Net operating income up 39 percent in a year, with occupancy from 88 to 97 percent and expenses held to 1 percent.

Centerra is a 203-unit garden community at Frank Lloyd Wright Boulevard and Shea in north Scottsdale. Stellar took over management in February 2020 with the property 95 percent occupied and a full renovation about to start: unit interiors, roofs, exterior paint, clubhouse and pool areas, all of it done with residents in place. The renovation was the owner’s capital program. Leasing the renovated units, keeping the rest of the building full and collecting the rent through the work was Stellar’s.

Then the pandemic arrived a month in. Monthly-average occupancy fell from 95 percent in February 2020 to 80 percent in July. Concessions reached 8 percent of scheduled rent in August. Bad debt, which had run near 2 percent of rent, spiked to 6 percent in July and 11 percent in October 2020. The first twelve months under Stellar finished with average occupancy of 88 percent and bad debt at 2.2 percent of gross potential rent.

Renovated units were leasing at premiums the unrenovated ones were not getting, so every turn was worth more than the vacancy it created. Vacancy, concessions and delinquency were stacking on the same months in the second half of 2020, which is a collections problem and a pricing problem at once. Occupancy was already recovering by December 2020, to 90 percent, before the rent schedule had moved at all.

Concessions were run down through the first quarter of 2021 and were effectively zero from April 2021 on: 0.2 percent of scheduled rent across the following twelve months.

Asking rents were moved up in steps as renovated units delivered, in March, April, May, August, September, November and December 2021: 31 percent in total between February 2020 and February 2022. In-place rent followed more slowly, up 13 percent over the same two years, because leases roll one at a time.

Renewals were repriced with the market rather than held flat. On the 35 leases signed from November 2021 through January 2022, the 22 new leases came in 28 percent above the prior rent on the same unit and the 13 renewals 22 percent above.

Collections were worked back to normal. Bad debt for the twelve months to February 2022 was 0.6 percent of gross potential rent, down from 2.2 percent the year before. Operating expenses over the same two periods rose 1 percent.

All figures compare the trailing twelve months to February 2021 (March 2020 through February 2021) with the trailing twelve months to February 2022 (March 2021 through February 2022), the two consecutive years under Stellar’s management, same 203 units, same accounting.

• Net operating income up 39 percent. Total income up 26 percent, total operating expense up 1 percent, operating margin from 65 to 72 percent. The twelve months to February 2022 also finished 6 percent above budget on net operating income.
• Average occupancy 88.4 percent to 97.1 percent. Vacancy loss fell 73 percent.
• Bad debt 2.2 percent to 0.6 percent of gross potential rent, a 73 percent reduction in dollars.
• Concessions 2.9 percent to 0.2 percent of scheduled rent.
• Average asking rent up 20 percent between the two periods, and 31 percent from February 2020 to February 2022. Lease trade-outs signed November 2021 to January 2022: new leases plus 28 percent, renewals plus 22 percent.

Part of the income lift is the renovation premium and part is the Phoenix market in 2021. The occupancy, concession, collections and expense lines are the operating contribution, and they are the ones Stellar is accountable for.