CSR - Earnings call transcript Q1 2024

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Operator

Welcome to the Centerspace Q1 2024 Earnings Call. My name is Carla, and I'll be coordinating your call today. [Operator Instructions] We'll now hand you over to your host, Josh Klaetsch to begin. Josh, please go ahead.

Josh Klaetsch

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

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

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

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

Anne Olson

and our joining Bhairav Patel, everyone, you Capital is Financial and Officer; morning, for Chief Vice morning quarter Campbell, President Grant Centerspace's earnings With Markets. of this our thank Good Senior call. me first

Before taking quarter activity and remainder first our cover your briefly transaction FFO expenses. the to our by of associated of questions, outlook for happy $X.XX from and a report help our little fundamentals for and that XXXX. I'm trends, with core results share across we'll our first management quarter, utilities and a stable disciplined mild the driven our per expense markets paired reduced winter

current our minute take leasing discuss in to a Bhairav I'd discuss quarter detail, results will our like trends. to While

growth. moderate line of quarter. has to expectations rent year-to-date, with X.X%, that we're positive And increased this portfolio, while same-store the our lease-over-lease in into In first translate year-over-year see and pleased our is market amount a for

quarter. focus, trade-outs today, each X.X%, The This increases flat the increases for trade-outs above month For new lease increased priced we're blended the our new for we leasing us for quarter, and X.X%. and as slightly averaging remains renewals in leases, begin the a bodes rate well were debt of season. Occupancy XX%.

the aimed leases at the last strategy in than has year. marketing same led Our converting intent period highest this more to quarter lease

with pricing look approximately renewal we feel at good trending April, which of lease XX%. our positively rates, of is X.X%. of increases X.X% trade-outs new indications about are and resident retention above As We

guidance, the X%, year. FFO XXXX in and for QX Our trends addition the with us we see of up give bring deleveraging reflect results our confidence growth growth we portfolio midpoint year-over-year raising this the coming core achieved annual outlook at the low end estimated upgrades in last to to our of and to

this portfolio low in bad points economy. in stability confidence Our in as continued bolstered our basis of regional as just well QX by debt is XX

Sunbelt experiencing not and nation some Denver the respect Minneapolis and the next it is portfolio markets our month according in the fourth in XX coastal dynamics supply supply seeing whole, of are the relatively homes of muted. supply of our markets, On with in and high highest tapering the levels the profile under we're construction our remains row. and into absorption last to year. With was months, market Minneapolis, RentCafe largest ranked most a #X for deliveries concentration, projected our eighth for market the apartment search and over to

narrow transaction the loosen recent the some on for to and acquisition transactions up spread We quiet larger Turning All believe valuations activity. front. acquisition market on the is activity. bid-ask help could

believe million facilitating Fort XXXX our of worth Minneapolis with were advancing recycling our to quarter, initiatives sales Collins. the These opportunities. We'll our capital teams transaction, in the be the that overall right for we pay gross to capitalization down communities to those the effectively X Completing used proceeds our portfolio for arise. well-positioned environment we associated and credit that proceeds stock when and our our our million. disclosed dedication of in our acquisition $XX all purchase business, value the debt do the line for opportunities grateful I'm portions current to quarter, of shareholders. $X.X access closed can early of has to extremely During capital, growing QX first limited the we're economic we previously of of in committed while deliver recycle was common of our

and recent on culture to achieve great our providing for a equity report, results. report strong our is and in best evident of available website. highlighting our the home diversity, our is inclusion commitment team Our advancement to This

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

Bhairav Patel

Thanks, core FFO Anne, increased strong same-store increase with a share, We're diluted good growth Revenues pleased X.X% morning, everyone. report of of from to year-over-year earnings in communities partially by XXXX quarter and the at X.X% period average per NOI. driven home, to was was same-store in compared $X.XX growth increase attributable monthly rollout end driven last with the as RUBS higher fully year. the by occupied same income, which to of revenue per implemented the X.X% another in

was weighted XX.X%. a revenue occupancy year-over-year XX average home slightly point offset to per by higher basis The decrease in

in and real was and estate we're successful has in down X.X% market by enter appeals driven leasing and The insurance April, expenses and administrative operating lower well positioned up Anne remarks, higher by increases as nicely by picked offset noted with decrease her premiums. marketing rents trending occupancy utilities compensation, line with season. Property as in were However, costs in expectations, tax year-over-year. we costs

are full appeals or $X.XX approximately spanning tax uncommon, $XXX,XXX recognize per we one from successful While share more diluted appeal not years. such

as full our our we shared impact projections ranges was in guidance materially corresponding the last anticipated quarter. not did year and prior refund incorporated projections it However,

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

results FFO than the same-store growth. during X.X% helping and core winter $X.XX increase and in first our expectations driven warmer same-store the of NOI expenses This usual growth an led growth expectations. expect gas A X.X%. number and in per favorable $X.XX same-store to $X.XX now revenue to X%, utilities prior natural to of in we quarter year-over-year X% XXXX, share, of from midpoint controllable For us for diluted to X% expense to at by of growth expense of X.X% decreased controllable changes total reduce turn, better-than-expected pricing assumes

expense tax results, and favorable noncontrollable previously mentioned as estate decreased rebate well as us particularly adjustments full other the related side, nonreimbursable real are both in the to year taxes to expectations. On leading lower losses

lower revenue to that which RUBS highlight I'd everyone between in RUBS like led for costs and our end revenues, to expectations revenues, the remind the Importantly, guidance. the lower utility expenses relation the drive of utilities decrease and high

are be slightly of property to higher and components other G&A interest previously projected. management than to on Moving guidance. expense costs and expected

capital is from spend for value-add including last guidance Our expenditures, quarter. unchanged

cost capital of quarter front, the time flexible. debt and On that cash maturity via liquidity weighted of credit well-laddered million remains and We've our maturity to of capacity. balance X a average $XXX and at weighted line features X.X% of years we end a approximately sheet schedule had average

capital year the Our drove EBITDA year, over course debt of a the to activities repositioning net X.Xx. last QX to half of leverage leading down churn

metro the the remaining of opportunistically with As incorporated our $XX along Centerspace noted $XX.X in expected shares in XX,XXX already the sale strength Minneapolis the funded to million committed X Minneapolis of back balance average for to our $X.X the been project million an sheet We've repurchasing at February several allowed area during we assets million months. QX. to $XX.XX over occur price funding buy of call, with shares this next has the area, in development roughly in with a This, guidance. us

to on the proud activity of Our I rest of results XXXX. To us we providing conclude, investment guidance assumes Centerspace we're the the team and back quarter, for to these our questions. an with to for no XXXX. And the turn achieved in operator additional commend year. building your start excellent the look line We of the forward rest results the I'll that, with upon in

Operator

from Our Instructions] from Heffern first [Operator question comes RBC. Brad

Brad Heffern

your how a quick all the Can on Denver, things North pretty on on but a St. be good you get would in Dakota, walk markets? great think Rochester, smaller Cloud, cetera. look to we and perspective through Omaha, have Minneapolis I et handle it ground

Anne Olson

great question. Yes. Brad,

Dakota a portion a the are pretty our basis. significant markets supply As you strength NOI. of our North really And make Those out those markets, there. know, seen we've hallmarks across on smaller of do lack real particularly of markets, year-over-year up

-- we continued so And and demand.

been in those unemployments rental steady increases, really good across and renewal very see of to occupancy we've increases low good lot markets. able those So markets. a

we've So Across supporting Billings. jobs and strong regional Dakota, North lot that of economies really a Rapid Omaha, good, demand City, seen strength. we've in

Brad Heffern

we of had a expect season? get it to there, lease Okay. Or Got see to where you of sequential you significant as inflection of more bulk do the the would shake there is April mentioned a new gain out sort that then for pretty leasing expect it? of it. deeper mid-Xs into pricing, you And kind

Anne Olson

renewals we to acceleration continue Yes, season, pricing we a we're but flat they're right now, for into the expected little right do months, see or we some we right accelerate. is on new more and the going expect around bit lease expect stay leasing to where few where a but do that may

Operator

BMO Markets. Our next question Capital John from comes Kim from

John Kim

first going driving of in net of It's demand right mentioned opposite the one it's What's driving absorption the -- had I top in markets. months in question. now? question a the to X searched one markets What's most Brad's what's on the You Minneapolis? row.

Anne Olson

Yes.

particularly Minneapolis in And has costs housing similar high to unemployment. smaller single-family think homes, then rates. I of rise single-family homes and our markets, from some with coupled interest of very continued low

So is gets there any was because one demand. Minneapolis supply the reasons of market or

bit lack on rates now and Minneapolis supply think I let lease interest lot pent-up ground of positive. years seeing what of and good that's pricing supply. I'll I dynamics just of and bit. had quite -- on traffic here, demand, a rising is and continued a Grant with touch the renewals coupled we're new demand occupancy little of strong the But a

comments So give you supply? Grant, on just to couple the of do a want

Grant Campbell

stock recent perspective, from about has certainly John, quarters. at under tapered Minneapolis, from X% XXXX. Currently, Certainly. midyear X.X% the down a existing we're that over at pipeline of is supply construction in

opinion in has past been realized, been in So and supply has that peak Minneapolis, tapering moved we've realized our it.

And this that X,XXX X-year homes. historically. apartment in at average XX-month been our annual deliveries has forecasted is XX-month figure X/X next realized XXXX that run Next look between are the annual XXXX, you rate of if and about market

John Kim

it's were other. higher. renewal the else basis building renewals Anne, that the right rates to remarks, your Okay. new April that something I there spread not higher were being think, Was you've leases rate on and or of led And renewal -- growth XXX top Historically, rate? that had mentioned in April each -- anything in you points whether growth new occupancy concessions prepared lease

Anne Olson

above I think and head Part XX, the of into We're building it as season. Yes, April occupancy. XX% yes. aiming back of as we up is -- towards as leasing we XX%

bit little in in flatter. these a So renewals April, rates really priced holding those Also, that is that or April affected that were the renewal in priced January.

And so rates. really that lease negative have -- time, did low we at slightly new

just they're So from occupancy that. some price timing-wise, they with for effective of focus building actually April. also, when to strong the we're when But is really yes, on a deceleration

John Kim

how over remainder or do the the see renewals year? for quarter And you the

Anne Olson

Yes.

are think and out July. I around into that's X.X% renewals right now, pricing

And for so X.X% and in X%, is I right to right around X% estimate think for X.X% quarter, they're going our come the quarter the now. -- between

Operator

Our Rob from comes next question Janney. from Stevenson

Robert Stevenson

new renewals? to maybe lease that maybe -- follow back are that what At you of guys growth. X, you and have below John's go seeing it's up the X are question. to expect inflection strong companies just growth point Anne, on one do lease new Because

Just if here? not falls to that relatively or -- the sort that at or curious back year whether as of point throughout that some stays consistent when

Bhairav Patel

Rob, take one. Bhairav. this I'll is that

in lease go the to we and season. pricing, the respect given our new than the rent just second with how renewals see as that we typically, market third So quarter acts quarter, through higher

trend the that towards the when into end is quarter see of fourth slip. you'll of quarter So third kind

Robert Stevenson

given it remainder the quarter? Okay. third the X.XX% the think and it see the guidance, Is revenue moves that seasonally of And quarter. the over same-store X.X% midpoint now you revenue conservatism just growth in second year? here, then of did from usually beneficial versus the the is accelerate doesn't first I in is What

Bhairav Patel

mean, the impact couple the things, of perspective, we right? so been trending I But has RUBS actual about Yes. an from first revenues. quarter revenue, with it's It our exactly was respect was utilities way had on a which rental expected. to costs,

leases the quarter quarter. price haven't projections and heading second changed. of quarter, the our really We and So second materially our quarter do into the third XX% in third

is income continues, really trend we utilities reducing RUBS we ballpark driving the if rental in because had to the is revenue expect do So X expected the revenue. lower months lower that be cost the ago. What's same

you've X%. So is for blended year call, about -- last exactly -- I quarter, it the expecting. expect What rental That a but overall, mentioned what we X%. on way the estimate enter QX we're is trend It's was had still X.X%, I would. our the think rate revenue and that about as we it's about first the thought April, in increase it it to in little We'd was see QX. bit seen

materially not from revenue again, perspective. So different a

there's couple expense driving real which, that's a the utilities the side, winter. change. to quarter. we the first the taxes, And things again, are thing On that estate mild a related costs, of onetime in And again, is mentioned

occupancy, we which is we of the in think from trending about as So time, had the are trending we different direction. said year, rest projections exactly way materially the what right is revenue the and including our had thought, last

Robert Stevenson

other then I the And got Okay. question.

Anne Olson

ahead. Go

Robert Stevenson

Anne. No, no, go ahead,

Anne Olson

going the to savings corresponding to offset greater revenue on I expense was that say, the actually side. just is

even -- for in overall, the mean, actually revenue, being we're positive decline manner though going a NOI. the we're conservative on it's revenue, in to total what feels and I So bottom line to that drop projecting

Robert Stevenson

year, talk and the rate on potentially dispositions? the can of in the sort you're environment you and your markets little sort out thinking thinking 'XX? you for submarkets the this sale seeing you guys about pricing that are guidance, types for that of more portfolio about of cap if of $XX can That's And you you but know -- get marketing bit a to of culling was over helpful. million how Okay. assets looking it's hit about and Where then I the are assets And price fall remainder sell? not guys the

Anne Olson

for assets I'm look is to in be as on We Grant going have to 'XX, Anne. could believe specifically pickup good that certainly need we'd that we then the do we at recycling. we acquire. Yes. in markets capital to candidates pricing. This ask And volume like some comment transaction But

So found a have great They're if overall. in historical transactions do some we'd low some or assets good growth are of assets that use like we potential, mind lower opportunity a capital markets, think in CapEx growth. good our thought older recycling, we and/or there those if have we where we with proceeds, high have was rents lower

could capital right just sold respect use feel acquisition recycling. that. With a pipeline answer like that Minneapolis activity we've to Grant some it. do that So we we to order the implement the in in let We assets for opportunity need and we pricing, I'll

Grant Campbell

communities, Xs. Yes. cap vintage The those low sale, Minneapolis rate there older was

again ago incremental increasingly the X.X%. then price common based and is recent the which by X.XX% to We volatility did data communities. in at, and valuations that on valuation treasury, private to do Regarding to call be what spread that call asset finding in having. bid-ask price that, and the the there public the there asset your buyers in X% sellers well-located uptick real-time it, XX-year question today conversations was of an a on between pricing the lot followed latest recent conviction transaction is continued X% valuations were approximately brought with market, installments cases a exists X in disconnect pricing landscape, one, points discovery. run-up where of I'll That ground private to we're market individual Along see current market continues that to Denver, for exist. In current month has today on is talk leading

Robert Stevenson

with bank or your reasonably? available of other flow is the not I the using and seeing you $XX still buying in apartments would Okay. other Fannie got Is if financing? raise and Is characterize how tight? I it to guess sort you've are that for But they And financing ask mean aren't the the stuff? of some available, assets it is, the or choppy environment? whether you've worth you guys. the or Freddie financing I environment financing a X guys back BB- stuff market question are somebody million markets, what pulled And that got

Bhairav Patel

Rob, this Bhairav. is

hold kind of the I rates. a market spreads So perspective, seen treasury I we've steady. by treasury volatility or really think mean, the from the driven is financing

really for despite on are bit in So Overall, think from think these -- the of The someone held some little like terms is agency of a challenged. in that little change a challenged to financing assets. assets environment a placement the the seen a perspective, bit of perspective financing have available a pricing finance from still from perspective, private being lend. the we big spreads banks cash treasury but spreads, are from to is terms haven't able I I still The term loan or a an volatility, flowing. willing us is

Operator

Our next from question comes Sandler. from Piper Mitchell Connor

Connor Mitchell

of how Anne going guys. a and kind bit, but answered that's this the you you to back Bhairav, maybe little and guys RUBS affecting

lighter ask versus a of you've guys residents that way. maybe revenue Just implemented, savings much the different winter the How for cost lower you savings for or benefited the RUBS?

Bhairav Patel

lower perspective, full expected of Connor, guide, revenue you from we at reduced it so by year is a lower was that look RUBS revenue the is of well. reduction driven our the that be at as -- as the expense to kind midpoint. maybe if Most

year-over-year basis points. say about the we by -- of now increase XX beginning driven year, the at about So points it's about I'd expect RUBS, of basis XX

in or rental So that's projections overall driving really projections. revenue reduction revenue the

Connor Mitchell

times. been the the discussed acquisition that's market Okay. couple helpful. transaction a and That's of maybe And then market, considering

buyers at cash the this You Is another to -- guys causing tough that's spreads right like competition primarily component there market tough some or there moment? are mentioned the that you've Or or discussing? is due other been competition market that it's now. from a more

Grant Campbell

perspective, as types a capital net now. profile we're is worth high private Grant. buyer I'd and the right Connor, Yes. say seeing this most aggressive competition from

accept We've the they're that those saying, of and a buy seen their of of groups financing they and certainly They They're there where that leverage. of cash, be later". view rate Some on buyer. they're to -- may are taking buy willing acknowledge "figure aware fully -- we'll out hold all many that. obviously the time are cap an what be all-cash side, period this a may we'll negative in instances, groups is long-term

same So I'd the of people say all that the doing competition us, amount for same things. are

conversations. deals, worth getting So touring capital having who's assets, underwriting high constructive, private types. and it actually it's net to most When comes

Connor Mitchell

helpful. That's guys mentioned -- tough you you're acquisition then Okay. seeing this And that of kind market. you're

So maybe your just buybacks thoughts you spreads and go versus some how market acquisition view some or maybe capital find for in share can the meantime, currently can other you stock purposes the utilizing you waiting for opportunities? on after better to that

Anne Olson

great top of And a for us. that one is That's mind question.

proceeds think now from about free or flow I our potentially are when we or sales, either other balance keeping selling sheet flexible. priorities having the think cash right

rate and very And so a year. which on this -- our we've maintaining program also value-add currently, low executing debt, floating

after of we'll and watch think I the I additional moderate. And supply little environment on sheet this $XX around that's time. the add company on and keeps deleveraging -- more more executing also than competitive stock the we're that, think this focused a a hopefully we balance move buybacks at mindful I and then good value us year, competitive return -- into for a think spend more which as million the products

Operator

next from from Our BTIG. Michael Instructions] question [Operator comes Gorman

Michael Gorman

improvement your there but of the missed terms discussions in about this, kind trends in in leasing the are I second across of in the quarter, particular I'm the differences trends your geography sorry new for the any quarter-to-date portfolio? Anne, if

Anne Olson

seen market a Cloud, across in St. lease performance. whole us better some good the In Dakota. I way North board. some we're seen markets. think But good the new I that's in as I outperformance We've the No, the board. in mean, smaller some of for performance seeing overall, a year-over-year. we've seen stronger we've moved improvement Rochester mentioned across has and rates seeing

Michael Gorman

the acquisition underwriting, any of volatility, helpful. side in at just pricing in Okay. the that given That's last terms given one or terms obviously, terms markets of in disconnect spread, in of expectations Understanding there NOI of kind then on market And of supply and the property trends in is buyer bid-ask impact the the seen level, maybe of some things. just of terms seller for the all we've across pressure? question

Grant Campbell

hard say groups underwriting underwrite certain to environment, that I'd maybe prior large growth Yes. in rent years. outsized here this it's over were very

a is dispersion that it ago the couple of think we stick that dispersion variable, with growth, underwritten I years wider So rent if today. of was than

think are conservative. fair they've to being if of that conservative they people were growth, Groups heavier thoughtful that to back. be I ago, underwriting a dialed years couple were to fair continue that

end some a is earlier, story day, submarket. variables touched rent of them believe to of that rate here leverage, has think at negative of cap the the feel perspective. And growth to from group it's perhaps the So that I on dispersion tightened the great perhaps they the doesn't that accept we've which maybe in long-term willing but today,

Operator

next Our Buck James. question from from comes Raymond Horne

Buck Horne

Minneapolis Just was deep dive supply wondering on was Because quick do the same for discussion there helpful the about you there. the if question I could Denver. really Grant. a pipeline for

in supply we're any terms the to just color Just the of deliveries? discussing of getting And additional close suburban kind we're of downtown between Denver? assets terms trends of pipeline if at in kind also peak where versus

Grant Campbell

quarter. beginning telling since the a a construction, the of Yes, market could is perspective, homes. be to last supply, currently existing telling tapered These supply highest with in the others tapering, apartment under represents has Denver our Minneapolis also have figures which similar is From that Denver. levels X% of of is period stock Buck. is XX,XXX data tapering seen longer and Minneapolis, but us -- about

That XXXX homes. that levels XXXX delivery consistent in market. apartment XX,XXX and at forecasted are is Denver in deliveries XX-month Next with

we produced pipeline, what It's past. not recent delivery get completed here outsized what over to us the forecast we're that is to what's deliver par actually and deliveries. market with and all has bifurcate versus be in try to on going any the really tell that the going going So see will

Buck Horne

the differences versus between downtown Denver? suburban assets of And Awesome. kind any

Grant Campbell

Yes.

urban construction the I think that been feeling you environment the downtown pockets in has construction. There Suburban pressures, concessionary you've or are geography when of think Denver more more certainly had of are larger leading area. maybe people size will markets, a desire in activity micro had that downtown opinion, is over in certain of new just where desirable a pressure of to geography and relative highly the building basis, concessionary to, build. the have to our environment. But on continue suburban spread less

Operator

hand Olson have We back further currently final questions. for no over to I'll Anne remarks.

Anne Olson

Thanks, you everyone, don't for joining real us this you to Janney see BTIG, in and conferences. of if at morning, there, and seeing we BMO estate look NAREIT many And upcoming June. catch the forward at we you we'll

Operator

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

You your may now disconnect lines.

Centerspace (CSR) 30 Apr 242024 Q1 Earnings call transcript