Centerspace Reports Third Quarter 2024 Financial Results and Raises Mid-Point for 2024 Core FFO per Share Guidance

Rhea-AI Summary

Centerspace (NYSE: CSR) reported its Q3 2024 financial results, showing a net loss of $0.40 per diluted share compared to net income of $0.41 in Q3 2023. Core FFO per diluted share increased 3.4% to $3.68 for the nine months ended September 30, 2024. Same-store revenues grew 3.0% year-over-year, driving a 2.8% increase in same-store NOI. The company raised its 2024 Core FFO guidance to $4.82-$4.90 per share. During Q3, Centerspace issued 1.5 million common shares for $105.1 million and used proceeds to redeem Series C preferred shares worth $97.0 million.

Positive

• Core FFO per share increased 3.4% to $3.68 for nine months ended September 30, 2024
• Same-store revenues increased 3.0% YoY in Q3 2024
• Same-store NOI grew 2.8% YoY in Q3 2024
• Raised 2024 Core FFO guidance
• Strong liquidity position with $235.5 million available

Negative

• Net loss of $0.40 per share in Q3 2024 vs. net income of $0.41 in Q3 2023
• New lease rate growth declined to -1.2% in Q3 2024
• Sequential NOI decreased 3.7% in Q3 2024 vs. Q2 2024
• Blended lease rate growth decreased to 1.5% from 3.6% in previous quarter

Insights

Financial Analyst

The Q3 2024 results present a mixed financial picture. The shift from $0.41 EPS in Q3 2023 to a loss of $0.40 in Q3 2024 is concerning, though Core FFO remains relatively stable at $1.18 vs $1.20 year-over-year. Same-store NOI growth of 2.8% shows operational resilience, but declining new lease rates (-1.2%) signal potential market softness.

The strategic move to replace $97.0 million in Series C preferred shares (6.625% yield) with common equity is positive for long-term capital structure, though dilutive near-term. The raised Core FFO guidance midpoint suggests management's confidence in operational performance despite market challenges. The $54.0 million Lydian acquisition in Denver demonstrates continued portfolio expansion in growth markets.

Real Estate Market Analyst

The operational metrics reveal shifting market dynamics. While maintaining healthy occupancy at 95.3%, the decline in new lease rate growth to -1.2% from 2.0% YoY indicates increasing market competition. The blended lease rate growth of 1.5% is significantly lower than the 3.6% seen in previous quarters, suggesting pricing power moderation.

The updated guidance showing reduced same-store revenue growth expectations (from 3.25-4.25% to 3.00-3.50%) reflects a more conservative outlook on market conditions. However, better expense control is projected, with expense growth revised down to 2.50-3.25% from 3.50-4.75%.

MINNEAPOLIS, Oct. 28, 2024 /PRNewswire/ -- Centerspace (NYSE: CSR) announced today its financial and operating results for the three and nine months ended September 30, 2024. The tables below show Net Income (Loss), Funds from Operations ("FFO")¹, and Core FFO¹, all on a per diluted share basis, for the three and nine months ended September 30, 2024; Same-Store Revenues, Expenses, and Net Operating Income ("NOI")¹ over comparable periods; along with Same-Store Weighted-Average Occupancy and leasing rates for each of the three and applicable nine months ended September 30, 2024, June 30, 2024, and September 30, 2023.

		Three Months Ended September 30,				Nine Months Ended September 30,
Per Common Share		2024		2023		2024		2023
Net income (loss) - diluted		$                        (0.40)		$                          0.41		$                  (0.96)		$                    2.96
FFO - diluted(1)		$                          1.01		$                          1.15		$                    3.40		$                    3.15
Core FFO - diluted(1)		$                          1.18		$                          1.20		$                    3.68		$                    3.56

 

		Year-Over-Year Comparison		Sequential Comparison		YTD Comparison
Same-Store Results(2)		Q3 2024 vs. Q3 2023		Q3 2024 vs. Q2 2024		2024 vs. 2023
Revenues		3.0 %		— %		3.3 %
Expenses		3.2 %		5.8 %		2.0 %
NOI(1)		2.8 %		(3.7) %		4.2 %

 

		Three months ended						Nine months ended
Same-Store Results(2)		September 30, 2024		June 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Weighted Average Occupancy		95.3 %		95.3 %		94.6 %		95.1 %		94.9 %
New Lease Rate Growth		(1.2) %		3.6 %		2.0 %		0.8 %		3.1 %
Renewal Lease Rate Growth		3.2 %		3.6 %		4.7 %		3.3 %		4.9 %
Blended Lease Rate Growth (3)		1.5 %		3.6 %		3.6 %		2.2 %		4.0 %

(1)	NOI, FFO, and Core FFO are non-GAAP financial measures. For more information on their usage and presentation, and a reconciliation to the most directly comparable GAAP measures, refer to "Non-GAAP Financial Measures and Reconciliations" and "Non-GAAP Financial Measures and Other Terms" in Supplemental and Financial Operating Data within.
(2)	Same-store results are updated for disposition activity. Refer to "Non-GAAP Financial Measures and Reconciliations" in Supplemental and Financial Operating Data within.
(3)	Blended lease rate growth is weighted by lease count.

Highlights for the Third Quarter and Year-to-Date

• Centerspace raised the mid-point and narrowed the 2024 financial outlook ranges for net loss per diluted share and Core FFO per diluted share. Refer to page S-17 in the Supplemental and Financial Operating Data within for additional detail;
• Centerspace issued approximately 1.5 million common shares for net consideration of $105.1 million, and an average price of $71.12 per share during the third quarter of 2024 under its at-the-market offering program and used the proceeds to redeem all of its outstanding Series C preferred shares for $97.0 million, which had a distribution equal to 6.625%;
• Net loss was $0.40 per diluted share for the third quarter of 2024, compared to net income of $0.41 per diluted share for the same period of the prior year;
• Core FFO per diluted share increased 3.4% to $3.68 for the nine months ended September 30, 2024, compared to $3.56 for the nine months ended September 30, 2023; and
• Same-store revenues increased by 3.0% for the third quarter of 2024 compared to the third quarter of 2023, driving a 2.8% increase in same-store NOI compared to the same period of the prior year.

Balance Sheet

At the end of the third quarter, Centerspace had $235.5 million of total liquidity on its balance sheet, consisting of $221.0 million available under the lines of credit and cash and cash equivalents of $14.5 million.

Updated 2024 Financial Outlook

Centerspace updated its 2024 financial outlook. For additional information, see S-17 of the Supplemental Financial and Operating Data for the quarter ended September 30, 2024 included at the end of this release. These ranges should be considered in their entirety. The table below reflects the updated outlook.

	Previous Outlook for 2024		Updated Outlook for 2024
	Low	High	Low	High
Net income per Share – diluted	$(1.21)	$(1.01)	$(1.21)	$(1.06)
Same-Store Revenue	3.25 %	4.25 %	3.00 %	3.50 %
Same-Store Expenses	3.50 %	4.75 %	2.50 %	3.25 %
Same-Store NOI	3.00 %	4.00 %	3.25 %	3.75 %
FFO per Share – diluted	$4.61	$4.76	$4.50	$4.59
Core FFO per Share – diluted	$4.78	$4.92	$4.82	$4.90

Additional assumptions:

• Same-store recurring capital expenditures of $1,100 per home to $1,150 per home
• Value-add expenditures of $23.0 million to $25.0 million

Note: FFO and Core FFO are non-GAAP financial measures. For more information on their usage and presentation and a reconciliation to the most comparable GAAP measure, please refer to "2024 Financial Outlook" in the Supplemental Financial and Operating Data within.

Subsequent Events

On October 1, 2024, Centerspace closed on the acquisition of The Lydian in Denver, CO, for total consideration of $54.0 million. The acquisition was financed through the assumption of mortgage debt, issuance of common operating partnership units, and cash.

Upcoming Events

Centerspace is scheduled to participate in Nareit's REITworld conference in Las Vegas, NV, November 18-21.

Earnings Call

Live webcast and replay:  https://ir.centerspacehomes.com
Live Conference Call			Conference Call Replay
Tuesday, October 29, 2024, at 10:00 AM ET			Replay available until November 12, 2024
USA Toll Free	1-833-470-1428		USA Toll Free	1-866-813-9403
International	1-404-975-4839		International	1-929-458-6194
Canada Toll Free	1-833-950-0062
Access Code	050510		Access Code	581939

Supplemental Information

Supplemental Operating and Financial Data for the quarter ended September 30, 2024 included herein ("Supplemental Information"), is available in the Investors section on Centerspace's website at www.centerspacehomes.com or by calling Investor Relations at 952-401-6600. Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined and reconciled in the Supplemental Financial and Operating Data, which accompanies this earnings release.  

About Centerspace

Centerspace is an owner and operator of apartment communities committed to providing great homes by focusing on integrity and serving others. Founded in 1970, as of September 30, 2024, Centerspace owned interests in 70 apartment communities consisting of 12,883 apartment homes located in Colorado, Minnesota, Montana, Nebraska, North Dakota, and South Dakota. Centerspace was named a top workplace for the fifth consecutive year in 2024 by the Minneapolis Star Tribune. For more information, please visit www.centerspacehomes.com.

Forward-Looking Statements

Certain statements in this press release and the accompanying Supplemental Operating and Financial Data are based on the company's current expectations and assumptions, and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Forward-looking statements are typically identified by the use of terms such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "will," "assumes," "may," "projects," "outlook," "future," and variations of such words and similar expressions. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements to be materially different from the results of operations, financial conditions, or plans expressed or implied by the forward-looking statements. Although the company believes the expectations reflected in its forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be achieved. Any statements contained herein that are not statements of historical fact should be deemed forward-looking statements. As a result, reliance should not be placed on these forward-looking statements, as these statements are subject to known and unknown risks, uncertainties, and other factors beyond the company's control and could differ materially from actual results and performance. Such risks, uncertainties, and other factors that might cause such differences include, but are not limited to those risks and uncertainties detailed from time to time in Centerspace's filings with the Securities and Exchange Commission, including the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" contained in its Annual Report on Form 10-K for the year ended December 31, 2023, in its subsequent quarterly reports on Form 10-Q, and in other public reports. The company assumes no obligation to update or supplement forward-looking statements that become untrue due to subsequent events.

Contact Information

Investor Relations
Josh Klaetsch
Phone: 952-401-6600
Email: IR@centerspacehomes.com 

Marketing & Media
Kelly Weber
Phone: 952-401-6600
Email: kweber@centerspacehomes.com 

 

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SOURCE Centerspace

FAQ

What was Centerspace's (CSR) net income per share in Q3 2024?

Centerspace reported a net loss of $0.40 per diluted share in Q3 2024, compared to net income of $0.41 per diluted share in Q3 2023.

What is Centerspace's (CSR) updated Core FFO guidance for 2024?

Centerspace raised its 2024 Core FFO guidance to $4.82-$4.90 per diluted share.

How much did Centerspace's (CSR) same-store revenues grow in Q3 2024?

Centerspace's same-store revenues increased by 3.0% in Q3 2024 compared to Q3 2023.