• Core FFO: $1.21 per diluted share for Q1.
• Same Store NOI Growth: 2.1% year-over-year increase.
• Same Store Revenue Growth: 3.5% increase compared to Q1 2024.
• Occupancy Rate: 95.8%, a 120 basis point year-over-year increase.
• Same Store Expense Increase: 5.8% year-over-year, primarily due to property taxes.
• Debt Cost: Weighted average debt cost of 3.6%.
• Liquidity: Over $223 million in total liquidity.

• Warning! GuruFocus has detected 6 Warning Signs with CSR.

Release Date: May 02, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Centerspace (NYSE:CSR) reported a 120-basis point year-over-year improvement in weighted average occupancy for its same-store portfolio.
• The company achieved a strong average physical occupancy rate of 96% with April renewal retention around 57%.
• Blended leasing spreads increased by 70 basis points in the first quarter, continuing a positive trend into April.
• Centerspace (NYSE:CSR) maintained a healthy rent-to-income ratio of 21.6%, with bad debt remaining low at roughly 40 basis points.
• The company reaffirmed its guidance for the full year, projecting core FFO of $4.98 per share and same-store NOI growth of 2.25%.

Negative Points

• Same-store expenses increased by 5.8% year-over-year, primarily driven by property taxes, creating a challenging year-over-year comparison.
• Denver market faced supply pressure, impacting new lease rates, although improvement is expected later in the year.
• Retention rates were lower in some markets, notably Denver, due to higher supply and more choices in the market.
• Omaha experienced a 220 basis point sequential decline in occupancy due to forced move-outs related to value-add projects.
• The company faces broader market volatility, impacting capital markets and creating a disconnect between public and private market pricing.

Q & A Highlights

Q: Are you being conservative with your projections given the strong start in the Midwest apartment market? A: Anne Olson, President and CEO, explained that they expected strong growth in the Midwest, particularly in North Dakota, Omaha, and Minneapolis. The performance is in line with their expectations, and they see potential for continued growth in these markets.

Q: How do you plan to manage occupancy and rates during the peak leasing season? A: Anne Olson stated that they project occupancy to average around 95% for the year, despite currently being at 96%. They plan to push rates while maintaining strong occupancy if demand continues.

Q: Can you explain the lumpiness in operating expenses, particularly real estate taxes and utilities? A: Bhairav Patel, CFO, noted that the lumpiness is expected in the first and fourth quarters due to property tax appeals and increased assessments in some jurisdictions. They have adjusted their expectations for tax increases accordingly.

Q: What is your outlook for the Denver market, given its current challenges with new and renewal rate growth? A: Anne Olson mentioned that they have seen improvements in new lease spreads in Denver and expect an inflection point in rates within 12 months. They anticipate that demand will remain strong, leading to positive lease rates by the end of the year.

Q: How does agriculture impact the local economies in your markets outside of Denver and Minneapolis? A: Anne Olson explained that while agriculture is significant in states like North Dakota and Nebraska, it is not the primary economic driver in the areas where Centerspace operates. These areas are more focused on healthcare and education, with agriculture having a secondary economic impact.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.