• Core FFO per Share: $4.88 for the year 2024; $1.21 for Q4 2024.
• Same-Store NOI Growth: Sector-leading growth, specific percentage not provided.
• Same-Store Revenue Growth: 3.1% increase in Q4 2024; 3.3% for the full year 2024.
• Same-Store Expenses: Increased by 4.6% year over year in Q4 2024.
• Occupancy Rate: 95.5% in Q4 2024, a 70 basis point improvement year over year.
• Dividend Increase: Quarterly dividend increased to $0.77 per share.
• Blended Leasing Spreads: Positive 45 basis points in Q4 2024.
• 2025 Core FFO Guidance: $4.98 at the midpoint, representing roughly 2% growth over 2024.
• 2025 Same-Store Revenue Growth Guidance: Expected to grow by 2.5%.
• 2025 Same-Store Expense Growth Guidance: Expected to grow by 3%.
• Interest Expense Guidance for 2025: Expected to range between $38.8 million and $39.4 million.
• Capital Expenditures for 2025: Value add expenditures expected between $16 million to $18 million.
• Weighted Average Debt Cost: 3.6% with a weighted average time to maturity of 5.6 years.

• Warning! GuruFocus has detected 5 Warning Signs with CSR.

Release Date: February 19, 2025

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

Positive Points

• Centerspace (NYSE:CSR) reported a strong financial performance in 2024, with a core FFO of $4.88 per share, driven by sector-leading same-store NOI growth.
• The company successfully expanded its portfolio by acquiring properties in Denver and Fort Collins, enhancing operational efficiency and margins.
• Centerspace (NYSE:CSR) achieved a high occupancy rate of 95.5% in Q4 2024, marking a 70 basis point improvement over the previous year.
• The company increased its quarterly dividend to $0.77 per share, reflecting confidence in its distributable cash flow.
• Centerspace (NYSE:CSR) received six industry awards and was named a Great Workplace by the Minneapolis Star Tribune for the fifth consecutive year, highlighting strong team performance and resident satisfaction.

Negative Points

• Same-store new lease tradeouts were down 3.3% in Q4 2024, indicating challenges in maintaining new lease pricing.
• The company faced a 4.6% year-over-year increase in same-store expenses, primarily due to higher controllable expenses like repairs and maintenance.
• In Denver, blended leasing spreads were down 140 basis points, reflecting supply pressures in the market.
• Interest expense is expected to increase in 2025 due to debt assumed from the Lydian acquisition, impacting financial flexibility.
• The transaction market remains muted due to interest rate volatility and a bid-ask spread, limiting acquisition opportunities for Centerspace (NYSE:CSR).

Q & A Highlights

Q: How do the market conditions in Minneapolis and Denver align with your portfolio performance, and what are the fundamental market drivers in these areas? A: Anne Olson, President and CEO, explained that the market conditions align with their observations. Supply pressure has eased in Minneapolis earlier than in Denver, with both markets experiencing strong absorption. While new lease rates have been lower in these areas, occupancy has been maintained or slightly increased. The outlook for both markets is positive for 2025 and 2026 as supply pressures diminish.

Q: Can you provide expectations for the performance of your smaller markets in 2025? A: Bhairav Patel, CFO, stated that smaller markets are expected to perform similarly to 2024, with limited new supply coming online. Blended spreads are anticipated to remain healthy, supporting stable performance as larger markets like Denver and Minneapolis stabilize.

Q: What are the components of your 2025 guidance for blended leasing spreads, and how does it compare to 2024? A: Bhairav Patel noted that the 2025 guidance assumes a 2.4% blended leasing spread, with renewals expected to lead new lease spreads. Renewals are projected at around 3%, while new leases are expected to be in the high 1% to 2% range. The guidance reflects a conservative approach, considering high retention rates and occupancy levels.

Q: What is your strategy for acquisitions and dispositions in 2025, and how do cap rates influence your decisions? A: Grant P. Campbell, SVP of Investments, mentioned that while they aim to grow and advance their strategic plan, they are mindful of their cost of capital. They are focusing on acquisitions with attractive financing or structural creativity, such as OP unit transactions, rather than engaging in competitive bidding for mid-four cap rate deals.

Q: How do retention rates vary across your markets, and what impact does this have on rental rate growth expectations? A: Anne Olson highlighted that smaller markets exhibit more stability and higher retention rates, allowing for greater pricing power on renewals and new leases. In contrast, markets with higher supply, like Denver, experience lower retention rates, which are offset by higher retention in smaller markets.

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