CSR - Earnings call transcript Q2 2024

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Operator

Good morning, and welcome to Centerspace Quarter 2 2024 Earnings Call. My name is Kiki, and I will be your conference call operator today. [Operator Instructions] I will now hand you over to your host, Josh Klaetsch, to begin. Josh, please go ahead.

Josh Klaetsch

Good morning. the SEC June close. 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 of that views to will remarks the statements to risks our subject non-GAAP be may on will and outlook place for assumptions. note guarantee statements. Please and information, our are materialize, based and include statements to today's not on in discussed under other These turn section forward-looking prepared the it It's Factors, Olson, that about Anne our call. I'll reliance uncertainties President on are the business and reconciliations these Centerspace's today's forward-looking cautioned filings company's important earnings other statements statements and SEC. over remarks. Risk any forward-looking management's undue filings CEO, discussed our cannot to refer current We which and titled, any are to now you in for release with

Anne Olson

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

Before trends briefly for taking your outlook cover questions, we and discussing before XXXX. will our our results the of remainder

by second driven earnings per expenses. diluted $X.XX quarter, starting revenue share discipline of a FFO have with good core for of We the news, lot growth of on stable and

price per which to These contrast on share. $XX first a at proceeds sales approximately to using to of per subsequent million $XX.XX reduce stock our issued at the share, gross ATM average are $XX.XX and buybacks quarter, an with are quarter leverage. positive shares average During we our we an of of

our balance welcomed XXXX. our Board recast to enhanced to a to Jay were in sheet maturity have to addition, And line at of the out of very beginning moving pleased Rosenberg credit, with July. the of further Trustees we our We

our growth vision apartment vibrant talk will for we feel As trends. but earnings today, results, let's a with of about we communities quarterly leasing sit be in drive some revenue to positioned to detail our and consistent first, to our investors. Bhairav premier advance discuss further provider very on well homes

second XXXX. X.X% revenue the For quarter, increased the over period same-store same in

for We are the group. XXXX lease new which X.X% just momentum peer trade-outs similarly, is the quarter, was top the and of growth the X% of blended renewals during continue in as we end lease proud quarter. averaging move this rates also renewal evidence our to through of increases strong see X.X%. high while the growth, which stability were we over earnings. Same-store is we and May achieved, peaked pricing in of at priced multifamily at X.X% new increases lease The of the portfolio of on public trade-out This

our is which Tapering typical Resident our at of look indications we drive in helping and X.X%. new lease leveling is we are rental in our us been occupancy, in expenses. for represents turn rates line expectations strong. remained portfolio. Resident has excess health the and with year-to-date and projections, for quarter maintain seasonality lease reduce July, new retention through we of work experiencing of As a amount expiration expected the range pricing as off a with trade-outs significant lease blended rates of of and

with quarter-over-quarter, in debt levels year-to-date norms. While line historical are our this was up quarter, bad

compared raising and our position represent the sustainable homeownership results midpoint second the us $X.XX we quarter's at improvement are and residents. These compelling current Importantly, believe full results to that $X.XX share. July from guidance confidence our a our sequential do for early prospects, increased metric higher levels suggests read the bad we debt as to trends renting year. Rent-to-income remains towards trend of remain give our the and a per by XX%, the the the on not remainder of for year in earnings of and cost $X.XX value and in

are external this cost in reflect our any rates our opportunities, XX of and provided transaction additional additional of guidance there specific time, higher about to which ever does no pipeline was second our had in markets capital the volatility past optimistic multifamily on than to the and economic that nationally in is our months activity leading activity to quarter, more been growth. clarity for limited At The but pricing turn have activity. interest to we increased we While communities, ability not as transactions and XXXX. we execute

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

Bhairav Patel

Thanks, Anne, morning, and everyone. good

pleased the increase at the mainly of which with FFO the point insurance by for earnings X.X% average X.X% premiums. higher another driven driven higher quarter spend are by same-store by year-over-year quarter. Property a core revenue repairs home during and the of of strong summer and share stood second to report by XX.X% in growth second occupancy, increase per expenses part We a operating per in basis weighted year-over-year, the increase early to XX $X.XX diluted same-store and occupied X.X% up increase communities maintenance for year-over-year quarter by compared increased XXXX, from X.X% in of with quarter, driven a NOI. Revenues the were

throughout repairs of and the This did an timing in have projects on maintenance expectations. impact full vary our to significant, not these costs Although was not unexpected the the year. year tends increase as

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

which increase prior is and same-store versus last of of at $X.XX of increase of are driven For increase by to an expectations XXXX, improved year's to we NOI expectations results. X.X%. These now the an the guidance FFO in our $X.XX expect midpoint $X.XX compared growth an core X.XX% midpoint, year-over-year of

across half year. better-than-expected While board year-over-year unchanged did increase the based midpoint, the levels expense our expectations the X.X% remained the growth expense projected first total of in the to we lower at revenue during same-store growth on of

between G&A of million. components the other for is to ATM expect issued to of interest $XX.X million under of our interest million line now debt down primarily and expense to Moving pay equity Lower to We the and program expenses our management million, to property by use $XX.X on range on $XX.X year driven between $XX.X credit. range expense guidance. to

We the expect spend expenditures $X per initiatives to capital unit. per million value-add to the year, less while at on $X,XXX up unit slightly during are midpoint

the today, issuances in our funded have, we acquisitions, $XX.X project guidance. or million investment factored development lastly Minneapolis of mezzanine area. into the in No And dispositions, additional fully are as borrowings our

in we'll first. core year the guidance in we of the year full lower that half see did our the Implicitly, suggests than second per FFO share

utilities in due don't the we introduce tax during to refund the first the half are there a share milder that costs winter, items in While such to quarterly health a costs the in to and first year, intend quarter equated about per quarter $XXX,XXX guidance, of notable a the the refund comparison. as lower $X.XX affecting second of few insurance

we of of generally in higher seasonality and for maintenance to incur including costs, second addition, annual normal QX half the that they line overhead repairs leading level costs return a costs during G&A our and the normal item and a In of expect year. the higher expense

XXX,XXX subsequent of quarter $XX steps a million. of raising during quarter and On that shares to after balance our full of $XX and million further occurred the guidance. the end over we front, the year program, capital couple the have our under to About we sold our sheet. strengthen issuance took ATM roughly end incorporated We within

the We issuance. of will always of impact be mindful

that million so on a roughly guidance $XX sheet our assumed draw recent earnings we has it X% high The not not year. balance impact this guidance. our do pay debt it and full would diluting down that on did year only profile, previous to our but without to rate us Our credit of have material line allowed improves opportunity

and cash reduced lowest is X.Xx, accretive leverage been. pro has fact, our to a it In the on forma it basis ever flow

Additionally, to terms our subsequent recast similar without XXXX existing now credit, challenging in end, the were to we facility to initially established. able relative when the lending it in any quarter matures we a changes of do much environment bank our to group was making to and which more so and on of line completed

that, commend that questions. us results years. To weighted cost to I We line in average our X.X% debt upon quarter average with providing the year. of of turn I will and weighted with quarter, rest well-laddered for the of a schedule and Centerspace conclude, team on an first operator time the the we building a to we at X.X excellent achieved proud the your are have We back end look XXXX. And in of maturity the had to half a results maturity these forward of

Operator

we Heffern question [Operator from Capital Brad RBC Markets. is received Instructions] from first The

Brad Heffern

what's that? of you're target being are reduce do issuances you underlying kind of equity You leverage the Do when on these mentioned that then to thinking more you're these to leverage. issuances? used equity plan And doing that

Anne Olson

Brad, pay line have high to issuance that used a on floating credit. we rate equity our debt debt, of mid- the have higher down little Xs. we rate to That's

pay potentially $XX $XX reduce on credit have million We that million or down of to to that more X. line to

for balance that have that issuances. targeting of for trying have And don't or rates. opportunities an we to nondilutive not and external uses we're with to ability we overall accretive equity unlimited grow leverage So amount We're the the growth.

we and the issuances equity floating exposure pleased had. overall really debt and the to the with rate we're that So both leverage reducing

Brad Heffern

it. that me took And Got Okay. one. next my in

you in said seeing on cost guess with the cost the than and can excited what I said current more you opportunities that acquisition ever. about this seeing opportunities. prepared capital? you're you're those make of just of You sense about capital And more think remarks specifically your I talk just you're if pricing

Grant Campbell

XXXX Brad, XX% XX% this volume remains levels. to Grant. down Transaction from is Yes.

X.XX% that general Minneapolis, seen here remain an consistent two in a the of activity. range, we uptick but have recent tale and So there Pricing does experiences X% of in our a in cap months Denver of to kind over lack with generally stories. is transactions

Some Xs. in-place recent there, urban really discount by trades low rates replacement to to thesis with cost mid-Xs cap driven

at today. Minneapolis is suburban vintage pricing Newer mid-Xs

kind We acquisitions, what funding. OP have lines mezz transactions I'll unit in on the call straight water and of

a net wide in we're and be there's So some optimistic opportunities half here to cautiously that going second the of year. casting the

Brad Heffern

end, went you said that's it. if case? high that affect Got Bhairav, the only and it curious guidance. equity that's not why And And just Okay. for didn't the end the I'm the the low up me. then,

Bhairav Patel

mean was It about projections Brad, impacted the our issuance $X.XXX. equity mostly neutral. by core yes. I

didn't material really a impact. it So have

low guidance, respect the lifting it's of leasing the lower by our performance. On derisking just with based on to end, lot end a

the kind of midpoint of leasing season, of projections. the half initial first our expect along continue During we to

high was high leasing it end in with respect where end up lower the So with the the performance lower what issuance. the we the just a was, by to we equity impacted previous given of but hitting wasn't place, ended kept really probability end,

As it's that I neutral of roughly the given said, half only was impacting second an perspective, earnings from year. the

Operator

is from from The Janney. Rob next question Stevenson

Robert Stevenson

about you talk the you're a the portfolio issues bit Can where biggest little facing in today? supply

Grant Campbell

is Grant. Portfolio-wide, muted. this Rob, supply profile our remains

with the market quarters that over other has at that average. And we're would XX-month These homes. levels secondary on to construction. our That's under market. Minneapolis homes. numbers Minneapolis, of Supply then existing which and approximately XXXX pipeline X of deliveries in with of our the in under-construction that stock. market to the have X% is no continue Denver of homes, past continues apartment are little apartment touch tapering really XX,XXX Currently, see in Again, range stock the midyear at today, That's X-year about the in institutional from under We to existing to over Midwest XXXX. our from market. highest Denver touch in X,XXX pipeline. on and construction here apartment XX-month reducing XXXX X.X% levels XXXX markets. Pipeline in forecasted deliveries stock supply X.X% and X.X% consistent down to taper recent to XX,XXX larger at next annual delivery next is tapering of existing to supply been X/X those markets, quarters. of represents X.X% been XXXX,

continue muted very pipeline to and a supply thematically, taper. profile So see we that

Robert Stevenson

that occupancy and quarter-over-quarter address guess, in again what What's Okay. lower to points basis are market And trended I Omaha doing XXX you year-over-year. driving that? then that? And down, guys

Anne Olson

projects. markets Well, one of Omaha value-add finishing we're is some up the just where

and renovation. of is deceleration Cloud So then kind look we kind typically some occupancy that of by vacancy if have driven up. the same you comparatively, that of St. see pick in And

of as So we the that really renovation renovations. expect again up completion do focus pushing past that XX% the finish occupancy out we bit to and post on last up pick level of

Robert Stevenson

X.XX% how some is, the mean, of the guidance in the the your in that these there guess, year on revenue and year X.X% sitting is side expense projects? guidance on question great on is of X.XX% the the year-to-date you utilities guidance X.X% were X.XX%. The gave back terms revenues the half the at much I of but same-store Bhairav, and revenue I a think that back the And strong. some X.X% year a I to last pretty half of based the to side of is in basis and you're because off of

so just about the of where curious we as as head you're new And given earlier into acceleration back commentary lease the to rate the getting half the year.

Bhairav Patel

Rob. Sure,

conservative. guidance, a yes, not midpoint it's revenue from of So

During rates the first half, our around X%. blended were

to blends in similarly as the half We July as stated. second close to with a expect well, Anne and is start great X%, perform

the half, use a heavy projecting year bolster we in to we of second second concessions. are especially to as half with Last were the in in of was trying the better fourth last occupancy. quarter relative year occupancy Second, concessions, lesser

have we we like a components Third, higher couple it. in second year. be half RUBS compared the the last of to revenue, of There's expect half to second to which

performance on some the during just higher of a lastly, utilities have finished the half year of half. And because we projection, item units line rollout last then which expect second last versus RUBS have the do runs plus debt. year we revenue bad second program in the through this the We year, RUBS we better more on slightly RUBS

better think On relative trend. a mentioned, it's slightly think year-over-year. contribute that a We a uptick. will basis, we a don't Anne comparison slight to As

Operator

The is Sandler. from Mitchell next Piper Connor question from

Connor Mitchell

if Anne, more in you're wondering more of some your down narrow your activity seeing increased kind was some could activity opening maybe remarks, you discussed markets of you some just to seeing with nationwide. opportunities, well. near I that, dispositions? in transactions, seeing even you the guys term as but not with where or in long then necessarily maybe And maybe medium along pricing are the term, acquisition, more where

Anne Olson

and Yes, was communities Connor. market. nationally, for and portfolio little markets, about that have ask meant to where located some saw those overall Graham I'll what large velocity pricing we transaction very trade did that transactions There has our in a and transactions talk bit in the

Grant Campbell

market, suburban aggressive buyers And lack those trades suburban Yes, Minneapolis, transaction of basis, markets urban X.X% communities acquisitions. been discount Anne, really portfolio more no as We've a or of we part here most cost after were XX The seen portfolio, acquired Pricing and then and in activity. in rate and value. Minneapolis, getting urban There's but for to on agreeing a Denver both have on of our we cap in XX,XXX in rebound private handful have those Minneapolis pricing there and the activity in their transaction in Lennar on asset individuals sellers that were of are terms overall communities portfolio and replacement space, in Connor. markets seen units. X some in nominal XX incrementally that total, within earlier, to Denver to thesis months I months past leader forward discussions. Really, over been still a was Within of about kind that to the constructive has high X X X net worth mentioned suburban trades, transacted. on portfolio. our really have communities. urban transactions of our the platforms as XX that the a on KKR, XX suburban that, math in a know, has

Connor Mitchell

other investments. mezz guys you it Is allocation your investment constantly your investment at this also into to markets? looking I mentioned just maybe you possible that other some work in Okay. that Or put fully your to markets and use of capital are focused on in other mentioned to Denver. think And some really could that capital you're then in? guys you And That's that helpful. opportunities type mezz core you you funded currently also venture

Anne Olson

That is in million Yes, mezzanine $XX.X that's our fully of funded, market. that investment in Minneapolis now Minneapolis, Connor.

a get looking development, other financing We to mezzanine access pipeline. -- and the markets as a look into at to to development and way have are use

have because in given has advantage also deepest relationships. our Minneapolis limited us that it for been This that's we there. of Denver we However, the to in competitive the growing have Minneapolis, is just scale where

have We the largest team.

new some back the we So see at opportunities on with to options those starting earnings get purchase markets access definitely are on and our creative sure to us help discount in really radar end. boost market to for other a to a way products as and value

are every this So can. we certainly opportunity we pursuing like and structure

Operator

question BMO. next The from Kim from Instructions] is [Operator John

John Kim

Anne, on was Or months to? like it's consumer? in than X.X supply the it that I commentary May, attribute new last peak your some is your which pressure of you follow I year. in up lease that markets? peaked what stress just pricing wondering of wanted to the about looks it earlier Is in

Anne Olson

Minneapolis. I the a particularly in the portfolio of in pressure, supply stress on sure of Denver a And ton and not seeing bit a -- it's of we're our that consumer. lot I'm little think

Our uptick at remains rent-to-income retention a seen rates. strong level really we But XX%. have in healthy

rates. earlier occupancy lacking bit partially peak a I respect sooner been so to driving with to think stabilize little that because we also And is able in an have those renewal really

So to as not to lease open allows right of while lease apartments it that new some achieve you that many drive there's new rates, on.

coming retention it indication. on or year won't so still July curve are X.X% us. those in out for another deceleration, how that's is in, starting initial think and out. July, shakes here June. know rates our days I has we're saw really We trend pricing to for been of something slight see XX So And We but blended this changed flatten is interesting think timing really the the really I the

John Kim

to blended, that deceleration That you're occupancy? as renewal in primarily driven by is grow rates looking

Anne Olson

dropping lease It's of really driven rates. the by, I think, new

there strong. rates are deceleration But is more in rates. renewal have in the pronounced in renewal the Our pretty holding we than lease rates new that the seen

John Kim

therefore scaled then like why just returns it's you you're And Can on CapEx your the you've million. it if the in XX.X% those Okay. versus value-add reason and seeing about down moderation $X you've And on value-add the where comment spend down? the came historically? down your you looks CapEx, some gotten come expected returns on which in seen guidance,

Bhairav Patel

Bhairav. John, this Yes. is

our couple of So was the we that value-add a projects in or driven the midpoint reduction by spend of pushed reassessed.

in on are slightly occupancy. those are Now, pressured markets that by relative a basis

So them in market. was one Minneapolis of the

The the was but achieve we other spend, place one when put been reassess. from in Denver we perspective, threshold a we have do the market. Overall, returns these that continually to able value-add return in we

where able in going we before place challenging a so threshold little to But feel markets to reassess. like been So to we we it's the in thresholds, initiate those that put we returns far, be have achieve we more achieve project.

Anne Olson

the of site. to a at projects it's in one about is that implementations keep technology the related this to John, lot things mind year's is And value-add of

our is and premiums So significant the to bit rent quite some able value-add we're smart a experiencing those. have that of on on and the cost roll savings also been get pretty out we

year have a renovation as really to not our those So renovations spreads leasing it's and turned we less pressure or on feel many acceleration common area great unit given new out rents to of in the good about and pipeline. be

Operator

Baird. from next is Mason from question The Guell

Mason P. Guell

acquisitions loan opportunity take And willing in how your a would you big be lending? see you or Do book? better to

Anne Olson

Mason, we do a that debate. great question, one that's

front construction arena, the for of given new it's very the development be to make capital deals opportunity looking to we a lending development are costs acquisitions construction a out. coming us in pencil think still The bit I Those hard are deployed loans that better in underlying high, just into tighter. now little is very right see high. costs

be that into the balance that would With when dilutive because that, portfolio, that pipeline we're there earnings. rolls can when to communities, respect take is really those trying a large we loan interest loan of of to how the drop-off stabilized a interest, rate higher acquisition to

size, some earnings quality we're that interest of having but higher really, trying to maintain pipeline not So a to necessarily manage, with rate.

Operator

have remarks. currently Olson, will for I questions, we closing President As other CEO, hand no further and to now Anne back

Anne Olson

culture to the performance resulted not June Thank you. Top the like being every I'd but their quarter, fifth including this of better year-to-date, efforts named outstanding only teams maintaining our for which Workplace in thank great And also time. day, in our for our

So thank Tuesday. you for joining, have a and great all

Operator

concludes This today's conference call.

lines. your Thank You may now disconnect you.

Centerspace (CSR) 30 Jul 242024 Q2 Earnings call transcript