Centerspace Reports Third Quarter 2021 Financial Results and Increases Financial Outlook

MINNEAPOLIS, Nov. 1, 2021 /PRNewswire/ -- Centerspace (NYSE: CSR) announced today its financial and operating results for the three and nine months ended September 30, 2021. The tables below show Net Income, Funds from Operations ("FFO")¹, and Core FFO¹, all on a per share basis, for the three and nine months ended September 30, 2021; Same-Store Revenues, Expenses, and Net Operating Income ("NOI")¹ over comparable periods; and Same-Store Weighted-Average Occupancy for each of the three months ended September 30, 2021, June 30, 2021, and September 30, 2020.

Highlights

• Net Loss was $(0.81) per diluted share for the third quarter of 2021, compared to Net Income of $1.38 per diluted share for the same period of 2020;
• Core FFO increased 4.3% to $0.98 per diluted share for the three months ended September 30, 2021, compared to $0.94 for the three months ended September 30, 2020 and 5.4% to $2.91 per diluted share for the nine months ended September 30, 2021, compared to $2.76 for the nine months ended September 30, 2020;
• Same-store revenues increased by 6.2% for the third quarter of 2021 compared to the third quarter of 2020;
• Same-store new lease over lease rates were 10.8% for the third quarter of 2021, compared to 0.0% in the same period of the prior year. Same-store renewal lease over lease rates were 7.2% for the third quarter of 2021, compared to 0.6% for the same period the prior year. Same-store blended lease over lease rates were 9.0% for the third quarter of 2021, compared to 0.4% for the same period the prior year;
• Full year earnings per share mid-point outlook of $(0.30) resulting in a 3% increase in Core FFO from our prior outlook;
• Continued to grow the portfolio through the strategic portfolio acquisition comprised of 14 communities in Minneapolis, Minnesota and three communities in St. Cloud, Minnesota totaling 2,696 apartment homes for an aggregate acquisition cost of $359.9 million;
• Issued $125.0 million of unsecured notes with a weighted average interest rate of 2.6% and weighted average maturity of 10.5 years with tranches of $35.0 million in 2030, $50.0 million in 2031, $25.0 million in 2032 and $15.0 million in 2034;
• Improved and extended $250.0 million revolving credit facility with an accordion feature for up to $400.0 million which matures in September 2025; and
• Continued to strengthen the balance sheet by issuing 199,000 common shares under the ATM program for net proceeds of $19.6 million.

Acquisitions and Dispositions

On September 1, 2021, Centerspace closed on its strategic portfolio acquisition in Minneapolis and St. Cloud, Minnesota for an aggregate acquisition cost of $359.9 million. The  portfolio is comprised of 14 communities in Minneapolis, Minnesota and three communities in St. Cloud, Minnesota. The acquisition added 2,696 apartments homes to the portfolio. Centerspace fully funded the acquisition with the issuance of $181.4 million of Convertible Preferred Operating Partnership Units at $100.0 dollar par value that pay a 3.875% dividend rate and are convertible into common units at an exchange rate of 1.2048 common units per Convertible Preferred Operating Partnership Units representing a conversion price of $83.00 per unit. The acquired assets were subject to $126.5 million in mortgage liabilities of which $20.0 million was assumed at a rate of 4.31% with the remaining $106.5 million refinanced through a $198.9 million Fannie Mae Credit Facility. The Fannie Mae Credit facility includes tranches in 7, 10 and 12-year increments with a weighted average interest rate of 2.78%. The additional proceeds from the refinancing were used to reduce the outstanding balance under our bank credit facility.  

Subsequent to the end of the quarter, Centerspace sold its sole remaining commercial property Minot IPS located in Minot, North Dakota on October 18th for an aggregate sale price of $2.3 million. 

Balance Sheet

At the end of the third quarter, Centerspace had $219.8 million of total liquidity on its balance sheet, consisting of $199.0 million available under the line of credit and cash and cash equivalents of $20.8 million.

In the three months ended September 30, 2021, Centerspace issued $125.0 million of unsecured notes with a weighted average interest rate of 2.6% and weighted average maturity of 10.5 years.

During the quarter, Centerspace amended and extended our existing $250.0 million revolving credit facility. The new facility includes an accordion feature for up to $400.0 million and matures in September 2025 with two optional six-month extensions.

Revised 2021 Financial Outlook

Centerspace revised its 2021 financial outlook, which includes the acquisition of KMS on September 1, 2021. For additional information, see S-16 of the Supplemental Financial and Operating Data for the quarter ended September 30, 2021 included at the end of this release. These ranges should be considered in their entirety. The revised outlook is:

COVID-19 Developments

The COVID-19 pandemic, including the associated economic disruptions, has continued to impact business and operations since March 2020. The company continues to prioritize the health and well-being of its residents, team members, and the communities it serves.

A discussion of the ongoing and potential effects of the COVID-19 pandemic on financial condition, results of operations, and cash flows can be found in "Management's Discussion and Analysis of Financial Conditions and Results of Operations" presented in the company's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 22, 2021. For a more detailed description of the risks and uncertainties affecting business, see the risk factors presented in Item 1A in the company's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 22, 2021.

Upcoming Events

Centerspace is scheduled to participate in the upcoming National Association of Real Estate Investment Trusts ("Nareit") REITworld 2021 Annual Conference, which will be held virtually November 9-11.

Earnings Call

Supplemental Information

Supplemental Operating and Financial Data for the quarter ended September 30, 2021 included herein ("Supplemental Information"), is available in the Investors section on Centerspace's website at www.centerspacehomes.com or by calling Investor Relations at 701-837-7104. Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined and reconciled in the Supplemental Financial and Operating Data, which accompanies this earnings release.  

About Centerspace

Centerspace is an owner and operator of apartment communities committed to providing great homes by focusing on integrity and serving others. Founded in 1970, as of September 30, 2021, Centerspace owned 79 apartment communities consisting of 14,275 apartment homes located in Colorado, Minnesota, Montana, Nebraska, North Dakota, and South Dakota. Centerspace was named a Top Workplace for 2021 by the Minneapolis Star Tribune. For more information, please visit www.centerspacehomes.com.

Forward-Looking Statements

Certain statements in this press release and the accompanying Supplemental Operating and Financial Data are based on the company's current expectations and assumptions, and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements to be materially different from the results of operations, financial conditions, or plans expressed or implied by the forward-looking statements. Although the company believes the expectations reflected in its forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be achieved. Such risks, uncertainties, and other factors that might cause such differences include, but are not limited to those risks and uncertainties detailed from time to time in Centerspace's filings with the Securities and Exchange Commission, including the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" contained in its Annual Report on Form 10-K for the year ended December 31, 2020, in its subsequent quarterly reports on Form 10-Q, and in other public reports. The company assumes no obligation to update or supplement forward-looking statements that become untrue due to subsequent events.

Contact Information

Investor Relations
Emily Miller
Phone: 701-837-7104
[email protected]

Marketing & Media
Kelly Weber
Phone: 701-837-7104
[email protected]

CENTERSPACE
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (unaudited)

This release contains certain non-GAAP financial measures. The non-GAAP financial measures should not be considered a substitute for operating results determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The definitions and calculations of these non-GAAP financial measures, as calculated by us, may not be comparable to non-GAAP financial measures reported by other REITs that do not define each of the non-GAAP financial measures exactly as Centerspace does.

The company provides certain information on a same-store and non-same-store basis. Same-store apartment communities are owned or in service for substantially all of the periods being compared, and, in the case of newly-constructed properties, have achieved a target level of physical occupancy of 90%. On the first day of each calendar year, Centerspace determines the composition of its same-store pool for that year as well as adjusts the previous year, which allows us to evaluate full period-over-period operating comparisons for existing apartment communities and their contribution to net income. The company believes that measuring performance on a same-store basis is useful to investors because it enables evaluation of how a fixed pool of its communities are performing year-over-year. Centerspace uses this measure to assess whether or not the company has been successful in increasing NOI, renewing the leases on existing residents, controlling operating costs, and making prudent capital improvements.

Reconciliation of Operating Income to Net Operating Income

Net operating income, or NOI, is a non-GAAP financial measure which the company defines as total real estate revenues less property operating expenses, including real estate taxes. Centerspace believes that NOI is an important supplemental measure of operating performance for real estate because it provides a measure of operations that is unaffected by depreciation, amortization, financing, property management overhead, casualty losses, and general and administrative expenses. NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income, net income available for common shareholders, or cash flow from operating activities as a measure of financial performance.

Reconciliation of Same-Store Controllable Expenses to Total Property Operating Expenses, Including Real Estate Taxes

Same-store controllable expenses exclude real estate taxes and insurance, in order to provide a measure of expenses that are within management's control, and is used for the purposes of budgeting, business planning, and performance evaluation. This is a non-GAAP financial measure and should not be considered an alternative to total expenses or total property operating expenses.