Q3 2024 Centerspace Earnings Call
and the World's and Extend Control Initiatives.
Same store new lease trade outs are seasonally slowing down one 2%, while renewal leases increased by three 2%, resulting in one 5% blended lease increases for the quarter.
Importantly, we achieved these results while also increasing occupancy to 95, 3%, which is a 70 basis point improvement over the same period last year.
Entailing occupancy above 95% has been an objective for us and that focus does have a tradeoff relative to new lease pricing.
Caution against extrapolating, our quarter over quarter leasing results, given both the seasonality and our prioritization of occupancy.
Much of our portfolio footprint has experienced lower supply the national averages and our results benefited from that during the quarter or.
North Dakota communities continue to lead the portfolio with blended spreads of five 4%, while our Nebraska communities also saw a strong blended growth at three 3%.
I'd like to highlight our largest market of Minneapolis, where we recognized one 2% blended rent increases.
Minneapolis once again ranked among the strongest absorption markets nationally and the quarter.
After several years of outsized supply here, the recent absorption and lower anticipated future deliveries should act as a tailwind for our portfolio.
Resident retention remains elevated at over 58% for the quarter, which has helped drive occupancy and bolsters, our blended leasing spreads during the seasonally slower months.
<unk> health remains strong so up slightly from last year bad debt year to date is trending similar to historical norms and rent to income levels remain sustainable at 23%.
Renting compared to the increased cost of homeownership remains a compelling value for our residents across our markets.
As a reflection of our operating results and our capital markets activity, we are raising the midpoint of our full year core <unk> guidance by a penny to $4 86 per share while our revenue results have trended to the low end of our initial guidance expectations for 2024, there are offsets on the expense side that result in positive NOI.
Growth and we are getting that to the bottom line. These.
These include items directly related to revenue such as lower utility expense and turnover costs as well as savings from leveraging technology and centralizing certain property management functions.
In the third quarter, we issued approximately one 5 million shares on our ATM raising $105 million.
Proceeds were used to redeem the entirety of our series C preferred shares.
The opportunity to both simplify our capital structure and improve our balance sheet, while improving cash flow and share liquidity was attractive, but we are mindful of our evaluation and intend to remain disciplined about our capital markets activities.
As we sit today, we feel very well positioned to advance our vision to be a premier provider of apartment homes and vibrant communities and drive consistent earnings growth for our investors.
Speaker Change: Part of that vision includes a new community the lithium and I will turn things over to grant to discuss that acquisition and the transaction market more broadly France.
France: Thanks, Dan and good morning.
France: Earlier this month, we completed the acquisition of ability in Denver. This 129 home community also features 23000 square feet of fully leased commercial and street level retail space with front door access to a light rail station.
France: The 2018, both property is located within one five miles of three other center space communities, providing opportunity to leverage our geographically proximate operating platform and broader Denver portfolio scale.
France: We are excited to add into our portfolio and introduce our operating platform with implementation of best practices.
France: After execution of our business plan, we expect the community to generate an NOI yield in the mid to high 5% range. The Lydian also provided us a financial structure that advanced external growth at attractive terms.
France: Specifically, our purchase was funded via the assumption of attractive long term mortgage debt with a balance of $35 million at a 372% interest rate maturing in 2037.
France: Along with the issuance of common operating partnership units at $76 42 per unit.
France: Additionally, the community as part of the tax increment financing district, where we anticipate receiving over $6 million of principal and interest payments.
France: Funded by the real estate taxes, we pay on the property over the duration of the agreement.
France: Looking at the transaction market more broadly we continue to see thawing in the market.
France: With both a smaller gap between buyer and seller expectations and higher levels of conviction from buyers, leading to increase liquidity and investor demand.
France: Our belief is transaction volume will continue increasing and more actionable opportunities will present themselves for the market as we move into 2025.
France: We want to take advantage of growth opportunities when they align with our strategic initiatives.
France: On the pricing side, well located higher quality communities in markets, such as Denver have recently been trading at 475% to 5% cap rates.
France: With 23% of our NOI coming from this market. This highlights the attractive relative valuation at which our stock currently trades.
France: Demand for apartments remains strong and on the supply side, we are past the peak of new deliveries in each of our largest markets and construction starts have declined materially.
France: As all of our markets move into the net absorption phase with deliveries tapering we are excited for our future growth potential.
And with that I'll turn it over to Rob to discuss our overall financial results and outlook for the remainder of 2024.
Rob: Thanks, Greg and good morning, everyone last night, we reported core <unk> of $1 18 per diluted share for the third quarter driven by a two 8% year over year increase in same store NOI.
Rob: Revenues from same store communities increased by 3% compared to the third quarter of 2023, driven by a two 2% increase in revenue per occupied home and a 70 basis point year over year increase in weighted average occupancy, which stood at 95, 3% for the quarter.
Rob: Same store expenses were up by three 2% year over year, driven by higher non controllable expenses with non reimbursable losses in insurance premiums as the primary drivers of year over year growth.
Rob: Controllable expenses growth remained muted up.
Rob: Only 80 basis points compared to Q3 last year as savings in repairs and maintenance and on site compensation were offset by increased administrative and marketing spend.
Rob: Turning to guidance, we updated our 2024 expectations in last nights press release, we now expect core it before $4 86 at the midpoint, which is an increase of <unk> compared to our prior expectations and an increase of <unk> <unk> versus our initial guidance released in February.
Rob: We are maintaining the mid point of year over year same store NOI growth guidance at three 5%, while lowering our expectations for both revenue growth and expense growth with.
Rob: With market rent softening more than expected same store revenues are now projected to increase 2% to three 5% for the year.
Rob: The decline in revenue is projected to be offset by lower growth in same store expenses, which are now projected to increase by two five to three 5%.
Rob: Moving on to other components of guidance, we now expect G&A and property management expenses for the year to range between 26, 5% to 27 million and interest expense to range between 37, 3% to $37 6 million.
Rob: Increased interest expense was primarily driven by the debt assumed in conjunction with the lithium acquisition.
Rob: Our expectations regarding value AD spend and same store recurring capex per unit are unchanged.
Rob: After the lithium no additional acquisitions dispositions issuances, our borrowings are factored into our guidance.
Rob: On the capital front as Ed noted, we have taken a series of steps to further strengthen our balance sheet.
Rob: So nearly one 6 million shares year to date under our ATM program.
Rob: <unk> gross proceeds of nearly $114 million.
These proceeds were used to both retire the series C preferred and decrease the balance on our line of credit.
Rob: While we will always be mindful of the impact of equity issuance the coupon and interest rate respectively. On these were both in the mid to high 6% range.
Rob: Issuing equity in a manner that improve both our cash flow per share and our leverage profile was a logical choice.
Rob: The redemption of the series C preferred alone is expected to increase our cash flow per year by roughly $2 $3 million based on the implied dividend yield of approximately four 2% on our common stock relative to the six 6% coupons on the preferred stock we redeemed.
Rob: Combined with the recast of our line of credit, which we announced last quarter, we have a well lettered debt maturity schedule of that pro forma for the lithium acquisition as the weighted average cost of $3, 61% and a weighted average time to maturity of five nine years.
Rob: To conclude it was a very active and productive quarter across the board.
Rob: <unk> strong operating results strengthened our balance sheet simplified our capital structure and expanded our portfolio and one of our desired markets.
Rob: Look forward to sustaining this momentum as we close out 2024.
Rob: And with that I will turn the line back to the operator for your questions.
Speaker Change: Thank you very much to ask a question. Please press star followed by one on your telephone keypad now when prepping to ask a question. Please ensure your devices and you could know kidney P change your mind. Please press star followed by two.
Speaker Change: Our first question comes from Brad Heffern with RBC capital markets. Brad. Your line is now open. Please go ahead.
Brad Heffern: Yes. Thank you good morning, everyone.
Brad Heffern: Mentioned market rent softening more than expected is that also a greater softening than the normal seasonal trend and what would you attribute that to.
Speaker Change: Good morning, Brad.
Speaker Change: I think we.
Speaker Change: It is more than we expected more than the seasonal expectation that we had just slightly more as you know we always expect that the soft at this time of year. They happened a little bit earlier, we talked about that last quarter, we really saw the peak leasing in may.
Speaker Change: And I think we attributed mostly to the supply demand and this is just against our expectations, but I think as we look at.
Speaker Change: No.
Speaker Change: Across our markets, we believe that the rents we're getting are.
Speaker Change: At market, we're using it not very much.
Speaker Change: Any concessions so we feel good about where they are I think our expectations for the year, we're just a little bit higher.
Speaker Change: Okay got it and then.
Speaker Change: Maybe for Bob just looking at the new revenue growth guidance implies a pretty substantial drop <unk> something like going from three to $1 six plus or minus.
Speaker Change: The year over year comps actually look a lot easier and I assume you don't have many leases expiring anyway. So I'm just curious what would lead to that large of a drop.
Speaker Change: Yeah.
Speaker Change: Yes, good morning, Brett so with respect to revenue guidance.
Speaker Change: At the midpoint.
Speaker Change: We'd expect to report about.
Speaker Change: When fire to 3% for.
Speaker Change: Revenue growth at the midpoint, our blended assumption is really.
Speaker Change: Flat for the quarter on a year over year basis, we do expect some rubs.
Speaker Change: Ability as we have baked in a slightly higher utilities cost in in our Q4 numbers and then Additionally, we also have less concessions, we expect to utilize in this quarter as we bolstered occupancy going into it.
Speaker Change: Overall, the 1.315% NOI growth at the midpoint is really driven by expenses, mainly on the non controllable side with with insurance premiums and losses is expected to be pretty high compared to last year.
Speaker Change: Okay.
And then last for me do you have any preliminary read on.
Speaker Change: Tober leasing stats.
Speaker Change: Yes, we it's very early in the month.
Speaker Change: We are cutoff, we usually allow some time after a date so.
Speaker Change: Sure.
Speaker Change: I think reflected in the guidance as Bob said, we did bring the revenue down we do believe that the blended will be flat. So new leases have remained slightly negative and renewals have remained slightly positive.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you. Our next question is from John Kim with BMO. John Your line is now open. Please go ahead.
Thank you.
John Kim: So for your third quarter lease.
John Kim: Results just trying to isolate September it looks like new lease rates were down 3% renewables below three blended of roughly plus 80 basis points and now you are saying that it's going to go flat or expect it to go flat in the fourth quarter, So what components between new lease new leases and renewals.
John Kim: We're driving that number lower.
Speaker Change: Hey, John.
John Kim: So with respect to fourth quarters.
Speaker Change: Expectations, we expect renewals to average somewhere in the mid twos, and we expect new leases to.
Average a negative.
Speaker Change: Mid to right on the trade out.
Speaker Change: Hi, it's balancing our expectation with respect to <unk>.
Speaker Change: Is 50%, that's what's driving our base case expectations.
Speaker Change: And do you have a view on what you earn in is going to be for next year or is it too early to determine.
Speaker Change: We're working through it at this point the earnings for this year is close to two 4% with respect to next year, it's going to be less than 1% at this point, but we are working through our estimates.
Speaker Change: And that can change as a as a leasing trends evolve.
Speaker Change: Just really quickly on the general acquisition, you guys mentioned, a mid to high 5% yield once you stabilize the asset under your new.
Speaker Change: Platform, how long will it take to get to that level and if you can comment on the going in cap rate.
Speaker Change: Yeah.
Grant: Yes. Good morning, John This is grant.
Grant: From a going in perspective.
Grant: NOI yield there is a blended five.
Grant: We think the operational best practices and operating initiatives that we alluded to in the prepared remarks some of those are.
Grant: First 90 to 120 day items.
Grant: In terms of the service that we provide to the residents on a day to day basis, and then there's other items.
Grant: Two things like.
Grant: Potential property tax savings Mark to market rents as you roll through the <unk>.
Grant: Lease exploration schedule that we.
We will take 12 to 18 months, so kind of two different buckets, but really looking at kind of 18 months for holistic implementation.
Speaker Change: Okay, great. Thanks, everyone.
Speaker Change: Our next question is from Conor Mitchell with Piper Sandler. Your line is now open. Please go ahead.
Conor Mitchell: Hey, good morning, Thanks for taking my question.
Conor Mitchell: So it sounds like potentially rates might be a little bit higher in the quarter than they have previously.
Conor Mitchell: Could you just kind of give us some more color on why you might think that the retention rates are higher or what might be driving them.
Conor Mitchell: The year or the quarter and then finally, just do you guys plan on disclosing turnover or retention.
In the supplemental in the future.
Speaker Change: That's a good question counter we are always looking for ways to enhance our supplemental so we'll note that down and consider that for future obligations with respect to the retention rates being higher.
Speaker Change: In month 18 of seeing higher retention rates across last year, they were slightly higher and year to date.
Speaker Change: They've been higher we've also seen the traffic pattern.
Speaker Change: It's showing that people are looking earlier than they had been in the past and so I think some of that is more choice in the markets right supply as people outlooks and making decisions a little bit earlier, and then also we have seen a pretty dramatic drop across the industry and people, leaving to buy homes.
Speaker Change: And with the high cost of housing renting as a necessity.
Speaker Change: <unk> more a larger percentage of the population and and we have a lot of renters in that category and our average rents are.
Speaker Change: Right around $600 just below $600. So most of our residents were two or three years ago are pre COVID-19.
Speaker Change: I have been looking to move out to buy a house that percentage was about 25% that's fallen to 12% to 15%.
Speaker Change: Post COVID-19, so I think that is impacting our retention rates.
Speaker Change: Okay and then.
Speaker Change: Just kind of along the same lines as you kind of think about it.
Speaker Change: The retention rates and balanced renewals with new leases could you guys just give us some color on kind of how you. How you think about pricing renewals, whether that's all the way up to markets or maybe partially just to offset any please.
Speaker Change: Please see costs for new <unk>.
Speaker Change: Leases that said.
Any any color you might have thought there would be helpful.
Speaker Change: Yeah sure counter we have taken the approach that.
Speaker Change: New renewal pricing goes about 75 days before the renewal actually happened and during that time, we want to make that price competitive, but it really depends property by property lease by lease how far that individual resident is away from market. So if they are only 5% away from market, we might take that renewal.
Speaker Change: A way to market, if they're 20% away from market. They might go up 10, if theyre above market they might be coming.
Speaker Change: Coming down slightly so we want to make that renewal pricing attractive both because it offsets turn costs, but also because having those renewals.
Speaker Change: Committed to having people that are committed to staying there helps us that the new lease pricing in order to maximize total overall revenue. So if we really pushed hard on renewals, we risk that less people renew and then that new lease pricing softens more so we really take the approach that we're trying to maximize.
Speaker Change: Overall revenue, we do factor in.
Speaker Change: That there are costs associated with with turning the residents and.
Speaker Change: So we're really focused on getting the best resident experience to make them.
Speaker Change: Want to stay with us and also providing the best value when we approach pricing.
Speaker Change: Okay very helpful. And then maybe just one quick one for Rob as well.
Speaker Change: You guys talked about like forecasting utilities, which drives expenses and.
Speaker Change: Revenue for <unk>.
Speaker Change: Just kind of a big picture I'm wondering.
Speaker Change: When you guys are looking at the forecasted utilities does it essentially debt out for earnings or how impactful way.
Think about it for earnings in terms of revenue and expenses to the bottom line.
Okay.
Speaker Change: Sure.
Speaker Change: So with respect to utilities.
Speaker Change: We pass through 80% of gas utilities, and most of the other utilities costs.
Speaker Change: For the most part we feel like we're hedged although when you look at our.
Speaker Change: Our P&L, you'll see revenues coming through in the form of rubs and the expenses going up in the form of utilities expenses. So there is a gross up on the income statement, but for the most part given the amount we charged through we feel like we're pretty well hedged, especially on the gas or upside, which we rolled out about a year year and a half ago, where we pass 380 <unk>.
Speaker Change: Some of the cost.
Speaker Change: Okay. Thank you very much.
Speaker Change: Our next question comes from Cooper Clark with Wells Fargo Cooper. Your line is now open. Please go ahead.
Cooper Clark: Hello. Thank you for taking the question just wanted to ask about some of the moving pieces as it relates to your insurance renewal coming up in mid to late November I'm wondering what type of growth, you're expecting and how much wildfire concerns in Denver and may have an impact.
Speaker Change: Good morning Cooper, Yes, we are in the final stages of a renewal we don't really have any definitive.
Cooper Clark: Color to provide.
Speaker Change: Surely we had expected a pretty favorable renewal cycle. However, some of the recent activity, especially the the.
Cooper Clark: The storms.
In Florida May have an impact as carriers are kind of estimating there their exposure there.
Cooper Clark: We haven't heard anything specific about the wildfires in Denver yet.
Cooper Clark: Although we are waiting with bated breath to find out.
The renewal looks like early indications, where again as I said very favorable but the recent activity may have some impact, but hopefully we will be able to report something on that front. Soon we do renew in the next month or so.
So we are in the final stages of that.
Speaker Change: Awesome. Thank you and then just as one follow up wondering if you could provide an update on where bad debt was for the quarter and any color on certain markets, where you may have more elevated levels of bad debt.
Speaker Change: Certainly.
Speaker Change: For the for the third quarter, we were about 45 to 50 basis points in terms of bad debt from a year to date perspective that puts us.
Speaker Change: The high end of our expected range of 30 to 40 basis points and we are expecting the same levels to continue.
Speaker Change: As you look across markets, there aren't really any broader trends to glean from any of our markets I think it's just kind of.
Speaker Change: Relatively spread out across our markets and nothing specific.
Speaker Change: With respect to a market or two.
Speaker Change: That's worth noting.
Speaker Change: Awesome. Thank you.
Speaker Change: Our next question is from Rob Stevenson with Janney Rob. Your line is now open. Please go ahead.
Rob Stevenson: Hi, good morning, guys.
Rob Stevenson: And what's the new lease growth of negative one 2% in the third quarter, driven mainly by Minneapolis, and Denver or was that fairly widespread across the portfolio.
Rob Stevenson: Any markets, where new lease growth was still meaningfully positive for you guys.
Speaker Change: Yes, good morning, Rob.
I'd say, we're still seeing a lot of strength in our north Dakota markets and across Nebraska, but generally all the market slowdown right. Now. So the drivers are we are seeing a bigger decline in Denver, Minneapolis, and then other mountain west typically the markets that had that's a market that's rapid city and billings.
Speaker Change: Where we saw tremendous lease growth during COVID-19 and so there have been some leveling out in that market. That's led those to be a little more negative than others, but we.
Speaker Change: We are still seeing strong growth really North Dakota, where we've had no supply and then also across the Nebraska markets.
Speaker Change: Okay, and then with technology savings on the expense side are still left for you guys to realize and how much additional spend over the next 18 months are you anticipating for your various tech programs going forward.
Speaker Change: Yes, that's a great question, we have really fully implemented all of the technology stack that we're currently looking at so I would say that from an expense side that is behind us.
Speaker Change: The exception to that would be the smart <unk> implementation, which we really consider value add about 70% of our portfolio has the smart run implemented fully in it and we plan to identify additional properties for 2025.
Speaker Change: So.
Speaker Change: But with respect to efficiencies on the operating side really we're looking at adoption and then how our staffing model can change given the implementation and adoption of that technology and like a lot of companies across the industry, we have centralized certain positions.
Speaker Change: Within our property teams, so rather than have an assistant community manager at every asset we now have those lives.
Speaker Change: Regional remote positions. So we're really trying to look forward and say what are the other impacts that the implementation that we did with technology what do those have on staffing models operation date.
Speaker Change: Data efficiencies and moving forward there. So we're still harnessing some of those I think next year will be the.
We'll probably see a true full year of savings from a staffing model implementation.
Speaker Change: Okay. That's great and then last one for me given your current NOI contribution from Denver Post Lydian acquisition, how are you thinking about future acquisitions in that market or you could be comfortable taking that up into the 30 like Minneapolis and given your comments on cap rates in Denver would you look to maybe selling an existing Denver.
Asset in order to buy another one with more upside and so how are you guys thinking about the optimal size of exposure of your Denver portfolio going forward.
Speaker Change: Yes. This is something we think a lot about we are seeing more and more opportunities in Denver.
Speaker Change: With operations like we have in Minneapolis, and Denver come opportunities and while we like that we really need through external growth like the lithium.
Speaker Change: In other markets. So that we could grow out of that we are actively looking in markets across the mountain west and seeking out opportunities. So.
Speaker Change: Ideally, we would like those market exposures to stay below 25%.
Speaker Change: But it's going to take us some time to work through that both with external growth and how the portfolio has changed over time, so it might rise a little bit on its way to a to a stabilized.
Speaker Change: 20% to 25% of the portfolio.
Speaker Change: Okay. Thanks, guys I appreciate the time this morning.
Speaker Change: Our next question is from Michael Gorman with BT IAG. Michael Your line is now open. Please go ahead.
Michael Gorman: Yes. Thanks, Good morning Grant if I could just go back to the Denver acquisition for a second is it possible to kind of breakdown as you talk about the improvement in the yield.
Michael Gorman: How much of that is directly in control of.
Michael Gorman: <unk> center space in terms of operating efficiencies. So how much is coming from the expense side versus that kind of mark to market piece that you spoke about and then I guess.
Michael Gorman: Secondarily to that.
Michael Gorman: How do you think about market rent growth as you talk about that improved yield is that baked in there at all as well.
Speaker Change: Yes, good morning, Mike I appreciate the question.
Speaker Change: Things like Mark to market rents in potential tax savings that we alluded to.
Speaker Change: I think one.
Speaker Change: They are in our control if you will in the sense that we.
Speaker Change: Appeal taxes in the normal course on all assets and communities that we own we think theres, a very logical path to achieve some of these savings obviously theres a counterparty there.
Speaker Change: We have to solicit feedback from them, but we think theres, a very logical path to achieve those savings.
Speaker Change: Mark to market rents we have been.
Speaker Change: Fair to conservative in our underwriting of this asset so.
Speaker Change: For instance, our.
Speaker Change: Year, one pro forma here as well.
Speaker Change: 1.5% to 175%.
Speaker Change: Topline scheduled rent growth.
Speaker Change: Which we think is a V.
Speaker Change: Measured.
Speaker Change: Target and base case scenario that perhaps we could outperform the reason we've taken that approach as we do understand that.
Speaker Change: We do have to work through lease expiration curve initiatives to kind of reposition that too so.
Speaker Change: Our operating.
Speaker Change: Standards in our operating practices and we've tried to account for that in the underwriting.
Speaker Change: On the resident experience side.
Speaker Change: Yeah.
Speaker Change: It's harder to.
Put a metric on.
Being present, providing high touch service, having a smile on your face it's harder to put.
Speaker Change: Number on that from a yield perspective, and say this is what it's going to achieve.
But we do know and do believe that's going to lead to higher retention levels higher satisfaction of our residents and we've been able to bake.
Speaker Change: Bacon those assumptions into the base case so.
Speaker Change: Different buckets different initiatives that we're focused on and we think in the aggregate those are the things that take it from that blended <unk> yield that I talked about pro forma year, one to that mid to mid to high fives.
Speaker Change: Okay. Thanks for thanks for the detail there and then.
Speaker Change: Maybe and I'm just trying to square some.
Speaker Change: Some of the commentary here it sounds like your markets are generally passed the peak impact or at least the peak supply.
Speaker Change: So I'm just trying to understand as we think about the revenue picture here.
Are we seeing any signs of stress out of out of the tenants I know I know you talked about relatively strong renter base, but bad debt back half of the year is going to be higher.
Speaker Change: Definitely the revenue expectations are down I mean are there any other demand metrics or tenant health metrics that youre seeing maybe a little bit of additional stress beyond just any impact from supply.
Speaker Change: Thanks, Mike.
Speaker Change: We don't believe so that we're seeing additional thrust so the rent to income levels have remained healthy our bad debt well, it's ticked up slightly I mean, we're still talking about 40 to 50 basis points. This is.
Speaker Change: Really stable level that we could expect almost in any portfolio I think relatively to other public peers much lower.
Speaker Change: Bad debt and I do want to call your attention to while we're past the peak of supply there's still quite a bit of absorption to go. So we still do see some softening in the rents and not only just seasonality, but it has been a little softer as markets continue to absorb as I mentioned Minneapolis has.
Speaker Change: Ben one of the leaders in absorption, but we're not all the way through it in that market either so there still is a lot of vacancy in these markets and new projects that are still in lease up but as we work through that into next year and then with the lack of deliveries that really should be a tailwind for us.
Speaker Change: But overall I think the we arent seeing any other demand drivers <unk> evidence in the data.
Speaker Change: Any stress to the consumer and our residents.
Speaker Change: Great. Thanks, so much for the time.
Speaker Change: Thank you very much just as a reminder to ask a question. Please press star followed by one on your telephone keypad now.
Speaker Change: When preparing to ask a question. Please ensure your devices unrelated locally.
Speaker Change: Our next question comes from Nathan grow with Center space. Nathan. Your line is now open. Please go ahead.
Nathan Grow: Hey, good morning, everyone can you talk more about what youre seeing in Denver, maybe on the new versus renewal rates.
Nathan Grow: And demand outlook in your Submarkets.
Speaker Change: Yeah, Greg.
Speaker Change: <unk> why don't you go ahead and start with the supply picture with respect to the Submarkets and then I can address the what were seeing on new and renewal in Denver.
Nathan Grow: Good morning Nathan.
Speaker Change: I'll start real quick by top side kind of framing where we are in Denver.
Speaker Change: That is our target market with the highest levels of supply currently about four 8% of existing stock under construction that represents about 15000 apartment homes.
Speaker Change: That percentage is down notably from 11% in 2023.
Speaker Change: When we look at next 12 month deliveries.
Speaker Change: Forecasted at 8400 apartment homes, which is below 22, and 'twenty three delivery levels in that market.
Speaker Change: Which averaged about 11000 and certainly below the past 12 months when.
Speaker Change: When we look at our Submarkets continue to see.
Higher levels of recent deliveries.
Speaker Change: In certain urban pockets, along with higher levels of recent deliveries in 2024 and certain suburban park.
Speaker Change: The East Metro the Aurora area has had a lot of recent deliveries, we do not own communities there.
Speaker Change: Our sub markets.
Speaker Change: Ill.
Speaker Change: Relatively insulated compared to some of the other locations that have experienced large influx of product.
Speaker Change:
Speaker Change: If I think about the Tech center southern part of the Metro where we own our community a lot of that land is built out.
Northern part of the Metro.
Speaker Change: It's really isolated to a couple communities and a lot of situations, where we own where we own products. So feeling relatively insulated in the suburban markets.
Speaker Change: Have seen net influx in the urban core.
Speaker Change: Certain pockets.
Speaker Change: And Nathan as we look at the Denver data as an individual market our occupancy there thats about 95%. We also have retention a little bit over 50% there a renewal trade.
Speaker Change: Played out kind of most recent four month would be.
Speaker Change: Slightly over 11213, and the new lease trade outs are just slightly over Q. So some differential there, but more renewals than the new leases and again going into these quarters. It's a very small sample size given our lease expiration profile.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Are there any onetime items this quarter that helped the moderation or other unexpected for the rest of the year.
Speaker Change: Good morning, Nathan I'll take that one so.
Speaker Change: Within operating.
Speaker Change: Opex we had.
Speaker Change: Benefit from adjusting our health insurance reserve in the third quarter, so that kind of did.
Speaker Change: <unk>.
Speaker Change: Some.
Speaker Change: Some positive variance.
Speaker Change: That's typical.
Speaker Change: Reassess our reserves.
Speaker Change: Throughout the year, but typically any adjustments are made in the third quarter. The fourth quarter. So although there is an impact there. It's also something that is typically expected around this time of the year when we adjust our reserves.
Speaker Change: Thank you.
Speaker Change: Thank you very much that concludes the Q&A session I will now hand back to <unk> for any closing remarks.
I'd like to thank our team for their outstanding efforts year to date and I look forward to meeting with many of you in Las Vegas at the upcoming REIT World Convention. Thank you all for joining this morning and have a great Tuesday.
Speaker Change: Thank you very much everyone for joining that concludes today's call you may now disconnect your lines.
Speaker Change: Okay.
Speaker Change: [music].