Tuesday, Baird financial firm updated its outlook on Centerspace (NYSE: CSR) shares, increasing the real estate investment trust's price target from $59.00 to $64.00, while maintaining a Neutral rating on the stock. The adjustment reflects the company's stronger pricing power due to less impact from supply constraints.
Centerspace has successfully built up occupancy leading into the peak leasing season, enabling it to secure higher new rents for the upcoming stronger second quarter.
The analyst noted that Centerspace's operating expenses have been more favorable, partly due to lower utility costs. Additionally, a tax refund contributing $0.04 per share was incorporated into the company's guidance.
While the Minneapolis and Denver markets are experiencing supply pressure, the situation is beginning to ease in Minneapolis, with potential moderation in Denver as well.
Centerspace is poised to achieve earnings growth in the coming years, supported by a solid balance sheet with limited near-term debt maturities and a weighted average debt maturity of over six years. Moreover, the company benefits from a below-market interest rate of 3.59%.
Despite these positives, the firm views the stock as relatively less attractive since it is trading above their net asset value per share estimate and due to some general and administrative inefficiencies.
The analyst also pointed out that Centerspace has been the top-performing residential real estate investment trust year-to-date. This performance is attributed to the scarcity of small-cap companies delivering growth and Centerspace's superior operational performance thus far in the year.
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