Centerspace Q4 2024 Earnings Call Transcript

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

Question: Brad Heffern - RBC Capital Markets Wealth Management - Analyst : Hey, good morning, everybody. Just starting with your top two markets, at least in the market data that we see, Minneapolis has been improving in recent months. Denver seems to be weakening, if anything. Does that align with what you're seeing in your portfolio, and can you just sort of compare and contrast the fundamental market drivers there?

Question: Brad Heffern - RBC Capital Markets Wealth Management - Analyst : Okay, got it, and then maybe just for the rest of the markets that are harder for us to track, can you just give your expectations for 25 performances of those and maybe any that stand out one way or the other?

Question: Brad Heffern - RBC Capital Markets Wealth Management - Analyst : Okay, thank you.

Question: John Kim - BMO Capital Markets - Analyst : Thank you. On the guidance this year, you mentioned, 2.4% blended. Can you just break that down between new and renewal and also when you look at it versus 2024, it doesn't seem to be that much improvement, and I'm wondering if you can comment on that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 3:00PM, CSR.N - Q4 2024 Centerspace Earnings Call

Question: John Kim - BMO Capital Markets - Analyst : Yeah, I was just wondering because you're starting out at a higher occupancy point than you were last year, you mentioned that retention rates are higher as well, so the ability to push renewals it seems like would have been more prevalent this year than last year, but just. I'm just wondering how much conservativism is baked in this guidance.

Question: John Kim - BMO Capital Markets - Analyst : Okay, and then my next question is on acquisition and disposition activity expect this year. Grant mentioned cap rates in the mid to high 4% range in Mountain West. Is that prevalent in markets that you're looking at today and what's your appetite to acquire with initial negative leverage?

Question: John Kim - BMO Capital Markets - Analyst : And do you expect to be net. Acquires this year.

Question: John Kim - BMO Capital Markets - Analyst : Thank you.

Question: Robert Stevenson - Janney Montgomery Scott LLC - Analyst : Good morning guys. Brav, what is the key factor factors that drive the same sort of expense guidance towards the 2% end versus the 4% end in the guidance range?

Question: Robert Stevenson - Janney Montgomery Scott LLC - Analyst : Okay, that's helpful. And then the same store of recurring CapEx per home guidance is up about 11% at the midpoint of your '25 guidance. Is this increase just inflationary, or is the scope of the 25 projects meaningfully greater than the '24 ones to drive that big of an increase?

Question: Robert Stevenson - Janney Montgomery Scott LLC - Analyst : Okay. And then last one for me and how different is the retention rate by markets, especially, Minneapolis and Denver, I guess you're more institutional markets versus some of the smaller markets, and how is that impacting, when you look at it, the market in terms of rental rate growth expectations for '25 here.

Question: Robert Stevenson - Janney Montgomery Scott LLC - Analyst : Okay, and then I guess the last one for me is in terms of non-rent revenue, the fees, and all the other sort of associated stuff, how fast is that growing on an annual basis for you guys versus sort of the core rental rate? And is that sort of a positive boost or a drag to overall revenue growth?

Question: Robert Stevenson - Janney Montgomery Scott LLC - Analyst : Okay, that's very helpful. Thanks guys. I appreciate the time this morning.

Question: Rich Anderson - Wedbush Securities - Analyst : Okay, thanks and good morning. So, the path to get to a more optimal sort of balance in your portfolio, I know we've talked about, maybe 18 months to 24 months to sort of get to a 75, 25 type split between institutional and secondary, correct me if I'm wrong on that. Is it fair to say that that that it appears that that's going to be extended significantly more. Further out than you know 18 or 24 months just because of how the markets are behaving and you know what should our expectations be about you know the path, the timeline path to get to something that is more in line with what you're thinking long term. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 19, 2025 / 3:00PM, CSR.N - Q4 2024 Centerspace Earnings Call

Question: Rich Anderson - Wedbush Securities - Analyst : Okay, and on the topic of sort of trading, perhaps older or newer, are you willing, and if you think about the CapEx load that might be involved in an older asset versus a newer asset, are you willing to allow for some FFO dilution in this process if at a FFO line it's more of a wash? Is that a reasonable way to think about how this could happen in the in the in the short term?

Question: Rich Anderson - Wedbush Securities - Analyst : Is there any quantifying ability of the pipeline right now, or is it just so quiet that you really can't form a number at this point?

Question: Rich Anderson - Wedbush Securities - Analyst : Okay, great, thanks very much.

Question: Michael Gorman - BTIG - Analyst : Yeah, thanks. Good morning. Maybe just sticking with the acquisition environment for a moment. Can you maybe share what are your thoughts on what could bring that bid ask spread together, right? I understand some stability in the interest rates, but that wouldn't necessarily collapse the spread. We're on the tail end of a supply shock moving towards stronger fundamentals. I'm just wondering what you think is in the pipe for a catalyst to bring them together, and do you think the market is going to trend towards the ask or towards where the bid is right now as the market strengthens and maybe more institutional capital comes back into the apartment space.

Question: Michael Gorman - BTIG - Analyst : That that's helpful, thanks. And then maybe and just in terms of the pipeline that you talked about being smaller than historically typical when you think about looking at the opportunities set in front of you. Have the reasons changed for opportunities falling out of that pipeline, i.e. is pricing driving more of those opportunities out of the pipeline, or are you may be able to find more of those unique opportunities starting to come to market?

Question: Michael Gorman - BTIG - Analyst : Great, thank you.

Question: Mason Guell - Robert W. Baird & Co., Inc. - Analyst : Hey, good morning, everyone. Just going back to the Raco assumption for 2025, I guess how do you expect this to trend throughout the year? Is the second half expected to be better than the first, or should it stay relatively steady throughout the year?

Question: Mason Guell - Robert W. Baird & Co., Inc. - Analyst : Yeah, renewal and new, and I guess it's blended, I guess how that's supposed to trend throughout the year.

Question: Mason Guell - Robert W. Baird & Co., Inc. - Analyst : Great. And then could you give any updates on the current mezzanine loan? I guess what assumptions do you have for this to be paid off?

Question: Mason Guell - Robert W. Baird & Co., Inc. - Analyst : Great, thanks for the time, everyone.