Centerspace Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brad Heffern - RBC capital market - Analyst : Yeah, thank you morning everyone. You mentioned market rent softening more than expected. Is that also a greater softening than the normal seasonal trend? And what would you attribute.

Question: Brad Heffern - RBC capital market - Analyst : Okay, got it. And then maybe for Rob just looking at the, the new revenue growth guidance, it implies a pretty substantial drop. Q3 to Q4, something like going from 3 to 1.6 plus or minus. The over year comps actually look a little easier and I assume you don't have many leases expiring anyway. So I'm just curious what would lead to that large of a drop.

Question: Brad Heffern - RBC capital market - Analyst : Okay. And then last for me, do you have any preliminary read on the October leasing stats? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 2:00PM, CSR.N - Q3 2024 Centerspace Earnings Call

Question: John Kim - BMO - Analyst : Thank you. So for your third quarter lease results just trying to isolate September, it looks like new lease rates were down 3% renewals below three blended of roughly plus 80 basis points. And now you're saying that it's going to go flat or expected to go flat in the fourth quarter. So what components between new new leases and renewals are driving that number lower?

Question: John Kim - BMO - Analyst : And do you have a view on what your earning is going to be for next year? Is it too early to determine?

Question: John Kim - BMO - Analyst : Just really quickly on the Denver acquisition, you guys mentioned a mid to high 5% yield. Once you stabilize the asset under your new platform, how long will it take to get to that level? And if you can comment on the going in cap rate?

Question: John Kim - BMO - Analyst : Okay, great. Thanks everyone.

Question: Connor Mitchell - Piper Sandler - Analyst : Hey, good morning. Thanks for taking my question. So it sounds like retention rates might be a little bit higher in the quarter than they have previously. Could you just kind of give us some more color on why you might think that the retention rates are higher, what might be driving them this year or the quarter. And then finally, just, do you guys plan on disclosing turnover or retention in the supplemental in the future?

Question: Connor Mitchell - Piper Sandler - Analyst : Okay? And then just kind of along the same lines as you kind of think about the retention rates and balance renewals with new leases. Could you guys just give us some color on kind of how you, how you think about pricing renewals, whether that's all the way up to market or maybe partially just to offset any leasing costs for new leases instead any, any color you might have, there would be helpful.

Question: Connor Mitchell - Piper Sandler - Analyst : Okay, very helpful and then maybe just one quick one for bav as well. You guys talked about like forecasting utilities which drives expenses and revenue for for rubs. Just kind of a big picture wondering when you guys are looking at the forecasted utilities, does it essentially net out for earnings or how impactful might we think about it for, for earnings in terms of revenue and expenses to the bottom line?

Question: Connor Mitchell - Piper Sandler - Analyst : Thank you very much.

Question: Cooper Clark - Wells Fargo Cooper - Analyst : Hello. Thank you for taking the question. Just wanted to ask about some of the moving pieces as it relates to your insurance renewal coming up in mid to late November, wondering what type of growth you're expecting and how much wildfire concerns in Denver may have an impact.

Question: Cooper Clark - Wells Fargo Cooper - Analyst : Awesome, thank you. And then just as one follow up wondering if you could provide an update on where bad debt was for the quarter and any color on certain markets where you may have more elevated levels of bad debt. Certainly. For the for the third quarter, we were about 45 to 50 basis points in in terms of bad debt from a year-to-date perspective that puts us towards the high end of our expected range of 30 to 40 basis points and we're expecting the same levels to continue. As we look across markets, there aren't really any broader trends to glean from any of our markets. I think it's just kind of relatively spread out across our market. So nothing specific you know, with respect to a market or two. That's worth noting. Awesome. Thank you.

Question: Rob Stevenson - Janney Rob - Analyst : Good morning guys. And was the new lease growth of negative 1.2% in the third quarter driven mainly by Minneapolis and Denver or was that fairly widespread across the portfolio and any markets where new lease growth was still meaningfully positive for you guys?

Question: Rob Stevenson - Janney Rob - Analyst : Okay. And then what technology savings on the expense side are still left for you guys to realize and how much additional spend over the next 18 months? Are you anticipating for your various tech programs going forward?

Question: Rob Stevenson - Janney Rob - Analyst : Okay. That's great. And then last one for me, given your current no I contribution from Denver Post Lydian acquisition. How are you thinking about future acquisitions in that market? Are you going to be comfortable taking that up into the 30s like Minneapolis and given your comments on cap rates in Denver, would you look to maybe sell an existing Denver asset in order to buy another one with more upside? And so how are you guys thinking about the optimal size and exposure of your Denver portfolio going forward?

Question: Rob Stevenson - Janney Rob - Analyst : Okay, thanks guys. Appreciate the time this.

Question: Michael Gorman - BTIG - Analyst : Yeah, thanks. Good morning. Grant. If I could just go back to the Denver acquisition for a second, is it possible to kind of break down as you talk about the improvement in the yield kind of how, how much of that is directly in control of, of center space in terms of operating efficiencies? So how much is coming from the expense side versus that kind of mark to market piece that you spoke about? And I guess secondarily to that, I, I how do you think about market rank growth as you talk about that improved yield? Is that baked in there at all as well?

Question: Michael Gorman - BTIG - Analyst : Okay, thanks for, thanks for the detail there. And then you know, maybe and I'm just trying to square some of the commentary here. It sounds like your markets are generally past the the kind of the peak impact or at least the peak supply. So I'm just trying to understand as we think about the revenue picture here. Are we seeing any signs of stress out of out of the tenants? I know you, I know you talked about relatively strong renter base but we bad debt back half of the year is going to be higher. Definitely the revenue expectations are down. I mean, are there any other demand metrics or tenant health metrics that you're seeing maybe a little bit of additional stress beyond just any impact from supply.

Question: Michael Gorman - BTIG - Analyst : Great. Thanks so much for the time.

Question: Mason Grow - cental space - Analyst : Hey, good morning, everyone. Can you talk more about what you're seeing in Denver, maybe on the new versus renewal rates and then the supply and demand outlook in your submarket. Yeah, I why grant, why don't you go ahead and start with the the supply picture with respect to the submarket and, and then I can address the what we're seeing on new and renewal in Denver. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 2:00PM, CSR.N - Q3 2024 Centerspace Earnings Call

Question: Mason Grow - cental space - Analyst : Thank you and unexpensive. Are there any one time items this quarter that helped the moderation or are there unexpected for the rest of the year.

Question: Mason Grow - cental space - Analyst : Reserves.