CSR - Centerspace: Attractive Valuation Despite The Risks

2024-06-02 02:41:00 ET

Summary

• Centerspace is a residential REIT with interests in 70 apartment communities, primarily in Minnesota, Colorado and North Dakota.
• Occupancy is at 94.6%, down 0.3% Y/Y, indicating some distress as the company raises rents.
• NOI was up 7.5% Y/Y in Q1 2024, with a 3.3% increase expected for the full year as the REIT catches up with expense spending.
• 44% of the enterprise value is funded by debt, which is a key risk along with falling occupancy.
• The market cap rate of 7.5% is quite attractive, despite elevated administrative expenses.

Introduction

Centerspace ( CSR ) has significantly outperformed the Vanguard Real Estate Index Fund ETF ( VNQ ) so far in 2024, with the REIT's shares delivering a double-digit gain, significantly above the mid-single-digit decline of VNQ:

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