed year to XXXX when full we XXXX. provide

that, over will call I operator. With turn to the the

Operator

Thank you.

session. from go Babin the ahead. today Drew [Operator begin Instructions] Baird. first will question-and-answer now question Please come will We with Our

Drew Babin

Hey, as, and rates exit markets good you’re country. to first be come year Obviously, recent markets well these cap you major of Can wondering a the probably coming exits to Topeka expectations are the of more as morning. willing around on stabilized acquisitions? I’m and of down they kind disclose cap and may core the about more Bismarck. fast down, us give if just talk have still markets markets little like the on while color rates on the this some or and

Mark Decker

then so as if Sure. that to so convention to of quarter at X.XX% And X% X.XX%, to X.XX% went would so said X.XXX% off for In side, on cap X% you to Drew, was Bismarck are roughly a thematically, Yes, our range, X.XX% to in. markets. still I recall, in we give Topeka. X.XX% a Topeka, say, the these as we pinpoint going cap a demand – buy X.X%. lot

Drew Babin

ones versus you’re which Bismarck. quantified places have in. growth Okay. probably exceed the term certainly you’re by internally of more is long you that and or And long Have little there’s why you’re That’s specific major thinks markets exiting the of sort Minneapolis, – you’re have color and I maybe how on the entering And reason exiting, growth the markets Topeka our you’re like obviously, between the guess doing been it. buying demand the helpful. of numbers, about that? ones also, Denver a expectations certainly at are all a difference of prospects Could IRR you been management you give growing the term

Mark Decker

Sure.

look what we a then have then to plan and And think we So going at tenure what – of for expenses cash I’m after quarter we you going what look everything are we we long and give every to that. have growth The asset we answer. the and set revenues we is at at all is look at grow assets. the around every by. judgment flow of sort prospects a look it bit an to asset. we NAV capital And rank And every we that to against also enterprise we generally. way force But markets a the and have

an of happy So indifference I was sale. opportunistic When would sort that that of our call are it. point we the where to in case of was hold really, Topeka

more there had interest So historically. a lot we a that community the Topeka from in been of was getting there feedback were brokerage lot than

we’ve up transacting credibly people, premium historically, better. be at XX to portfolio. that we to really think pricing highly did and whole Topeka brokers, bids buyers to to in six two eight to have In NAV. buy who you and that’s We’ll might from you’re ended are said, years well, take we these selling hey, market could qualified is your have for interesting. we basis. this X% are And about the get all it and end, So saying, going been on XX% that our going who Today,

for that thought an so we us. really what it move was was So worth, opportunistic

load heavy smaller assets, our judgment, rents of assets those In the case in capital next the Bismarck with years. lower pretty XX were over a and the

cap XXXX, on a low there, are those And and growth growth XXX,XXX higher be you there can flow experience everything today single for we there better. Topeka’s what XXX,XXX, very had fun fact at a than I range. the there’s in purchased we’re the Topeka, in XXX,XXX could sort this cases – home family while some were of after mean, $XXX,XXX we rates So certainly, cash and better. the And in but is in or grateful the same buy people

bad that’s an thing being of of terms terms in of a a cost thing in excellent landlord. So living, but

So with think cetera. our how of there. again, of out we that larger were more assets, it. Bismarck much where That’s paired higher we more, on portfolio the institutional, we to to tactical like And down really efficiencies, would in happy margins, better we have get rents, side say, et about Minnesota, the I case more versus opportunistic,

Drew Babin

prefer answers sure. Okay. That’s detail. long to non-answers I for great

Mark Decker

an all top IRR, I an should put add. of IRR. that we On just unlevered

what we we be what with could factor key hold buy compare we could what So another we’re – would there.

Sorry.

Drew Babin

appreciate just one Okay, And more great. it. for a I me.

Or kind income a other growth on of back the and we which income things very been that, year? other remains And numbers in reimbursement some and lower growth other getting margins. how of the revenue income like work expect peers, maybe in opportunity goes fees Should sounds in to a getting and plenty The to where are exceeding low-hanging that point you of talked case rents. of doing caps lifting to there’s pure just in overall guess, tailwind this are? about the pure number rent not penalty of the and where kind of which growth, like your the through number is kind things it crucial insurance rents some for we growing and your far growth very Or important to even next that growth left are the fruit I of stalls. renters from

helpful. could be that you very away, square if Just that’d

Mark Decker

some Anne I’ll yes. detail. The answer is Sure. to ask you short give And

Anne Olson

next Drew. tailwind it do expect be will through Thanks, that We a year. Yes.

these lot we the lease on indicated, doing of initiatives a I are roll. As

So year. way units of we’re getting about into next which these XX% into XX% through programs, the leaves

you to ongoing. really And do started our think a ongoing this ago program is that’s will fees. an That a resetting a by and grow. if continue half we of – so we lot market And recall, that it year

not a one-time thing. just that’s So

So what to pet our every – we really garage keep in them at either revenue rents our now, line we where look that overall and rent, market. optimized increasing and fees, with trying we’re can year

see opportunities. think do we from other the good revenue we that will tailwinds So side on revenue

Drew Babin

color. the for Great. Thanks me. all for all That’s

Mark Decker

Thanks, Drew.

Operator

from come ahead. will question next Please Our Stevenson go Janney. Rob with

Rob Stevenson

about like. How Good the you so asset the what one-third looks does Mark, compare what’s Bismarck morning, versus you guys? guys. for portfolio sold of sold quality with you remaining

Mark Decker

Yes.

So by and a units by one-third the answer than quarter Does probably question? less value. that

Rob Stevenson

Okay.

So the stuff what remaining then than better you quality that’s is sold? just some theoretically,

Mark Decker

Unquestionably, yes.

Rob Stevenson

right. All Okay.

maybe Just trying transactions, recent late, yours – confident How your rates as for to to acquisition and how lower sell your proceeds it, standpoint, on to be some From the the marketing some when as given has future near other cost at these as think the you sold. term? debt the much potential of properties but is people are in down Are with are look or you’ve close on near cap in with got likely proceeds these term for well disposition about side come redevelopment even of used you two? executing proceeds fund reduce could how that. that the been demand you to these acquisition strong capital, well like side is where you you’ve though

Mark Decker

thematically, I I ability balance. say, than since I’ve here, I to our we’ve highly been more would continue would to ideas it job confident the money. had mean, we’re, redeploy in capital. that in consider our

and or whether future sales lot do both of a ideas Minne. with for to come we what ATM good So have they in the Denver asset from proceeds,

we feel that. good So about

Rob Stevenson

run an limit? close pragmatically, a to even year? going assets Are you John, to then sell you if given ability And is and to there in limit a of sell more terms in Okay. anywhere guys rolls any

John Kirchmann

issues any have don’t We No. there.

Rob Stevenson

All one… right. last And then

John Kirchmann

guidelines, in factors. and compliance actually rules. sure limiting and monitor do with that have And any all We our those that make we not we’re do track

Rob Stevenson

last then from John. me, And Okay. or Anne one

is fourth expense growth up growth revised same-store fourth numerically quarter. is implies What’s X% a a same-store plus to So X% X.X% X.X% for driving in is more quarter the expense X%? year-to-date. guidance than The the

John Kirchmann

question. Great Yes.

We a XXXX. fourth comp have very tough quarter in our

our go strong very you that back was a performance quarter and at If look quarter.

just to So are with resolutions favorable some happen them. comp there some that issues

all In this had kind XXXX and and third and nice we’ve addition, comp gone XXXX, of fourth staffing by in we had through of as around the quarter a implemented. had some been initiatives structuring did we’ve year, of the pretty quarter those

there expenses, we’re don’t we side. as some comp non-controllable the growth on offset have as seeing So the those of expense strong to

Rob Stevenson

I appreciate Okay. it. Thanks guys.

Operator

will Davidson. D.A. question next Barry come Oxford Please go from Our with ahead.

Barry Oxford

in eyeing Great. look in? current Thanks, get you your some acquisitions, the guys. and your when economies are be growth markets Or markets? more newer will XXXX of Mark, you into goal that to you’re scale

Mark Decker

you’re when you and talking the markets, Cities. growth Denver Twin or So Minne, say

Barry Oxford

Correct.

Mark Decker

the Yes. and finish be a answer I is, guess in some benefits from to have to to human a there. more We capital Denver. starting I deals perspective few mean, like procurement we’d perceive there

eight communities someone all in in in overall three apartment now, love of and we’d have we similar north we own population to five. speaking characteristics four heavy built kind to other we’re who’s out, think and like way of other And in Minneapolis the towards weather have, the three seasonality. when some mean, it we four then lots markets housing different total. six would innovation, own maybe really to to If And We about to broadly, dynamics of markets, markets. business, and to or turn think been a would for we Denver, I growth, and thinking million, those terms or right good Denver I of

any of the those market we’re work Denver, Cities around the in but now doing at markets. Twin and dynamics economics that, really So right not things like we’re looking beyond multi-family

Barry Oxford

margin. I’m at margin. a I you’re roughly giving one line wide then come will XXXX, disposition guidance. together a wide will looking And or XXXX for they talking acquisition know Right. and outstrip not the by in by other,

Mark Decker

buyer be goes XXXX way our a biased everything we would be margin. I in we plan, the net – we by mean towards Yes. if would –

Barry Oxford

Okay. Great.

Mark Decker

That we’ll laid plans – very see.

Barry Oxford

know Yes, control. exactly. you that I issues can’t Right. are these

You can only go after them, right?

Mark Decker

far I size company. think more the on the Yes. we’re mean, size And directionally interested the and than distributable FFO per I the share of of cash

Barry Oxford

Absolutely. Thanks guys. no. Yes, makes sense. That I Right. appreciate right. All it.

Operator

next go question Capital Please ahead. Markets. BMO with Our will Kim John from come

John Kim

you. Thank

patterns, some attributable points like down atypical have occupancy quarter XXX same-store where Can can you to? this remind a XX this I sequentially, us You just see is was points year-over-year on basis what but basis. basis

Anne Olson

really to Yes. our Good question. It’s attributable goal of optimizing revenues.

So are we willing really let occupancy a when seeing rent have to we we’re strong little and growth. bit dip a

the revenue schedule So and expiration rents have the load good Also the with the Most down about the heavy little come occupancy allowed and trend it rent overall a – talked the of bit. It’s markets. the people we summer. we in in a past the lease are seasonality moving pretty in looks in really tough our to have has summer.

in that a revenue that to it easier management with really on things a our to those and of undertaken line bit get working on have that in been to initiatives move. the system little regard have We property seasonality lot make take time the

think profile. goal get the and to really optimize trend, achieve I the to rents lease higher our and our occupancy expiration So – revenue overall due it’s higher the also

John Kim

the were renewal and missed are quarter new now? have this, blended renewals and this rates where growth what I going out least but Okay. right may

Anne Olson

Yes.

going X.X%, are overall right year-to-date. is with around October in our line which in our same-store out numbers, right renewals October So now

X.X%. at right is blended Our

good feel still where leases coming pretty we about the in. are So,

John Kim

in quarter I leases the as new well. the where And choose third

Anne Olson

bit. in New leases third the down a were little quarter

We growth have seeing side. renewal been the more on

the So quarter. X.X% in was on new third leases

John Kim

was Mark. or maybe City Okay. how as that rent question and this Can month. forward? measure. comment portfolio at Council, month going Actually potential last it your earlier from control impact Minneapolis you A The looking may

Mark Decker

Yes.

an a the a because call which policy, as more think housing. lot density, We they enact a bill. what don’t also queue it’s a terms think think large for there into help the that issues allows which real that probably of did see will which of developers with of I zoning put They I debate we enacted practical getting in a plan, matter, are The affordability bunch and kind city XXXX threat. real have more policy as that early. supply inclusionary

coming in So there’s here particular the lot ground the in out a of Downtown.

I around really zoning its that – But here in we have it’ll of surge general, certainly but a also kind peter some in. town. rent but is in something And we’re as works there’s arguing think a There’s been think of screening way supply about. politician. we’ll It’s that I actively out I’m some and control criteria then inclusionary that unlikely, concerned not not watch,

John Kim

So from as markets. perspective, the investment as in you an it acquisitions put far new doesn’t on pause

Mark Decker

it But it seeing like we’re market. of lot a pricing this else. prepared new in to in does seeing I is calls, we’re not happening And It my stop sounds in and seen tightening some pricing, and seeing the mentioned really remarks, we’ve not other broadly. higher we are anyone the and participants listening some of

So ever. I’d market than is stronger this say the interest in

John Kim

it. Got

Where balance the improving versus debt growth? leverage sheet concentration does then guess, priorities sheet, your a improving has my final which top your Okay. XX And question on markets? basis. earnings I in your EBITDA balance been net fall increasing the on looks is in And like

Mark Decker

Yes. Top three but third.

to than So and slows we leverage is that of of We’ve event there our we being we to most a given is have at the are maturities. quickly, out a downturn level the cap work also FFO demand those gaps ladder financing quickly, having quickly have markets on focused mean, the today. I distributable cash. in greater that bit out apartment levels today risk that gap core are there rates in is that that metrics, view done quite where

is improve the as we equal debt created hard worked to very and the of all not know, form we’ve you have. debt So,

that. to continue And we’re do going to

sold a did we turn. we point brings So more market you to a did we industrial it small I say, where quarter. in that’s and a we’re into about asset really with And when in thing down we the comment had probably think is for the time portfolio Cities consider Bismarck We leverage, but then we comfortable note tell on were of in the priority. that your note, the sold. the it’s a I aren’t trying quarter going would something It that we that leverage. this kind had constantly. We of asset it kind tick Twin with happy certain were up,

I through a you’ll our back towards us of cetera. way raises, capital that potential, see et think work combination level sales

John Kim

Great. Thank you.

Mark Decker

John. Thanks,

Operator

will come from question Our next ahead. Sullivan Jim Please go with BTIG.

Jim Sullivan

of Couple me. questions operations for you. Thank

question I and know just curious that the all, was trend occupancy market’s Minneapolis. looking in the occupancy expect biggest at reasons sequential of the curious, rate may occupancy of kind individual program value-add But, earlier is be how that, behind over your the a The you And to I’m quarters? quarter that markets about two basis. drop there, next on First factor. a so concentrated trend

Anne Olson

It’s vacancy Yes. Thanks. When loss associated nailed really it. value-add look – our we you with program.

are of we As trends historically. see earlier, Minneapolis do in occupancy in feel And assets has one our that that overall not strongest Mark think mentioned our that we programs. and the value-add

our have you – occupancy largest impacting the which going in is assets is Minneapolis what two really So the here. value-add, two of large simply

Jim Sullivan

Okay.

of projects? further the little period priority kind list. on Just complete think average allocation the in of point that’s I to – kind the value-add. the I know two bit a What’s value-add capital

Anne Olson

years generally to complete to we when looking an four we’re two think a at asset, overall, project. I look at

Some much on shorter, in turns, if of we’re do least about we the roll. unit but those talking them are

shorter We timeframe. have done projects much some in

last units about finished I we four That us But, units, think renovate very years. whole we’re and early took mid year. going to we our if months. building it’s or through three two of roll renovation, in only about to four did kind occupied those first full or

Jim Sullivan

an talking My the question weeks was basis. Once really the days you value-add focused and on to lease be are unit released. about? individual terminates the is we ready when many to unit How or start

Anne Olson

the one target Minneapolis under do currently We our at Minneapolis days XX to and Yes. – at that, been just XX. at XX averaging able have and XX we days under of days we’re asset we’re other assets, our

Jim Sullivan

specified prior you value-add in a presentations, of kind menu. then a And also question, Okay. related

your out update I you you But again, about think grow your multiyear is I year is total menu is of XXXX, come materially with know from I likely know next and a when the where this it that give a value-add for may effort. presentation? million. $XX guidance to when you And

Anne Olson

Yes.

start our the our project think it I quarter, we will the start Lincoln. seeing third beginning and Omaha Omaha project significant assets of with six that there, in of launching just in XXXX a we’ll – tests the Omaha units and that’s will at very affects we in that underwriting launched – projects down we’re

projects to are so value-add. the we approved queue. underwrite of beginning at the do that next XXXX, the look grow the of that And will We in expect will pipeline set of

Jim Sullivan

projects And so underwriting. are in I the days, early the obtained yields far, line and with on know it’s

Anne Olson

we’re need trying Yes. Yes, we’ve looking to achieve. costs been nimble maybe as roll decreased pleased so – And stay projects. if costs, that through increased the monitor far. it an or Really for we to we We the closely. means premium what very do there’s at

Jim Sullivan

Okay. And the final me question outlook. on revised then for

Is because number backs increasing may may You’ve not it. price potential changed share shares the where average of currently is the do? that or buy the you there, and that outstanding

John Kirchmann

count what through. in weighted in to change No. Are share rolling the The prior you guidance? just comparing the it average do was with has to the

Jim Sullivan

Yes.

John Kirchmann

in too so – some from the that dilution would’ve building which Part have is that dilution, we it’s now, increase shares. of

Mark Decker

OP, The dilution February. is did C in from we preferred the the that Series convertible

John Kirchmann

Yes.

share backs or any So buy our guidance doesn’t anticipate issuances.

Jim Sullivan

you. Thank good. Very Okay.

Mark Decker

Thanks, Jim.

Operator

next question will Raymond Horne come ahead. with Buck Please [Operator Our James. Instructions] from go

Buck Horne

time But go I I could just I ketchup think sounds back to it listener, guys. in to CapEx quarter. If wanted the spending CapEx guys. Yes, time long to maybe a like enough, there’s here caller understand, the first a in guidance. fourth Close

level into in Just you’re maybe equal. XXXX same, be looking aggregate some out walk better, me that younger else if through curious also about spend timing we spend introduction all lower of this Should as CapEx of with portfolio, spending, ahead and the the then the the year? just buildings think related

John Kirchmann

Yes.

year your CapEx. going fourth quarter question and So full far guidance to first as as around

and got these late but up are been winter, off they projects we of start because a and late roaring So teed now. we’ve getting

have in up to to on get get But projects winter months the real of prior spin, in these three to focus lot setting is, a fourth we’re done. into four the quarter, going So, the going been and work for to these really going to running. the it’s

unit gets is a from next of As a of on the it go assets – yield newer cost is into rent these We from to assets. will that buy rent for stow right? we unit per basis, gets a the of that look a far $X,XXX not turn So year, the CapEx stow as And cost with as thesis. that rent. that are be a lower different of at that unit $XXX a relative these

future. definitely that are planning going the and improvement So, from we seeing into

Buck Horne

real estate year? think pricing Minne effect Just to happening just about appraisals looks you Great. do outlook into how asset how the taxes, how Denver. start next about markets strong activity And with taxes think that’s and to tax Do has for particularly Or just for in estimated or been future? what’s you given tax next going thinking budgeting you the guys? year capital in does – affect going

John Kirchmann

affected continue and are up my It’s years valuations growth seeing the are that XXXX. We do we’ve and up. three taxes anything. been and than it expect Yes. more going into And to here going by transactions

are speaking, get We expecting compare are of XXXX. we And to in we number typically appeal to those. have taxes valuation asset every time valuation we do But – our it taxes we is. – an in we increase increase where seeing a

– going the me really you a get until rates are won’t or up yet December, actually get now we valuation. that evaluations valuations What But we’re this getting later are we We’re what and seeing little month XXXX. prevents don’t you giving in and clearer from to those picture. increases mill give those the for

Buck Horne

And my real last quick. just one

and any costs to Looking in thoughts? for there lower to little any a your rate what or or the the interest Are bit pay early at opportunities those XXXX, your opportunities other drive debt just refinance maturities off XXXX near-term?

John Kirchmann

Yes.

So, we to of at debt the that we of next have average months. have rate about $XX million X.X% access over weighted to XX million an $XX

this pared quarter. in to some past third the down fruit there quarter, we some out financing there be But done still really the with activity we’ve harvested. So of is that

Mark Decker

that. Yes. Buck, to just to add

been sort a also we’ve deliver moving portfolio. improving very per I And to planning of sell catalyzed fortunate us the the like weren’t share these think of still environment. metrics, we’re on financing feel we We us. it’s to and very this pull that able tailwind been for really that this what – of has forward some a part earlier good while quality good news of assets big

news bad is, months good ago. was there, news So, is, it as not it it’s six was much as

Buck Horne

Congrats. guys. Thanks,

Mark Decker

Yes. Thanks much. so

Operator

question-and-answer any This session. to remarks. I over to turn will our now conference the for Mark like would closing back Decker conclude

Mark Decker

interest time everyone’s see if happy we healthy appreciate We and Annual everyone today. And John. next L.A. holiday. in you wish company Thanks, a for and the there. to you Meeting are attending in hope Thanks week, your IRET’s

Operator

The Thank today’s now concluded. disconnect. may conference attending presentation has you you for and now

Centerspace (CSR) 7 Nov 192019 Q3 Earnings call transcript