8-K
CENTERSPACE (CSR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 30, 2023
CENTERSPACE
(Exact name of Registrant as specified in its charter)
| North Dakota | 001-35624 | 45-0311232 |
|---|---|---|
| (State or Other Jurisdiction<br>of Incorporation or Organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
3100 10th Street SW, Post Office Box 1988, Minot, ND 58702-1988
(Address of principal executive offices) (Zip code)
(701) 837-4738
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed from last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Shares of Beneficial Interest, no par value | CSR | New York Stock Exchange |
| Series C Cumulative Redeemable Preferred Shares | CSR -PRC | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
The Company issued an earnings release on October 30, 2023, announcing certain financial and operational results for the three and nine months ended September 30, 2023. A copy of the press release is furnished as Exhibit 99.1 and incorporated herein by reference.
The information in this Item 2.02 and item 9.01, including the press release furnished as Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any Company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such filing.
ITEM 9.01 Financial Statements and Exhibits
(d)Exhibits
| Exhibit | |
|---|---|
| Number | Description |
| 99.1 | Earnings Release and Supplemental Operating and Financial Data, dated October 30, 2023. |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL Document. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Centerspace | ||
|---|---|---|
| By | /s/ Anne Olson | |
| Anne Olson | ||
| Date: October 30, 2023 | President and Chief Executive Officer |
Document
Exhibit 99.1
Earnings Release
Centerspace Reports Third Quarter 2023 Financial Results and Raises Mid-Point for 2023 Core FFO Guidance
MINNEAPOLIS, MN, October 30, 2023 – Centerspace (NYSE: CSR) announced today its financial and operating results for the three and nine months ended September 30, 2023. The tables below show Net Income (Loss), Funds from Operations (“FFO”)1, and Core FFO1, all on a per common share basis, for the three and nine months ended September 30, 2023; Same-Store Revenues, Expenses, and Net Operating Income (Loss) (“NOI”)1 over comparable periods; and Same-Store1 Weighted-Average Occupancy for each of the three months ended September 30, 2023, June 30, 2023, and September 30, 2022.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Per Common Share | 2023 | 2022 | 2023 | 2022 | |||||||||
| Net income (loss) - diluted | $ | 0.41 | $ | (0.14) | $ | 2.96 | $ | (1.11) | |||||
| FFO - diluted(1) | $ | 1.15 | $ | 1.13 | $ | 3.15 | $ | 3.16 | |||||
| Core FFO - diluted(1) | $ | 1.20 | $ | 1.15 | $ | 3.56 | $ | 3.25 | Year-Over-Year<br>Comparison | Sequential<br>Comparison | YTD Comparison | ||
| --- | --- | --- | --- | ||||||||||
| Same-Store Results(2) | Q3 2023 vs. Q3 2022 | Q3 2023 vs. Q2 2023 | 2023 vs. 2022 | ||||||||||
| Revenues | 5.7% | 0.6% | 8.3% | ||||||||||
| Expenses | 6.1% | 7.4% | 6.6% | ||||||||||
| NOI(1) | 5.4% | (3.7)% | 9.5% | Three months ended | Nine months ended | ||||||||
| --- | --- | --- | --- | --- | --- | ||||||||
| Same-Store Results(2) | September 30, 2023 | June 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | ||||||||
| Weighted Average Occupancy | 94.7% | 95.2% | 94.5% | 94.9% | 94.5% |
(1)NOI, FFO, Core FFO, and same-store results are non-GAAP financial measures. For more information on their usage and presentation, and a reconciliation to the most directly comparable GAAP measures, refer to “Non-GAAP Financial Measures and Reconciliations” in supplemental and financial operating data within.
(2)Same-store results are updated for disposition activity. Refer to “Non-GAAP Financial Measures and Reconciliations” in supplemental and financial operating data within.
Highlights
•During the three months ended September 30, 2023, Centerspace successfully executed the sale of four non-core apartment communities and associated commercial space in Minot, North Dakota for an aggregate sales price of $82.5 million, resulting in a gain on sale of $11.3 million;
•Net income increased to $0.41 per diluted share for the third quarter of 2023, compared to Net loss of $0.14 per diluted share for the same period of 2022;
•Core FFO per diluted share increased 4.3% to $1.20 for the three months ended September 30, 2023, compared to $1.15 for the three months ended September 30, 2022;
•Same-store revenues increased by 5.7% for the third quarter of 2023 compared to the third quarter of 2022, driving a 5.4% increase in NOI compared to the same period of the prior year; and
•Narrowed the 2023 financial outlook ranges for net income per diluted share and FFO per diluted share and raised the mid-point for Core FFO per diluted share. Refer to page S-18 in the supplemental and financial operating date within for additional detail.
Balance Sheet
At the end of the third quarter, Centerspace had $285.7 million of total liquidity on its balance sheet, consisting of $256.0 million available under the lines of credit and cash and cash equivalents of $29.7 million.
As of September 30, 2023, the Company had no outstanding variable rate debt and only $30.6 million in debt maturing through 2025.
Subsequent Events
On October 11, 2023, the Company acquired Lake Vista Apartment Homes in Loveland, Colorado, for an aggregate purchase price of $94.5 million. The acquisition was financed through the assumption of $52.7 million in mortgage debt and cash.
Revised 2023 Financial Outlook
Centerspace revised its 2023 financial outlook. For additional information, see S-18 of the Supplemental Financial and Operating Data for the quarter ended September 30, 2023 included at the end of this release. These ranges should be considered in their entirety. The table below reflects the revised outlook.
| Previous Outlook for 2023 | Updated Outlook for 2023 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Low | High | Low | High | |||||||||
| Net income per Share – diluted | $ | 2.84 | $ | 3.64 | $ | 2.90 | $ | 3.56 | ||||
| Same-Store Revenue | 6.50 | % | 8.00 | % | 7.00 | % | 7.50 | % | ||||
| Same-Store Expenses | 4.00 | % | 5.25 | % | 4.00 | % | 4.50 | % | ||||
| Same-Store NOI | 8.50 | % | 10.00 | % | 9.00 | % | 9.50 | % | ||||
| FFO per Share – diluted | $ | 4.14 | $ | 4.35 | $ | 4.20 | $ | 4.27 | ||||
| Core FFO per Share – diluted | $ | 4.55 | $ | 4.75 | $ | 4.63 | $ | 4.71 |
Additional assumptions:
•Same-store capital expenditures of $1,000 per home to $1,050 per home
•Value-add expenditures of $30.0 million to $31.5 million
•Acquisitions of $94.5 million
•Proceeds from dispositions of $226.8 million
Earnings Call
| Live webcast and replay: https://ir.centerspacehomes.com | |||
|---|---|---|---|
| Live Conference Call | Conference Call Replay | ||
| Tuesday, October 31, 2023, at 10:00 AM ET | Replay available until November 14, 2023 | ||
| USA Toll Free Number | 1-833-470-1428 | USA Toll Free Number | 1-929-458-6194 |
| International Toll Free Number | 1-929-526-1599 | International Toll Free Number | 1-929-458-6194 |
| Canada Toll Free Number | 1-833-950-0062 | Canada Toll Free Number | 1-226-828-7575 |
| Conference Number | 775561 | Conference Number | 468138 |
Supplemental Information
Supplemental Operating and Financial Data for the quarter ended September 30, 2023 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, 2023, Centerspace owned interests in 71 apartment communities consisting of 12,785 apartment homes located in Colorado, Minnesota, Montana, Nebraska, North Dakota, and South Dakota. Centerspace was named a Top Workplace for the fourth consecutive year in 2023 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. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Forward-looking statements are typically identified by the use of terms such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “assumes,” “may,” “projects,” “outlook,” “future,” and variations of such words and similar expressions. 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. As a result, reliance should not be placed on these forward-looking statements, as these statements are subject to known and unknown risks, uncertainties, and other factors beyond the company's control and could differ materially from actual results and performance. 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, 2022, 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
Josh Klaetsch
Phone: 701-837-7104
Email: IR@centerspacehomes.com
Marketing & Media
Kelly Weber
Phone: 701-837-7104
Email: kweber@centerspacehomes.com
Supplemental Financial and Operating Data
Table of Contents
September 30, 2023
| Page | |
|---|---|
| Common Share Data | S-1 |
| Key Financial Data | |
| Condensed Consolidated Statements of Operations | S-2 |
| Condensed Consolidated Balance Sheets | S-3 |
| Non-GAAP Financial Measures and Reconciliations | |
| Net Operating Income | S-4 |
| Same-Store Controllable Expenses | S-7 |
| Funds From Operations and Core Funds From Operations | S-7 |
| Adjusted EBITDA | S-10 |
| Debt and Capital Analysis | |
| Debt Analysis | S-11 |
| Capital Analysis | S-12 |
| Portfolio Analysis | |
| Same-Store Comparisons | S-13 |
| Portfolio Summary | S-16 |
| Capital Expenditures | S-17 |
| 2023 Financial Outlook | S-18 |
Common Share Data (NYSE: CSR)
| 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2023 | 2023 | 2022 | 2022 | |||||||||||
| High closing price | $ | 66.57 | $ | 64.18 | $ | 71.07 | $ | 70.20 | $ | 89.71 | |||||
| Low closing price | $ | 59.39 | $ | 53.98 | $ | 51.39 | $ | 58.50 | $ | 65.85 | |||||
| Average closing price | $ | 62.52 | $ | 58.61 | $ | 61.68 | $ | 64.64 | $ | 79.40 | |||||
| Closing price at end of quarter | $ | 60.26 | $ | 61.36 | $ | 54.63 | $ | 58.67 | $ | 67.32 | |||||
| Common share distributions – annualized | $ | 2.92 | $ | 2.92 | $ | 2.92 | $ | 2.92 | $ | 2.92 | |||||
| Closing dividend yield – annualized | 4.8 | % | 4.8 | % | 5.3 | % | 5.0 | % | 4.3 | % | |||||
| Closing common shares outstanding (thousands) | 15,052 | 14,949 | 15,032 | 15,020 | 15,376 | ||||||||||
| Closing limited partnership units outstanding (thousands) | 864 | 961 | 967 | 971 | 980 | ||||||||||
| Closing Series E preferred units outstanding, as converted (thousands) | 2,087 | 2,094 | 2,103 | 2,119 | 2,186 | ||||||||||
| Total closing common shares, limited partnership units, and Series E preferred units, as converted, outstanding (thousands) | 18,003 | 18,004 | 18,102 | 18,110 | 18,542 | ||||||||||
| Closing market value of outstanding common shares, plus imputed closing market value of outstanding limited partnership units and Series E preferred units, as converted (thousands) | $ | 1,084,861 | $ | 1,104,725 | $ | 988,912 | $ | 1,062,514 | $ | 1,248,247 | |||||
| S-1 | |||||||||||||||
| --- |
CENTERSPACE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | 9/30/2022 | 9/30/2023 | 9/30/2022 | ||||||||||
| REVENUE | $ | 64,568 | $ | 64,776 | $ | 67,897 | $ | 67,848 | $ | 65,438 | $ | 197,241 | $ | 188,868 | ||
| EXPENSES | ||||||||||||||||
| Property operating expenses, excluding real estate taxes | 19,602 | 17,872 | 21,342 | 21,755 | 20,290 | 58,816 | 58,315 | |||||||||
| Real estate taxes | 7,143 | 7,174 | 7,581 | 7,464 | 7,039 | 21,898 | 21,103 | |||||||||
| Property management expense | 2,197 | 2,247 | 2,568 | 2,358 | 2,563 | 7,012 | 7,537 | |||||||||
| Casualty loss | 937 | 53 | 252 | 335 | 276 | 1,242 | 1,256 | |||||||||
| Depreciation and amortization | 24,697 | 24,371 | 25,993 | 25,768 | 23,720 | 75,061 | 79,489 | |||||||||
| General and administrative expenses | 3,832 | 4,162 | 7,723 | 3,276 | 4,519 | 15,717 | 14,240 | |||||||||
| TOTAL EXPENSES | $ | 58,408 | $ | 55,879 | $ | 65,459 | $ | 60,956 | $ | 58,407 | $ | 179,746 | $ | 181,940 | ||
| Gain (loss) on sale of real estate and other investments | 11,235 | (67) | 60,159 | 14 | — | 71,327 | 27 | |||||||||
| Loss on litigation settlement | — | (2,864) | — | — | — | (2,864) | — | |||||||||
| Operating income | 17,395 | 5,966 | 62,597 | 6,906 | 7,031 | 85,958 | 6,955 | |||||||||
| Interest expense | (8,556) | (8,641) | (10,319) | (9,603) | (7,871) | (27,516) | (23,147) | |||||||||
| Interest and other income | 330 | 295 | 49 | 132 | 70 | 674 | 1,116 | |||||||||
| Net income (loss) | $ | 9,169 | $ | (2,380) | $ | 52,327 | $ | (2,565) | $ | (770) | $ | 59,116 | $ | (15,076) | ||
| Dividends to Series D preferred unitholders | (160) | (160) | (160) | (160) | (160) | (480) | (480) | |||||||||
| Net (income) loss attributable to noncontrolling interest – Operating Partnership and Series E preferred units | (1,204) | 712 | (8,566) | 753 | 439 | (9,058) | 3,546 | |||||||||
| Net income attributable to noncontrolling interests – consolidated real estate entities | (31) | (35) | (30) | (34) | (32) | (96) | (93) | |||||||||
| Net income (loss) attributable to controlling interests | 7,774 | (1,863) | 43,571 | (2,006) | (523) | 49,482 | (12,103) | |||||||||
| Dividends to preferred shareholders | (1,607) | (1,607) | (1,607) | (1,607) | (1,607) | (4,821) | (4,821) | |||||||||
| NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | 6,167 | $ | (3,470) | $ | 41,964 | $ | (3,613) | $ | (2,130) | $ | 44,661 | $ | (16,924) | ||
| Per Share Data - Basic | ||||||||||||||||
| Net income (loss) per common share – basic | $ | 0.41 | $ | (0.23) | $ | 2.79 | $ | (0.24) | $ | (0.14) | $ | 2.98 | $ | (1.11) | ||
| Per Share Data - Diluted | ||||||||||||||||
| Net income (loss) per common share – diluted | $ | 0.41 | $ | (0.23) | $ | 2.76 | $ | (0.24) | $ | (0.14) | $ | 2.96 | $ | (1.11) | S-2 | |
| --- |
CENTERSPACE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
| 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | 9/30/2022 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||||||
| Real estate investments | ||||||||||||
| Property owned | $ | 2,326,408 | $ | 2,434,138 | $ | 2,420,911 | $ | 2,534,124 | $ | 2,513,470 | ||
| Less accumulated depreciation | (516,673) | (543,264) | (519,167) | (535,401) | (511,000) | |||||||
| Total real estate investments | 1,809,735 | 1,890,874 | 1,901,744 | 1,998,723 | 2,002,470 | |||||||
| Cash and cash equivalents | 29,701 | 9,745 | 8,939 | 10,458 | 14,957 | |||||||
| Restricted cash | 22,496 | 566 | 48,903 | 1,433 | 1,417 | |||||||
| Other assets | 16,349 | 18,992 | 19,298 | 22,687 | 19,742 | |||||||
| TOTAL ASSETS | $ | 1,878,281 | $ | 1,920,177 | $ | 1,978,884 | $ | 2,033,301 | $ | 2,038,586 | ||
| LIABILITIES, MEZZANINE EQUITY, AND EQUITY | ||||||||||||
| LIABILITIES | ||||||||||||
| Accounts payable and accrued expenses | $ | 62,674 | $ | 56,713 | $ | 56,639 | $ | 58,812 | $ | 58,322 | ||
| Revolving lines of credit | — | 18,989 | 143,469 | 113,500 | 171,500 | |||||||
| Notes payable, net of unamortized loan costs | 299,443 | 299,428 | 299,412 | 399,007 | 299,388 | |||||||
| Mortgages payable, net of unamortized loan costs | 539,245 | 563,079 | 474,999 | 495,126 | 496,530 | |||||||
| TOTAL LIABILITIES | $ | 901,362 | $ | 938,209 | $ | 974,519 | $ | 1,066,445 | $ | 1,025,740 | ||
| SERIES D PREFERRED UNITS | $ | 16,560 | $ | 16,560 | $ | 16,560 | $ | 16,560 | $ | 16,560 | ||
| EQUITY | ||||||||||||
| Series C Preferred Shares of Beneficial Interest | 93,530 | 93,530 | 93,530 | 93,530 | 93,530 | |||||||
| Common Shares of Beneficial Interest | 1,169,025 | 1,169,501 | 1,176,059 | 1,177,484 | 1,209,732 | |||||||
| Accumulated distributions in excess of net income | (527,586) | (522,796) | (508,420) | (539,422) | (524,905) | |||||||
| Accumulated other comprehensive loss | (1,434) | (1,758) | (1,917) | (2,055) | (2,158) | |||||||
| Total shareholders’ equity | $ | 733,535 | $ | 738,477 | $ | 759,252 | $ | 729,537 | $ | 776,199 | ||
| Noncontrolling interests – Operating Partnership and Series E preferred units | 226,205 | 226,294 | 227,920 | 220,132 | 219,466 | |||||||
| Noncontrolling interests – consolidated real estate entities | 619 | 637 | 633 | 627 | 621 | |||||||
| TOTAL EQUITY | $ | 960,359 | $ | 965,408 | $ | 987,805 | $ | 950,296 | $ | 996,286 | ||
| TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY | $ | 1,878,281 | $ | 1,920,177 | $ | 1,978,884 | $ | 2,033,301 | $ | 2,038,586 | S-3 | |
| --- |
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 the company, 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 the company to evaluate the performance of existing apartment communities and their contribution to net operating 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, raising average rental revenue, renewing leases on existing residents, controlling operating costs, and making prudent capital improvements.
For the comparison of the nine months ended September 30, 2023 and 2022, five apartment communities were non-same-store. Sold communities are included in “Dispositions,” while “Other properties” includes non-multifamily properties and the non-multifamily components of mixed-use properties.
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 excludes gain (loss) on the sale of real estate and other investments, depreciation and amortization, financing costs, property management expenses, 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 (loss), net income (loss) available for common shareholders, or cash flow from operating activities as a measure of financial performance.
| S-4 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands, except percentages) | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Three Months Ended | Sequential | Year-Over-Year | ||||||||||
| 9/30/2023 | 6/30/2023 | 9/30/2022 | Change | % Change | Change | % Change | ||||||
| Operating income | $ | 17,395 | $ | 5,966 | $ | 7,031 | 191.6 | % | 147.4 | % | ||
| Adjustments: | ||||||||||||
| Property management expenses | 2,197 | 2,247 | 2,563 | (50) | (2.2) | % | (366) | (14.3) | % | |||
| Casualty loss | 937 | 53 | 276 | 884 | * | 661 | 239.5 | % | ||||
| Depreciation and amortization | 24,697 | 24,371 | 23,720 | 326 | 1.3 | % | 977 | 4.1 | % | |||
| General and administrative expenses | 3,832 | 4,162 | 4,519 | (330) | (7.9) | % | (687) | (15.2) | % | |||
| (Gain) loss on sale of real estate and other investments | (11,235) | 67 | — | (11,302) | * | (11,235) | N/A | |||||
| Loss on litigation settlement | — | 2,864 | — | (2,864) | (100.0) | % | — | — | ||||
| Net operating income | $ | 37,823 | $ | 39,730 | $ | 38,109 | (4.8) | % | (0.8) | % | ||
| Revenue | ||||||||||||
| Same-store | $ | 57,949 | $ | 57,630 | $ | 54,838 | 0.6 | % | 5.7 | % | ||
| Non-same-store | 3,556 | 3,629 | 2,219 | (73) | (2.0) | % | 1,337 | 60.3 | % | |||
| Other properties | 676 | 663 | 685 | 13 | 2.0 | % | (9) | (1.3) | % | |||
| Dispositions | 2,387 | 2,854 | 7,696 | (467) | (16.4) | % | (5,309) | (69.0) | % | |||
| Total | 64,568 | 64,776 | 65,438 | (208) | (0.3) | % | (870) | (1.3) | % | |||
| Property operating expenses, including real estate taxes | ||||||||||||
| Same-store | 23,906 | 22,262 | 22,533 | 1,644 | 7.4 | % | 1,373 | 6.1 | % | |||
| Non-same-store | 1,469 | 1,348 | 806 | 121 | 9.0 | % | 663 | 82.3 | % | |||
| Other properties | 270 | 189 | 267 | 81 | 42.9 | % | 3 | 1.1 | % | |||
| Dispositions | 1,100 | 1,247 | 3,723 | (147) | (11.8) | % | (2,623) | (70.5) | % | |||
| Total | 26,745 | 25,046 | 27,329 | 1,699 | 6.8 | % | (584) | (2.1) | % | |||
| Net operating income | ||||||||||||
| Same-store | 34,043 | 35,368 | 32,305 | (1,325) | (3.7) | % | 1,738 | 5.4 | % | |||
| Non-same-store | 2,087 | 2,281 | 1,413 | (194) | (8.5) | % | 674 | 47.7 | % | |||
| Other properties | 406 | 474 | 418 | (68) | (14.3) | % | (12) | (2.9) | % | |||
| Dispositions | 1,287 | 1,607 | 3,973 | (320) | (19.9) | % | (2,686) | (67.6) | % | |||
| Total | $ | 37,823 | $ | 39,730 | $ | 38,109 | (4.8) | % | (0.8) | % |
All values are in US Dollars.
* Not a meaningful percentage
| S-5 | |||||||
|---|---|---|---|---|---|---|---|
| (in thousands, except percentages) | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Nine Months Ended September 30, | |||||||
| 2023 | 2022 | Change | % Change | ||||
| Operating income | $ | 85,958 | $ | 6,955 | * | ||
| Adjustments: | |||||||
| Property management expenses | 7,012 | 7,537 | (525) | (7.0) | % | ||
| Casualty loss | 1,242 | 1,256 | (14) | (1.1) | % | ||
| Depreciation and amortization | 75,061 | 79,489 | (4,428) | (5.6) | % | ||
| General and administrative expenses | 15,717 | 14,240 | 1,477 | 10.4 | % | ||
| Gain on sale of real estate and other investments | (71,327) | (27) | (71,300) | * | |||
| Loss on litigation settlement | 2,864 | — | 2,864 | N/A | |||
| Net operating income | $ | 116,527 | $ | 109,450 | 6.5 | % | |
| Revenue | |||||||
| Same-store | $ | 172,071 | $ | 158,886 | 8.3 | % | |
| Non-same-store | 10,822 | 5,937 | 4,885 | 82.3 | % | ||
| Other properties | 2,014 | 1,885 | 129 | 6.8 | % | ||
| Dispositions | 12,334 | 22,160 | (9,826) | (44.3) | % | ||
| Total | 197,241 | 188,868 | 8,373 | 4.4 | % | ||
| Property operating expenses, including real estate taxes | |||||||
| Same-store | 69,791 | 65,461 | 4,330 | 6.6 | % | ||
| Non-same-store | 4,126 | 2,286 | 1,840 | 80.5 | % | ||
| Other properties | 546 | 691 | (145) | (21.0) | % | ||
| Dispositions | 6,251 | 10,980 | (4,729) | (43.1) | % | ||
| Total | 80,714 | 79,418 | 1,296 | 1.6 | % | ||
| Net operating income | |||||||
| Same-store | 102,280 | 93,425 | 8,855 | 9.5 | % | ||
| Non-same-store | 6,696 | 3,651 | 3,045 | 83.4 | % | ||
| Other properties | 1,468 | 1,194 | 274 | 22.9 | % | ||
| Dispositions | 6,083 | 11,180 | (5,097) | (45.6) | % | ||
| Total | $ | 116,527 | $ | 109,450 | 6.5 | % |
All values are in US Dollars.
* Not a meaningful percentage
| S-6 |
|---|
Reconciliation of Same-Store Controllable Expenses to Total Property Operating Expenses, Including Real Estate Taxes
Centerspace defines same-store controllable expenses as property operating expenses excluding real estate taxes and insurance. 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 and real estate taxes.
| (in thousands, except percentages) | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
| 2023 | 2022 | Change | % Change | 2023 | 2022 | Change | % Change | |||||||
| Controllable expenses | ||||||||||||||
| On-site compensation(1) | $ | 6,440 | $ | 5,617 | 14.7 | % | $ | 18,369 | $ | 16,515 | 11.2 | % | ||
| Repairs and maintenance | 3,946 | 4,261 | (315) | (7.4) | % | 10,315 | 10,358 | (43) | (0.4) | % | ||||
| Utilities | 3,513 | 3,670 | (157) | (4.3) | % | 11,555 | 11,709 | (154) | (1.3) | % | ||||
| Administrative and marketing | 1,436 | 1,286 | 150 | 11.7 | % | 3,923 | 3,674 | 249 | 6.8 | % | ||||
| Total | $ | 15,335 | $ | 14,834 | 3.4 | % | $ | 44,162 | $ | 42,256 | 4.5 | % | ||
| Non-controllable expenses | ||||||||||||||
| Real estate taxes | $ | 6,334 | $ | 5,856 | 8.2 | % | $ | 19,099 | $ | 17,663 | 8.1 | % | ||
| Insurance | 2,237 | 1,843 | 394 | 21.4 | % | 6,530 | 5,542 | 988 | 17.8 | % | ||||
| Total | $ | 8,571 | $ | 7,699 | 11.3 | % | $ | 25,629 | $ | 23,205 | 10.4 | % | ||
| Property operating expenses, including real estate taxes - non-same-store | $ | 1,469 | $ | 806 | 82.3 | % | $ | 4,126 | $ | 2,286 | 80.5 | % | ||
| Property operating expenses, including real estate taxes - other properties | 270 | 267 | 3 | 1.1 | % | 546 | 691 | (145) | (21.0) | % | ||||
| Property operating expenses, including real estate taxes - dispositions | 1,100 | 3,723 | (2,623) | (70.5) | % | 6,251 | 10,980 | (4,729) | (43.1) | % | ||||
| Total property operating expenses, including real estate taxes | $ | 26,745 | $ | 27,329 | (2.1) | % | $ | 80,714 | $ | 79,418 | 1.6 | % |
All values are in US Dollars.
(1)On-site compensation for administration, leasing, and maintenance personnel.
Reconciliation of Net Income (Loss) Available to Common Shareholders to Funds From Operations and Core Funds From Operations
Centerspace believes that FFO, which is a non-GAAP financial measure used as a standard supplemental measure for equity real estate investment trusts, is helpful to investors in understanding its operating performance, primarily because its calculation does not assume that the value of real estate assets diminishes predictably over time, as implied by the historical cost convention of GAAP and the recording of depreciation and amortization.
Centerspace uses the definition of FFO adopted by the National Association of Real Estate Investment Trusts, Inc. (“Nareit”). Nareit defines FFO as net income or loss calculated in accordance with GAAP, excluding:
•depreciation and amortization related to real estate;
•gains and losses from the sale of certain real estate assets;
•impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity; and
•similar adjustments for partially owned consolidated real estate entities.
The exclusion in Nareit’s definition of FFO of gains and losses from the sale of real estate assets and impairment write-downs helps to identify the operating results of the long-term assets that form the base of the company's investments, and assists management and investors in comparing those operating results between periods.
Due to the limitations of the Nareit FFO definition, Centerspace has made certain interpretations in applying this definition. The company believes that all such interpretations not specifically identified in the Nareit definition are consistent with this definition. Nareit’s FFO White Paper 2018 Restatement clarified that impairment write-downs of land related to a REIT’s main business are excluded from FFO and a REIT has the option to exclude impairment write-downs of assets that are incidental to its main business.
| S-7 |
|---|
While FFO is widely used by Centerspace as a primary performance metric, not all real estate companies use the same definition of FFO or calculate FFO in the same way. Accordingly, FFO presented here is not necessarily comparable to FFO presented by other real estate companies. FFO should not be considered as an alternative to net income or any other GAAP measurement of performance, but rather should be considered as an additional, supplemental measure. FFO also does not represent cash generated from operating activities in accordance with GAAP, nor is it indicative of funds available to fund all cash flow needs, including the ability to service indebtedness or make distributions to shareholders.
Core Funds from Operations (“Core FFO”) is FFO as adjusted for non-routine items or items not considered core to business operations. By further adjusting for items that are not considered part of core business operations, the company believes that Core FFO provides investors with additional information to compare core operating and financial performance between periods. Core FFO should not be considered as an alternative to net income, or any other GAAP measurement of performance, but rather should be considered an additional supplemental measure. Core FFO also does not represent cash generated from operating activities in accordance with GAAP, nor is it indicative of funds available to fund the company's cash needs, including its ability to service indebtedness or make distributions to shareholders. Core FFO is a non-GAAP and non-standardized financial measure that may be calculated differently by other REITs and should not be considered a substitute for operating results determined in accordance with GAAP.
| S-8 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share amounts) | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Three Months Ended | Nine Months Ended | |||||||||||||
| 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | 9/30/2022 | 9/30/2023 | 9/30/2022 | ||||||||
| Funds From Operations | ||||||||||||||
| Net income (loss) available to common shareholders | $ | 6,167 | $ | (3,470) | $ | 41,964 | $ | (3,613) | $ | (2,130) | $ | 44,661 | $ | (16,924) |
| Adjustments: | ||||||||||||||
| Noncontrolling interests – Operating Partnership and Series E preferred units | 1,204 | (712) | 8,566 | (753) | (439) | 9,058 | (3,546) | |||||||
| Depreciation and amortization | 24,697 | 24,371 | 25,993 | 25,768 | 23,720 | 75,061 | 79,489 | |||||||
| Less depreciation – non real estate | (56) | (89) | (91) | (91) | (94) | (236) | (296) | |||||||
| Less depreciation – partially owned entities | (20) | (19) | (19) | (19) | (18) | (58) | (46) | |||||||
| (Gain) loss on sale of real estate and other assets | (11,235) | 71 | (60,159) | (14) | — | (71,323) | (27) | |||||||
| FFO applicable to common shares and Units | $ | 20,757 | $ | 20,152 | $ | 16,254 | $ | 21,278 | $ | 21,039 | $ | 57,163 | $ | 58,650 |
| Adjustments to Core FFO: | ||||||||||||||
| Non-cash casualty (gain) loss | 854 | (52) | 13 | 20 | 46 | 815 | 234 | |||||||
| Loss on extinguishment of debt | — | — | — | — | — | — | 5 | |||||||
| Technology implementation costs(1) | — | — | — | 89 | 234 | — | 784 | |||||||
| Interest rate swap termination, amortization, and mark-to-market | 324 | 159 | 138 | 104 | 204 | 621 | (204) | |||||||
| Amortization of assumed debt | (116) | (116) | (116) | (117) | (116) | (348) | (347) | |||||||
| Pursuit costs | — | — | 5 | 137 | 38 | 5 | 1,165 | |||||||
| Severance and transition related costs | — | (19) | 3,199 | — | — | 3,180 | — | |||||||
| Loss on litigation settlement and one-time trial costs(2) | 34 | 3,201 | — | — | — | 3,235 | — | |||||||
| Other miscellaneous items(3) | (129) | (22) | 49 | (28) | 17 | (102) | 113 | |||||||
| Core FFO applicable to common shares and Units | $ | 21,724 | $ | 23,303 | $ | 19,542 | $ | 21,483 | $ | 21,462 | $ | 64,569 | $ | 60,400 |
| FFO applicable to common shares and Units | $ | 20,757 | $ | 20,152 | $ | 16,254 | $ | 21,278 | $ | 21,039 | $ | 57,163 | $ | 58,650 |
| Dividends to preferred unitholders | 160 | 160 | 160 | 160 | 160 | 480 | 480 | |||||||
| FFO applicable to common shares and Units - diluted | $ | 20,917 | $ | 20,312 | $ | 16,414 | $ | 21,438 | $ | 21,199 | $ | 57,643 | $ | 59,130 |
| Core FFO applicable to common shares and Units | $ | 21,724 | $ | 23,303 | $ | 19,542 | $ | 21,483 | $ | 21,462 | $ | 64,569 | $ | 60,400 |
| Dividends to preferred unitholders | 160 | 160 | 160 | 160 | 160 | 480 | 480 | |||||||
| Core FFO applicable to common shares and Units - diluted | $ | 21,884 | $ | 23,463 | $ | 19,702 | $ | 21,643 | $ | 21,622 | $ | 65,049 | $ | 60,880 |
| Per Share Data | ||||||||||||||
| Net income (loss) per share and Unit - diluted | $ | 0.41 | $ | (0.23) | $ | 2.76 | $ | (0.24) | $ | (0.14) | $ | 2.96 | $ | (1.11) |
| FFO per share and Unit - diluted | $ | 1.15 | $ | 1.11 | $ | 0.89 | $ | 1.16 | $ | 1.13 | $ | 3.15 | $ | 3.16 |
| Core FFO per share and Unit - diluted | $ | 1.20 | $ | 1.28 | $ | 1.07 | $ | 1.17 | $ | 1.15 | $ | 3.56 | $ | 3.25 |
| Weighted average shares - basic | 14,989 | 14,949 | 15,025 | 15,027 | 15,373 | 14,988 | 15,280 | |||||||
| Effect of redeemable operating partnership Units | 908 | 965 | 968 | 974 | 984 | 943 | 980 | |||||||
| Effect of Series D preferred units | 228 | 228 | 228 | 228 | 228 | 228 | 228 | |||||||
| Effect of Series E preferred units | 2,093 | 2,103 | 2,118 | 2,185 | 2,186 | 2,105 | 2,186 | |||||||
| Effect of dilutive restricted stock units and stock options | 28 | 24 | 20 | 9 | 30 | 23 | 48 | |||||||
| Weighted average shares and Units - diluted | 18,246 | 18,269 | 18,359 | 18,423 | 18,801 | 18,287 | 18,722 |
(1)Costs are related to a two-year implementation.
(2)Consists of a $2.9 million loss on litigation settlement for a trial judgment entered against the Company and $371,000 in one-time trial costs related to the litigation matter for the nine months ended September 30, 2023.
(3)Consists of (gain) loss on investments.
| S-9 |
|---|
Reconciliation of Net Income (Loss) Available to Controlling Interests to Adjusted EBITDA
Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, gain/loss on sale of real estate and other investments, impairment of real estate investments, gain/loss on extinguishment of debt, gain/loss from involuntary conversion; and other non-routine items or items not considered core to business operations. The company considers Adjusted EBITDA to be an appropriate supplemental performance measure because it permits investors to view income from operations without the effect of depreciation, financing costs, or non-operating gains and losses. Adjusted EBITDA is a non-GAAP financial measure and should not be considered a substitute for operating results determined in accordance with GAAP.
| (in thousands) | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Nine Months Ended | |||||||||||||
| 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | 9/30/2022 | 9/30/2023 | 9/30/2022 | ||||||||
| Adjusted EBITDA | ||||||||||||||
| Net income (loss) available to controlling interests | $ | 7,774 | $ | (1,863) | $ | 43,571 | $ | (2,006) | $ | (523) | $ | 49,482 | $ | (12,103) |
| Adjustments: | ||||||||||||||
| Dividends to Series D preferred unitholders | 160 | 160 | 160 | 160 | 160 | 480 | 480 | |||||||
| Noncontrolling interests – Operating Partnership and Series E preferred units | 1,204 | (712) | 8,566 | (753) | (439) | 9,058 | (3,546) | |||||||
| Income (loss) before noncontrolling interests – Operating Partnership and Series E preferred units | $ | 9,138 | $ | (2,415) | $ | 52,297 | $ | (2,599) | $ | (802) | $ | 59,020 | $ | (15,169) |
| Adjustments: | ||||||||||||||
| Interest expense | 8,542 | 8,626 | 10,305 | 9,589 | 7,856 | 27,473 | 23,103 | |||||||
| Loss on extinguishment of debt | — | — | — | — | — | — | 5 | |||||||
| Depreciation and amortization related to real estate investments | 24,675 | 24,351 | 25,971 | 25,747 | 23,699 | 74,997 | 79,438 | |||||||
| Non-cash casualty (gain) loss | 854 | (52) | 13 | 20 | 46 | 815 | 234 | |||||||
| Interest income | (187) | (248) | (92) | (92) | (82) | (527) | (620) | |||||||
| (Gain) loss on sale of real estate and other investments | (11,235) | 71 | (60,159) | (14) | — | (71,323) | (27) | |||||||
| Technology implementation costs(1) | — | — | — | 89 | 234 | — | 784 | |||||||
| Interest rate swap mark-to-market | — | — | — | — | — | — | (564) | |||||||
| Pursuit costs | — | — | 5 | 137 | 38 | 5 | 1,165 | |||||||
| Severance and transition related costs | — | (19) | 3,199 | — | — | 3,180 | — | |||||||
| Loss on litigation settlement and one-time trial costs(2) | 34 | 3,201 | — | — | — | 3,235 | — | |||||||
| Other miscellaneous items(3) | (129) | (22) | 49 | (28) | 17 | (102) | 113 | |||||||
| Adjusted EBITDA | $ | 31,692 | $ | 33,493 | $ | 31,588 | $ | 32,849 | $ | 31,006 | $ | 96,773 | $ | 88,462 |
(1)Costs are related to a two-year implementation.
(2)Consists of a $2.9 million loss on litigation settlement for a trial judgment entered against the Company and $371,000 in one-time trial costs related to the litigation matter.
(3)Consists of (gain) loss on investments.
| S-10 |
|---|
CENTERSPACE
DEBT ANALYSIS
(in thousands)
Debt Maturity Schedule
Annual Expirations
| Future Maturities of Debt | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Secured Fixed<br>Debt | Unsecured Fixed<br>Debt | Unsecured Variable Debt | Total<br>Debt | % of<br>Total Debt | Weighted<br><br>Average Interest Rate(1) | |||||||
| 2023 (remainder) | $ | — | $ | — | $ | — | $ | — | — | — | ||
| 2024 | — | — | — | — | — | — | ||||||
| 2025 | 30,634 | — | — | 30,634 | 3.6 | % | 3.70 | % | ||||
| 2026 | 50,889 | — | — | 50,889 | 6.0 | % | 3.73 | % | ||||
| 2027 | 49,993 | — | — | 49,993 | 5.9 | % | 3.47 | % | ||||
| Thereafter | 411,043 | 300,000 | — | 711,043 | 84.5 | % | 3.42 | % | ||||
| Total debt | $ | 542,559 | $ | 300,000 | $ | — | $ | 842,559 | 100.0 | % | 3.46 | % |
(1)Weighted average interest rate of debt that matures during the year.
| 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | 9/30/2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Debt Balances Outstanding(1) | |||||||||||||||
| Secured fixed rate - mortgages payable - other | $ | 343,709 | $ | 367,679 | $ | 279,340 | $ | 299,427 | $ | 300,956 | |||||
| Secured fixed rate - Fannie Mae credit facility | 198,850 | 198,850 | 198,850 | 198,850 | 198,850 | ||||||||||
| Unsecured variable rate lines of credit | — | 18,989 | 143,469 | 113,500 | 171,500 | ||||||||||
| Unsecured term loans | — | — | — | 100,000 | — | ||||||||||
| Unsecured senior notes | 300,000 | 300,000 | 300,000 | 300,000 | 300,000 | ||||||||||
| Debt total | $ | 842,559 | $ | 885,518 | $ | 921,659 | $ | 1,011,777 | $ | 971,306 | |||||
| Mortgages payable - other rate | 4.14 | % | 4.14 | % | 3.85 | % | 3.85 | % | 3.85 | % | |||||
| Fannie Mae Credit Facility rate | 2.78 | % | 2.78 | % | 2.78 | % | 2.78 | % | 2.78 | % | |||||
| Lines of credit rate(2) | — | 7.35 | % | 6.39 | % | 5.23 | % | 4.13 | % | ||||||
| Unsecured term loan rate | — | — | — | 5.57 | % | — | |||||||||
| Unsecured senior notes rate | 3.12 | % | 3.12 | % | 3.12 | % | 3.12 | % | 3.12 | % | |||||
| Total debt | 3.46 | % | 3.54 | % | 3.71 | % | 3.62 | % | 3.45 | % |
(1)Excludes deferred financing costs and premiums or discounts.
(2)Weighted average interest rate includes amount reclassified from accumulated other comprehensive income into interest expense from terminated interest rate swaps and excludes any unused facility fees.
| S-11 |
|---|
CENTERSPACE
CAPITAL ANALYSIS
(in thousands, except per share and unit amounts)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | 9/30/2022 | |||||||||||
| Equity Capitalization | |||||||||||||||
| Common shares outstanding | 15,052 | 14,949 | 15,032 | 15,020 | 15,376 | ||||||||||
| Operating partnership units outstanding | 864 | 961 | 967 | 971 | 980 | ||||||||||
| Series E preferred units (as converted) | 2,087 | 2,094 | 2,103 | 2,119 | 2,186 | ||||||||||
| Total common shares, Units, and Series E preferred units, as converted, outstanding | 18,003 | 18,004 | 18,102 | 18,110 | 18,542 | ||||||||||
| Market price per common share (closing price at end of period) | $ | 60.26 | $ | 61.36 | $ | 54.63 | $ | 58.67 | $ | 67.32 | |||||
| Equity capitalization-common shares and units | $ | 1,084,861 | $ | 1,104,725 | $ | 988,912 | $ | 1,062,514 | $ | 1,248,247 | |||||
| Recorded book value of preferred shares | $ | 93,530 | $ | 93,530 | $ | 93,530 | $ | 93,530 | $ | 93,530 | |||||
| Total equity capitalization | $ | 1,178,391 | $ | 1,198,255 | $ | 1,082,442 | $ | 1,156,044 | $ | 1,341,777 | |||||
| Series D Preferred Units | $ | 16,560 | $ | 16,560 | $ | 16,560 | $ | 16,560 | $ | 16,560 | |||||
| Debt Capitalization | |||||||||||||||
| Total debt | $ | 842,559 | $ | 885,518 | $ | 921,659 | $ | 1,011,777 | $ | 971,306 | |||||
| Total capitalization | $ | 2,037,510 | $ | 2,100,333 | $ | 2,020,661 | $ | 2,184,381 | $ | 2,329,643 | |||||
| Total debt to total capitalization(1) | 41.4 | % | 42.2 | % | 45.6 | % | 46.3 | % | 41.7 | % |
(1)Total debt to total market capitalization, a non-GAAP financial measure, is total debt not adjusted for unamortized deferred financing costs from the balance sheet divided by the sum of total debt from the balance sheet, market value of common shares, operating partnership units, and the as converted Series E preferred units, and book value of Series C preferred shares and Series D preferred units outstanding at the end of the period. This non-GAAP financial measure should not be considered a substitute for operating results determined in accordance with GAAP.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | 9/30/2022 | 9/30/2023 | 9/30/2022 | |||||||||||||||
| Debt service coverage ratio(1) | 3.11 | x | 3.33 | x | 2.70 | x | 2.99 | x | 3.35 | x | 3.03 | x | 3.22 | x | |||||||
| Adjusted EBITDA/Interest expense plus preferred distributions and principal amortization | 2.65 | x | 2.83 | x | 2.35 | x | 2.58 | x | 2.81 | x | 2.60 | x | 2.70 | x | |||||||
| Net debt/Adjusted EBITDA(2) | 6.41 | x | 6.54 | x | 7.22 | x | 7.62 | x | 7.71 | x | 6.30 | x | 8.11 | x | |||||||
| Net debt and preferred equity/Adjusted EBITDA(2) | 7.28 | x | 7.36 | x | 8.09 | x | 8.46 | x | 8.60 | x | 7.15 | x | 9.04 | x | |||||||
| Distribution Data | |||||||||||||||||||||
| Common shares and Units outstanding at record date | 15,916 | 15,910 | 15,999 | 15,991 | 16,356 | 15,916 | 16,356 | ||||||||||||||
| Total common distribution declared | $ | 11,615 | $ | 11,608 | $ | 11,668 | $ | 11,614 | $ | 11,939 | $ | 34,891 | $ | 35,831 | |||||||
| Common distribution per share and Unit | $ | 0.73 | $ | 0.73 | $ | 0.73 | $ | 0.73 | $ | 0.73 | $ | 2.19 | $ | 2.19 | |||||||
| Payout ratio (Core FFO per diluted share and unit basis)(3) | 60.8 | % | 57.0 | % | 68.2 | % | 62.4 | % | 63.5 | % | 61.5 | % | 67.4 | % |
(1)Debt service coverage ratio is computed by dividing Adjusted EBITDA by interest expense and principal amortization. This term is a non-GAAP financial measure and should not be considered a substitute for operating results determined in accordance with GAAP. Refer to the Adjusted EBITDA definition included within the Non-GAAP Financial Measures and Reconciliations section.
(2)Net debt is the total outstanding debt balance less cash and cash equivalents. Adjusted EBITDA is annualized for periods less than one year. Net debt and adjusted EBITDA are non-GAAP financial measures and should not be considered a substitute for operating results determined in accordance with GAAP. Refer to the Adjusted EBITDA definition included within the Non-GAAP Financial Measures and Reconciliations section.
| 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | 9/30/2022 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Total debt | $ | 842,559 | $ | 885,518 | $ | 921,659 | $ | 1,011,777 | $ | 971,306 |
| Less: cash and cash equivalents | 29,701 | 9,745 | 8,939 | 10,458 | 14,957 | |||||
| Net debt | $ | 812,858 | $ | 875,773 | $ | 912,720 | $ | 1,001,319 | $ | 956,349 |
(3)Payout ratio (Core FFO per diluted share and unit basis) is the ratio of the current quarterly or annual distribution rate per common share and unit divided by quarterly or annual Core FFO per diluted share and unit. This term is a non-GAAP financial measure and should not be considered a substitute for operating results determined in accordance with GAAP. Refer to the Core FFO definition included within the Non-GAAP Financial Measures and Reconciliations section.
| S-12 |
|---|
CENTERSPACE
SAME-STORE THIRD QUARTER COMPARISONS
(in thousands, except property data amounts and percentages)
| Apartment Homes Included | Revenues | Expenses | NOI | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Regions | Q3 2023 | Q3 2022 | % Change | Q3 2023 | Q3 2022 | % Change | Q3 2023 | Q3 2022 | % Change | ||||||||||||||||||||
| Denver, CO | 1,889 | $ | 11,805 | $ | 11,260 | 4.8 | % | $ | 4,172 | $ | 3,824 | 9.1 | % | $ | 7,633 | $ | 7,436 | 2.6 | % | ||||||||||
| Minneapolis, MN | 4,519 | 21,167 | 20,328 | 4.1 | % | 9,722 | 9,530 | 2.0 | % | 11,445 | 10,798 | 6.0 | % | ||||||||||||||||
| North Dakota | 1,710 | 6,912 | 6,404 | 7.9 | % | 2,718 | 2,395 | 13.5 | % | 4,194 | 4,009 | 4.6 | % | ||||||||||||||||
| Omaha, NE | 872 | 3,580 | 3,263 | 9.7 | % | 1,545 | 1,399 | 10.4 | % | 2,035 | 1,864 | 9.2 | % | ||||||||||||||||
| Rochester, MN | 1,129 | 5,779 | 5,451 | 6.0 | % | 2,245 | 2,039 | 10.1 | % | 3,534 | 3,412 | 3.6 | % | ||||||||||||||||
| St. Cloud, MN | 832 | 3,528 | 3,166 | 11.4 | % | 1,522 | 1,580 | (3.7) | % | 2,006 | 1,586 | 26.5 | % | ||||||||||||||||
| Other Mountain West(1) | 1,222 | 5,178 | 4,966 | 4.3 | % | 1,982 | 1,766 | 12.2 | % | 3,196 | 3,200 | (0.1) | % | ||||||||||||||||
| Same-Store Total | 12,173 | $ | 57,949 | $ | 54,838 | 5.7 | % | $ | 23,906 | $ | 22,533 | 6.1 | % | $ | 34,043 | $ | 32,305 | 5.4 | % | ||||||||||
| % of NOI Contribution | Weighted Average Occupancy (2) | Average Monthly<br><br>Rental Rate (3) | Average Monthly<br>Revenue per Occupied Home (4) | ||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Regions | Q3 2023 | Q3 2022 | Growth | Q3 2023 | Q3 2022 | % Change | Q3 2023 | Q3 2022 | % Change | ||||||||||||||||||||
| Denver, CO | 22.4 | % | 95.4 | % | 96.1 | % | (0.7) | % | $ | 1,957 | $ | 1,866 | 4.9 | % | $ | 2,185 | $ | 2,067 | 5.7 | % | |||||||||
| Minneapolis, MN | 33.6 | % | 94.2 | % | 94.3 | % | (0.1) | % | 1,480 | 1,427 | 3.7 | % | 1,657 | 1,590 | 4.2 | % | |||||||||||||
| North Dakota | 12.3 | % | 95.8 | % | 96.9 | % | (1.1) | % | 1,276 | 1,182 | 8.0 | % | 1,406 | 1,289 | 9.1 | % | |||||||||||||
| Omaha, NE | 6.0 | % | 95.1 | % | 94.9 | % | 0.2 | % | 1,299 | 1,192 | 9.0 | % | 1,439 | 1,314 | 9.5 | % | |||||||||||||
| Rochester, MN | 10.4 | % | 94.4 | % | 93.5 | % | 0.9 | % | 1,711 | 1,619 | 5.7 | % | 1,808 | 1,721 | 5.1 | % | |||||||||||||
| St. Cloud, MN | 5.9 | % | 92.2 | % | 85.8 | % | 6.4 | % | 1,349 | 1,296 | 4.1 | % | 1,532 | 1,478 | 3.7 | % | |||||||||||||
| Other Mountain West(1) | 9.4 | % | 95.0 | % | 95.7 | % | (0.7) | % | 1,338 | 1,279 | 4.6 | % | 1,487 | 1,415 | 5.1 | % | |||||||||||||
| Same-Store Total | 100.0 | % | 94.7 | % | 94.5 | % | 0.2 | % | $ | 1,511 | $ | 1,438 | 5.1 | % | $ | 1,676 | $ | 1,589 | 5.5 | % |
(1)Includes apartment communities in Billings, Montana and Rapid City, South Dakota.
(2)Weighted average occupancy is defined as the percentage resulting from dividing actual rental revenue by scheduled rent. Scheduled rental revenue represents the value of all apartment homes, with occupied apartment homes valued at contractual rental rates pursuant to leases and vacant apartment homes valued at estimated market rents. When calculating actual rents for occupied apartment homes and market rents for vacant homes, delinquencies and concessions are not taken into account. Market rates are determined using the currently offered effective rates on new leases at the community and are used as the starting point in determination of the market rates of vacant apartment homes. Centerspace believes that weighted average occupancy is a meaningful measure of occupancy because it considers the value of each vacant unit at its estimated market rate. Weighted average occupancy may not completely reflect short-term trends in physical occupancy, and the calculation of weighted average occupancy may not be comparable to that disclosed by other REITs.
(3)Average monthly rental rate is scheduled rent divided by the total number of apartment homes.
(4)Average monthly revenue per occupied home is defined as total rental revenues divided by the weighted average occupied apartment homes for the period.
| S-13 |
|---|
CENTERSPACE
SAME-STORE SEQUENTIAL QUARTER COMPARISONS
(in thousands, except property data amounts and percentages)
| Apartment Homes Included | Revenues | Expenses | NOI | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Regions | Q3 2023 | Q2 2023 | % Change | Q3 2023 | Q2 2023 | % Change | Q3 2023 | Q2 2023 | % Change | ||||||||||||||||||||
| Denver, CO | 1,889 | $ | 11,805 | $ | 11,968 | (1.4) | % | $ | 4,172 | $ | 3,944 | 5.8 | % | $ | 7,633 | $ | 8,024 | (4.9) | % | ||||||||||
| Minneapolis, MN | 4,519 | 21,167 | 21,069 | 0.5 | % | 9,722 | 9,088 | 7.0 | % | 11,445 | 11,981 | (4.5) | % | ||||||||||||||||
| North Dakota | 1,710 | 6,912 | 6,767 | 2.1 | % | 2,718 | 2,510 | 8.3 | % | 4,194 | 4,257 | (1.5) | % | ||||||||||||||||
| Omaha, NE | 872 | 3,580 | 3,443 | 4.0 | % | 1,545 | 1,381 | 11.9 | % | 2,035 | 2,062 | (1.3) | % | ||||||||||||||||
| Rochester, MN | 1,129 | 5,779 | 5,760 | 0.3 | % | 2,245 | 2,137 | 5.1 | % | 3,534 | 3,623 | (2.5) | % | ||||||||||||||||
| St. Cloud, MN | 832 | 3,528 | 3,459 | 2.0 | % | 1,522 | 1,405 | 8.3 | % | 2,006 | 2,054 | (2.3) | % | ||||||||||||||||
| Other Mountain West(1) | 1,222 | 5,178 | 5,164 | 0.3 | % | 1,982 | 1,797 | 10.3 | % | 3,196 | 3,367 | (5.1) | % | ||||||||||||||||
| Same-Store Total | 12,173 | $ | 57,949 | $ | 57,630 | 0.6 | % | $ | 23,906 | $ | 22,262 | 7.4 | % | $ | 34,043 | $ | 35,368 | (3.7) | % | ||||||||||
| % of NOI Contribution | Weighted Average Occupancy (2) | Average Monthly<br><br>Rental Rate (3) | Average Monthly<br>Revenue per Occupied Home (4) | ||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Regions | Q3 2023 | Q2 2023 | Growth | Q3 2023 | Q2 2023 | % Change | Q3 2023 | Q2 2023 | % Change | ||||||||||||||||||||
| Denver, CO | 22.4 | % | 95.4 | % | 96.1 | % | (0.7) | % | $ | 1,957 | $ | 1,928 | 1.5 | % | $ | 2,185 | $ | 2,198 | (0.6) | % | |||||||||
| Minneapolis, MN | 33.6 | % | 94.2 | % | 94.9 | % | (0.7) | % | 1,480 | 1,463 | 1.2 | % | 1,657 | 1,637 | 1.2 | % | |||||||||||||
| North Dakota | 12.3 | % | 95.8 | % | 96.4 | % | (0.6) | % | 1,276 | 1,242 | 2.7 | % | 1,406 | 1,368 | 2.8 | % | |||||||||||||
| Omaha, NE | 6.0 | % | 95.1 | % | 94.7 | % | 0.4 | % | 1,299 | 1,262 | 2.9 | % | 1,439 | 1,389 | 3.6 | % | |||||||||||||
| Rochester, MN | 10.4 | % | 94.4 | % | 95.0 | % | (0.6) | % | 1,711 | 1,688 | 1.4 | % | 1,808 | 1,790 | 1.0 | % | |||||||||||||
| St. Cloud, MN | 5.9 | % | 92.2 | % | 91.7 | % | 0.5 | % | 1,349 | 1,343 | 0.4 | % | 1,532 | 1,512 | 1.3 | % | |||||||||||||
| Other Mountain West(1) | 9.4 | % | 95.0 | % | 95.3 | % | (0.3) | % | 1,338 | 1,327 | 0.8 | % | 1,487 | 1,479 | 0.5 | % | |||||||||||||
| Same-Store Total | 100.0 | % | 94.7 | % | 95.2 | % | (0.5) | % | $ | 1,511 | $ | 1,489 | 1.5 | % | $ | 1,676 | $ | 1,658 | 1.1 | % |
(1)Includes apartment communities in Billings, Montana and Rapid City, South Dakota.
(2)Weighted average occupancy is defined as the percentage resulting from dividing actual rental revenue by scheduled rent. Scheduled rental revenue represents the value of all apartment homes, with occupied apartment homes valued at contractual rental rates pursuant to leases and vacant apartment homes valued at estimated market rents. When calculating actual rents for occupied apartment homes and market rents for vacant homes, delinquencies and concessions are not taken into account. Market rates are determined using the currently offered effective rates on new leases at the community and are used as the starting point in determination of the market rates of vacant apartment homes. Centerspace believes that weighted average occupancy is a meaningful measure of occupancy because it considers the value of each vacant unit at its estimated market rate. Weighted average occupancy may not completely reflect short-term trends in physical occupancy, and the calculation of weighted average occupancy may not be comparable to that disclosed by other REITs.
(3)Average monthly rental rate is scheduled rent divided by the total number of apartment homes.
(4)Average monthly revenue per occupied home is defined as total rental revenues divided by the weighted average occupied apartment homes for the period.
| S-14 |
|---|
CENTERSPACE
SAME-STORE YEAR-TO-DATE COMPARISONS
(in thousands, except property data amounts and percentages)
| Apartment Homes Included | Revenues | Expenses | NOI | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Regions | 2023 | 2022 | % Change | 2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||||||||||||||||
| Denver, CO | 1,889 | $ | 35,514 | $ | 32,840 | 8.1 | % | $ | 12,151 | $ | 10,567 | 15.0 | % | $ | 23,363 | $ | 22,273 | 4.9 | % | ||||||||||
| Minneapolis, MN | 4,519 | 63,040 | 59,017 | 6.8 | % | 28,399 | 27,410 | 3.6 | % | 34,641 | 31,607 | 9.6 | % | ||||||||||||||||
| North Dakota | 1,710 | 20,189 | 18,456 | 9.4 | % | 8,071 | 7,501 | 7.6 | % | 12,118 | 10,955 | 10.6 | % | ||||||||||||||||
| Omaha, NE | 872 | 10,379 | 9,455 | 9.8 | % | 4,360 | 4,051 | 7.6 | % | 6,019 | 5,404 | 11.4 | % | ||||||||||||||||
| Rochester, MN | 1,129 | 17,188 | 15,689 | 9.6 | % | 6,610 | 6,274 | 5.4 | % | 10,578 | 9,415 | 12.4 | % | ||||||||||||||||
| St. Cloud, MN | 832 | 10,338 | 9,392 | 10.1 | % | 4,617 | 4,454 | 3.7 | % | 5,721 | 4,938 | 15.9 | % | ||||||||||||||||
| Other Mountain West(1) | 1,222 | 15,423 | 14,037 | 9.9 | % | 5,583 | 5,204 | 7.3 | % | 9,840 | 8,833 | 11.4 | % | ||||||||||||||||
| Same-Store Total | 12,173 | $ | 172,071 | $ | 158,886 | 8.3 | % | $ | 69,791 | $ | 65,461 | 6.6 | % | $ | 102,280 | $ | 93,425 | 9.5 | % | ||||||||||
| % of NOI Contribution | Weighted Average Occupancy (2) | Average Monthly<br><br>Rental Rate (3) | Average Monthly<br>Revenue per Occupied Home (4) | ||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Regions | 2023 | 2022 | Growth | 2023 | 2022 | % Change | 2023 | 2022 | % Change | ||||||||||||||||||||
| Denver, CO | 22.9 | % | 95.7 | % | 94.8 | % | 0.9 | % | $ | 1,932 | $ | 1,826 | 5.8 | % | $ | 2,182 | $ | 2,038 | 7.1 | % | |||||||||
| Minneapolis, MN | 33.9 | % | 94.6 | % | 94.5 | % | 0.1 | % | 1,466 | 1,398 | 4.9 | % | 1,639 | 1,536 | 6.7 | % | |||||||||||||
| North Dakota | 11.8 | % | 96.3 | % | 96.0 | % | 0.3 | % | 1,244 | 1,150 | 8.2 | % | 1,363 | 1,249 | 9.1 | % | |||||||||||||
| Omaha, NE | 5.9 | % | 94.6 | % | 95.9 | % | (1.3) | % | 1,265 | 1,138 | 11.2 | % | 1,397 | 1,257 | 11.1 | % | |||||||||||||
| Rochester, MN | 10.3 | % | 94.7 | % | 93.9 | % | 0.8 | % | 1,688 | 1,554 | 8.6 | % | 1,786 | 1,645 | 8.6 | % | |||||||||||||
| St. Cloud, MN | 5.6 | % | 91.4 | % | 89.6 | % | 1.8 | % | 1,336 | 1,241 | 7.7 | % | 1,511 | 1,400 | 7.9 | % | |||||||||||||
| Other Mountain West(1) | 9.6 | % | 95.1 | % | 95.4 | % | (0.3) | % | 1,328 | 1,213 | 9.5 | % | 1,474 | 1,337 | 10.2 | % | |||||||||||||
| Same-Store Total | 100.0 | % | 94.9 | % | 94.5 | % | 0.4 | % | $ | 1,490 | $ | 1,396 | 6.7 | % | $ | 1,655 | $ | 1,534 | 7.9 | % |
(1)Includes apartment communities in Billings, Montana and Rapid City, South Dakota.
(2)Weighted average occupancy is defined as the percentage resulting from dividing actual rental revenue by scheduled rent. Scheduled rental revenue represents the value of all apartment homes, with occupied apartment homes valued at contractual rental rates pursuant to leases and vacant apartment homes valued at estimated market rents. When calculating actual rents for occupied apartment homes and market rents for vacant homes, delinquencies and concessions are not taken into account. Market rates are determined using the currently offered effective rates on new leases at the community and are used as the starting point in determination of the market rates of vacant apartment homes. Centerspace believes that weighted average occupancy is a meaningful measure of occupancy because it considers the value of each vacant unit at its estimated market rate. Weighted average occupancy may not completely reflect short-term trends in physical occupancy, and the calculation of weighted average occupancy may not be comparable to that disclosed by other REITs.
(3)Average monthly rental rate is scheduled rent divided by the total number of apartment homes.
(4)Average monthly revenue per occupied home is defined as total rental revenues divided by the weighted average occupied apartment homes for the period.
| S-15 |
|---|
CENTERSPACE
PORTFOLIO SUMMARY(1)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 9/30/2023 | 6/30/2023 | 3/31/2023 | 12/31/2022 | 9/30/2022 | |||||||||||
| Number of Apartment Homes at Period End | |||||||||||||||
| Same-Store | 12,173 | 12,885 | 12,885 | 11,330 | 11,330 | ||||||||||
| Non-Same-Store | 612 | 612 | 612 | 3,735 | 3,734 | ||||||||||
| All Communities | 12,785 | 13,497 | 13,497 | 15,065 | 15,064 | ||||||||||
| Average Monthly Rental Rate(2) | |||||||||||||||
| Same-Store | $ | 1,511 | $ | 1,467 | $ | 1,450 | $ | 1,438 | $ | 1,411 | |||||
| Non-Same-Store | 1,907 | 1,894 | 1,890 | 1,352 | 1,286 | ||||||||||
| All Communities | $ | 1,530 | $ | 1,487 | $ | 1,470 | $ | 1,417 | $ | 1,381 | |||||
| Average Monthly Revenue per Occupied Apartment Home(3) | |||||||||||||||
| Same-Store | $ | 1,676 | $ | 1,634 | $ | 1,606 | $ | 1,592 | $ | 1,565 | |||||
| Non-Same-Store | 2,072 | 2,072 | 2,066 | 1,471 | 1,417 | ||||||||||
| All Communities | $ | 1,695 | $ | 1,654 | $ | 1,627 | $ | 1,562 | $ | 1,530 | |||||
| Weighted Average Occupancy(4) | |||||||||||||||
| Same-Store | 94.7 | % | 95.2 | % | 94.8 | % | 94.9 | % | 94.5 | % | |||||
| Non-Same-Store | 93.5 | % | 95.4 | % | 95.9 | % | 94.7 | % | 94.6 | % | |||||
| All Communities | 94.6 | % | 95.2 | % | 94.9 | % | 94.9 | % | 94.5 | % | |||||
| Operating Expenses as a % of Scheduled Rent | |||||||||||||||
| Same-Store | 43.3 | % | 41.2 | % | 43.9 | % | 43.1 | % | 42.5 | % | |||||
| Non-Same-Store | 41.9 | % | 38.8 | % | 37.8 | % | 51.7 | % | 48.7 | % | |||||
| All Communities | 43.3 | % | 41.1 | % | 43.5 | % | 45.1 | % | 43.9 | % | |||||
| Capital Expenditures | |||||||||||||||
| Total Capital Expenditures per Apartment Home – Same-Store | $ | 389 | $ | 258 | $ | 115 | $ | 364 | $ | 465 |
(1)Previously reported amounts are not revised for changes in the composition of the same-store properties pool.
(2)Average monthly rental rate is scheduled rent divided by the total number of apartment homes. Scheduled rental revenue represents the value of all apartment homes, with occupied apartment homes valued at contractual rates pursuant to leases and vacant apartment homes valued at estimated market rents. When calculating actual rents for occupied apartment homes and market rents for vacant homes, delinquencies and concessions are not taken into account. Market rates are determined using the currently offered effective rates on new leases at the community and are used as the starting point in determination of the market rates of vacant apartment homes.
(3)Average monthly revenue per occupied home is defined as total rental revenues divided by the weighted average occupied apartment homes for the period.
(4)Weighted average occupancy is the percentage resulting from dividing actual rental revenue by scheduled rent. The company believes that weighted average occupancy is a meaningful measure of occupancy because it considers the value of each vacant unit at its estimated market rate. Weighted average occupancy may not completely reflect short-term trends in physical occupancy and the calculation of weighted average occupancy may not be comparable to that disclosed by other REITs.
| S-16 |
|---|
CENTERSPACE
CAPITAL EXPENDITURES
($ in thousands, except per home amounts)
| Three Months Ended | Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| Capital Expenditures | 9/30/2023 | 9/30/2022 | 9/30/2023 | 9/30/2022 | ||||
| Total Same-Store Apartment Homes | 12,173 | 12,173 | 12,173 | 12,173 | ||||
| All Properties - Weighted Average Apartment Homes | 12,785 | 14,981 | 12,785 | 14,882 | ||||
| Same Store | ||||||||
| Building - Exterior | $ | 975 | $ | 1,302 | $ | 1,181 | $ | 1,891 |
| Building - Interior | 45 | 132 | (17) | 207 | ||||
| Mechanical, Electrical, & Plumbing | 1,726 | 1,131 | 2,766 | 1,827 | ||||
| Furniture & Equipment | 95 | 124 | 269 | 291 | ||||
| Landscaping & Grounds | 112 | 709 | 28 | 900 | ||||
| Turnover replacements | 1,341 | 2,237 | 2,737 | 4,127 | ||||
| Work in progress | 443 | (554) | 2,291 | (707) | ||||
| Capital Expenditures - Same-Store | $ | 4,737 | $ | 5,081 | $ | 9,255 | $ | 8,536 |
| Capital Expenditures per Apartment Home - Same-Store | $ | 389 | $ | 417 | $ | 760 | $ | 701 |
| Capital Expenditures - All Properties | $ | 4,930 | $ | 6,185 | $ | 10,064 | $ | 10,403 |
| Capital Expenditures per Apartment Home - All Properties | $ | 386 | $ | 413 | $ | 787 | $ | 699 |
| Value Add | ||||||||
| Same Store | ||||||||
| Interior - Units | $ | 4,512 | $ | 7,598 | $ | 10,230 | $ | 14,547 |
| Common Areas and Exterior | $ | 1,734 | $ | 2,970 | $ | 4,288 | $ | 7,821 |
| Work in Progress | $ | 695 | $ | (142) | $ | 912 | $ | (1,936) |
| Total Value Add - Same Store | $ | 6,941 | $ | 10,426 | $ | 15,430 | $ | 20,432 |
| All Properties | ||||||||
| Interior - Units | $ | 4,512 | $ | 7,639 | $ | 10,230 | $ | 14,594 |
| Common Areas and Exterior | $ | 1,750 | $ | 3,114 | $ | 4,408 | $ | 8,017 |
| Work in Progress | 695 | (142) | $ | 912 | $ | (1,949) | ||
| Total Value Add - All Properties | $ | 6,957 | $ | 10,611 | $ | 15,550 | $ | 20,662 |
| Acquisition Capital | ||||||||
| All Properties | 2,188 | 2,475 | 12,150 | 5,039 | ||||
| Total Capital Spend | ||||||||
| Total Capital Spend - Same-Store(1) | $ | 11,678 | $ | 15,507 | $ | 24,685 | $ | 28,968 |
| Total Capital Spend per Apartment Home - Same-Store(1) | $ | 959 | $ | 1,274 | $ | 2,028 | $ | 2,380 |
| Total Capital Spend - All Properties | $ | 14,075 | $ | 19,271 | $ | 37,764 | $ | 36,104 |
| Total Capital Spend per Apartment Home - All Properties | $ | 1,101 | $ | 1,286 | $ | 2,954 | $ | 2,426 |
(1)Excludes acquisition capital on same-store communities.
| S-17 |
|---|
CENTERSPACE
2023 Financial Outlook
(in thousands, except per share and per home amounts)
Centerspace revised its outlook for 2023 in the table below.
| Nine Months Ended | 2023 Previous Outlook Range | 2023 Revised Outlook Range | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2023 | Low | High | Low | High | ||||||||||
| YTD Actual | Amount | Amount | Amount | Amount | ||||||||||
| Same-store growth | ||||||||||||||
| Revenue | $ | 172,071 | 6.50 | % | 8.00 | % | 7.00 | % | 7.50 | % | ||||
| Controllable expenses | 44,162 | 2.00 | % | 3.50 | % | 2.00 | % | 2.50 | % | |||||
| Non-controllable expenses | 25,629 | 7.50 | % | 9.00 | % | 8.00 | % | 8.50 | % | |||||
| Total Expenses | $ | 69,791 | 4.00 | % | 5.25 | % | 4.00 | % | 4.50 | % | ||||
| Same-store NOI(1) | $ | 102,280 | 8.50 | % | 10.00 | % | 9.00 | % | 9.50 | % | ||||
| Components of NOI(1) | ||||||||||||||
| Same-store | $ | 102,280 | $ | 137,000 | $ | 139,000 | $ | 137,750 | $ | 138,250 | ||||
| Non-same-store | 6,696 | 9,000 | 9,200 | 8,900 | 9,000 | |||||||||
| Other properties | 1,468 | 1,700 | 1,800 | 1,700 | 1,800 | |||||||||
| Dispositions | 6,083 | $ | 7,200 | $ | 7,400 | $ | 6,000 | $ | 6,000 | |||||
| Total NOI(1) | $ | 116,527 | $ | 154,900 | $ | 157,400 | $ | 154,350 | $ | 155,050 | ||||
| Accretion (dilution) from investments and capital market activity, excluding impact from change in share count | $ | — | (400) | (200) | 100 | 150 | ||||||||
| Other operating income and expenses | ||||||||||||||
| General and administrative and property management | (22,729) | (31,100) | (30,700) | (30,900) | (30,700) | |||||||||
| Casualty loss | (1,242) | (1,300) | (1,100) | (1,700) | (1,600) | |||||||||
| Loss on litigation settlement | (2,864) | (3,200) | (3,200) | (2,900) | (2,900) | |||||||||
| Non-real estate depreciation and amortization | (236) | (375) | (325) | (375) | (325) | |||||||||
| Non-controlling interest | (96) | (110) | (100) | (110) | (100) | |||||||||
| Total other operating income and expenses | $ | (27,167) | $ | (36,085) | $ | (35,425) | $ | (35,985) | $ | (35,625) | ||||
| Interest expense | $ | (27,516) | (37,000) | (36,600) | (36,000) | (35,800) | ||||||||
| Interest and other income | 620 | $ | 600 | $ | 800 | $ | 600 | $ | 700 | |||||
| Dividends to preferred shareholders | (4,821) | (6,400) | (6,400) | (6,400) | (6,400) | |||||||||
| FFO applicable to common shares and Units - diluted(1) | $ | 57,643 | $ | 75,615 | $ | 79,575 | $ | 76,665 | $ | 78,075 | ||||
| Non-core income and expenses | ||||||||||||||
| Non-cash casualty (gain) loss | $ | 815 | $ | 400 | $ | 200 | $ | 950 | $ | 1,000 | ||||
| Interest rate swap amortization | 621 | 900 | 1,000 | 900 | 1,000 | |||||||||
| Amortization of assumed debt | (348) | — | — | (219) | (219) | |||||||||
| Severance and transition related costs | 3,180 | 3,180 | 3,180 | 3,180 | 3,180 | |||||||||
| Loss on litigation settlement and one-time trial costs | 3,235 | 3,200 | 3,200 | 3,300 | 3,300 | |||||||||
| Other miscellaneous items | (97) | (240) | (290) | (81) | (131) | |||||||||
| Total non-core income and expenses | $ | 7,406 | $ | 7,440 | $ | 7,290 | $ | 8,030 | $ | 8,130 | ||||
| Core FFO applicable to common shares and Units - diluted(1) | $ | 65,049 | $ | 83,055 | $ | 86,865 | $ | 84,695 | $ | 86,205 | ||||
| EPS - Diluted | $ | 2.96 | $ | 2.84 | $ | 3.64 | $ | 2.90 | $ | 3.56 | ||||
| FFO per diluted share(1) | $ | 3.15 | $ | 4.14 | $ | 4.35 | $ | 4.20 | $ | 4.27 | ||||
| Core FFO per diluted share(1) | $ | 3.56 | $ | 4.55 | $ | 4.75 | $ | 4.63 | $ | 4.71 | ||||
| Weighted average shares outstanding - diluted | 18,287 | 18,250 | 18,275 | 18,275 | 18,300 | |||||||||
| Additional Assumptions | ||||||||||||||
| Same-store capital expenditures (per home) | $ | 760 | $ | 1,100 | 1,150 | $ | 1,000 | 1,050 | ||||||
| Value-add expenditures | $ | 15,550 | $ | 31,500 | $ | 34,500 | $ | 30,000 | $ | 31,500 | ||||
| Investments | $ | — | $ | 95,000 | $ | 100,000 | $ | 94,500 | $ | 94,500 | ||||
| Dispositions | $ | 226,755 | $ | 220,000 | $ | 225,000 | $ | 226,800 | $ | 226,800 |
(1)NOI, FFO, and Core FFO are non-GAAP financial measures. For more information on their usage and presentation, and a reconciliation to the most directly comparable GAAP measures, refer to "Non-GAAP Financial Measures and Reconciliations" in the Supplemental Financial and Operating Data above.
| S-18 |
|---|
Reconciliation of Net Income (Loss) Available to Common Shareholders to FFO and Core FFO
The following table presents reconciliations of Net income (loss) available to common shareholders to FFO and Core FFO, which are non-GAAP financial measures described in greater detail under “Non-GAAP Financial Measures and Reconciliations.” They should not be considered as alternatives to net income or any other GAAP measurement of performance, but rather should be considered as an additional, supplemental measure. FFO and Core FFO also do not represent cash generated from operating activities in accordance with GAAP, nor are they indicative of funds available to fund all cash needs, including the ability to service indebtedness or make distributions to shareholders. The outlook and projections provided below are based on current expectations and are forward-looking.
| Previous Outlook | Revised Outlook | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Nine Months Ended | 12 Months Ended | 12 Months Ended | ||||||||
| September 30, 2023 | December 31, 2023 | December 31, 2023 | ||||||||
| Actual | Low | High | Low | High | ||||||
| Net income available to common shareholders | $ | 44,661 | $ | 59,679 | $ | 74,457 | $ | 60,729 | $ | 72,957 |
| Noncontrolling interests - Operating Partnership and Series E preferred units | 9,058 | (7,795) | (7,885) | (7,795) | (7,885) | |||||
| Depreciation and amortization | 75,061 | 92,556 | 91,768 | 92,556 | 91,768 | |||||
| Less depreciation - non real estate | (236) | (375) | (325) | (375) | (325) | |||||
| Less depreciation - partially owned entities | (58) | (110) | (100) | (110) | (100) | |||||
| Gain on sale of real estate | (71,323) | (68,980) | (78,980) | (68,980) | (78,980) | |||||
| Dividends to preferred unitholders | 480 | 640 | 640 | 640 | 640 | |||||
| FFO applicable to common shares and Units - diluted | $ | 57,643 | $ | 75,615 | $ | 79,575 | $ | 76,665 | $ | 78,075 |
| Adjustments to Core FFO: | ||||||||||
| Non-cash casualty loss | 815 | 400 | 200 | 950 | 1,000 | |||||
| Interest rate swap termination, amortization, and mark-to-market | 621 | 900 | 1,000 | 900 | 1,000 | |||||
| Amortization of assumed debt | (348) | — | — | (219) | (219) | |||||
| Severance and transition related costs | 3,180 | 3,180 | 3,180 | 3,180 | 3,180 | |||||
| Loss on litigation settlement and one-time trial costs | 3,235 | 3,200 | 3,200 | 3,300 | 3,300 | |||||
| Other miscellaneous items | (97) | (240) | (290) | (81) | (131) | |||||
| Core FFO applicable to common shares and Units - diluted | $ | 65,049 | $ | 83,055 | $ | 86,865 | $ | 84,695 | $ | 86,205 |
| Net income per share - diluted | $ | 2.96 | $ | 2.84 | $ | 3.64 | $ | 2.90 | $ | 3.56 |
| FFO per share - diluted | $ | 3.15 | $ | 4.14 | $ | 4.35 | $ | 4.20 | $ | 4.27 |
| Core FFO per share - diluted | $ | 3.56 | $ | 4.55 | $ | 4.75 | $ | 4.63 | $ | 4.71 |
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 sales of real estate and other investments, depreciation, amortization, financing costs, property management expenses, 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.
| Previous Outlook | Revised Outlook | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Nine Months Ended | 12 Months Ended | 12 Months Ended | ||||||||||
| September 30, 2023 | December 31, 2023 | December 31, 2023 | ||||||||||
| Actual | Low | High | Low | High | ||||||||
| Operating income | $ | 85,958 | $ | 96,060 | $ | 109,948 | $ | 95,310 | $ | 107,098 | ||
| Adjustments: | ||||||||||||
| General and administrative and property management expenses | 22,729 | 31,100 | 30,700 | 30,900 | 30,700 | |||||||
| Casualty loss | 1,242 | 1,300 | 1,100 | 1,700 | 1,600 | |||||||
| Depreciation and amortization | 75,061 | 92,556 | 91,768 | 92,556 | 91,768 | |||||||
| Gain on sale of real estate and other investments | (71,327) | (68,980) | (78,980) | (68,980) | (78,980) | |||||||
| Loss on litigation settlement | 2,864 | 2,864 | 2,864 | 2,864 | 2,864 | |||||||
| Net operating income | $ | 116,527 | $ | 154,900 | $ | 157,400 | $ | 154,350 | $ | 155,050 | S-19 | |
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