What are some of your near-term strategic initiatives or priorities?
Like a lot of multifamily companies, we’re really focused on optimizing technology so that we can streamline some of our operations. Potentially, we could centralize some of our positions to allow more flexibility in our staffing models and really leverage that technology to help us defend against continued tight labor markets, continued inflation for materials, insurance costs, and things like that.
When you talk about optimizing technology, I have to ask if Centerspace has its own chatbot that gets mistaken for a person?
We do use chatbots, but what is even more effective for us is a true AI product where it connects real-time via text message or email with prospective residents. We do see that residents sometimes show up to their appointments looking for our AI assistant, named Riley. Riley also gets some reviews online, mostly with positive stars, as well as thank you notes in the mail.
During 2023, Centerspace sold 13 communities and in early 2024 sold two additional properties that were under contract. What was your strategy behind those dispositions?
We’re constantly focused on making sure we have the best portfolio that we can to position ourselves for future growth, alongside the right market exposures. The overarching strategy behind the recent dispositions is to reduce the amount of older, slow growth, low rent product that we had in the portfolio, as well as pare back some of the exposure that we had across North Dakota. The state tends to have smaller markets and not as many market fundamentals in its favor, such as population, job, and income growth.
We don’t currently have anything on our disposition list for the remainder of this year. Our focus has been on how we can recycle that capital from the lower performing assets in our portfolio into the new markets we want to enter, and/or other new investments.
How have you recycled the capital raised from those sales?
A couple of ways. We acquired property in a new market in Fort Collins, Colorado, which is really an expansion of our presence in Denver. We acquired some of our own stock, given that we’re trading at a fairly significant discount to our consensus NAV. On a cap rate basis, we were able to sell assets at a lower capitalization rate than we were able to buy our own stock back.
We also recently invested in a preferred financing vehicle for a new development in Minneapolis-St. Paul. We are providing capital for the developer on a preferred basis with an option to purchase it upon stabilization. So, we’re doing a couple of different things to make sure we get the best possible return from those sales proceeds.
What’s your pipeline for growth specifically related to new development projects or acquisitions?
Unfortunately, very little. There continues to be a real dearth of transactions in the market. For what product does become available, there’s still a very large disconnect between what a seller wants to achieve and what a buyer is willing to pay, as well as volatility and uncertainty surrounding interest rates. So, besides recently investing in that preferred financing, we really don’t have anything on the drawing board for this year. However, we’re optimistic that during the second half of the year we may see some pick up in volume that will provide us with some opportunities.
What do you see as the biggest opportunities and challenges for Centerspace in the coming year?
I think the largest challenge is just going to be whether the transaction market picks up. Part of having a healthy real estate company is the ability to buy and sell and having some liquidity to change your portfolio and take advantage of opportunities to grow. We really haven’t seen much transaction activity at all.
The big opportunity that we have is that we’re well-capitalized and we have a very flexible balance sheet. So, when those opportunities come, we should be able to move quickly and capitalize on them to either enhance our scale in markets that we’re currently in, where we’re interested in growing, or enter a new market.
There was an interesting study recently showing that female CEOs leading Fortune 500 companies have shorter tenures than male CEOs at 4.5 years versus 7.2 years respectively. How are you approaching the job to prove that trend wrong outside of the Fortune 500?
My long-term view of the company is definitely more than 4.5 years, and it’s more than 7.5 years, it’s really 10-plus years. I’m planning for a longer-term future, and to the extent that the board and I are able to stay aligned on what that long-term vision is, and we’re able to make progress towards it, hopefully, I’ll have a good long tenure here.
