D/B/A Centerspace

Good morning everyone and welcome to today's conference call titled Centerspace Q2 2023 Earnings Call. My name is Ellen and I'll be coordinating the call for today. At the end of today's presentation, there will be an opportunity to ask a question. If you would like to ask a question, please press star followed by one on the telephone keypad to join the question queue. I'll now turn the call over to Josh Cleach to begin. Josh, please go ahead whenever you're ready.

Center Spaces Form 10-Q for the quarter ended June 30, 2023, was filed with the SEC yesterday after the market closed. Additionally, our earnings release and supplemental disclosure package have been posted to our website at centerspacehomes.com and filed on Form 8-K. It's important to note that today's remarks will include statements about our business outlook and other forward-looking statements that are based on management's current views and assumptions. These statements are subject to risks and uncertainties discussed in our filing under the section titled Risk Factors and in our other filings for the SEC. We cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on these forward-looking statements. Please refer to our earnings release for reconciliation of any non-GAAP information which may be discussed on today's call. I'll now turn it over to Ann Olson for the company's prepared remarks.

Good morning, everyone, and thank you for joining our call. With me this morning is Bharat Patel, our Chief Financial Officer. We're pleased with our second quarter results, and I'm happy to be here this morning to discuss them with you. Revenue growth has been strong, our occupancy is steady, and expenses have moderated significantly from 2022. Jumping right in on revenue, we are seeing consistent strength, achieving 7 to 10% revenue increases across our markets in the same store portfolio over the same quarter last year. This is heavily driven by leasing. With respect to our revenue trends, in the second quarter, we moved through 30% of our portfolio lease expirations, and on same-store new lease tradeouts, we achieved 5.2% increases and 7% increases on same-store renewals. This results in a 4.9% blended rent increase. These trends continued in July, with 4.6% increases on same-store new lease tradeouts and 4.1% increases on same-store renewals. resulting in a 4.3% blended rent increase. With respect to expenses, we can see our efforts to mitigate expense increases are working. We continue to see tax pressure in Denver, where we had higher expense growth and are working diligently on insurance costs. But our focus this year has been on what we can control, what we do internally versus outsourcing, our vendor relationships, and leveraging technology to provide efficiencies. Our team has been doing an excellent job. It takes all of our team members working together to achieve these results, and I'm grateful for their dedication. Our overall operational performance drove core FFO growth of 10.8% over the same period last year, and year-to-date we've increased core FFO by 10% year-over-year. These results give us confidence that we can raise our guidance as we look to the remainder of this year. Bharad will cover our guidance projections in more detail in his remarks, but I wanted to highlight a few key assumptions. Our initial 2023 guidance included the projected sale of 11 communities. We have sold nine and currently anticipate selling four more, bringing our total dispositions to 13 for 2023. We're pulling forward value-add renovation work and our guidance includes an increase to our projected spend from 26 to 33 million at the midpoint. We have a deep value-add pipeline and this is the most accretive use of our capital. We had not previously assumed any acquisitions, but our updated guidance includes investment of $100 million. And lastly, we expect normal seasonality in our leasing and revenue trends and continued discipline on expenses. While the transaction market is still slow for institutional quality products in our target markets, we are seeing significant demand in our tertiary markets for our well-located and stable product, where buyers can obtain positive leverage. These conditions led us to identify additional potential sales for this year, and we believe that using this dynamic as a catalyst to advance portfolio composition initiatives will help keep our balance sheet flexible, fuel our value-add pipeline, and fund opportunities to expand our Mountain West portfolio in a manner that delivers consistent and growing cash flow. Now I'll turn it over to Rob to discuss our overall financial results and 2023 outlook.