Centerspace Homes reported a solid third-quarter performance, with revenue from its same-store portfolio growing 5.7% year-over-year and core FFO increasing by 6.8% over the same period. However, the company anticipates a slowdown in leasing in the fourth quarter, with a focus on maintaining occupancy. The company also noted a 6.1% increase in expenses year-over-year, primarily due to real estate taxes and insurance.
Key takeaways from the call include:
- Centerspace plans to implement smart home technology in about 50% of their communities by the end of 2024.
- The company announced the sale of four communities in Minot, North Dakota, and the acquisition of Lake Vista apartment homes in Fort Collins, Colorado.
- Centerspace expects a mid-94% occupancy rate for the remainder of the year.
- The company sees Fort Collins as a separate market from Denver and intends to continue scaling its operations in the Mountain West region.
The company also increased its full-year 2023 core FFO guidance, reflecting strong financial results. Centerspace expects the supply of new products to be low in 2024 but anticipates leasing some products that have taken longer to lease.
The rollout of smart home technology, which has had a minor impact on revenue this year, is expected to provide expense savings and revenue growth next year. The company also discussed the challenges of finding and retaining onsite staff due to a lack of new talent in the industry.
Centerspace is exploring investment opportunities in its markets, including the acquisition of existing developments with refinance risk and providing mezzanine financing to developers. The company has not experienced much tenant application fraud, and its bad debt remains consistent with pre-COVID trends. Anne Olson from Centerspace mentioned that the company's bad debt for Q3 was around 30 to 40 basis points, in line with historical trends.
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