Centerspace(CSR)2024-10-29 19:12Financial Data and Key Metrics Changes - The company reported core FFO of 0.01 to 0.06 versus initial guidance [9][19] Business Line Data and Key Metrics Changes - Same-store new lease trade-outs decreased by 1.2%, while renewal leases increased by 3.2%, resulting in a 1.5% blended lease increase for the quarter [6] - North Dakota communities led the portfolio with blended spreads of 5.4%, while Nebraska communities saw blended growth at 3.3% [8] - Minneapolis recognized a 1.2% blended rent increase, maintaining its position as a strong absorption market nationally [8] Market Data and Key Metrics Changes - The company noted that much of its portfolio experienced lower supply than national averages, benefiting its results during the quarter [7] - The Denver market, where the company expanded its presence, is seeing a decline in new deliveries, with current construction at about 4.8% of existing stock [63] Company Strategy and Development Direction - The company aims to be a premier provider of apartment homes and vibrant communities, focusing on consistent earnings growth for investors [11] - The acquisition of the Lydian in Denver is part of the strategy to leverage geographically proximate operating platforms and enhance portfolio scale [12][13] - The company is actively looking for growth opportunities in various markets while maintaining a balanced exposure to any single market [51] Management's Comments on Operating Environment and Future Outlook - Management commented on the softening of market rents, attributing it to supply and demand dynamics, with expectations for future rent growth being conservative [25][58] - Despite some increases in bad debt, management believes that overall tenant health remains stable, with rent-to-income levels at 23% [9][58] - The company anticipates that as markets move into the net absorption phase with tapering deliveries, it will create a favorable environment for future growth [15][59] Other Important Information - The company issued approximately 1.5 million shares under its ATM program, raising $105 million, which was used to redeem Series C preferred shares [11][21] - Bad debt for the third quarter was reported at 45 to 50 basis points, which is at the high end of the expected range [45] Q&A Session Summary Question: Is the market rent softening greater than the normal seasonal trend? - Management acknowledged that the softening is more than expected and attributed it to supply/demand dynamics [25] Question: What leads to the large drop in revenue growth guidance from Q3 to Q4? - Management explained that the drop is due to expectations of higher utility costs and fewer concessions in Q4 [26] Question: What are the preliminary October leasing stats? - Management indicated that it is early in the month, but new leases remain slightly negative while renewals are slightly positive [28] Question: What components are driving the lower new lease rates? - Management expects renewals to average in the mid-2s and new leases to average a negative mid-rate [32] Question: How long will it take to stabilize the Lydian acquisition? - Management estimates it will take about 12 to 18 months to fully implement operational best practices [34] Question: What is driving the higher retention rates? - Management noted that the drop in home-buying interest due to high costs is contributing to higher retention rates [38] Question: What is the expected growth for insurance renewal? - Management indicated that early indications were favorable, but recent weather events may impact the renewal [44] Question: What is the bad debt level for the quarter? - Bad debt was reported at 45 to 50 basis points, consistent with expectations [45] Question: How is the new lease growth distributed across markets? - Management noted strength in North Dakota and Nebraska, but declines in Denver and Minneapolis [47]