10/29/21 06:13 AM EDT

REIT RECAP | 10.28.21 | CPT 3Q21 RESULTS

Rob Simone, CFA

Takeaway: Another massive acceleration in leasing spreads in 3Q21

CPT 3Q21 Core FFO of $1.36/share +$0.04/share vs. Hedgeye and -$0.01/share vs. Consensus. Parsing the numbers it looks like the same-store pool was smaller by 292 units q/q leading to a ~$3.4mm or -$0.03/share delta vs. our model, offset by +$0.06/share from non-same store assets including a $176mm/368-unit acquisition in the quarter + one development lease-up completion. On balance total property NOI +$2.4mm or +$0.02/share of the +0.04/share beat relative to our model, so relatively down the middle in our view above the NOI line. On the SSRev line both average occupancy (97.3%, +180bp y/y) and average rate +3.3% were better than our estimates, so the delta was really driven by a lower unit count in the pool. +$0.01/share each of fees and lower interest expense account for the remaining variance. This is one we have been wrong on and too conservative thus far, so need to revisit the model and take into account that average realized rates could potentially accelerate through 2H22 given the trend in leasing spreads below

FY21 Core FFO guidance raised +$0.10/share (+1.9%) at the midpoint, with the 4Q21 range of $1.46 to $1.52 comparing to Hedgeye at $1.38 and the Street at $1.42. SSRev and SSNOI moved +50bp and +75bp, respectively, with an unchanged SSExp outlook combining for +$0.05/share of additional Core FFO from the same store pool, with the non-same store pool accounting for another +$0.05/share. Impacts from asset disposition timing + ATM issuance appear to be a wash.
Sequential trend in signed (vs. when effective) blended leasing spreads 1Q20-3Q21: +2.5%/-1.1%/-0.9%/-0.8%/+4.6%/+8%/+16% followed by +16.7% in October. So a massive move higher in the second derivative moving 2Q to 3Q, followed by a leveling but still high RoC number 4QTD. Digging a little deeper, spreads on renewal leases (larger % of revenue growth given annual net turnover ~45%) +4.7%/+6.7%/+12.1% over the last three quarters followed by +13.8% in October. The forward top line RoC outlook is improving, but we still prefer AVB/EQR/ESS heading into FY22 which are slightly higher-octane and stand to benefit from easier comparisons.