Centerspace(CSR) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a year-to-date increase in core FFO of 6.8% year-over-year [6] - Same store revenue achieved a 5.7% year-over-year increase, slightly ahead of expectations [7] - Core FFO was reported at $1.20 per diluted share, driven by a 5.4% year-over-year increase in same store NOI [19] Business Line Data and Key Metrics Changes - The company executed one-third of its lease expirations in the third quarter, achieving a 3.9% blended lease trade out [7] - New lease trade outs showed a 2.3% increase, while renewals increased by 4.9% [7] - Cost control measures have benefited repairs and maintenance costs, offsetting increased on-site compensation [9] Market Data and Key Metrics Changes - Market rent is declining as leasing slows into the fourth quarter, with October showing a blended 0.8% leasing trade out [8] - The company noted that certain markets, particularly Denver and Minneapolis, are experiencing elevated supply pressures [38] Company Strategy and Development Direction - The company is focusing on value-add capital in smart home and smart community categories, targeting implementation in about 50% of total communities by the end of 2024 [10] - The company aims to improve portfolio quality and market exposure through capital recycling, with recent dispositions and acquisitions enhancing its geographic footprint [11][18] Management's Comments on Operating Environment and Future Outlook - Management expects supply to moderate in 2024, with a focus on maintaining occupancy levels [25][39] - The company anticipates no relief on insurance costs and expects overall expenses to moderate to 3% to 4% growth [57] - Management expressed optimism about holding revenue and growing NOI next year [47] Other Important Information - The company ended the quarter with no balance on its line of credit and a weighted average interest rate of 3.46% [20] - The acquisition of Lake Vista apartment homes was completed for$ 94.5 million, with an attractive interest rate on the assumed mortgage [18] Q&A Session Summary Question: What are the new lease numbers in October? - Management indicated that the new lease numbers are relatively normal for October, but they are feeling some pressure on lease rates [24][25] Question: What is the expected occupancy level for Q4? - The company expects occupancy to be in the mid-94% range, factoring in guidance [41] Question: How is the company managing staffing and retention? - The company is focused on retention through professional development and training opportunities to combat staffing challenges in the industry [60][61] Question: What are the expectations for new supply in the market? - Management noted that while some markets are experiencing elevated supply, they feel insulated due to their portfolio's characteristics [38][39] Question: What is the current state of bad debt? - Bad debt is reported at about 30 to 40 basis points, consistent with pre-COVID trends, and management has not seen significant fraud [52][71]