Mason P. Guell

Mason Guell observed a sequential and year-over-year decline in Centerspace's retention rate, with a lower forecast for 2026, and asked if this trend is driven by a focus on rates over occupancy or other factors. He also questioned the wider range and lower expected midpoint for 2026 value-add expenditures compared to 2025.

Answer

CFO Bhairav Patel stated that the company is taking a measured and conservative approach to retention expectations for 2026, building in a slight downtick observed in Q4 2025, and plans to adjust assumptions after the first couple of quarters. He explained that the wider range and lower expected value-add for 2026 are due to being highly selective with projects given higher capital costs and execution risks, and holding back approvals due to the ongoing strategic review to avoid starting projects that might not be completed.

Mason Guell asked about the drivers behind the sequential and year-over-year decline in retention rates, and the lower forecast for 2026. He also inquired about the wider range and lower expected value-add CapEx for 2026 compared to 2025.

Answer

CFO Bhairav Patel stated that the lower 2026 retention forecast is a measured, conservative approach, reflecting a slight downtick observed in Q4 2025, and they plan to observe the first couple of quarters before adjusting. Regarding value-add CapEx, Bhairav explained the wider and lower range is due to extreme selectivity on projects given higher capital costs and execution risk, and holding back approvals due to the ongoing strategic review to avoid starting projects that might not be completed. The low end of $2.5 million represents the completion of projects started in prior years.

Mason Guell of Baird asked for specifics on renewal rates being sent out for August and September, the outlook for blended rates in the second half of the year, and for numerical details on new and blended lease rates in the company's tertiary markets.

Answer

EVP & CFO Bhairav Patel responded that renewals sent out through October are in the high 2% to 3% range and that second-half blended rate growth should be similar to the first half. He specified that for Q2, markets like Nebraska and North Dakota saw 6-7% rent growth, while Minneapolis was around 3%, with Denver being the main negative outlier.

Mason P. Guell of Robert W. Baird & Co. asked for the outlook on new lease rates for the remainder of the year and whether expectations for blended rates had changed. He also inquired about attractive uses of capital and the potential timing for a return to acquisitions.

Answer

President and CEO Anne Olson and CFO Bhairav Patel confirmed that leasing trends are progressing as expected, with new lease rates improving before a seasonal taper, reaffirming their guidance. SVP of Investments Grant Campbell added that the company is actively exploring investment opportunities to grow its Mountain West footprint, considering acquisitions, M&A, and OP unit transactions.

Mason P. Guell of Baird inquired about the expected trend of blended rate growth throughout 2025 and requested an update on the company's outstanding mezzanine loan, including its payoff timeline.

Answer

CFO Bhairav Patel projected that renewal spreads would lead new lease spreads in the first half of 2025, with a potential rebalancing in the second half as markets stabilize. Regarding the mezzanine loan, he reported the project is on budget and on track for stabilization in mid-2026, at which point Centerspace would have a potential opportunity to purchase the community.

Mason Guell asked if MAA is observing more opportunities to acquire lease-up properties, given the extended duration of the market cycle.

Answer

Brad Hill, President and CEO of Mid-America Apartment Communities, stated that MAA is not seeing more opportunities to acquire lease-ups. He noted that fewer lease-ups are being marketed due to valuation impacts from uncertainty regarding lease-up timing and concession roll-off, leading sellers to hold onto assets longer.

Mason Guell asked if MAA is observing more opportunities to acquire lease-up properties, given the extended cycle for market recovery.

Answer

Brad Hill, President and CEO of Mid-America Apartment Communities, stated that MAA is not seeing more opportunities to acquire lease-ups. He explained that fewer lease-ups are being marketed due to increased valuation uncertainty regarding lease-up timing and concession roll-off, leading sellers to hold onto assets longer until they are more stabilized.

Mason Guell of Baird requested a performance update on MAA's two acquisition lease-up properties and asked if their initial yield expectations had changed.

Answer

EVP Timothy Argo confirmed there has been no real change to the yield assumptions for the acquisition lease-ups. He noted that while leasing velocity was slightly behind, in line with the broader portfolio, rent performance has been adequate, and the original yield expectations remain intact once the properties are fully stabilized.

Mason Guell asked for updates on Mega Campuses like San Carlos, San Bruno, Seattle, and Campus Point, which have large shadow pipelines, and if Alexandria Real Estate Equities expects to reevaluate some of these in the future.

Answer

Joel Marcus, Executive Chairman and Founder, stated that these Mega Campuses are currently under 'deep study' in each market. He indicated that Alexandria Real Estate Equities is actively looking to reduce non-income-producing assets as a percentage of gross assets and to accelerate the monetization path for land, particularly in the Bay Area and Seattle.

Mason Guell asked for updates on the reevaluation of mega campuses like San Carlos, San Bruno, Seattle, and Campus Point, which have large shadow pipelines, and if any updates are expected in the coming quarters.

Answer

Joel Marcus, Executive Chairman and Founder, stated that these campuses are under deep study in each market and declined to provide specific details at this point. He reiterated the company's goal to reduce non-income-producing assets as a percentage of gross assets and monetize land faster, advising to 'stay tuned' for updates, particularly for Bay Area and Seattle locations.

Mason Guell from Baird inquired if Camden is now assuming longer lease-up periods for acquisitions currently in lease-up, compared to assumptions at the start of the year.

Answer

President & CFO Alex Jessett stated they are not changing their assumptions, noting that for a recent Austin acquisition, a slower lease-up was anticipated and underwritten from the start due to known market competition. EVP & COO Lori Baker added that while the submarket faces near-term supply challenges, it remains a compelling long-term asset.

Mason P. Guell inquired about the difference in blended rent growth between Midwest and Sunbelt markets and the company's preference for acquiring lease-up versus stabilized assets.

Answer

EVP of Operations Janice Richards stated that Midwest blended rents are trending at 2-3%, while Sunbelt markets are seeing an improving positive trajectory. President and CFO Jim Sebra explained that acquisitions are opportunistic, with no specific preference for lease-up or stabilized assets, as long as they are accretive to earnings in year one and can be acquired below replacement cost.

Mason P. Guell asked for an update on the 1,000 Oaks preferred equity investment, including current demand and its maturity status.

Answer

CFO & CIO Joe Fisher reported that the 1,000 Oaks project is experiencing very strong demand and leasing momentum, with occupancy rising from the low-90s to the mid-90s. He stated that due to this momentum, the equity partner will likely seek a short-term loan extension to maximize the asset's value before a transaction, which is still expected to occur this year.