CSR - Earnings call 4 2023

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Operator

Hello, everyone, and welcome to the Centerspace Q4 2023 Earnings Call. My name is Harry, and I'll be coordinating your call today. [Operator Instructions] Now I'd like to hand the call over to Josh Klaetsch from Centerspace. Josh, please go ahead.

Josh Klaetsch

Centerspace's Form 10-K for the year ended December 31, 2020, was filed with the SEC yesterday after the market closed.

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

about materialize, to on management's It's will the any views and other Risk that note statements. statements current uncertainties the and statements in on our will are discussed These statements with our subject forward-looking section based important forward-looking and and filings business that are guarantee titled reliance today's Factors, you that assumptions. outlook not risks to SEC. include remarks under cautioned cannot filings other We undue are to and statement our place forward-looking these in

call. Olson Please prepared release non-GAAP reconciliations refer which any for remarks. our it of for earnings over to now the I'll turn on company's Anne may to today's information, be discussed

Anne Olson

Thank of for growth Josh, XXXX. capital reported Chief Patel, for together share over you joining significant X%, morning, our Officer; Bhairav leads Financial investment X.X% were good growth our XXXX, and who excellent Thanks, With of is on night, our G&A NOI FFO we projections this core outperformance activities. results Campbell, Last our and morning everyone. me call. markets Grant in same-store of by These per driven with representing of items. strong $X.XX year-over-year diluted

our well side pleased the supply and how attainable head growth about a feel the position This great was our into we the efficiencies on But and in year into mid- the with as given XXXX. transition. with CEO difficult we and be Mountain a of It which continued pressures. translate think rents West, exposures the XXXX. portfolio we responded, will we XXXX, and performance have economic in uncertainties. of geographic softening relative macroeconomic volatility average harvested will business. We multifamily faced I'm of fundamentals During feel we that our G&A and so multifamily uncertainty, lot positioned financial teams a

FFO At X.X% growth include guidance for $X.XX XXXX core at same-store of growth the overall year. share driving our with NOI full diluted midpoint, projections the of X.X%, per

about that While I be that confidence will after share our achieve able XXXX Bhairav even in trends some more and in undertook give to provide results sale recent to we XXXX. us and the that repositioning XXXX, will want detail activity we guidance, growth

year weighted with We occupancy the XX.X%. ended of average

to rate optimism fourth same-store X.X% and quarter, trade-outs the of pleased decrease for X.X% realized increase an in same-store During we renewals, as average new see trade-outs on market same-store rents an XXXX in of we X.X% provided holding. of of average X.X% increase. average January X.X% decrease an blended are resulting on of a on average lease lease our rate increase. January, blended leases renewals, in an realized and a increase X.X% With on same-store X% expiring resulting we new

While January historically, rates average not worth is spreads, January is was in basis on QX and showed noting than uncommon this new the and negative change that lease stronger December. lease XXX percentage points new it

position new QX and see leases the physical new occupancy growth rebound necessary lease until and will both level rent We in through QX on date, a of to to drive volumes we to so aggressive do us have to prioritized sufficient over implement demand put and and much continue more pricing a renter to renewals.

pressures other are and seeing of supply Denver parts U.S., some in Less the Minneapolis. so than we

have our X minimal, the range new Midwest in of construction. in to stock time, of markets the same sighted XXXX particularly second nation secondary those of top for existing resiliency markets both XXXX strongest absorption as third CoStar and Minneapolis the today, quarter, with However, the ranking from through X% supply having shown both a under X At nationally any, the and if XXXX. most and absorption, in have notable,

the transaction it continued of disposition on the a We expense With operating busy front. year there portfolio dearth focused pressures, experiencing was to challenging a that is moderating through operations due activity. and and and on fundamentals supply improvement elevated industry in both

During XX to of located sold of Cloud for sales and price communities the $XXX.X Omaha debt. aggregate The Colorado, Minneapolis, in Dakota. Lincoln, and were of sold community Fort were the million. XXXX, we repayment and communities Nebraska, North for Minot, Minnesota, in St. The Collins, the in used proceeds acquire

mezzanine Grove to multifamily successfully Heights, Additionally, new that fourth funding we homes the quarter, purchase submarket in of demographically strong Twin during the Inver a a the Cities. of includes loan close able a were on development option, XXX

million. XXX the from consideration by size The these of sales proceeds our communities transaction $XX.X in with To approximately and used were to provide we summer as scheduled million have our next of for Minneapolis refinement X quality portfolio. the able or XXXX. These margin week our close is aggregate well and pay its these continued exposure for communities community to we down highlight of Limited for a growth This age, Subsequent year-end, market should commitment. funded transactions portfolio, in expect $XX.X date, XX% market homes of NOI sheet. line commitment agreements our maintaining not our sale will us comprising credit. to entered age, be to strong of into and balance the in as delivery we

Regarding results, reported our asset $XX. on common of buying current cap XXXX of execution share our of and rate weighted an like have we implied at a continued on With lower-growth price have demonstrated in QX portfolio our we less our of do average of efficient We acquired X.X%. authorized approximately $X.X capacity an of some we volumes, certain transaction at remaining rate lack and based assets NOI, our sales of cap since program. average prior buybacks, XX-month X.X% stock million buyback our at

balance valuation. maintaining prioritize market calibrating factors relative will while affecting flexibility We sheet asset

we sector, mentioned we believe earlier, we and the operating done multifamily will composition a I platform. have portfolio be relative on tough our work a but on the As perform year this well basis given may for

has Board will a it declared that share. strong common $X.XX have the share Our per in strategy, to raising per shares common discipline next our $X.XX coupled dividend, belief with our and on we quarterly results, increase executing

it I our their XXXX because to want thank commitment a work and to turn better hard organizational appreciate team. great Bhairav, I year days, Before I over was to of our every dedication. and

overall I'll Now our discuss Bhairav ask outlook. to of our details results XXXX financial and

Bhairav Patel

$X.XX quarter the year. everyone. last good with by increasing operating per was same-store and Last reported driven FFO results, fourth Thanks, share quarter by Anne, of diluted core XXXX, of of quarter strong NOI we the for another night, morning, same X.X% over which

earlier quarter off primarily expectations, that our in income, mezzanine charge our capped X previous FFO compared to of including core during share, higher quarter at X% activity for driven an the communities increase almost and fee NOI FFO related core upon for of and expectations. discussed $X.XX to Our for remarks IT-related of spend an strong per the the Other in the approximately of X% the $XXX,XXX year. same-store notable were lower-than-projected G&A, exceeded impairment the earnings included origination of core operating during with line interest by to for diluted mentioned Both million excluded $X.X lower year earlier. This next loan due the $X FFO. growth related Anne expect prejudgment of litigation was to settlement are an the Anne results FFO with quarter charges while from outperformance Minneapolis in to charge the growth in that close sell in year interest received the week and we year. another the million core additional company The of

is strong flexible our $XXX lower positioned of at the On are the which balance liquidity, because million and of repositioning year capital net a than beginning ended X.Xx XXXX front, we the and debt-to-EBITDA, We sheet. the with activities year. well leverage during of capital of X.Xx with

until our In no maturity addition, X.X of weighted to value the allowed middle we This time XXXX, well-laddered with balance repurchase in average average of of have weighted believe trading true us maturities below to opportunistically debt the strength shares, currently schedule significantly maturity assets and of X.XX%. the which years we portfolio. sheet are a cost debt

shares we share. the repurchased XX,XXX we $XX.XX our XX,XXX at shares to of shares, During an $XX.XX quarter, year-end, additional XXX,XXX at repurchases an XXXX price share. per After repurchased per nearly bringing average

press We XXXX Turning in our guidance. expectations introduced night's release. last to

XXXX incremental an line investment to our For in same-store the is NOI program. in revenue expect million of additional growth and revenue on XXXX, X% top of projected the rollout growth year-end We almost $XX $XX to midpoint. The X.X% we X.X% fueled million of earn-in growth continued at and projected by at of growth million midpoint. further following value-add initiatives by healthy RUBS of XXXX. expect and our X.X% completion spent It an X.X%, blended value-add invest $XX in the lease with at driven relatively to is

growth to on-site as at X.XX% pressures and have driven driven of insurance expense the growth growth the XX% revenue still by Although premium moderated, expenses expect year-over-year. by expense of market exceed increases primarily labor midpoint over XXXX. remarkably compensation resilient was in The remains our we

activities subsequent We increase of $X.XX below million end QX. The communities and No our expected per the I mezzanine also guidance early [ loan proceeds the expect of core of revenue from a is This peak share is investment quarter. year-over-year result core the projected XXXX. Please the diluted $X.XX FFO increase of or and of approximately FFO note despite guidance and dispositions during will our guidance. primarily although average $X.XX during further earlier with in disposition growth to is share in that QX XXXX approximately FFO of by quarter expirations that lease quarter, It diluted be of net during X million to Minneapolis. buyback activity $X.XX of QX. the million impact $XX.X all per $XX fully assumes per each in assumed core of slight first equates of ] to leasing be since sale $XXX from in funded share, per that the range the a incorporates midpoint sequential to highlighted the that season

announced press XXXX, Board share Trustees unitholders of our $X.XX our share. shareholders $X.XX in in to noted common as close XX. The will per of on and common paid at April Lastly, of business quarterly our per on the to increase record X, of be an March dividend dividend release,

we improving XXXX, to earnings operator the across quality achieved year. in the portfolio results proud positioning. for these We our XXXX. are our front, it in so a entire in we the to This considered strategic results hard work turn because priorities not balance conclude, commitment possible I more our would growth and key open on just I throughout their but and organization, focus and advancing with effort, building only market of even sheet, look of And the is To and line to will back upon for to the team discipline like up the questions. thank forward that, of

Operator

our the first question Capital. from Heffern [Operator Brad RBC Instructions] of line of is And today

Brad Heffern

gave rent lease and but a as of you you revenue of Bhairav, I loss could in occupancy, also to couple remarks, the give if was wondering prepared pieces guide the well. market growth

Bhairav Patel

with where respect at to loss we about what we which so roughly in X.X%. projecting roughly about January, at sitting with Yes, are of the is months we XX line occupancy, had to line This lease, with XX%, end respect With Sure. in the for we to were were about is ago. year.

expect grow from here. So rents we to do

did them, to we really in they last that point However, this reach at don't year. time, same the expect peak

a be it So months. still here bit enter from market grow the will leasing growth we muted, rent little as will but

Brad Heffern

the And of Okay. increasing some versus do and leverage, how guess, on et company the the downsides about you Got I of attractiveness then like repurchase, weighing shrinking the obviously that it. cetera? think

Anne Olson

a a time X we That's question, Brad, great and on. spend lot of

a are looking where to particularly our strength. we lot to year sheet of we so proceeds, of growth balance paired is, the and a effectuate maintain what use had dispositions with best real and want external how lot So really a capital strategy and the of balance we of

like the good a time. this from felt had we sales. proceeds So We was the

buybacks scheduled. year maintaining that sheet balance here the But going we you'll trying We XXXX. us forward I to prepared stated back pull have in really see really are X into And I as this sales the more remarks, on think flexibility. balance

Operator

Piper today the Mitchell Our of next Connor line question is from of Sandler.

Connor Mitchell

questioning of ending following your statement just maybe that there. First, line and

that more the you just us idea maybe or see in As on give debt, pay whenever a down buybacks, slow capital are of that could the you going allocate acquisitions guys guys best more some better use you case? you'll of to towards down

Anne Olson

allocation. are Yes. capital strong looking have very We really to

for program opportunities on difficult. look we we as into be make we really so see still And market a growth. big value-add With want our volume in to lot But prioritizing the pretty sufficiently. pricing, that external we a disconnect transacting would of that may XXXX, not fund sure and

year million any We maturities debt little And to that. get at difficult $XX bit have until $XX mid-XXXX, no with it's slated pay to million for downs. this a for us

the as it into So buyback we as available of that at X wasn't doing when considerations had that be is the opportunity might was the that us looked future. to we

growth But of really ours well strategically market the think, on is is repositioning keep quality external priority portfolio, exposures, list. I getting value-add portfolio, and our a the high of as priority increasing better the

Connor Mitchell

maybe guys in color just that executed And fourth back there. quarter. Okay. about you the then the Appreciate deal thinking Colorado the

core. assumed implications being to It debt the GAAP on make the want of Just the understand to amortization back earnings. is seems added sure we

So we bigger have missed GAAP implications can perspective? more the just guys give you from of on an the may if earnings any or us any curious regarding what impacts details pictures

Bhairav Patel

the question? Page the amount of Does On guidance. about million, of adjustments will noncore, In amortization. Connor. will of be the the of that's see core assumed to you amortization to the respect answer our added Sure, That's that components supplement, with debt. down to debt XX and that our the $X.X back we break kind

Connor Mitchell

guess I the that understand, make fully is Yes. fourth Colorado deal to sure executed? quarter was I primarily that that to related just in

Bhairav Patel

about. deal That's relates most the talking correct. are That's amortization we of -- that to that

Operator

of line Our next the Markets. from of Kim Capital BMO is John today question

John Kim

think assuming to purchase I had on intention I I'm option loan. on mentioned the the asset? origination the The the fee, a exercise by rate loan, question Bhairav and borrower, paid mez an the it's of that's your if

Anne Olson

Good that take morning, John. I'll have one. Grant

Grant Campbell

XX% accrued that rate me, -- with with transaction. or on interest a earning compounded interest accrued monthly excuse and We're

but purchase On of option, to value at X% the stabilization. option include community the the stabilized the that then community that back a end, with discount, terms related comes to acquire prenegotiated market

Our intent community the completed with enter to entities on to we acquire exercise the end. option, purchase desire a the back stabilized

will We funding, in make decision to monitor chair, monitor performance in sit the mid-XXXX. and that continue asset lender

John Kim

City's past other some your markets? mez for it realize, looked you already. exposure Nashville entry in like opportunities Twin as Other at I overweight investments of potential market, the but And a seems in you're

you're you if other the So in similar I was interested a of in? investment wondering opportunities just saw some markets that

Grant Campbell

about are Yes, harder this in talking to to speaking, folks other underwriting execution. Broadly make it's markets we in pencil development this environment.

sense. seek We visibility referenced. timeline make about visibility provide via direct this asset and that strategies. allocation and book opportunities purchase These opportunities will continue we with returns it when to potential of business as performance do on view initiative. to that capital This is good We beneficial option complement think we direct a other do that recomposition acquisition portfolio future our

continue to having other we'll but in pencil very environment, conversations make them. are seek It's So yes, we in these hard today's to geographies.

Anne Olson

financial to our mezzanine done And to These a are for the like allocated have size. to of us John, our difficult capital we get from standpoint, certain a at deals portion funding. purely

them so have do very we And deep is have connection. Minneapolis this you seen place a in us because where

here. Our headquarters are

lot But spending of other target find We large have here ours. standing. relationships just so and have to that with those from time longer more preclude we a a have deals doesn't team, Grant opportunities definitely of see probably it in trying more and markets developers

John Kim

absorption, mentioned but supply mentioned there's what didn't and what's lot is which had the highest I market I it. so the Minneapolis as in demand? absorption fully driving that appreciate that -- this? second What's of second you net last well, highest a And you realize has net driving or year,

Anne Olson

probably I mean really low a of answers a but driving jump what's Grant it. But of then in can and I'd to say there's lot strong too, unemployment. couple things economy, here,

We very base, of have job a Minneapolis good companies. -- has XXX lots Fortune

the So more stable. bit is market a little itself

here, supply that to amount and good a absorption. seeing are we while drive have So the fundamentals of space we fill

home also had we we've than in less think seen single-family the I starts past.

housing at of little shift the is you single-family communities, which we from a driving and apartment bit in home communities if have into of -- have... you single-family options. home total permitting been there's look lack the availability universe, Grant, So a shift of some less

Grant Campbell

market. -- has on et echo rank this in over cut finance, relative consistently recent just touch banking, income pipeline tech, Yes. med We prevalent renting Anne's to it. affordability of depending very Minneapolis would market a top on our in comments very I in then are in on taper The quarters. income you terms is we've of incomes supply That presence High jobs the comment. how seen XX And supply the attractive. to apartments profile. of cetera,

of So couple of construction quarters. sitting currently, we're existing X% the that stock at over is about down under here last X.X% from

again, So has measured supply a been story tapering. that,

Operator

today Our Rob is next Stevenson question of from line the of Janney.

Robert Stevenson

revenue of versus other about much of portfolio? talk instituting from and X% some the you marking rents the how the market uplift improvements X% Can operational to growth been continued for 'XX from the to is you've guidance same-store within that technology

Bhairav Patel

I'll really being RUBS components at and But driven by Rob, is midpoint, X% you Anne then X.X% mark-to-market other complete. rents, components. may is by rollout, driven now on of about overall, the chime give fully being the which in what's is X% the some

year, RUBS. course of obviously the So we And by have of but $XX value-add invested year. we the the about the about driven XX% to invest then this is We the initiatives. being expect over billback in remainder some million

impact be on going X.X%. year the So about is revenue for to the

Anne Olson

go technology Rob. And the -- front on ahead,

Robert Stevenson

No, going helpful. say was was to very that no, I

Anne Olson

to we sure is the think really executing we're And to in that that some going the on move fully have may on That cushion did not strides we making our work going and in gaining some on continue. on anything. those. just saw some efficiencies we're do early it's platform. I in Yes. technology and/or great a of -- XXXX, of couple projecting initiatives that for but projections, But outperformance We materially very provide us, we're front,

the implemented on good in say we that. feel in stabilized would we X and I over past really shape years, platform using So we're like that to the feel X

Robert Stevenson

quick I just than your less markets then mean, in, guys not markets? that are guidance the you for be revenue you public there're overall same-store Denver, lot of that Can a so helpful. company we review a X% markets you the other markets which that And data have That's a above of there. about I X% as other give Okay. peers can there's you mean, talk the which growth these how bit to be thinking to just to individually? expecting about and below? little of should

Anne Olson

a Yes, question. that's good

we One the markets. in of are some those -- the of We're owner a on data couple of provider a them. largest good

in through outperformance to what last As we had, massive Other Mountain we run-up we're call started Rapid a 'XX A seeing 'XX. see seeing going that of in off are will is rents the They West. to North We Dakota to That we middle really the look Minneapolis XXXX, I recall, XXXX. some and Nebraska, and where cool well. Billings. in the some see that just that be into believe to place hold continue cool City been has year, you and if in Omaha, would of we're And softness I'd pack then in, is kind to performing continue really Denver say there. think coming and

say Omaha at and at the I'd top bottom. City probably Billings, So Rapid the

Robert Stevenson

Rochester about we Okay. are bottom? How and middle, Cloud, just And they be those? should thinking then St.

Anne Olson

some there. us. bit raised middle. and there really concerned nothing supply come a the in right little has that had supply, they're our our some Rochester we experience say I'd value-add profile great customer there, And have renter projects off of has that Yes.

that, So know, And you I this well. that the some to we that will that sold St. perform of out think Cloud, of continue as portfolio, assets year.

average. really feel we there the kind be right of to positioned well So on

Robert Stevenson

in you where look, guidance? helpful. baked into a have 'XX? Okay. what you debt 'XX guys And Bhairav, then, And That's take for when you was extremely the do bad

Bhairav Patel

pre-COVID. about we at projecting were which to are With basis to XXXX, we about respect points, XX And XXXX, with consider XX to normalized, XX respect points. midpoint, the basis Sure. we

sticking anything otherwise. of kind as So XXXX really around makes seen we think that we haven't what us in experienced

Robert Stevenson

real or And And Okay. did in in expecting 'XX upticks of that seeing a vein, then downticks this what renter guess what today or turnover? terms guys do in year, the you given are I unit of you're similar terms you any profile?

Bhairav Patel

at With to XXXX. respect a had of we seen escalating unit Sure. the turnover, lot end costs of

were running I to have XXXX, can would with XXXX. And have of, a slightly say, So XXXX. there. XXXX. prices XXXX a some material is we we a the like, But increase increases over we respect than higher respect would then kind though, we With sense normalized then seen expect would is inflationary in down little XXXX, reduction labor, versus bit what so to itself we was over that still expect slight

Anne Olson

But respect retention, with during to And do overall resident did to turns that 'XX include in the see the a will of little turn -- XXXX our course year. fewer units the 'XX. yes. of uptick during an the projections of had so kind XX% standard about -- bit of in our We just

Robert Stevenson

ex what given And does days, downtime? labor cost a you these typically cost material what the turn -- and

Bhairav Patel

the would turn can see Again, look an roughly, cost thereabouts. from differ roughly a on I different would markets, at -- but of as that kind what be we $X,XXX about portfolio about that's say you perspective, a average.

Operator

Colliers. from And line of question the is of our next Oxford Barry today

Barry Oxford

looking it I in be same-store Great. was same-store relates thing One was expenses looking to can as in being expenses down What at I XQ. for 'XX?

Bhairav Patel

is respect that XXXX, major to be there in items XXXX. line our will compensation. driving X is with expenses One on-site So

to We pretty still it's still some to a hard in fill compared positions. XXXX is much although -- mean, those the we strong. As in I place said, better of are I labor market XXXX,

is consider item driving that slightly insurance. you would above do that we other expect So is line what inflationary. then or cost to the up run normalized really And

That's XX% of the line. X/X Our XX%. to premiums year-over-year by increased insurance

are year-over-year major growth. categories the So X expense driving those

Barry Oxford

in then, of what negative to some And some like Omaha numbers in be was Great. of cities causing those XQ? those Okay.

Bhairav Patel

negative -- of sure. Some the yes,

negative years, some to numbers we related have in some credit some the credits we from years, appeals. tax-related of adjustments. In have accrual Some -- certain real certain from upticks estate

what's the credits see some basis really that's you driving of So a Omaha. on that year-over-year in

item favorably also nonreimbursable we of comparing and XXXX. really losses an kind fourth in where they quarter in is is that of line the in had those uptick XXXX losses other The normalized the

So is 'XX driving versus QX that's what the 'XX comparison. QX

Operator

our [Operator line question next Wes Instructions] from of is the And Golladay of Baird.

Wesley Golladay

I have a the market. Is starting with growth, in the you seeing quick taking are see your that job there happening the then Denver did well? there in from maybe multifamily markets. question starts what on fewer to X single-family in Just Denver? as and but that of the you out side comment We're share slowing overall, the some demand make disappeared

Anne Olson

We'll that out Grant one. you have on help

Grant Campbell

Yes.

So decade the play robust, fundamentals I market very time, long think have that Colorado agree to here with your continue and seen are term, Denver We more job seen continue demand past recently. believe we've in what to growth and will in slowing comment, the out. over do in broadly that, some

about When think couple fundamentals about from Denver we that a it. of I think a perspective ways

our supply it levels is existing the market On and with of supply new highest the side, construction. existing

focus story does Denver, targeted in we another in favorable. all in specific our instances Denver. say of complete not in that community that that ground and markets, about environment that referenced X.X% our function earlier, headwinds. may using of and that which capital I on Denver, X.X% be a portfolio, the Denver I Concessions concession concessions really new this way including case that very We've X on markets supply our been what So and the given would in today and It pipeline and is concessions is in all fundamentals in in very is are today seeing submarket. we profile be Minneapolis that would in of today supply

happening So long to have believe that is term, that tapering, demand job profile Fundamentals unique Denver. growth. in That slowdown the but And remains. isn't are nationwide. seen

Operator

no And have queue questions we further the time. at in this

back would for remarks. Olson I further to hand Anne So like to over any

Anne Olson

everyone, great have a joining, Thanks, for day. and

Operator

joining. Thank This all for concludes today's you call.

may You lines. now disconnect your

Centerspace (CSR) 21 Feb 242023 Q4 Earnings call transcript