Earnings call transcript Q1 2023

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Operator

Thank you all for joining. I would like to welcome you to Centerspace Q1 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. And after the speakers’ remarks, we will conduct a question-and-answer session. [Operator Instructions] Thank you.

to conference like host, to now McComish. Joe would hand over the your I Joe. ahead, go Please

Joe McComish

Centerspace's the the XX-Q with Form for the was XX, SEC filed XXXX yesterday after market quarter closed. ended March

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

are that and remarks views include forward-looking based with discussed management's current statements that important filings section statements our business It's under are risks today's SEC. the and titled to about assumptions. subject These in our Risk statements and note filings uncertainties in other will to outlook and the other our on Factors

refer We any today's cautioned cannot place these call. may undue information statement will that Please release forward-looking on which on not our reconciliations for materialize, to and non-GAAP be earnings of to any you discussed reliance are statements. guarantee forward-looking

it I'll prepared company's now Anne remarks. the turn Olson for over to

Anne Olson

the six confidence confidence of next have I excited and CSR. foundation for years Mark Board last into in team opportunity Bhairav Mark's Officer. me the thank six are our With that the know joining opportunities lead and of years the and call. and provided over everyone, the last this missing tremendous and humbled strategy the that led Notably accomplishments our who morning, Patel, many, Decker, leader, I'm Centerspace morning is, drove a and for ahead March. out role the to you the at Good a key share CEO chapter. its who our end of Mark is culture our and is to grow. Chief learn and transitioned was morning this Financial building in Mark both for company I

We Mark the and wish will best. miss him

results to company. great have our for share I Today,

driven expense by NOI the core XX% highlight in pressure Revenue resulted large the XXXX. from The first quarter still increases scheduled to throughout over and off. our rental the capture in loss growth of comparable increases last growth same as period was year. strong. leveling the of in quarter. prior was we experienced The very over of rent growth XX.X%, is to is XXXX FFO leading lease operations stability markets Same-store The revenue we X% growth

The first over quarter QX XXXX, cost control efficacy flat our easing same-store sign inflation of expenses of were of a measures. and

provide his positive our can give with coupled G&A, we the CEO remarks. of and that this us results, Our impact guidance the reiterate transition associated in reduction more confidence detail Bhairav will for operational year. of

in quarter, trade increases same-store QX. April. With trends, on same-store our in which increases trends This X.X% the respect same-store X.X% a to These revenue X.X% in results a X.X% lease blended April X.X% renewals first renewals. us rent outs, to increases new and with outs on increases on we continued new leads increase achieved lease trade rent same-store in blended on increase in X.X%

mid presence. broad experiencing Mountain by which are markets, and our differentiated strength We our West are across

today. times out of our in exposure and and is just rental are affordability $X,XXX leasing lower household stability monthly play XX%. uncertainty market that resident rent with positive of low demonstrated, average consistency our rents the the of first in and rate As in good Hallmarks income quarter of XXXX unemployment are we our to (ph) under provides the portfolio supply, again our seeing and portfolio of

compared of of respectively, Minneapolis X.X% and light units XXXX, to of supply. QX X.X% and elevated Denver in construction supply, revenue respect inventory institutional to X.X% is other inventory of With weighted we even under markets. XX.X%, In and achieved and our in our in Minneapolis of QX in Denver, markets average growth

the opportunities. of like well-located QX XXXX. for Denver opportunities, in to XX% the growth Mountain West compared Transaction Metro QX has seeing external Denver And up. look to velocity competition at down continue we was in believe holding significantly on we are though As fundamentals tapered, and deep volume continue that we

quiet and XXXX, our for earnings The acquisition of profiles post-sale the strategy of achieved an but based the St. on unit front been those very keeping Minneapolis QX operations. communities nine Omaha that had with the pleased quarter. NOI in disposed closed X% XXXX with unit exposure the are on a lower higher have Cloud, revenue we this XXXX communities. thus and and we nine compared the that in portfolio our first average monthly of In since disposition We cost communities improve to communities during to our of our and portfolio revenue per construction cap $X,XXX, per and rent had markets and we average was growth monthly $XXX of QX pricing quality, rate

acquisition used $X.X quality. less sales of dearth believe a around back implied buy price our portfolio, to its opportunity our internal those about opportunities and a trading. stability of to trading in and confident ability cap at average desirable we feel rate we and X.X%, also an We the our at given our are inside assets of enhance Given our our million execute of price $XX.XX, at of diversity rate cap where stock portfolio and we our approximately proceeds stock an

time. is stock at reasons, investment these our a this us good for For

it financial I'll Now over turn to results discuss Bhairav XXXX and to overall outlook. our

Bhairav Patel

In outlook my night, XXXX XX% quarter which NOI expectations ending for by Thanks, review driven highlight XXXX, I in discuss liquidity line share, we and Anne, today, balance recently of March of the was results quarter sheet of and another for with XXXX. we have taken diluted everyone. our core XX, with performance comments to strong per for our year-over-year. optimize our same-store will actions the morning, Last good quarter and $X.XX operating first and FFO reported increasing

charges quarter Please related million our CEO expenses to that Anne of the As in from we remain showcasing her totaling excluded have positive and G&A transition, trends $X.X markets. mentioned note the remarks, core FFO. during portfolio, the expenses one-time which leasing our stability across included

to steps to balance our first to flexibility. We of enhance financial Turning and the quarter subsequent strength our sheet. took XXXX sheet and maximize balance during several

First, to proceeds the fully we place down at million loan end last line the our $XXX We of of received in term to sales credit. initial balance used the which the sales the to $XX year. end, repay used quarter promptly we on of proceeds the put asset outstanding from we from approximately pay million subsequent

exposure million has XX a of then under years we a rate. at financing XX-year of spread of fixed further The $XX Second, floating our balance rate proceeds last which week. the existing fixed we term a of financing X.XX%, with basis secured points repaying on reduced from by rate credit treasury line of rate another XXX our represented closed

the extremely capital the disruption with by markets the are caused banking despite in we of We crisis. as were execution able pleased schedule the of the close to ahead onset it

been maturity Pro X.X% less also $XXX approximately X% to forma million to impact rate of X.X total than of our for debt our or exposure those current outstanding our the reduced interest average actions, weighted and average It million. increased to weighted rate years. approximately floating lowered $XX has our of

from been by available with and today of driven of as of the almost total liquidity which, proceeds our asset line is refinancing. on have earlier -- amount of as approximately fully I credit, million, the repaid We sales has which most $XXX mentioned

the to our of $XX million are able is pro stock an total than a we we our of With of of value the leverage forma times portfolio, underlying significant less are we to immediately strongest outstanding by believe repurchasing we ever coming price from per share $XX.XX XX than leverage balance we Anne strength next of less $X.X discount debt at to sheet believe one balance discussed. in as net months have in debt been EBITDA, our sheet and perspective, previously of due a our the of million and which own X adjusted position the average

will I Page which XXXX, of financial for our the S-XX supplemental. Now discuss presented is outlook on

guidance expectations, are incremental have result as barring same-store ranges line CEO our for impact the our in results G&A core as of with NOI We and been our first quarter transition. maintaining the FFO a

the unchanged. core expectations leading As incremental I G&A our earlier, from relatively for we have excluded mentioned FFO core FFO

Excluding determining the G&A XXXX, to of savings is reallocated as be and the we much currently impact support may the million of how for we $X the are reorganize transition approximately of functions. one-time the need charge, potential savings

that quarter confidence strong Our current FFO. give first range above results and our G&A we guidance will potential midpoint core for of the savings us be

of which comprehensively any quarter, expect next the half impact activity first outlook incorporates year and updated of during an to realize. the we G&A the operating savings provide will We

thankful years him best for of time all him from congratulate Mark for his in greatly over and would future accomplishments opportunity endeavors. benefited his past and I'm I during and X.X to work Centerspace. conclude, Centerspace to as have very at guidance the the wish with To like the CEO his leadership my many

said, tremendous well in Anne look I next have I to we on her are of the to As us, evolution of in shaping do very and her positioned leadership. ahead we opportunity opportunity the the forward believe under a capitalize Centerspace. assisting chapter

open I up over for that, the will operator to questions. with to it turn And it

Operator

Instructions] Markets. Capital [Operator Heffern have the from We Thank question RBC of first you. Brad

Brad Heffern

in and about either call first the can on operator. your call Anne if Mark's things Thank talk I'm first CEO. were you, congratulations Yeah. Good or focus any for wondering strategy as potential how done all, out your leadership? everyone. company differences under morning, of you versus vision

Anne Olson

Brad. Yeah. you. Thank Good morning,

we for really worked strategy of how and Mark I've on execute. years the I been here company think the and with six closely

had changes. And of as standards past into that so line with huge to we we that technology respect I to of as a enhancements transformation some investments team, done and expecting lot our accountability the we made think over couple execution moved our refocused systems with in had the we're office of do years. and a not back we XXXX

So really I really Mark we on little better planned improvements as of our when part the bit to to the enhance that accelerate to a feels was also and the both both was better company the of continue our about do different. and our construction. would incremental and opportunity focus then our transition platform That it here internal part and as results goals portfolio XXXX think strategically think

feel it's vision. So of but of different, bit a little kind the plan same it and part all might

Brad Heffern

you it on obviously, first it then the increasing Okay. sheet you repurchase, did And or I'm you through scale about think a if the the on context Thank either for do dispositions? reducing you did it more quarter. in in if balance bit you curious leverage, the doing little how of that. potentially

Anne Olson

investment that to That's be and for sheet us that Yeah. will very powder our the very really reiterated, best some balance of been this have take I as have undertake to question. like use debt do has enough year and and want make additional we our we any be impact ability the an keep with the dry at and We of potentially have guided careful both external we an approach judicious. we opportunities think, balance beginning more time. is at a do on on we way. -- and of couple dispositions our mean that what paydown year, would to great sure advantage I sheet eye that the a how the to come

Brad Heffern

in the the so Okay. that talk market guidance? to you this what's sits far things, relative rent what market your can And finally, was where rent in on and growth change of then year about the side in expectation been

Anne Olson

bit quarter So behind I only not of running market ahead our lot a a our little where of that's But on expirations. think us, one with were. we're expectations lease rents

profile the expiration lease first is our XX%. think actually at smallest quarter I

meat the And so want of feel the results. April good season. We about we really get leasing the into to

in new you As first quarter. was noted ahead outs probably bit our a than little lease trade April remarks, the on

of have seen. full chunk to that are projections. bodes year comes of in middle the see the in leasing guidance -- to when really for projections It us be we're that our well. So remains that's The we going year and the big

doesn't about it bit us how them tell going running at little the the the year to rest the So is a too of ahead of beginning year, much of go.

Brad Heffern

you. Thank Okay.

Operator

Thank We have of you. Barry now Oxford Colliers.

Barry Oxford

guys. Thanks, Great.

build that to regarding debt Just question paydown. on

type you dispositions guys what debt? to in You you clearly maturities. going be when should more capital debt stack after have taken care you would But of any pay choose do short-term down your of

Bhairav Patel

Barry, mean, this Bhairav. I Yeah. is

that a on we yeah, rate So I included would debt more look dispositions, we credit we of think Anne couple we we expect pay the have We a as guidance. down. in go that to the line mean, we I as through do floating -- will at dispositions be more have mentioned, year, little our able

looking fixed is in that doesn't only pay that debt it So debt give because lot really fixed, are a down and terms paydowns. of really is you flexibility rate the to of we the

be more down will ramp a would we expect which little to go through debt, up looking we of year. as kind So bit pay floating rate the we

would dispositions So that planned be the with the goal.

Barry Oxford

Right.

Okay. that for to the make make or opportunistic viewing X.X are you to best buy I acquisitions guess, cap at Great. relatively question going probably are you implied And at up look a least be they when kind to, rate, look -- portfolio? your them or place your opportunity acquisitions, to bumping or to look close own of stock of is are kind with Anne, then, the you acquisitions

Anne Olson

Yeah.

that best capital our our right would be but or where sub-X just the value-add is in of targeted I I cap use sub-X we think seeing sorry. envisioned. acquisitions transaction -- are And we're not I seeing returns look you're that our transactions, we do at to getting internally, markets think the that we are that also now right cap program, still accretive. our mean not right stock, now are level really

maybe help that -- bit acquisitions out, that will as and more year accretive itself And move well we market as transaction stock hopeful and also that pretty so to price. up between can and picks ask. think out. bid become the And of that disparity the off there's that, now hopefully some little progresses, the price us as a big we're There's right leveling works a with

Barry Oxford

Great. the Thanks color, guys. for

Operator

question comes of Janney. next Stevenson Your Rob from

Robert Stevenson

I just and aggregate for of where And portfolio pick targeted sense? the the many the guys. value that? numbers $XX at How million morning, on question And there. for redevelopment What's midpoint $XX behind have dollar guys to the Good are investments? you left there you up Barry's what's in make those guidance units have in today 'XX. million, think that

Anne Olson

Yeah.

few a buy four So an we into now pipeline because pipeline, we that respect have built coming XXXX with now. the to quite add That stable. in is that pipeline. the clearly projects ago, right growing becoming looks the -- And it's always value asset in years was

about So $XX -- for you're and right have year. on, million scheduled we this

which Our things portfolio. that not value unit also affect additions only the entire renovations, home add can pipeline is like it's smart of technology,

kind units So for all kind investments. right of are XX,XXX of those that,

both which about will or a So I feel have I continue to X,XXX units the over think now, good, kind if grow. and we I under look little pipeline at of renovation that being change touched,

kind ending it's that time, it's -- or ending, out over product into to never So the we're able enhancements implement new come as of communities. pipeline never older gets

Robert Stevenson

and much I be deployment expansion that any given big dramatically mean $XX subcontractors, stock units mean your cetera.? increases your how And et do rates than year, likelihood the any X,XXX how so in repurchases? given year? this staffing, source that can more in cap if a or could that, your don't I than in given you you year million what's material upward for that see of becomes best other

Anne Olson

have Yeah. really the the on I mean rent. to would we ramp that increases staffing execution really side up and

that's So not we as through doing the extent about of taking would smart -- good does technology million. of kind feel such really large -- than be implementation that that rather get it wide all To home a to increased, a of kind at the it and $XX portfolio would rolling might once. portion have we're portfolio --

good feel the we $XX So about million. really

respect to those. year fund this puts I how and feel where think that about the us we great with dispositions we

to big ramp So that that going expect past a up amount. I be don't there's

Robert Stevenson

to of or -- -- a 'XX of should you look reduced a guys 'XX, how fall what's forward your into when so. and there exposure forward looking exposure know you I put costs? of the utility have that then days these much these all place But be programs? and to the going over bunch in your as result stuff last And Okay. year

Anne Olson

question. Great

As expenses portion, portfolio own of of offsetting our our started system and that rolling you decrease the rolling through the ratio RUBS way the we're we the -- utility of with which the gas our out And out. probably at quarter, billing first year, revenue. last will end volatility XX% in the recall, the

really costs we like year revenue particularly XX%, maybe going we given that we way the the so fall, generate as the offsetting utility lease on, help volatility in to get should us as be XXXX. -- there feel in exposure. larger XX% and fall, really And And to in that's saw -- of particularly to that mitigate the goes the we even about through

Robert Stevenson

water all to for most it how the much part? natural just is your exposure gas electric is and And or basically

Anne Olson

in Yeah. portfolio. The things gas. exposure been was majority RUBS of the had trash, those natural of our across already program our Water, part sewer,

Robert Stevenson

Appreciate guys. Thanks, time. Okay. the

Operator

[indiscernible] Thank of you. We Baird. now have

Unidentified Participant

talk focus Hey. your about over to revenue congrats, maintaining Good everyone next few and more our on the really or plan morning, you pushing continue more rate And a management Anne. occupancy? is the months? Could strategy little bit

Anne Olson

balance That's here on just always revenue argument about have we day the every and internally management. a that

take had past, the we rate have our which maximize into this run watch lease more we you because pushing heavy to It's think like just more closely trying a means we account really And overall, really to time to where costs. turnover slightly than would are we during little have I So bit versus experience this that so that have with year revenue occupancy typical occupied. expirations. occupied we to years

the factors. residents costs place retention, as makes two those our we important particularly and balance experience drive have really industry, an in to As which those keeping increased resident significantly,

Unidentified Participant

time. your Awesome. Thank you for

Operator

James. Raymond of Horne Buck have now We

Buck Horne

VIX, color trends. delinquency bad Thanks, the in there's quarter or Hey. If recently Good patterns a benefit bad any lower been was changes there debt? from some in debt everyone. skips get any in morning. and Wanted extra on to

Bhairav Patel

Hey, This Bhairav. those mean Yes. in is trends. do we stabilization Buck. I see

about pre-COVID with return points. with of last is projected XX to higher which kind was it XX perspective. the benefit do us in some basis historical ahead line of first at to trends points, the year So we respect averages basis than bad debt from had where was slightly basis year-over-year see points, bad Yeah. quarter, We did it's debt it. a a that because perspective from XX And and

So -- to volatile. again, bad be but debt tends

of what factored this So we feel pretty numbers at kind good the we've into point. about

Buck Horne

All right. is good those post profile you the the how a say, the What of disposition portfolio? remaining the would properties, would Appreciate that. portfolio CapEx be helpful. of kind Very portfolio of nine here And remaining run change? for annualized CapEx recurring for rate,

Anne Olson

gave per at Well, had when in and door the our we those of the year, dispositions. beginning we guided number estimated

properties guidance think I had when door. remains those some a getting We older that of factored our already helping in we the of $X,XXX $X,XXX, made It So off or unchanged is books. projections. that about

Buck Horne

And cost, units of of tenant when is normalize Understood. or of turn just very come as kind days just COVID back is turn effect level those -- will extended a the a trends function that and the costs elevated kind legacy of of available?

Anne Olson

Yeah.

I inflation cost is the also services, think of cost goods. increasing in the particular, of on high turn driver really and

that? and comment you that Bhairav, saw last have also really we on So do then year a

Bhairav Patel

were the a time. long, occupied for had Yeah. residents. units I for -- because KMS mean time we was units long lot some overall the turnover elevated were first costs units from we turning by A those were that from had because elevated last the of portfolio year also

turnover CSR So it expense decent of kind of to and amount we just bring standards. up spent to a capital

into rolled already has existing portfolio. that the of some Now

So over of impact to of expect that do the kind moderate we time.

and year. costs already place. reflection versus -- of being if the a is a of have factored measures year we've at it this guidance, lot cost of is And a units some turned these lot point, some we our a of last you So that last that in in of we've lower result year control churn this of put that

Buck Horne

appreciate Thanks, I it. Bhairav. Got it.

Operator

questions Thank further you. confirm, had [Operator I no have Instructions] can we registered.

I would to the it management back So to hand like team.

Anne Olson

get special see thanks these us all joining NAREIT. team are and you results hopefully, you to thank we'll who today Well, at and a all our helping great for us

Operator

Thank you I you now lovely lines. all day for disconnect does and rest confirm conclude your joining. call. this may can of have a today's Please your

Centerspace (CSR) 2 May 232023 Q1 Earnings call transcript