IRET - Earnings call transcript Q4 2019

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Operator

Good day, and welcome to the Investors Real Estate Trust Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions].

Please note, this event is being recorded. I would now like to turn the conference over to Jonathan Bishop, Vice President of Finance. Please go ahead.

Jonathan Bishop

morning. good and you, Thank IRET's Form with XXXX filed full for SEC yesterday the the closed. year after was XX-K the market

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

discussed this earnings remarks based will you forward-looking we subject with I need expectations release use our in call, on uses including respect and no supplement reasons forward-looking GAAP, non-GAAP statements reconciliation respect and their uncertainties update statements making on these untrue risks to in measures pro certain management's assumptions business outlook assumes our about filings company that subsequent management statements made the our that inherent to begin are Form due current any forma Any to the the events recent during become a to to measures, today's to used our events. current assumptions. limitations. obligation supplement the and we XX-K we morning, and call these on to this and and represent statements Before for be and future the measures forma or call, discuss These remind With with pro and non-GAAP please will other to refer measures SEC. opinions,

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

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

Mark Decker

XXXX we've shareholders be very team. incredible for the job to We for you part I'm joining XXXX year so team, appreciate thank fourth to To an you much discuss proud a of John, year results. full Thanks, and our And good what IRET and morning, done. well our quarter accomplished. the business, our everybody. and was

ratio that finally, X%, growth in coverage to has XXXX. growth healthy XXXX safety markets strong minimum coverage of operations, big disciplined and FFO highlights core from include a balanced in and The of NOI a XXXX of dividend by produced margin improved

take Heading into this With now $X.XX, per to bridge in core components like were of our highlight FFO a key to share. need the I'd we moment of range to call, our estimates of $X a the consensus XXXX difference. midpoint outlook.

sale the Sioux December of of had XXXX in $X.XX the $X.XX XXXX impact First, to portfolio Falls FFO. an on

premium a this excited a As made adjustment qualitative low to and NAV. hasn't That yet. growth, was into low were it a reminder, exit to we win, margin market a our at consensus

XXXX outlook noncontrollable The second our is impacting expenses. our factor

our versus in investing XX% excellence taxes of increase estate Minneapolis expect real our research component, and dynamic was in into their Rochester transform saw in we markets to place this center where we is we'd more particularly which and to Nebraska. went infrastructure to a total taxes in a XX% well other major global Rochester, a what XXXX to portfolio-wide. medical Rochester valuations close than live, up we XX% will taxes Overall, 'XX. measured in in to A approach where expected, of support. funding higher appealing our more Nevertheless, be in rise see we like as as to infrastructure, is

in the stop as is experiencing front, XXXX teens, through insurance high well both is the in the the on industry of And cost reduction we not as expecting. losses. significant the and deductibles increases, whole single higher XXXX digits in Lastly, our versus coverage insurance were in as difference

total. loss to deductibles the $X.XX $X.XX of and expectations, increase premiums reduces to insurance XXXX in stop and $X.XX $X.XX together, our in taxes, our real by Taken FFO in excess our estate outlook or

in $XXX million million. $XXX redeployed comment we XXXX I that and only sold should of also assets have

fund to the took opportunity pipeline. the fourth our quarter to equity also raise early in We XXXX

$XX with for closed great in year have upon planned in construction apartment million the proceeds late a XXXX new QX financing of So development These stabilization. return strong as earn purchase in option we and we fund the lender community combined to cash. investments, this our will where we a a including will started Minneapolis,

per The funded While course exiting short-term for us these the reducing flow construction our of for growth, and of trade-off recent were with redeployed all and loan get long-term a will Sioux achieved Topeka have Falls by over to basis we're for year, fully the The the will positioned XXXX how and excellent sales exposure are North excited cash durable long-term us be a investments earnings these the share we activities results was our financings. managed the on today. future. leverage-neutral and impact of funded Dakota

and If quality and we've balance heard cash improve talk third, you grow our than target growing flexibility the are: core goals. about distributable to markets; us of story, key the X had and to our improve and tell flow second, exposure a greater of maintain opportunity sheet. These first, you've our with X%; FFO

Given items outlined, growth distributable I've XXXX and our cash in XXXX. flow we hit core hard. miss the certainly should goal, the balance FFO while grow combination markets sheet of just may And we

what these While about I'm I'm today decline a about decisions. not FFO got thrilled X as I ecstatic portfolio at year-over-year ago, versus for look guiding our we core in to total year

counts. Quality

size XXX XX XXXX, Here are average average In some had units. XX And an have we with size of communities great per community. an of we units XXX with communities January comparisons. today,

in in of XX%. XXXX reduction a our Our by resulted roofs the portfolio or XXX of number dispositions

target derived basis total from Our average by NOI by XX% from to margin points. rent XX% Denver and NOI Minneapolis XX%. portfolio increased increased XX and our of markets increase should

mortgages improved. today. much and unsecured our by half, at We sit also XX% is sheet we aggregate balance number reduced Our of

basis also. X.X call weighted to milestones Qualitatively, We last big also interest maturity reduced our ladder by our from our increasing continue schedule. we over years had XX our average rate average maturities X and points, to since some year-end while

achieved comparable and pricing issuers. investment-grade market placement to investment private other -- the accessed we notably, grade Most REIT

the to $XXX very common million ATM, issuance recognized our market fruit. million market XXXX. to primary transition XXXX, equity XXXX, transparency accessed XX/XX, cap $XXX efficiently company's market our our from efforts with from on the And XX/XX, our rose at and since around comparability and as the bore multifamily diversified first equity We also equity

S&P of weeks $X.X few was in and big equity a included IRET roughly cap over -- SmallCap we've of ago, Just to float billion XXX, the billion. seen $X and a a lift a

investors world This opens and to daily of up our liquidity. a add should new

have continue initiatives we're in bear XX% critical XXXX to and five to on going improvements, operational and we plus continue expect growth our can. we to by impediment, an what work we this fruit, rise of Our Noncontrollable is expense achieve progress to to control goal. momentum but

on plan Our the and great to past X a team years still we build our has There's company. proven lots that innovative do successfully over execute that to us. can agile, energizes are

the Turning markets. briefly to

of like Minnesota fundamentals, We're capital over now strength which formation built in upon incomes, cash development XX% our Minneapolis, greater employment continued We Denver, seeing great underpinned and enthusiasm by from high housing continued comprise household and to continue flow. and the community market. a

all strong Our fundamentals. healthy remain secondary reasonable supply with and markets

own continue market of in to sales pricing in have took we in summary, on work of We lots So the driving our our XXXX. still value. portfolio market and great can tertiary achieved we advantage do

when portfolio to pipeline pricing long-term we we per the results, the financial believe find well basis. have a is acquisitions investments funded as create add have we further as We flexibility on share that of strength to that power and a And the leverage-neutral act.

with that, Anne -- the I pass And and mic.

Anne Olson

brief. morning, Thank remarks keep operations on my our good you, I'll Mark, everyone. and

continued and have lot we NOI we talk about heard, focused and it. on good insurance, do XXXX. you As X.X% But progress. impact a about in the work to and of are for to better our With efforts take first, minute let's I'd feel we mitigate get to of XXXX XXXX XXXX, a compared same-store growth taxes to what to our

occupied to combination Our has XX led same-store of in year-over-year by a unit into steady with The of rents, fourth gains with occupancy continued Increasing February, growth occupancy, XX.X%. increasing is and the throughout growth and period, of occupancy. per coupled trend year-over-year occupancy revenue quarter points the saw today's basis X.X%. rent at driven

at was across lease renewal in Our average push year. XX%. X.X% were to able renewal the And new our held rents while portfolio we for rents steady in flat, XXXX percentage the relatively the difference

As X.X% in with occupancy and we a XXXX, Weather-related year-over-year markets. an is particularly the growth in Omaha, year-over-year. Minneapolis, NOI growth was XXXX estate occupancy we pleased today, associated that notable early XX.X%. of It Minnesota the very in with decline performed damages resulted standpoint, today, a in units that initiatives exposure had this The of NOI. X.X% well recovered, we're year-over-year increased were we we our see had similar expenses pleased North Dakota a we portfolio. in efficiencies achieving across saw also This from in region be in sit result portfolio repairs. in and position taxes the off-line taken higher We're We're resulted there incurred Expense has in to a that insurance for growth revenue containment in claims. increased are is our to real to from our but occupancy where where in our and markets decline strong XXXX. Overall, rents. markets,

this in RUBS. around our XX.X% increasing points. repairs in revenue executing points. This by the reimbursements removed our basis We our on period our to of we roof in plan of affected margin would remember our of realized XXXX, XX X our negatively and that respect by CapEx. anticipated in in our as fourth or process you inclusion the for had did the related to quarter growth compared refined income that we same basis through utility $XXX,XXX $XXX,XXX of And fourth expense caps our some we control, but realize quarter of the expense By XXXX. which are a May was expectations goal increase rise may expenses We With with XXXX, year-over-year portfolio, to XXX all NOI expenses our hit to rolled initiatives,

in renters' May also the impact insurance months the will insurance fourth results Similarly, we continue our RUBS program, rollout. our $XXX,XXX quarter. renters' to as final which of XXXX, off in and through kicked few our positively these Both in move brought

but margin year-over-year, progress flat have business NOI can of we our that control. the we same-store made components was Our on

margin basis to compared of to an in XX resulted gross points efforts XXXX. XXXX in increase Our

starting NOI basis by We roed, And as market Minneapolis both we we XXX units assets. new leases our with bringing our as two to rise the in total XX XXXX, work rise our points. component amenity across Since renovations. X have unit our across overall our of is key fourth assets X our by construction of today, margin in clubhouses and by A unit quarter our as XXXX to increased under has reposition renovations. our X value-add renovations portfolio XXX in completed

In for flexible achieved the XXXX, in-unit while million our our average into our in million renovations we and invested million also our getting and $XX,XXX plan XXXX, on Lincoln, we underwritten We're amenity premium unit Omaha in fourth averaged and committed $X existing quarter, in executing to portfolio. In of cost renovation was approximately anticipate $XX returns. spending capital $XX value-add our and staying and to $XXX.

on beginning in platform five our are interactive of in resident Our is on training stages the and rolling the at that our of onboarding final XXXX. enhanced XXXX out platform focus by training lead-to-lease and implemented We're rise rollout experience. was a

estate growth, best our practices scalability, the will exposure improve our achieving experience portfolio exploring focusing appeals. enhanced additionally and our By on an and advocacy we of and are are tax customer on goals into renewal flexibility. providing we execute position our consistency throughout excellent going We next market flow how real sheet what enhance can balance in cash insurance to and

that which investors. have and We home for and team team our our provide a with is residents, fully a aligned is to committed our experienced, great mission, our

these for to results so tell efforts efforts line, and impacted wait company-wide the our our hit I'll you bottom XXXX let can't John John? XXXX them how outlook.

John Kirchmann

from X.X% core XX, the $X.XX an you, increase XXXX, prior diluted $X.XX period ending FFO for XX-month December of Last per Anne. reported night, the of Thank year. we or share,

ended December diluted was or per quarter the share, increase the from an core year. $X.XX XX, X.X% $X.XX prior For XXXX, FFO of

offset interest expense casualty that The took events. growth in reduced the of FFO The in reduced full of weather-related third net administrative expenses, of growth, refinancing and third partially of during year expenses dispositions by was FFO by from core property increase is favorable higher debt at general the due and new management more core primarily quarter fourth during and impact losses acquisitions from lower terms to quarters fourth NOI quarter. the the rate place the and

administrative a $XXX,XXX year and period. the general our expenses, total from the year, at G&A Looking for million was prior $XX.X decrease

increase management $X.X ended resident to prior G&A $X.X December technology year. primarily year. solutions XXXX, the the increase The XX, experience. to the million new XX% implementation line in related full $X.X was with at quarter for Property prior the the for is year, compared million was to For expense a improving our million due of

Moving the prior the $X.X Page XX, to capital presented million, of of the $X.X increase in start million capital projects increase year. some This as was first XXXX, of XXXX. from same-store for delay expected the due and S-XX a expenditures December a the ended half the during quarter supplemental was in to timing of CapEx

guidance $XXX XXXX which same-store of year for $XXX $XXX per CapEx was Full unit. our than lower original to per unit, is

maintenance quarter, which instead fourth the per lower and as planned As discussed repairs to recorded $XXX,XXX spend. contributed during of earlier the were unit Capex, repairs roof of by Anne, CapEx

spend In to was full and programs increased to the for for the discussed out continue $X as Anne quarter we the addition, million $X value-add million roll value-add year earlier.

Turning our sheet. to balance

As December liquidity, total $XXX $XXX we corporate on revolver. XX, of XXXX, million including million in available our had

term in strides weighted great our borrowings, our costs. interest and average lowering make our secured maturity decreasing to to continue We increasing

with December million a December improve markets. with XXXX. the XXXX, increase our have At of outstanding we seek as outstanding XX portfolio balance we improvements XX, our sheet $XXX XX versus target of to million our at loans to $XXX mortgage mortgages balance the in flexibility These balance XX,

communities communities, total commercial properties aggregate X apartment and we an During these XX from land $XXX for aggregate of sales used disposed new price noncore acquire to price ended off December sales apartment gross parcels $XXX of of for million. XX, primarily two Proceeds were the XXXX, million. a year three

As the December redeployed, that of of have the be $XX sale XXXX December Falls is available of Exchange hand from cash to $XX million on portfolio. million of XX, XXXX, funds Sioux including we

has XX, As a as X.Xx to of result, our December improved as of XXXX. December X.Xx ratio from XX, net debt-to-EBITDA XXXX,

shares XX-month of the common per XXXX, repurchased December million for XXX,XXX During and $XX.XX. at and period net average ended share operating an we price cost of aggregate unit XX, $XX retired approximately an

total sale $XX per During at-the-market and in for consideration program of an quarter, shares, share registered for XXX,XXX the million ongoing up an issued of we common offering fourth which, shares at average for $XXX we $XX.XX to price a net net million.

in FFO outlook $X.XX $X.XX presented core of is to with as our a XXXX, to diluted our $X.XX ahead share, range midpoint Looking earnings share. per release, for a of per diluted

on is XXXX reduction shown Page NOI XXXX of S-XX million dispositions, the of $XX.X million growth As XXXX acquisitions. FFO in increase NOI a $X.X for an by by approximately of for nonsame-store in offset impacted in supplemental, from XXXX

of held of XXXX at FFO. are In XXXX, add to XXXX million $XX investments the $XX XX, addition, expected December $X.X from undeployed proceeds million to approximately accretion million to net

approximately by impacted favorably XXXX million of is cost result outlook refinancings. XXXX's a debt $X as lower of Finally, interest

to X% NOI This same-store in revenue same-store XXXX. X.X% and between and growth expected growth reflects operating between expect communities, X% between same-store expense X%. and we our X.X% grow X% property For and

growth rent growth seek to revenue million to catastrophic insurance in that come stream. of seek estate optimize XX% same-store experience revenue rates is a across our expense result income and other loss expect an increase noncontrollable offset country. $XXX,XXX growth real We taxes a to or increasing costs overall in $X.X XX% to or increase a increase carriers insurance higher the in and from property expenses due a primarily Impacting initiatives as valuations by as adverse

loss $XXX,XXX in expected premiums, of our addition in $X projected increases and reduction we XXXX through casualty impact for changes million. stop over from deductibles total also insurance coverage to a for additional resulting seeing changes in and In an of our losses in insurance are higher to coverage a premiums

are On our seeing the modestly flat benefit X rise with controllable side of we costs. generally initiatives operating expenses, of to increasing the by

And and market to as wage compensation we we respond X% conditions. most increasing X% However, low unemployment experience markets to of continue pressure. XXXX same-store expect to increase our to cost

costs, well include to compensation costs for X%. total marketing as are Total to repairs expenses utilities and administrative X/X increase expenses, and and same-store as X.X% controllable account which expected maintenance, and of

administrative for XXXX. to and turning Now and general management expenses property

expense continue million $X.X million per for to to our XXXX $XXX,XXX new are current of implementation management are XXXX. We for G&A $X.X run projecting expected $XXX,XXX related to the to initiatives. to rate expenses costs Property quarter the continued increase technology for of

$XXX million to from for range per to while Same-store range are to XXXX expenditure $XX Turning from value-add costs unit, our $XXX expected $XX spend to capital. program capital is million. capital to expected

greater XXXX affecting toward Mark's had we of I the made closing, members reflect XX more choose comments daily our target have provide and sheet to like the to our year, reiterate a exposure the while we and the flow, of may that to who our In flexibility would are balance we to our team markets, our portfolio the with embraced like who of than portfolio, change each a durability not long-term months valuable during improvements cash improved dare to outlook of would thank qualitative I basis. on company ago. growth win potential construction

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

Operator

[Operator Securities. National Gaurav Mehta Instructions]. come question of will And first today from our

Gaurav Mehta

about balance of on XXXX. question kind are the advantage that of forward your taking guess, earnings improving How and seeing you of do you I tertiary that going and your in market. markets out the of First pricing the further portfolio in going guys think recycling in dispositions goal forward? you with improving as capital

Mark Decker

on operating the side Yes. lot I saw and gains it's year a last what mean, side. financing think we -- Carefully. opportunity big on the of I a was

some past, pulled I as we've the forward those sales. in we really of so think And commented

said than investors, just got the few we and AFFO said we this to didn't do of a that moments we've ago, on caught greater core the things And committed taxes. growth. we really I X% the think FFO bit to try and and is we're a a that little deliver because year one

that a to ways to going do in have way stays find we're it So to balanced.

So we'll it. be to I anything. exceptional very be the -- to picky is market think sell about do continues

some eye certainly eke best growth But something there. this on So focused be really absent we've our on doing exceptional, I ball got really I out our and share ops that's mean, the we're year. going to per think, to

Gaurav Mehta

Okay. maybe I redeployment have proceeds? investments know you the color about And expect the talk question, million maybe $XX second timing on XXXX, of $XX you some when close that. of in of you more can to million provide to

Mark Decker

Yes.

roughly or a balance this is So The if we as everything close, goes that assets in of -- is half talk construction half that I I'll in less quarter. us loan, expect which X about little moment. have first the to of than a planned that

is counterparty well. So is the Crow the here know construction our very the and Arcata, of Chicago. out a built They've called market. commercial It's loan they're Trammell active a cities in loan, one we group assets in of twin our

we them grocery in there confidence prepared get and cities XX is a and in really market. right that, I think, bunch will great asset foods their XX Foods, of people be experience. we're like the that grocer or Byerlys, over stores excited which really, Lunds of company a The about things work. twin So with a Whole degree And & a local had high has, local units XXX that

and mile Nokomis area -- a a with neighborhood. restaurants fantastic good The So of there's new area there's no been couple area, a supply and it's lot nice radius. couple where There's block park there some in really amenities. things, couple -- of within like a

is attainable of in added think is this point of loans. what South, is I and the two the really the at door. piece really structure the with a There a which average two we're there'll grocer about, which price that out location. folks care very to most The probably the desirable is, we're The $X,XXX, So about some amenities is kind right the point are front deal, This $X,XXX what's Minneapolis. range, it's there neighborhood, -- your rents excited excited amenity the be which many.

first We One year. fixed think, end at $X of the is X.X% a I $XX.X mortgage, million. It's of the roughly rate. funded, million it

at the -- the December. right draw. continue of end very to So fund we'll And

mortgage a at really XX.X%. have loan So construction it's -- $XX get And till that's -- a first mezzanine that a is won't we second, about mortgage. We of into then million that's next which year. a

but So or get will we two buy by that that of be either it. funded the XXXX. those XXXX, things in we a might most gets will asset little the until of run then of sold And end

it. We purchase have an to That would option our be plan.

excited So really we're about that.

to the opportunity I for continue here portfolio in great think a build on us cities. it's our to twin

Operator

Our next will question of Stevenson Rob come from Janney.

Robert Stevenson

you're about in the of of seems bit talk your rental your revenue how against And How systems? rate you seeing? assets? Can guys that's And operationally? supply over occupancy what Minneapolis you a abnormal then XX% in new the much directly days a little seeing much market of making are management occupancy is as sub market call competing also,

Mark Decker

which couple high I'll X,XXX seeing as whose then we're cycle talk A in cycle. X,XXX somewhere would the supply the with supply economic numbers and we've twin But been between this depending occupancy. read, and cities units, in we're start there. be you Anne picture is on what the as questions ask in Yes. about to of

other major any this hand, one markets of occupied most is market, rent On the to we and the growth. still of see continue

picture some balanced. is, market supply. supply whole I a I'd heightened where the for there overall say that are few So the say, There areas is would

deals done zoning, new particular, happened market inclusionary there's try been law, this to just beginning the a the of that around rules through in before the became which some there in developers bunch of at So Downtown the to ran get window where year.

of and these affect us. few a submarkets there's then And some

radius, asset actually Downtown units X- So which X-year for XXX X,XXX X- of new or apartments, within has asset, or our most X-block high-rise. old are in the market, example, RedXX, now a

basis now good in lease-up got The product we're $X.XX in a $X.XX rents, really in and So getting that's to a the there. is right foot $X.XXs. I mean, we've competing

competition So the that's Arcata, up bad basis really there. it want I Again, being boutique-ee. have place. market, with few will where feel has that be very In product, that like good location another And good story we time. done In had the our sprouting people help it a last about around and we End is up that be Edina, mean, in for news to occupancy. over West the feels all of an like it other another good asset, cases, market a us where both we've submarket would job holding pull in dynamic is years.

if And supply End, X so half you in Together, submarkets, took almost Edina. and those it's the West market. the Downtown

I us. the affect good So going us rents. very negatively. push think it's affect new supply, which is dynamic to ability think our attractive will I again, very But to It it affect with will product. below It's we're -- don't a

about you talk want On occupancy? the to --

Anne Olson

Yes.

is market is in side there the in we to the going add. of largest have the really our occupancy dip through assets value-add renovation. This due On the where value occupancy Minneapolis, X

just And our increase that a that we we vacancy in quarter tapering -- And because rolling that add. bit as off to higher increase little programs fourth occupancy was of So a is It attributable the do get QX faster. see little those value lease our expiration. our does was lower bit vacancy. in X.X%

the you're program. in actually But value-add have right. less we units So

to is optimize total or balance goal Our to revenue.

-- you little a have occupancy, can see growth see did in we twin is did that our as good but suboptimal we really bit cities. so positive rental the supplemental, in And

of vacancy a value the add. of little portion was it and of occupancy, some was So big a trade-off from bit rate it for versus

Robert Stevenson

it portfolio how make Okay. and how 'XX in talk they're And Can the they are then in about in did to you XXXX? not assets expected And supplemental. performing? same-store Denver the perform since into your

Mark Decker

Yes.

to... want You

Anne Olson

Yes.

we're the So assets. Denver with pleased really

assets one internalized Lugano And XXXX. in just of have also we We acquired management X West XXXX. End there, the in we which

the managing great the in the for in that which seeing Dylan we're been with our assets ourselves, both same-store on and great growth we're And X We're considering And End now So side performing. is very market. in our West has we that the team there, have how team, which they're positive really solid really Denver. in be supply portfolio. will -- renewal XXXX, happy

start So get first some all Strong that in rent in leases on the we're XXXX side, rent on from seeing to on seeing assets. study X But region new numbers well. expecting of you'll growth growth there and hold and are those results. renewal our as some quarter we

Robert Stevenson

the at lower you you And up wind Okay. end? They're where for same-store even to can markets revenue above then the be of being terms little bit the are ones the of of to in expect going a about or of in guys? for sort talk the high-end And guidance going year? high-end come which the at you to sort

Mark Decker

keep going. Anne, Yes,

Anne Olson

the expect XXXX of Minneapolis, -- due guidance, of on to strong revenue side. contributor bit high-end And expecting quite be revenue that to we'll -- some growth seeing we're our add. We value should in a Omaha. the better Yes, think a mostly will for really we Denver growth out I be and

the there. where guidance North a see the be our end do amount limited would of we of to ability Dakota markets, lower to On push continue rents

Robert Stevenson

And redevelopment store? is out stripped of the same Or store? is included in same it

Anne Olson

the included store. It's same in

Robert Stevenson

investment a If high forward? new to how thinking order additional, markets legacy markets time, willing are for some about sell a market concentration And that you opportunities, Okay. some you need going in could me, Minnesota to go other markets you it then like the into? or and Dallas over balance go? the Board Denver in Phoenix that down whether you of and how market incremental or And the out you Mark, market are do be lastly

Mark Decker

how strategy spending the other whole a time end into up and we on. be and differentiate great markets, as gets how markets. something of will different we question. lot it's compete I of it It's think Yes, And of a looking to a part we're what we investor in

DNA the live and life durable, the that terms will quality we we've think of in talked innovation-centric what reasons and be to I As -- to economies. Mini have past, believe high Denver it share there will of in about they and

few to we're around I of all think could feel concentrations We markets it have be. now. less is it relates it's a as and the markets. we So can with be the me in in sit above-average definitely and doing we not continuing really will in full margin. this focus to team work hone about the on directionally, speaking, and my which I that's a really operating areas more competitive right talk build about Board, build When advantage is what mean, mind, And every growth. myself not we -- where day, and should

Robert Stevenson

in in But the of revenue can put particular in at market markets of is terms or much just meantime, particular look or that any have in X there you terms risk? in any or concentration one X whatever of caps how metric place how Okay. want you to much terms really guys and diversity any represent

Mark Decker

We have not.

Operator

D.A. from question today Barry of next will Davidson. Our Oxford come

Barry Oxford

guess, then one, looking in deals that of Falls rate marketplace recent of of sale the an kind I cap Sioux rate of I'm and there, the dilution. at you now. kind Mark, kind give is if the if about it? right you're currently what maybe -- talk at cap rate for And at could getting the cap exact Looking you really can't

Mark Decker

Yes.

Falls, were portfolio Sioux in In X point our City, and range, to Sioux fact, South sold reasonably we We disparate we about. X.XX X% is -- there pleased portfolios Falls. Sioux Falls, give we we're -- -- on were X.XX% at were So geographies, to which there put in that quite that cap, the point Sioux Iowa. actually actually City, Sioux like Dakota in

So drew we -- eye I was what kind of product markets, very happen a and robust that the our have saw to product and had in on high a bid as but sale, what low similar for that CapEx was prospects different very really very growth last may which felt we mentioned we Topeka, call needs.

has and I been think to this, priced. your other surprised see where that which my could expectations. their is half investment do So where to the return some math assets the have answer some we've I the community investing? expected you find belief, overall we probably support mean, -- It lowered question, of of really is with

longer, have also rate. I and to basis down they need to insurance X who, I get returns. money general win for expansion funds, out, have that their from IRR flat deals there's underwriting right your XX gone And the to dial And large I changed maybe hold can't also turn. a exit we're cap moved think or reversion think may a been lower unlevered last think think, they're you that's and unlevered year they every big So is It's to that required perception six. time year their -- points about for to companies, going because to of an I they've assumptions mid-Xs X% now. number this they've pension

that's way spread XXX long-winded probably points. is the So basis a of red saying cap

I is I think a little cash better. masks story, the which think that AFFO the or distributable bit story

Capex. you just portfolio tell and it, of agency Sioux could that way. would Falls you $XXX mean, unit on that you that debt isn't be broker I going and it's We could buy put can't underwrite to so. So a don't. a We the

we about hold powerful you for which look that's when versus growth, is positive talk highly us. pretty sell, that's at even So And before important. a our

Barry Oxford

but Mark, runoff. you ones Are to like one? this other those they're there that guys like of there? more out we'd are more kind more, out right. runoff engaged Barry Trammell there deals there look, in, Right, Or situations, just are do other Crow

Mark Decker

for a was -- stack an have like development-type to doing It if open mezz our mean, know road way probably of full asset. -- possibly more that deals. lot a We with we year, earnings. was where is was had more a there close like do a another that and many, It uni-tranche with. down and are well how we and deals us situation, partner look look them. and call we're owning quick be able That of In preferred-type you'll bit at would But I'm we can to there They group do that. we opportunity risk. far that, opportunistic the got I at quality dialogue of was not I one-off. the the pretty needed see particular sure sort at of to a of the to the what there there. end were deals, We're see investments, the

So It's them the all and spigot on turn opportunities. of get time. the we it can -- look at you something volume crushed with just

So we're pretty picky there.

Barry Oxford

Perfect. at is end? No, pre on the negotiated option that that negotiated? Or to that be makes sense. will a And Mark last, buy, that question.

Mark Decker

so be XX perceive a what point of price, premium gets market cap that in we a XX rate to construct new there's kind ceiling a us of a a at and basis have for floor terms today's to We to asset.

stout lower said that, I than we rate negotiated is because having seen cap market pretty think we've Now pricing. new asset for some today's a

example, it It one stabilized. a was It's of that here to there my not certainly in old, town. give just in was anecdote, judgment. the at you A+ less but were for buyer, of location, it in than buyers just traded last an twin And the year X.XX% was an all a good quarter. So an asset cities out barely town to traded out location a

I cities occupancy, Minneapolis, that's the and reason, It's of they're of twin in people a for long-term seeing more on I'd it's a control they very that's And capital little top rent and capital. more stable of So good, growth lot produced moving because because about other trained historically. places, than nervous historically. has consistent or whatever have just true are line think, Manhattan, out is market a been there's and say

Operator

BMO Our next Capital John Markets. Kim come question of from will

Marisa Jones

And John. this year? rise you noncontrollable Can of the does program? how timing by off which large for to your impact markets question Marisa contributing is discuss expenses. is increase My on first X on of this are that, the This

Mark Decker

Yes.

biggest Lincoln, the XX% of weren't was taxes planning. in expectations In a And everyone then they think I last and who I So Omaha, went numbers other market Minneapolis our Rochester. high we in which couple taxes, particular, markets, a had by we our bit. we that read had and our Nebraska. exceeded up us But expectations. mean, else, quite -- I for really so surprise, caught Rochester, is night, year-over-year, and think,

So X. growth to us backwards. for I'd like will to mean, allows by stunts as be report next it. It going that are rise like But opposed this to I it. the we've year. how I we're margin mean, definitely expenses we does affect five us to hard hell it's meaningful say, going it our margin do on time to I to rise try to show did all those by year. to hard done hold work go overcome. this And

So one is part going forward of backwards. not going

We that. achieve will

Marisa Jones

Got it.

Mark Decker

Sorry, go ahead.

Marisa Jones

on you're how Also, can I this and spending was wondering year tech potentially branding initiatives? much if investments you discuss

John Kirchmann

is John Kirchmann. This

tech initiatives, We expenses on using on new as a management the the point. of really user that. things spending just going communicate we investments really more So additional property not are is lot from a or to in to X right year it's versus fees just A on now we through it's I And going lot spending we've rate now, down the for XXXX the what run full the amount increase that $XXX,XXX implementing and that at and do technologies. $XXX,XXX. capital will the this really already guidance, about in may road, in we're increase XXXX. committed it's We're in But just months increases of XXXX, getting user XXXX, fees. discussed think additional of as in the rate our run that to

Operator

come Ami question will of next Probandt Our BTIG. from

Ami Probandt

return moment. to occupancy a I'd just to for like

With Minneapolis? and see similar saw in Omaha, occupancy renovations bath in expect we the should we a dip kitchen to to starting what

Anne Olson

loss occupancy, given and last be now XXXX we I any we going what recovered than we've wouldn't the XX.X%, that in market. up of sit dip there say off-line still that Yes, we we the in But some in where will experienced and have it's today. we -- units additional to worse that's some Omaha. had vacancy year we in to had

Ami Probandt

then And your reducing you increase efforts to how Okay. overall XXXX? the to in also discuss lease on vacant a that? Could past, trend portfolio occupancy And you through occupancy expect about talked following the days in progress termination. you've in

Anne Olson

Yes.

-- delta our So goal the across start run top -- pricing occupancy believe or really market our the volatility we and the portfolio. really, us and are between really where our gives trying to XX% hits at And which kind right the right around we're low is high is of power good there, to portfolio occupancy, to the minimize there.

X of are -- number turned progress that: We on components one, of have made reducing the vacant, days they being faster. both

that. much done year, our to on are larger last all of as our X turns focus we second, and a have management Our leasing. we days. a that the enhanced units the on platform, and revenue And that -- of we have within lot is out focus door success expectation X is Particularly price the right have getting at had getting some in

Ami Probandt

Okay.

through end continued So XXXX? Or into the this maybe benefit should ongoing to we expect of of XXXX? something that's through XXXX see first the half is

Anne Olson

vacant. think down can't on of some really efficiencies they drive number move on-site we process I the -- create ongoing. that when mean, really a the of lot I quickly. our -- it those and I revenue to days ever it's focus mean, does reducing you can get -- units

Ami Probandt

any kitchen the renos? repair that to then one Or increase quick And bath capitalized? that one is Is of maintenance. on just Absolutely. all due and the R&M and

Anne Olson

That's capitalized. being all

repairs CapEx due would some As roof I repairs in those we increase to mentioned, be believed of the engaged the time considered that on was the at fourth quarter we items. roof

noted, John a see lower -- won't we of we that but in and $XXX,XXX a as hit than maintenance So our have in quarter the CapEx had guided again. little fourth came to, our repairs bit did

Operator

[Operator Instructions].

will question come Horne Raymond next of from Our James. Buck

Buck Horne

for tax get some process the or entire play possibly you or property modeling Lincoln? that Was increases, and chance you could how go outsized? looking increase, to Or wherever this want to with at reassess in process can Rochester particular to a could was there's you're later municipality? there market outsized whether do How just recovery the understand if that about year. is your out? do of scenario go the back these second. the any Did if Minneapolis kind Mark, that think reassessment? similar through Or something the that worst-case what you getting of I appeals trying you're kind Or you're appeals here get just magnitude you

Mark Decker

of that lot assessor And in we've Yes, their think a is share. it. They a are. jumping you if who's a is here view, But government is, talked have the jurisdiction inconsistent. answer multifamily there where in it's that lot question of the around one, about so all They've The hasn't because somewhat things. I show to question this they I a much benefit values start. have view Buck, table mean, everyone the been new been of to house paying I'll will, answer Rochester. that fair transactions a

years look you our XX%. Last couple the if went taxes taxes over last of ago, years, up our up X%. X So went up year, --

is marked mill think, or are anything like fees absolutely which thing appeal, that did, XX%, expecting change come in I or were they the way. I we they time mean, unusual rate the and we What whole have expected writing to -- think tax they is increases. would say could and I start a really with up to no of going I XX%, through increases at that. even it up So spilled assets, we X/X sort

So a that increase straight year-over-year close million. it's $X to is just

I mean, largest it's expense line P&L. in our our

outstanding. still So are years appeals we from will two appeal. I mean, our the last

to worst things we these what assessed will road. we've what if So take at from year better case, been is are numbers years unfold you can two that be on is believe plus have us time. which a the do - we The down and the do appeal,

thematically, impossible Minnesota find because best there San what and they've Bay perspective, in all Rochester, across their done and this this making homeowner success terms up more again, to from efforts markets I else to their you place they a pick don't making a we this is is with A look live. everyone limited So it they're and And have that at Diego. happening job revenue, and like a it's tax really flows. think we'll to we around that's it there, Mayo doesn't place think I have we the in But like attractive think dynamic compete And truly can of have trying than and incredible. owner abilities multi to in Diego, ebbs but like it's of say. the some because they it February Back talent something a vote. And lot to the great facility. are or feel The San in a Rochester, just more if world,

So we it dynamic, support more more do it we'll discussion measured to doing that's way. a And think, I that's like effective, what hard the is a they're be We'd thing make to compete in with that. to certainly having.

Buck Horne

I got you.

investments And previous really return a and Or incremental quantify at for value-add how rents you've year, have helpful. on or you're you either the program, getting that's value-add you underwritten different the the achieved what do the Okay, than looking it there? spending? any this Is for ROI guys do that incremental on year's target investment this spend?

Anne Olson

Yes.

have really on return. XX-plus looking be categories those, kind of upgrades to One And get amenity two assets. projects. value percent or we're repositioning add would we a of of So

that a And investments we're drives the those return, second the that longer right? exterior think the XX% for return, really we unit of rebranding, looking work. to XX-plus percent clubhouse, is in new So that what half renovations. that is Now there, And putting life, have it really XX%.

of over $XX,XXX with spend $XXX I about return XX%. think just our quarter a and fourth premium is

is premium respect that And renovations. some reposition on as variation what get to help the the that expect can unit we is from to there think unit with turns. forward then I the us assets us going you

Operator

question-and-answer this conclude closing remarks. to conference like Ladies our over Mark this Decker back session. to I'd turn At time, will for the and any gentlemen,

Mark Decker

if you're Thanks, everyone, we'd for the thanks, Investor to and Institutional first you forward the James interest today. see time And headed March, quarter. after love company there. our to We you talking to look Raymond your Conference Allison. in in And to

Operator

you disconnect The may We for conference today's and now presentation, you thank now line. has your concluded. attending

Centerspace (CSR) 20 Feb 202019 Q4 Earnings call transcript