Good morning, and welcome to the Centerspace Third Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Mark Decker, Chief Executive Officer. Please go ahead. Good morning, everyone. Centerspace's Form 10-Q for the quarter ending September 30, 2021 was filed with the SEC yesterday after the market closed. Additionally, our earnings release and supplemental disclosure package have been posted to our website at centerspacehomes.com and filed on Form 8-K. It's important to note that today's remarks will include our business outlook and other forward-looking statements that are based on management's current views and assumptions. We cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on these forward-looking statements. Please refer to our earnings release for reconciliations of any non-GAAP information which may be discussed on today's call. I'm joined this morning by Anne M. Olson, our Chief Operating Officer, and John Kirchmann, our Chief Financial Officer. I'd like to start by welcoming my team members out there on the line, many of whom are shareholders, and thanking them for the fantastic efforts as we endeavor to create better every days. It's an incredible time to be in the housing business, and the Centerspace team is giving outstanding effort and getting results. 2021 is a big year for the company. So far this year, we've implemented and integrated a new operating system that will enable our team to deliver a consistent resident experience, welcomed over 100 team members, and integrated 17 new communities, growing our portfolio by 20%, and refinanced over 1/3 of our debt outstanding, lowering rates, adding considerable duration, and providing greater financial flexibility and certainty. All of this in addition to our day jobs. As shareholders, we're so fortunate to have this Centerspace team and these key foundational steps position us for further growth and efficiency. Meanwhile, our business remains resilient. We posted an outstanding quarter, and our outlook for the year has improved. The results are driven by broad-based strength across all of our markets, with notable improvement in the Twin Cities and Denver. We've discussed in past calls our expectation that these markets would serve as a bit of a second gear, and that is coming to fruition. With just 60 days left in the year, we begin to turn towards 2022, where we'll focus on taking our recent platform investments and using them to deepen the value proposition for our residents. We'll also continue to invest in communities to grow the quality of our portfolio and our long-term earnings power. It's true that we've never witnessed a more competitive investment climate, and at the same time, we've never had a higher quality earnings stream or better cost of capital. We are able to be competitive for assets that we like, and we are actively underwriting and offering on communities in our focus markets. We're also always opportunistic should we come across a portfolio that makes sense. We do see challenges in the years ahead for the industry and ourselves with respect to labor, property taxes, insurance, and a more difficult regulatory environment. Of these, the one we can have the most influence over is labor, and we're working to address this critical issue by maintaining an environment where people want to be and providing compensation benefits and tools that allow our team to thrive here. Balancing these headwinds out are very strong fundamentals, and we believe those will prevail in the months and years ahead. One specific area of pressure is rent control. This is an important day here in Minnesota for the housing industry, as both Minneapolis and St. Paul, our largest cities, have rent control initiatives on their ballots. In St. Paul, the ballot includes rent control measures that are far more restrictive than we've seen anywhere in the U.S. In Minneapolis, the vote is to determine whether or not to give the city council the authority to regulate residential rents. We are monitoring these initiatives closely. The passage of the St. Paul initiative would impact one community that contains 191 homes, representing approximately 1.4% of our NOI. In Minneapolis, potential rent control measures could affect 4 of our communities with 385 homes and 3.1% of our NOI. In total, 5 communities, 576 homes, and approximately 4.5% of expected NOI. We'll know more tomorrow. We've supported efforts opposing these initiatives in both cities because we know that the way to improve the quality and affordability of housing is to make it easier to add supply. Adding restrictive regulations inhibits investment. With that, Anne, would you please provide us with an operating update? Thank you, Mark, and good morning. Our third quarter results demonstrate that the improvements to our operating platform are providing us with leverage to capitalize on the strong fundamentals of 2021. Our same-store portfolio is performing well with stable occupancy and 6.2% revenue growth in the third quarter compared to the same period last year, driving a year-over-year increase in NOI of 7.5%. Our revenue growth is the result of very strong leasing activity with 10.8% average effective lease over lease increases and average effective renewal increases of 7.2% across our same-store portfolio. This resulted in blended effective rent increases of 9% in the third quarter, comprising 41% of our total lease exposure. While all of our markets experienced same-store sequential revenue growth in the third quarter, our largest market, Minneapolis, experienced 7.8% revenue growth and 15.7% NOI growth. This is a positive trend given the slower recovery we had been seeing in Minneapolis and Denver. Across our Minnesota markets, we are encouraged by the progress within our portfolio as the eviction moratorium has expired and rental assistance programs have gained momentum. Our collections this quarter were 98.7%, a 70 basis point improvement over the second quarter. With strong occupancy, we grew our same-store average monthly rental rate per unit to $1,279, a $46 or 3.7% per unit increase over the second quarter of this year. As we head into the fourth quarter, initial results are positive. In October, we saw significantly increased traffic over 2020, and our same-store portfolio achieved 7% average lease over lease effective rent increases and 7.4% average effective renewal increases. Our current same-store occupancy is 94%, and with just 12% of our leases expiring in the fourth quarter, we expect to be able to capture rent increases while boosting occupancy throughout the quarter. These results take the right systems and the right people. Our teams have worked tremendously hard this year, and on top of that, we onboarded 17 new Minnesota communities and over 100 new team members in September. We are 60 days in, and while we expect some volatility in our non-same store results as we move our new communities onto our systems, we remain optimistic about the opportunities for growth that the new portfolio brings. We're gonna execute on these opportunities by keeping our mission to provide great homes and our focus on customer experience at the forefront. Our Rise by Five margin improvement program demonstrates this commitment. Our 2021 focus has been on our transition to a single stack technology platform and value add improvements. We're now live across our portfolio on our new systems and working our adoption plan to ensure we take full advantage of all that it has to offer. The non-recurring expense related to this implementation in the third quarter was $625,000, and we're expecting $466,000 of additional non-recurring expense by year-end. These costs are higher than we originally anticipated due to the expansion of the implementation across our 17 new communities, and we are carefully assessing the project results and spend to make the most of each dollar invested. On the value add front, we delivered 338 renovated units in the third quarter, spending approximately $4.8 million and averaging $206 per unit in premium, achieving an approximate year one ROI of 16%. With respect to both the value add renovations and our expense planning for the remainder of 2021 and into 2022, we're monitoring supply chain disruption and the rise in costs of labor and materials. The effects of inflation are being felt across all areas of our business and will be a headwind in our quest to improve margin. I'm so grateful to our teams across the company. Each individual is contributing to better every day, and we truly are better together. Our efforts show positively for our residents, for each other, and in our financial results, which I will now ask John to discuss. Thank you, Anne. As Mark and Anne have discussed, 2021 has been a year of change as we have emerged from the pandemic. For some context, I would like to start with where we left off 2020 as we made decisions to minimize costs and conserve cash. Those decisions included not filling open corporate support positions and changing the form of our incentive compensation, resulting in a 7% decrease in G&A and property management expenses in 2020 versus 2019. In 2021, we have pressed forward with our technology initiatives, which include filling open positions from 2020 to ensure its success. During the third quarter, we undertook several financings that improved our balance sheet, reduced our cost of capital, and increased our weighted average maturity. These initiatives included improving and extending our existing line of credit, issuing $125 million of unsecured senior notes with a weighted average interest rate of 2.63% and weighted average maturity of 10.5 years, while also expanding our bond investor group from one to four investors. Entering into a $198.9 million secured Fannie Mae credit facility to refinance the debt associated with this quarter's portfolio acquisition and which resulted in a weighted average interest rate of 2.78% and weighted average maturity of 9.8 years. During the quarter, we also authorized the 2021 ATM program, which allows us to offer and sell up to $250 million of common shares. During the quarter, we issued 199,000 shares at an average net price of $98.57. During the nine months ended September 30, we have issued 1.1 million common shares at an average net price of $70.63 for a total consideration of $86 million. As of September 30, 2021, there is $230 million remaining under the ATM. With that, let's look at our results. Last night, we reported core FFO for the quarter ended September 30, 2021 of $0.98 per share, an increase of $0.04 or 4.3% from the third quarter of 2020. Year to date, Core FFO is $2.91 per share, representing an increase of $0.15 or 5.4% from the prior year. These increases are primarily due to higher NOI offset by higher fully diluted share count. Looking at our general and administrative expenses for the nine months ended September 30, 2021, G&A increased by $2.3 million to $12 million compared to $9.7 million in the same period of the prior year. This is primarily attributable to $1.3 million in incentive-based compensation costs and $600,000 in non-recurring technology initiatives. Property management expense increased $1.8 million to $6.1 million for the nine months ended September 30, 2021, compared to the same period of the prior year. The increase is primarily due to $900,000 in non-recurring technology initiatives, as well as $600,000 in compensation costs from the filling of open positions. Turning to capital expenditures, which is presented on page S-15 of our supplemental. Same-store CapEx was $5.7 million for the nine months ended September 30, 2021, which is a decrease of $1.4 million from the same period of the prior year. This decrease is primarily due to the timing of the completion of work and full-year same-store CapEx spend is expected to be $885-$915 per unit, which is 6.5% lower than our midpoint guidance of $962 per unit at the beginning of the year, with that reduction due to the disposition of older Rochester assets during the second quarter. As presented on page S-16 of our supplemental, we have revised our financial outlook for the remainder of 2021, resulting in increasing our full-year Core FFO guidance to a range of $3.92-$4.02 per share, or a 3% increase over the midpoint of our prior guidance. The guidance increase is driven by continued strength in our core operations, resulting in an increase in the full-year outlook of same-store NOI growth to a range of 3%-3.5% from a midpoint of 1.25% in our prior guidance. The year has been a year of tremendous achievement by our team as we have executed on several initiatives. We continue to advance our technology platform, successfully onboard our new team members in their communities, and fortify our balance sheet while delivering outstanding results. I will take this opportunity to thank all of our team members for demonstrating what is possible when we perform as one team. We will now begin the question and answer session. To ask a question, you may press Star, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Star then two. At this time, we will pause momentarily to assemble our roster. Our first question today comes from John Kim with BMO Capital Markets. Please go ahead. Thank you. I was wondering if I could ask about your new lease growth rate, which looked like it was decelerating during the third quarter, and then it sounds like so far in October, it's at about 7%, which is below the third quarter as well. Are there any markets that's kind of driving this deceleration? I realize it's still a high growth rate, but many of your peers are seeing accelerating growth in their markets. Yeah. Hi, John. Good morning. This is Anne. I think, you know, we saw really good growth even in October, in Denver, for example, that's at 14.4%. You know, I think we have a little more seasonality in our lease expirations in that we really do slow down. We have very little exposure in these months. We have seen some deceleration in those kind of colder weather markets like across North Dakota and northern Minnesota, where we really captured high rent growth during the second and third quarter. You know, the October numbers are still a little bit early. We pulled those through, I think, the 25th of the month. There may have been some, you know, we may see some movement in those, from the end of the month data as well. We feel really good about particularly Denver and Minneapolis, which have been accelerating, and are a little bit larger portions of the portfolio on an NOI basis. Can you remind us when concession use peaked? Was it the third quarter of last year? Rough percentages, you know, how much concessions did you use in the third and fourth quarter of last year and first quarter this year? Yeah. I mean, we haven't ever used a ton of concessions, but the peak would probably have been. Yeah, I'd probably say second quarter of this year when we were starting to see the ramp up was probably our high point. As Mark noted, you know, we report on effective rents, and we do try to keep the concessions out of the revenue management system. You know, pretty sparse use. Yeah. John, our concessions in Q3 ran about 1.3%, but that includes employee concessions like, you know, we give employees a 20% discount, so that's including everything. It's a pretty low number. Okay. Just one more question if I can. Your leverage increased this quarter to 9.9x. Is any of this timing related with the KMS acquisition, a mismatch of EBITDA with that? Yeah. I mean, John, you gotta remember we have all of the KMS debt in one month of the EBITDA, so that's a trailing number on today's debt. On a forward basis, it would be significantly lower. Go ahead, John. On a forward basis, it's in the high sevens. It's actually by our measurement using forward NOI, it's actually come down from the prior quarter. High sevens including preferred? No, excluding the preferred. We'll save the preferred for debate club. Yeah. It would be mid-eight at- Essentially a term. 87, yeah, on, including the preferred. I get it. Okay. Thank you. Thanks, John. The next question is from Gaurav Mehta with National Securities. Please go ahead. Yeah, good morning. You talked about improvement in Denver and Minneapolis. Is that the urban part of your portfolio that's improving there? Yeah, the improvement in the Twin Cities, I would say it's pretty broad-based. The urban assets in particular, I would say, have not had a, you know, big snapback. I would just say they've stabilized. Is that fair, Anne? I think across the rest of the portfolio, we've seen, you know, as I noted, a little bit of deceleration. In most of the markets, the growth has been pretty steady. You know, we're still seeing strong growth in the other Mountain West and, you know, across Omaha. That's remained pretty steady. We're seeing a little bit of deceleration, I would say, in across North Dakota, St. Cloud market and then, you know, good acceleration in Denver and Minneapolis. I'd also say that lower growth rate is off of a stronger base, so we didn't see big downdrafts last year. Okay. Then for your St. Cloud portfolio, I saw that occupancy dropped by 200 basis points for that part of the portfolio in 3Q. Can you provide some color on the drop in occupancy in that market? Yeah, sure. Great question. You know, we're really our goal is to optimize the revenue. When the lease rates are growing the way they have been, you know, we will give up a little bit of occupancy. We also have our highest amount of exposure lease expirations during the third quarter. 41% of our portfolio rolls over during that quarter. You know, we naturally have a little bit of dip in occupancy at that time. Really what we're trying to do is optimize the revenue. To the extent we can continue to push rents up, you know, we will wait for the resident who will take that higher rent and leave it open a little bit longer. Okay, thank you. That's all I had. Thanks, Gaurav. The next question is from Rob Stevenson with Janney. Please go ahead. Good morning, guys. Just to follow up on the last question about the occupancy. I mean, how did you guys sort of debate, you know, given your comments about, you know, the leasing sort of materially slowing down in terms of number of leases, as you hit here in the fourth quarter driving occupancy higher into the 95s rather than keeping it down in the 94s for the winter versus continuing to push rental rate. Did any of the rental control measures have you pushing rental rates more aggressively in anticipation of any of that getting put in and sort of the mark on that? Yeah. With respect to kind of the debate that we have about optimizing revenue, I mean, we really do kind of let the revenue management system work. Having lower expirations, we haven't seen a significant drop-off in traffic. You know, for example, October traffic in 2021 was almost 3x October traffic in 2020. You know, so we feel confident that leaving some of that occupancy, you know, that we still have the traffic to fill those, and we don't have as many people expiring. We really expect to see that occupancy grow in this quarter with strong rates. With respect to the rent control measures, it's such a small part of our portfolio. As Mark noted in the prepared comments, only one of our assets would be subject to rent control if in fact it passes today in St. Paul and Minneapolis. Minneapolis is just authorizing the city council to take it up. There's actually no measure on the ballot. St. Paul would actually have a measure that would set rate increases at 3%. That only affects one of our assets. You know, to date, we've just been running it the way we always have, which is optimize the revenue, and that asset has good, strong occupancy and is pretty well-positioned and, so we didn't really change course based on the limited exposure we have to it. Okay. It's been a couple of months now since you've closed the Minnesota portfolio acquisition. Any additional upside you're finding here? Are you guys thinking about taking advantage of the strong market for assets to sell maybe some of your previously owned assets in Minnesota to reduce that market exposure? How are you feeling about that market exposure as you're heading into 2022? Yeah. Good morning, Rob. I would say we feel very sanguine about our exposure to the Twin Cities market. We viewed that as a lower risk proposition because we know the market very well. In terms of selling, I mean, listen, we always consider selling everything and anything, but you know, the case for those assets is we believe what we expected it to be, which is that there is some operating opportunity within those. While you can probably get credit for a lot of that, you wouldn't get credit for all of it. You know, we really didn't buy them to flip them. We bought them to run them better in cash flow. We'll always make you know, portfolio-related decisions in terms of the overall strength. It is our plan and goal over time to lower the percentage of NOI that comes from the Twin Cities. We're happy with it for now. You know, we'll grow out of it more likely by adding things than selling things. Any additional upside you're finding out of the acquisition at this point? I mean, look, we underwrote a fair amount of upside, which we haven't shared all that with you. I guess I'll say it is what we think it is, and there's a lot of upside embedded in that as it relates to you know, opportunity, really probably much more so on the revenue side. Then there could be, over time, some kind of densification opportunities, which is something we didn't underwrite but believe may be there. That would be, you know, 120 units that sits on 8 acres, that's 49 years old, and we might do something different with that over time. You know, that's all in the future. Okay. Last one for me, Anne or John. When you take a look at the expense, the same-store expense guidance for the year and the sort of high 4s at the midpoint, how much of that is sticky in terms of upward pressure on wages, property taxes, et cetera, versus temporary or non-recurring stuff like, you know, incremental technology investments and other things that could pull that back down into, you know, a more normalized 3%? Or are we just in an environment right now where it's, in order to drive higher revenues, you're going to have to have higher expenses for the foreseeable future? I'll start with the real estate taxes and then let Anne. I don't know real estate taxes will go down. I don't expect that. I don't remember that happening. That's definitely sticky. You know, as you know, the asset inflation is pretty significant, and there's a lot of comp data out there. I expect there to continue to be pressure on taxes. You know, we've had a couple of bad years in insurance cost increases. I think that will mitigate somewhat. You know, what we're hearing now is that will mitigate somewhat, but once again, it's not going backwards. Those large increases we've had the last two years will stick in our forward run rate. Anne, as far as the operating. Yeah, I think I do think that what you're seeing on the inflation side is really difficult on wage inflation, and I think we are gonna see that a little bit. I think the answer to your question is yes, some of it is non-recurring. You know, we do have some technology costs and things built in there that aren't recurring. But we also, you know, are committed to keeping our assets running well, and, you know, it takes both the systems and the people. And while a lot of our technology initiatives are aimed at, you know, increasing efficiencies, that doesn't necessarily automatically translate into less people. And in the meantime, you know, wage inflation is real and the cost of retention is significant. You know, I think we are gonna feel some pressure there, and hopefully, you know, the good news is that we're seeing really good increases on the rates that more than makes up for it. Okay. Thanks, guys. Appreciate it. Thanks, Rob. The next question is from Amanda Sweitzer with Baird. Please go ahead. Thanks. Good morning. Morning. Your growth in revenue per occupied home exceeded rental rate growth during the quarter, particularly in Minneapolis. Was that related to rental assistance payments, or are there any other revenue initiatives driving that you think will persist? Yeah, I think you got it right. Anne, you- Yeah, it really is. The rental assistance payments really started to come in during the third quarter. There was a lot of momentum, particularly in Minnesota, where we had seen very little of that actually getting out to the residents from the government program. I think that is a big driver there. That makes sense. Following up on an earlier question, how are you thinking about your leverage target following the close of the KMS transaction? I think in the past, you've talked about prioritizing improving your market exposures and driving earnings growth. Is that still how you're thinking about it today? Yeah, I mean, as John outlined just a moment ago, we really don't look at this as a leveraging up transaction. It's leverage neutral. While we did put more leverage on those assets and take cash proceeds at the table, we applied that cash to our line and some of these other unsecured bank loans. You know, on a net basis, we did not. As that portfolio was roughly on par with our portfolio in terms of leverage and post all of the different moving pieces, it's in the same spot and cash flow should grow. We would actually look at that as a leveraging down transaction or, you know, we're gonna have less leverage, everything else equal post, you know, 12 months from now, if nothing else happens. Our leverage will be lower on a multiple basis, and it's the same on a percentage of assets basis. Okay. That's fair. Yeah, it does make sense. As you think about funding some of that additional acquisition activity you spoke about, is it fair to assume that you try to fund that on a leverage-neutral basis going forward as well? Yeah. I mean, I think everything equal in a perfect world, we'd over-equitize and drive leverage down. You know, the sort of counterbalance is we have, in our judgment, a pretty strong stream of earnings, and we'd like to keep it. I mean, I think when we consider our investor base, we definitely have NAV and leverage-focused investors, and we have earnings growth investors, and we have to be mindful of both of those sets of expectations. I'd also say we feel really good about the duration that we added and the rate. You know, we've lengthened our average duration by about three years and lowered the rate. We're almost at eight years. I mean, Camden's average duration is similar. That's an A-rated company. Obviously, they have less turns. We feel very good about the composition of our debt. You know, it's not all quantity. 2x expiring tomorrow and you can't refund it is worse than 14x it isn't due for several years. We think a lot about it, and we think about it in a balanced fashion. That all makes sense. Appreciate the time. Thanks. The next question is from Barry Oxford with Colliers. Please go ahead. Great. Thanks, guys. Looking at your renovations and getting 16% ROI, should we think about that as a good number going into 2022? Look, labor costs and materials are gonna weigh on that number. Yeah, I think that is a good number looking into 2022. I mean, one of the things that we really try to be disciplined about is if we're not getting, you know, more than 15%, we really, you know, slow that down and monitor whether or not we wanna continue. Historically, we've run between 16% and 18%, so I think 16% is a good number. Okay. Great. When you look at rental increases that you guys have been able to get over this year, as you move into 2022, can you continue to get those type of rental increases, given the markets that you're in, and can your tenants kind of continue to absorb those type of increases? Or look, maybe 2022 we'll have to kind of slow it down. I mean, that's a great question. You know, we haven't seen a significant amount of supply, and while there is in a lot of those secondary markets, and while there is some planned, you know, even planning supply right now or announcing supply, those won't be opening for 18-24 months. We also. That's on the multifamily side. We also haven't seen a lot of supply on the single family side, really coming quick enough to, you know, drive these rates down. You know, we have a pretty significant loss-to-lease in the portfolio now, so we would expect the renewal rates, you know, really stay pretty high into 2022, and that the new lease rates, you know, maybe there's some moderation in growth. We're optimistic given the growth we've had this year and where we've reset and that loss-to-lease that's embedded in the portfolio. Right. No, great. Perfect. That makes sense. Last question on acquisitions. Where have the cap rates gone, you know, let's just say since the beginning of the year? Are we down 25, you know, seeing compression at 25 or 50 basis points? Maybe talk about Nashville. I know that's been a target market. You know, has Nashville even gotten further away from you because of cap rate compression, or do you think it's coming back to you? Good question, Barry. I think the cap rate compression I'd estimate to be 50 basis points -75 basis points. basis points. It's definitely more than 25. Just, I mean, it's just to consider Union Point, which we closed on in January, or Parkhouse, which we closed on last fall. Those were both kind of plus or minus on our, you know, forward 12 ±4 caps, as I think we disclosed when we did those. I think that those would be 3.25% today. I don't know, 3%-3.4%. I mean, you know, it's all whose math you're using. A lot of times the brokers come in, you'll say, "Oh, that's a 4 cap," and then when we do the math, it looks more like a 3.6. You know, h ow exactly you're calculating it and what growth assumptions and capitals and taxes, you know, leave lots of room for discrepancies. I would say in general, 50-75 basis points feels right. In many instances, that doesn't mean. I mean, you know, the year one cap rate's one thing. We sort of think about it on a 10-year unlevered IRR basis, which is also fraught with assumptions. I think there, you know, the back end, you know, those returns have probably come down 25-50. The front end cap rate's gone down. People's growth rate assumption in the early years has probably gone up, and it, the IRR isn't down 50-75 basis points in my opinion. But, i f you're BREIT and you're solving for a levered 5 to get your promote, you know, your cost of capital is pretty low. Correct. Right. How are you feeling about Nashville? I love Nashville. I think it's a fantastic market. How are you feeling about pricing in Nashville? It sucks. No, listen, I think, Right, right. It's becoming our white whale. No, listen. Nashville is still a great market. We still are actively underwriting there. I mean, we really are the bridesmaid quite a bit. You know, we have to hold discipline on our per-share metrics. So we do that, but we are frequently very competitive, and we're not missing by much, but we're you know we just you have to draw the line somewhere, and where we're drawing the line is somewhere between 0.2% and 1% below where things are clearing right now. Okay. No, that's It's not as if assets are trading for 105 and we're running out of ink at 94. You know i f we're excited about it, we can be in the hunt. Okay. Great. No, that's helpful color. That's all for me. Thanks, guys. Thanks, Barry. Yep. The next question is from Daniel Santos with Piper Sandler. Please go ahead. Hey, good morning. Thank you. Thank you for taking my questions. I'll just sort of follow up on that, on Barry's question and say, are there any markets that have sort of performed stronger than expected and that maybe kind of moved up your interest list? It seems like, you know, the outperformance in, you know, the Sun Belt in the Midwest was pretty broad. Yeah. You mean, like, markets we aren't in? Yes. Yeah, I mean, I would say for the most part, if it's not one of our focus markets, we're really looking at it on an opportunistic basis. It's probably some, you know, there's something to it. You know, we're not just saying, "Oh, well, that one-off asset in Salt Lake City looks great, let's just do it." I mean, we just don't. Maybe we're not that opportunistic. It has to be more than just an asset for us to kind of turn our head. I would say broadly, we agree with your point that the market strength has been broad-based. Your focus market list hasn't grown. It has not. I mean, I would say we're considering. I mean, in our last board meeting, we had a long discussion with the team and the trustees about maybe we should broaden that scope a little bit. We do a lot of work to kind of land on these markets. You know, to say like, "Hey, we're gonna go," you know, we'd first go reevaluate the work we did where we did have a list of, call it 10 markets. I mean, it's a fair amount of work, and I would say the standard is pretty high for our board to say, "Yeah, sure. Name 3 more markets." I will say their view is, we've heard this from investors, is maybe we should have a few more places to hunt. Got it. I guess now that your sort of urban assets have stabilized, is there some thought to maybe, you know, sort of cycling out of them and making the portfolio, you know, truly sort of suburban-focused? No. I mean, you know, today our portfolio is something like 15% urban, you know, taking all. You know, that's not a same-store number, that's a total number. I would say long term, we believe in cities. I mean, we might actually find things we like in a city because the cash flows are depressed and there's less interest, so on a relative basis. I would say no, we're not seeking to kind of alter the mix that we have there, at this time. Got it. That's it for me. Thank you. Thanks. The next question is from Ami Probandt with BTIG. Please go ahead. Hi. Good morning, everyone. I was just hoping to come back a little bit to the October traffic. You cited that October 2021 was about 3x 2020, but I'm wondering how that compares to 2019 or your typical seasonality. Yeah. Yeah, I think traffic this year has been a little better. That's consistent in October. Yeah. If we looked at traffic year-over-year, it's definitely better. If we looked 2021 over 2019, I'd say it's also better. Yeah. I think we are seeing some strength, particularly, in the secondary markets. You know, some of the technology transition has made it difficult for us to kind of track asset to asset over 2019. 2021 has had stronger traffic. Okay, how has traffic specifically trended within Minneapolis? I know we've discussed in the past about how this market, particularly in the urban area, was just taking longer to come back due to some various factors. What are you seeing on the ground right now? Are people coming back to the urban centers, or is the strength really just continuing in suburban and urban is humming along? We are seeing more strength in the urban areas, I'd say particularly kind of post-Labor Day. As office occupants who come downtown, Minneapolis every day, there's more traffic on the roads and more people downtown. A few more restaurants are starting to open back up. We are seeing the live music venues are open. Our professional sports teams are back playing in person. There's a lot more going on. We have seen that translate into our traffic numbers, and it's showing up in our rental rates. Yeah. Great. Thanks. Then in the specific three kind of sub-markets where we are downtown, I mean, they're driven less by being able to walk to your office than being able to walk to things like bars and entertainment, and those things are coming back, so that's a positive. Great. Thank you. All my other questions have been answered. Thanks, Ami. Again, if you have a question, please press star then one. The next question is from Buck Horne with Raymond James & Associates. Please go ahead. Hey, thanks. Good morning. I wanted to go back to just the tech initiatives and some of the costs that are kind of going on there. It seems like we've kind of gone over budget a couple times with the cost. Just wondering, you know, what, you know, based on what you're expecting for the fourth quarter and, you know, what additional costs might be incurred going into 2022, how quickly could those drop off next year? Yeah. If you could see the look on John Kirchmann's face right now, you would laugh, Buck, but because he doesn't like when I go over budget. You know, we're over budget slightly, but we've done a couple things that have increased those costs during the year that we're very mindful of. The first being we did pull forward one of our phases, so something that we had planned to do in 2022, we pulled into 2021. That increased some costs there. Then, you know, adding the Minneapolis portfolio of 17 new assets, you know, really did expand the project pretty significantly. I think the cost, we're gonna see those decrease very rapidly in 2023. You know, we're fully live on the new system right now. We're working the adoption plan and I'm sorry, in 2022, they're gonna drop right off. You know, our goal is to have this really wrapped up and be moving on to looking at how we might use this platform for other technology enhancements towards efficiencies next year. Yeah, this last $475,000 that we expect in the fourth quarter really should be kind of the tail end of the non-recurring fees. Yeah. Okay. I'll just add, Buck, with the portfolio acquisition, not only was it the extra work for those 17 communities, but that was a big lift for the entire team. We took some things that we were originally doing internally, and we brought some additional consultants to, you know, kind of relieve some of the workload so we could focus on the onboarding. Got it. All right. Very helpful color, guys. Appreciate that. Thank you. Kind of a different tack on an earlier question in terms of, you know, can your customers continue to keep up with the rent increases that you're seeing? I'm just wondering if you have any extra data or color you can provide on rent-to-income ratios that you're seeing. Are you seeing the incoming tenants or applicants coming in with higher income levels or seeing any signs of that economic strength kind of driving that or are you starting to see those metrics start to tick up? Yeah. You know, I would say we're generally speaking still in the low 20s. We require 3 x rent to income. We haven't seen any drop off in qualified applicants. You know, that would really be the first thing that we would see is a lot more denials or, you know, less applications based on the qualifications. You know, we haven't started to see that yet. I do think that, you know, to the extent that there is inflation in the rents, that we're seeing good rental increases. I mean, people are also feeling it in their wages. We really haven't seen any deterioration of those metrics to date. Very helpful. That's all. That's all for me. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mark Decker for any closing remarks. Thanks so much. Everyone, thanks. We appreciate your time and interest in Centerspace. We wish everyone a safe and healthy holiday season. Hope you get out and vote today, and look forward to meeting with some of you next week at Nareit. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.