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): February 21, 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.
Centerspace (the "Company") issued an earnings release on February 21, 2023, announcing certain financial and operational results for the year ended December 31, 2022. 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 February 21, 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/ Mark O. Decker, Jr. | |
| Mark O. Decker, Jr. | ||
| Date: February 21, 2023 | President and Chief Executive Officer |
Document
Exhibit 99.1
Earnings Release
Centerspace Announces Financial and Operating Results for the Year Ended
December 31, 2022 and Provides 2023 Financial Outlook
MINNEAPOLIS, MN, February 21, 2023 – Centerspace (NYSE: CSR) announced today its financial and operating results for the year ended December 31, 2022. The tables below show Net Income (Loss), Funds from Operations (“FFO”)1, and Core FFO1, all on a per share basis, for the year ended December 31, 2022; Same-Store Revenues, Expenses, and Net Operating Income ("NOI")1 over comparable periods; and Same-Store Weighted Average Occupancy for the three months ended December 31, 2022, September 30, 2022, and December 31, 2021 and the twelve months ended December 31, 2022 and 2021.
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Per Share | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Net loss per share - diluted | $ | (0.24) | $ | (0.61) | $ | (1.35) | $ | (0.47) | ||||||||||
| FFO - diluted(1) | 1.16 | 1.07 | 4.32 | 3.54 | ||||||||||||||
| Core FFO - diluted(1) | 1.17 | 1.08 | 4.43 | 3.99 | Year-Over-Year Comparison | Sequential<br>Comparison | YTD<br>Comparison | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||||||
| Same-Store Results | 4Q22 vs 4Q21 | 4Q22 vs. 3Q22 | CY22 vs. CY21 | |||||||||||||||
| Revenues | 9.3 | % | 2.2 | % | 10.0 | % | ||||||||||||
| Expenses | 14.2 | % | 3.3 | % | 11.6 | % | ||||||||||||
| Net Operating Income (“NOI”)(1) | 6.1 | % | 1.4 | % | 9.0 | % | Three months ended | Twelve months ended | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||
| Same-Store Results | December 31, 2022 | September 30, 2022 | December 31, 2021 | December 31, 2022 | December 31, 2021 | |||||||||||||
| Weighted Average Occupancy | 94.9 | % | 94.5 | % | 93.4 | % | 94.5 | % | 94.3 | % |
(1)NOI, Funds from Operations, 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 below.
Highlights for the Year Ended December 31, 2022
•Net Loss was $1.35 per diluted share for the year ended December 31, 2022, compared to Net Loss of $0.47 per diluted share for the year ended December 31, 2021;
•Core FFO(1) increased to $4.43 or 11.0% per diluted share for the year ended December 31, 2022, compared to $3.99 for the year ended December 31, 2021;
•Same-store year-over-year NOI(1) growth of 9.0% driven by same-store revenue growth of 10.0%; and
•Repurchased 432,000 common shares for total consideration of $29.1 million and an average of $67.23 per share.
Balance Sheet
Centerspace closed on a $100.0 million term loan which bears interest at a floating rate of 120 to 175 basis points over the Secured Overnight Financing Rate (“SOFR”) based upon its leverage ratio and has a 364-day term with an option to extend for an additional 364-day term.
At December 31, 2022, Centerspace had $153.0 million of total liquidity on its balance sheet, including $142.5 million available on its lines of credit.
Subsequent Events
Subsequent to December 31, 2022, we entered into definitive purchase and sale agreements for nine communities and believe they will close in the first quarter. The closing of pending transactions is subject to certain conditions and restrictions; therefore, there can be no assurance that the transactions will be consummated or that the final terms will not differ in material respects.
2023 Financial Outlook
Centerspace is providing the following guidance for its 2023 performance.
| 2023 Financial Outlook | ||||||
|---|---|---|---|---|---|---|
| Range for 2023 | ||||||
| 2022 Actual | Low | High | ||||
| Net income (loss) per Share - diluted | $ | (1.35) | $ | 2.37 | $ | 3.25 |
| FFO per Share - diluted | $ | 4.32 | $ | 4.21 | $ | 4.50 |
| Core FFO per Share - diluted | $ | 4.43 | $ | 4.27 | $ | 4.56 |
Additional assumptions:
•Same-store capital expenditures of $1,100 per home to $1,150 per home
•Value-add expenditures of $24.5 million to $27.5 million
•Proceeds from potential dispositions of $155.0 million to $165.0 million
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, please refer to "2023 Financial Outlook" in the Supplemental Financial and Operating Data below.
Earnings Call
| Live webcast and replay: https://www.ir.centerspacehomes.com | |||
|---|---|---|---|
| Live Conference Call | Conference Call Replay | ||
| Wednesday, February 22, 2023 at 10:00 AM ET | Replay available until March 8, 2023 | ||
| USA Toll Free Number | 1-844-200-6205 | USA Toll Free Number | 1-866-813-9403 |
| International Toll Free Number | 1-929-526-1599 | International Toll Free Number | 44-204-525-0658 |
| Canada Toll Free Number | 1-833-950-0062 | Canada Toll Free Number | 1-226-828-7578 |
| Conference Number | 831728 | Conference Number | 229148 |
Supplemental Information
Supplemental Operating and Financial Data for the year ended December 31, 2022, is available in the Investors section on Centerspace’s website at https://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 December 31, 2022, Centerspace owned 84 apartment communities consisting of 15,065 homes located in Colorado, Minnesota, Montana, Nebraska, North Dakota, and South Dakota. Centerspace was named a Top Workplace for 2022 by the Minneapolis Star Tribune. For more information, please visit www.centerspacehomes.com.
Forward-Looking Statements
Certain statements in this press release are based on the company's current expectations and assumptions, and are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. 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. Any statements contained herein that are not statements of historical fact should be deemed forward-looking statements. 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 and uncertainties are detailed from time to time in filings with the SEC, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” contained in the company's Annual Report on Form 10-K, in quarterly reports on Form 10-Q, and in other reports the company files with the SEC from time to time. The company assumes no obligation to update or supplement forward-looking statements that become untrue due to subsequent events.
Contact Information
Investor Relations
Joe McComish
Phone: 701-837-7104
E-mail: IR@centerspacehomes.com
Marketing & Media
Kelly Weber
Phone: 701-837-7104
E-mail: kweber@centerspacehomes.com
Supplemental Financial and Operating Data
Table of Contents
December 31, 2022
| 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 Detail | S-4 |
| Same-Store Controllable Expenses | S-6 |
| Funds From Operations and Core Funds From Operations | S-6 |
| Adjusted EBITDA | S-9 |
| Debt and Capital Analysis | |
| Debt Analysis | S-10 |
| Capital Analysis | S-11 |
| Portfolio Analysis | |
| Same-Store Comparison | S-12 |
| Portfolio Summary | S-15 |
| Same-Store Capital Expenditures | S-16 |
| 2023 Financial Outlook | S-17 |
Common Share Data (NYSE: CSR)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | |||||||||||
| High closing price | $ | 70.20 | $ | 89.71 | $ | 103.17 | $ | 108.27 | $ | 111.26 | |||||
| Low closing price | $ | 58.50 | $ | 65.85 | $ | 76.65 | $ | 89.01 | $ | 96.58 | |||||
| Average closing price | $ | 64.64 | $ | 79.40 | $ | 87.61 | $ | 97.15 | $ | 103.29 | |||||
| Closing price at end of quarter | $ | 58.67 | $ | 67.32 | $ | 81.55 | $ | 98.12 | $ | 110.90 | |||||
| Common share distributions—annualized | $ | 2.92 | $ | 2.92 | $ | 2.92 | $ | 2.92 | $ | 2.88 | |||||
| Closing price dividend yield - annualized | 5.0 | % | 4.3 | % | 3.6 | % | 3.0 | % | 2.6 | % | |||||
| Closing common shares outstanding (thousands) | 15,020 | 15,376 | 15,373 | 15,365 | 15,016 | ||||||||||
| Closing limited partnership units outstanding (thousands) | 971 | 980 | 995 | 997 | 832 | ||||||||||
| Closing Series E preferred units, as converted (thousands) | 2,119 | 2,186 | 2,186 | 2,186 | 2,186 | ||||||||||
| Closing market value of outstanding common shares, plus imputed closing market value of outstanding limited partnership units (thousands) | $ | 1,062,514 | $ | 1,248,247 | $ | 1,513,079 | $ | 1,819,930 | $ | 1,999,971 | |||||
| S-1 | |||||||||||||||
| --- |
CENTERSPACE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share amounts)
| Three Months Ended | Twelve months ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | ||||||||||
| REVENUE | $ | 67,848 | $ | 65,438 | $ | 63,116 | $ | 60,314 | $ | 57,988 | $ | 256,716 | $ | 201,705 | ||
| EXPENSES | ||||||||||||||||
| Property operating expenses, excluding real estate taxes | 21,755 | 20,290 | 19,011 | 19,014 | 16,852 | 80,070 | 57,753 | |||||||||
| Real estate taxes | 7,464 | 7,039 | 7,205 | 6,859 | 6,654 | 28,567 | 24,104 | |||||||||
| Property management expenses | 2,358 | 2,563 | 2,721 | 2,253 | 2,697 | 9,895 | 8,752 | |||||||||
| Casualty loss | 335 | 276 | 382 | 598 | 280 | 1,591 | 344 | |||||||||
| Depreciation and amortization | 25,768 | 23,720 | 24,768 | 31,001 | 30,418 | 105,257 | 92,165 | |||||||||
| General and administrative expenses | 3,276 | 4,519 | 5,221 | 4,500 | 4,231 | 17,516 | 16,213 | |||||||||
| TOTAL EXPENSES | $ | 60,956 | $ | 58,407 | $ | 59,308 | $ | 64,225 | $ | 61,132 | $ | 242,896 | $ | 199,331 | ||
| Gain (loss) on sale of real estate and other investments | 14 | — | 27 | — | 678 | 41 | 27,518 | |||||||||
| Operating income (loss) | 6,906 | 7,031 | 3,835 | (3,911) | (2,466) | 13,861 | 29,892 | |||||||||
| Interest expense | (9,603) | (7,871) | (7,561) | (7,715) | (7,456) | (32,750) | (29,078) | |||||||||
| Interest and other income (loss) | 132 | 70 | (17) | 1,063 | 1,117 | 1,248 | (2,915) | |||||||||
| Net income (loss) | $ | (2,565) | $ | (770) | $ | (3,743) | $ | (10,563) | $ | (8,805) | $ | (17,641) | $ | (2,101) | ||
| Dividends to Series D preferred unitholders | (160) | (160) | (160) | (160) | (160) | (640) | (640) | |||||||||
| Net (income) loss attributable to noncontrolling interest – Operating Partnership and Series E preferred units | 753 | 439 | 950 | 2,157 | 1,793 | 4,299 | 2,806 | |||||||||
| Net (income) loss attributable to noncontrolling interests – consolidated real estate entities | (34) | (32) | (38) | (23) | (36) | (127) | (94) | |||||||||
| Net income (loss) attributable to controlling interests | (2,006) | (523) | (2,991) | (8,589) | (7,208) | (14,109) | (29) | |||||||||
| Dividends to preferred shareholders | (1,607) | (1,607) | (1,607) | (1,607) | (1,607) | (6,428) | (6,428) | |||||||||
| NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | (3,613) | $ | (2,130) | $ | (4,598) | $ | (10,196) | $ | (8,815) | $ | (20,537) | $ | (6,457) | ||
| Per Share Data - Diluted | ||||||||||||||||
| Net earnings (loss) per common share – basic and diluted | $ | (0.24) | $ | (0.14) | $ | (0.30) | $ | (0.68) | $ | (0.61) | $ | (1.35) | $ | (0.47) | S-2 | |
| --- |
CENTERSPACE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||||||
| Real estate investments | ||||||||||||
| Property owned | $ | 2,534,124 | $ | 2,513,470 | $ | 2,401,427 | $ | 2,390,952 | $ | 2,271,170 | ||
| Less accumulated depreciation | (535,401) | (511,000) | (487,834) | (465,752) | (443,592) | |||||||
| 1,998,723 | 2,002,470 | 1,913,593 | 1,925,200 | 1,827,578 | ||||||||
| Mortgage loans receivable | — | — | — | — | 43,276 | |||||||
| Total real estate investments | 1,998,723 | 2,002,470 | 1,913,593 | 1,925,200 | 1,870,854 | |||||||
| Cash and cash equivalents | 10,458 | 14,957 | 13,156 | 13,313 | 31,267 | |||||||
| Restricted cash | 1,433 | 1,417 | 1,914 | 2,409 | 7,358 | |||||||
| Other assets | 22,687 | 19,742 | 18,950 | 24,651 | 30,582 | |||||||
| TOTAL ASSETS | $ | 2,033,301 | $ | 2,038,586 | $ | 1,947,613 | $ | 1,965,573 | $ | 1,940,061 | ||
| LIABILITIES, MEZZANINE EQUITY, AND EQUITY | ||||||||||||
| LIABILITIES | ||||||||||||
| Accounts payable and accrued expenses | $ | 58,812 | $ | 58,322 | $ | 48,077 | $ | 50,360 | $ | 62,403 | ||
| Revolving line of credit | 113,500 | 171,500 | 73,000 | 46,000 | 76,000 | |||||||
| Notes payable, net of unamortized loan costs | 399,007 | 299,388 | 299,374 | 299,359 | 299,344 | |||||||
| Mortgages payable, net of unamortized loan costs | 495,126 | 496,530 | 497,917 | 521,536 | 480,703 | |||||||
| TOTAL LIABILITIES | $ | 1,066,445 | $ | 1,025,740 | $ | 918,368 | $ | 917,255 | $ | 918,450 | ||
| SERIES D PREFERRED UNITS | $ | 16,560 | $ | 16,560 | $ | 18,627 | $ | 22,412 | $ | 25,331 | ||
| EQUITY | ||||||||||||
| Series C Preferred Shares of Beneficial Interest | 93,530 | 93,530 | 93,530 | 93,530 | 93,530 | |||||||
| Common Shares of Beneficial Interest | 1,177,484 | 1,209,732 | 1,207,849 | 1,203,685 | 1,157,255 | |||||||
| Accumulated distributions in excess of net income | (539,422) | (524,905) | (511,552) | (495,732) | (474,318) | |||||||
| Accumulated other comprehensive income (loss) | (2,055) | (2,158) | (2,362) | (2,550) | (4,435) | |||||||
| Total shareholders’ equity | $ | 729,537 | $ | 776,199 | $ | 787,465 | $ | 798,933 | $ | 772,032 | ||
| Noncontrolling interests – Operating Partnership and Series E preferred units | 220,132 | 219,466 | 222,528 | 226,302 | 223,600 | |||||||
| Noncontrolling interests – consolidated real estate entities | 627 | 621 | 625 | 671 | 648 | |||||||
| TOTAL EQUITY | $ | 950,296 | $ | 996,286 | $ | 1,010,618 | $ | 1,025,906 | $ | 996,280 | ||
| TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY | $ | 2,033,301 | $ | 2,038,586 | $ | 1,947,613 | $ | 1,965,573 | $ | 1,940,061 | 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 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 development properties, have achieved a target level of physical occupancy of 90%. On the first day of each calendar year, Centerspace determines the composition of the same-store pool for that year and adjusts the previous year, to evaluate full period-over-period operating comparisons for existing apartment communities and their contribution to Net Operating Income. Measuring performance on a same-store basis allows investors to evaluate how a fixed pool of communities are performing year-over-year. Centerspace uses this measure to assess success in increasing NOI (defined and reconciled below), renewing leases on existing residents, controlling operating costs, and making prudent capital improvements.
Reconciliation of Operating Income (Loss) 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 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, net income available for common shareholders, or cash flow from operating activities as a measure of financial performance.
| (dollars in thousands) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Sequential | Year-Over-Year | ||||||||||
| 12/31/2022 | 9/30/2022 | 12/31/2021 | Change | % Change | Change | % Change | ||||||
| Operating income (loss) | $ | 6,906 | $ | 7,031 | $ | (2,466) | (1.8) | % | (380.0) | % | ||
| Adjustments: | ||||||||||||
| Property management expenses | 2,358 | 2,563 | 2,697 | (205) | (8.0) | % | (339) | (12.6) | % | |||
| Casualty loss | 335 | 276 | 280 | 59 | 21.4 | % | 55 | 19.6 | % | |||
| Depreciation and amortization | 25,768 | 23,720 | 30,418 | 2,048 | 8.6 | % | (4,650) | (15.3) | % | |||
| General and administrative expenses | 3,276 | 4,519 | 4,231 | (1,243) | (27.5) | % | (955) | (22.6) | % | |||
| Gain (loss) on sale of real estate and other investments | (14) | — | (678) | (14) | N/A | 664 | (97.9) | % | ||||
| Net Operating Income | $ | 38,629 | $ | 38,109 | $ | 34,482 | 1.4 | % | 12.0 | % | ||
| Revenue | ||||||||||||
| Same-store | $ | 51,337 | $ | 50,253 | $ | 46,980 | 2.2 | % | 9.3 | % | ||
| Non-same-store | 15,611 | 14,151 | 10,198 | 1,460 | 10.3 | % | 5,413 | 53.1 | % | |||
| Other | 900 | 1,034 | 810 | (134) | (13.0) | % | 90 | 11.1 | % | |||
| Dispositions | — | — | — | — | N/A | — | N/A | |||||
| Total | 67,848 | 65,438 | 57,988 | 2,410 | 3.7 | % | 9,860 | 17.0 | % | |||
| Property operating expenses, including real estate taxes | ||||||||||||
| Same-store | 21,063 | 20,389 | 18,436 | 674 | 3.3 | % | 2,627 | 14.2 | % | |||
| Non-same-store | 7,839 | 6,620 | 4,753 | 1,219 | 18.4 | % | 3,086 | 64.9 | % | |||
| Other | 317 | 317 | 312 | — | — | % | 5 | 1.6 | % | |||
| Dispositions | — | 3 | 5 | (3) | (100.0) | % | (5) | (100.0) | % | |||
| Total | 29,219 | 27,329 | 23,506 | 1,890 | 6.9 | % | 5,713 | 24.3 | % | |||
| Net Operating Income | ||||||||||||
| Same-store | 30,274 | 29,864 | 28,544 | 410 | 1.4 | % | 1,730 | 6.1 | % | |||
| Non-same-store | 7,772 | 7,531 | 5,445 | 241 | 3.2 | % | 2,327 | 42.7 | % | |||
| Other | 583 | 717 | 498 | (134) | (18.7) | % | 85 | 17.1 | % | |||
| Dispositions | — | (3) | (5) | 3 | (100.0) | % | 5 | (100.0) | % | |||
| Total | $ | 38,629 | $ | 38,109 | $ | 34,482 | 1.4 | % | 12.0 | % |
All values are in US Dollars.
| S-4 | |||||||
|---|---|---|---|---|---|---|---|
| (dollars in thousands) | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- |
| Twelve Months Ended December 31, | |||||||
| 2022 | 2021 | Change | % Change | ||||
| Operating income (loss) | $ | 13,861 | $ | 29,892 | (53.6) | % | |
| Adjustments: | |||||||
| Property management expenses | 9,895 | 8,752 | 1,143 | 13.1 | % | ||
| Casualty loss | 1,591 | 344 | 1,247 | 362.5 | % | ||
| Depreciation and amortization | 105,257 | 92,165 | 13,092 | 14.2 | % | ||
| General and administrative expenses | 17,516 | 16,213 | 1,303 | 8.0 | % | ||
| Gain (loss) on sale of real estate and other investments | (41) | (27,518) | 27,477 | (99.9) | % | ||
| Net Operating Income | $ | 148,079 | $ | 119,848 | 23.6 | % | |
| Revenue | |||||||
| Same-store | $ | 197,348 | $ | 179,348 | 10.0 | % | |
| Non-same-store | 55,602 | 16,276 | 39,326 | 241.6 | % | ||
| Other | 3,766 | 2,831 | 935 | 33.0 | % | ||
| Dispositions | — | 3,250 | (3,250) | (100.0) | % | ||
| Total | 256,716 | 201,705 | 55,011 | 27.3 | % | ||
| Property operating expenses, including real estate taxes | |||||||
| Same-store | 80,368 | 72,009 | 8,359 | 11.6 | % | ||
| Non-same-store | 27,063 | 7,087 | 19,976 | 281.9 | % | ||
| Other | 1,203 | 1,120 | 83 | 7.4 | % | ||
| Dispositions | 3 | 1,641 | (1,638) | (99.8) | % | ||
| Total | 108,637 | 81,857 | 26,780 | 32.7 | % | ||
| Net Operating Income | |||||||
| Same-store | 116,980 | 107,339 | 9,641 | 9.0 | % | ||
| Non-same-store | 28,539 | 9,189 | 19,350 | 210.6 | % | ||
| Other | 2,563 | 1,711 | 852 | 49.8 | % | ||
| Dispositions | (3) | 1,609 | (1,612) | (100.2) | % | ||
| Total | $ | 148,079 | $ | 119,848 | 23.6 | % |
All values are in US Dollars.
| S-5 |
|---|
Reconciliation of Same-Store Controllable Expenses to Property Operating Expenses, Including Real Estate Taxes
Centerspace defines same-store controllable expenses as property operating expenses excluding real estate taxes and insurance. The company believes it provides 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.
| (dollars in thousands) | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||
| 2022 | 2021 | Change | % Change | 2022 | 2021 | Change | % Change | |||||||
| Controllable expenses | ||||||||||||||
| On-site compensation (1) | $ | 5,379 | $ | 4,614 | 16.6 | % | $ | 20,341 | $ | 18,634 | 9.2 | % | ||
| Repairs and maintenance | 3,296 | 2,941 | 355 | 12.1 | % | 12,810 | 10,363 | 2,447 | 23.6 | % | ||||
| Utilities | 3,458 | 2,950 | 508 | 17.2 | % | 13,902 | 11,762 | 2,140 | 18.2 | % | ||||
| Administrative and marketing | 1,069 | 1,025 | 44 | 4.3 | % | 4,348 | 3,934 | 414 | 10.5 | % | ||||
| Total | $ | 13,202 | $ | 11,530 | 14.5 | % | $ | 51,401 | $ | 44,693 | 15.0 | % | ||
| Non-controllable expenses | ||||||||||||||
| Real estate taxes | $ | 5,672 | $ | 5,226 | 8.5 | % | $ | 21,746 | $ | 21,267 | 2.3 | % | ||
| Insurance | 2,189 | 1,680 | 509 | 30.3 | % | 7,221 | 6,049 | 1,172 | 19.4 | % | ||||
| Total | $ | 7,861 | $ | 6,906 | 13.8 | % | $ | 28,967 | $ | 27,316 | 6.0 | % | ||
| Property operating expenses, including real estate taxes - non-same-store | $ | 7,839 | $ | 4,753 | 64.9 | % | $ | 27,063 | $ | 7,087 | 281.9 | % | ||
| Property operating expenses, including real estate taxes - other | 317 | 312 | 5 | 1.6 | % | 1,203 | 1,120 | 83 | 7.4 | % | ||||
| Property operating expenses, including real estate taxes - dispositions | — | 5 | (5) | (100.0) | % | 3 | 1,641 | (1,638) | (99.8) | % | ||||
| Total property operating expenses, including real estate taxes | $ | 29,219 | $ | 23,506 | 24.3 | % | $ | 108,637 | $ | 81,857 | 32.7 | % |
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 measurement used as a supplemental measure for equity real estate investment trusts, is helpful to investors in understanding 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.
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 impairment write-downs and gains and losses from the sale of real estate assets 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 the definition. The company believes that all such interpretations not specifically provided for in the Nareit definition are consistent with the 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 the main business.
| S-6 |
|---|
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 needs, including the ability to service indebtedness or make distributions to shareholders.
Core Funds from Operations ("Core FFO"), a non-GAAP measure, is FFO 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 as 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 all cash needs, including the 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 that should not be considered a substitute for operating results determined in accordance with GAAP.
| S-7 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share amounts) | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Three Months Ended | Twelve Months Ended | |||||||||||||
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | ||||||||
| Net (loss) income available to common shareholders | $ | (3,613) | $ | (2,130) | $ | (4,598) | $ | (10,196) | $ | (8,815) | $ | (20,537) | $ | (6,457) |
| Adjustments: | ||||||||||||||
| Noncontrolling interests - Operating Partnership and Series E preferred units | (753) | (439) | (950) | (2,157) | (1,793) | (4,299) | (2,806) | |||||||
| Depreciation and amortization | 25,768 | 23,720 | 24,768 | 31,001 | 30,418 | 105,257 | 92,165 | |||||||
| Less depreciation - non real estate | (91) | (94) | (101) | (101) | (101) | (387) | (366) | |||||||
| Less depreciation - partially owned entities | (19) | (18) | (7) | (21) | (21) | (65) | (93) | |||||||
| (Gain) loss on sale of real estate | (14) | — | (27) | — | (678) | (41) | (27,518) | |||||||
| FFO applicable to common shares and Units | $ | 21,278 | $ | 21,039 | $ | 19,085 | $ | 18,526 | $ | 19,010 | $ | 79,928 | $ | 54,925 |
| Adjustments to Core FFO: | ||||||||||||||
| Non-cash casualty loss (recovery) | 20 | 46 | 163 | 25 | — | 254 | — | |||||||
| Loss on extinguishment of debt | — | — | 5 | — | 2 | 5 | 535 | |||||||
| Technology implementation costs(1) | 89 | 234 | 447 | 103 | 535 | 873 | 2,020 | |||||||
| Commercial lease termination proceeds | — | — | — | — | — | — | (450) | |||||||
| Acquisition related costs | — | — | — | — | 90 | — | 230 | |||||||
| Interest rate swap termination, amortization, and mark-to-market | 104 | 204 | 205 | (613) | (411) | (100) | 4,942 | |||||||
| Amortization of assumed debt | (117) | (116) | (116) | (115) | (26) | (464) | (53) | |||||||
| Pursuit costs | 137 | 38 | 1,127 | — | 38 | 1,302 | 39 | |||||||
| Other miscellaneous items(2) | (28) | 17 | 100 | (4) | (99) | 85 | (103) | |||||||
| Core FFO applicable to common shares and Units | $ | 21,483 | $ | 21,462 | $ | 21,016 | $ | 17,922 | $ | 19,139 | $ | 81,883 | $ | 62,085 |
| FFO applicable to common shares and Units | $ | 21,278 | $ | 21,039 | $ | 19,085 | $ | 18,526 | $ | 19,010 | $ | 79,928 | $ | 54,925 |
| Dividends to Series D preferred unitholders | 160 | 160 | 160 | 160 | 160 | 640 | 640 | |||||||
| FFO applicable to common shares and Units - diluted | $ | 21,438 | $ | 21,199 | $ | 19,245 | $ | 18,686 | $ | 19,170 | $ | 80,568 | $ | 55,565 |
| Core FFO applicable to common shares and Units | $ | 21,483 | $ | 21,462 | $ | 21,016 | $ | 17,922 | $ | 19,139 | $ | 81,883 | $ | 62,085 |
| Dividends to Series D preferred unitholders | 160 | 160 | 160 | 160 | 160 | 640 | 640 | |||||||
| Core FFO applicable to common shares and Units - diluted | $ | 21,643 | $ | 21,622 | $ | 21,176 | $ | 18,082 | $ | 19,299 | $ | 82,523 | $ | 62,725 |
| Per Share Data | ||||||||||||||
| Net earnings (loss) per share and unit - diluted | $ | (0.24) | $ | (0.14) | $ | (0.30) | $ | (0.68) | $ | (0.61) | $ | (1.35) | $ | (0.47) |
| FFO per share and unit - diluted | $ | 1.16 | $ | 1.13 | $ | 1.02 | $ | 1.01 | $ | 1.07 | $ | 4.32 | $ | 3.54 |
| Core FFO per share and unit - diluted | $ | 1.17 | $ | 1.15 | $ | 1.12 | $ | 0.98 | $ | 1.08 | $ | 4.43 | $ | 3.99 |
| Weighted average shares - basic | 15,027 | 15,373 | 15,369 | 15,097 | 14,541 | 15,216 | 13,803 | |||||||
| Effect of redeemable operating partnership units | 974 | 984 | 995 | 965 | 838 | 978 | 899 | |||||||
| Effect of Series D preferred units | 228 | 228 | 228 | 228 | 228 | 228 | 228 | |||||||
| Effect of Series E preferred units | 2,185 | 2,186 | 2,186 | 2,186 | 2,186 | 2,185 | 729 | |||||||
| Effect of dilutive restricted stock units and stock options | 9 | 30 | 48 | 66 | 75 | 38 | 45 | |||||||
| Weighted average shares and units - diluted | 18,423 | 18,801 | 18,826 | 18,542 | 17,868 | 18,645 | 15,704 |
(1)Costs are related to a two-year implementation.
(2)Consists of (gain) loss on investments
| S-8 |
|---|
Reconciliation of Net Income (Loss) Available to Common Shareholders to Adjusted EBITDA
Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, gain or loss on sale of real estate and other investments, impairment of real estate investments, gain or loss on extinguishment of debt, and adjustments for non-routine items. Adjusted EBITDA is a non-GAAP financial measure and should not be considered a substitute for operating results determined in accordance with GAAP. 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.
| (in thousands) | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Twelve Months Ended | |||||||||||||
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | ||||||||
| Net income (loss) attributable to controlling interests | $ | (2,006) | $ | (523) | $ | (2,991) | $ | (8,589) | $ | (7,208) | $ | (14,109) | $ | (29) |
| Adjustments: | ||||||||||||||
| Dividends to Series D preferred unitholders | 160 | 160 | 160 | 160 | 160 | 640 | 640 | |||||||
| Noncontrolling interests – Operating Partnership and Series E preferred units | (753) | (439) | (950) | (2,157) | (1,793) | (4,299) | (2,806) | |||||||
| Income (loss) before noncontrolling interests – Operating Partnership | (2,599) | (802) | (3,781) | (10,586) | (8,841) | (17,768) | (2,195) | |||||||
| Adjustments: | ||||||||||||||
| Interest expense | 9,589 | 7,856 | 7,547 | 7,700 | 7,440 | 32,692 | 29,018 | |||||||
| Loss on extinguishment of debt | — | — | 5 | — | 2 | 5 | 535 | |||||||
| Depreciation and amortization related to real estate investments | 25,747 | 23,699 | 24,759 | 30,980 | 30,397 | 105,185 | 92,073 | |||||||
| Non-cash casualty loss (recovery) | 20 | 46 | 163 | 25 | — | 254 | — | |||||||
| Interest income | (92) | (82) | (74) | (464) | (644) | (712) | (2,403) | |||||||
| Gain (loss) on sale of real estate and other investments | (14) | — | (27) | — | (678) | (41) | (27,518) | |||||||
| Technology implementation costs(1) | 89 | 234 | 447 | 103 | 534 | 873 | 2,020 | |||||||
| Commercial lease termination proceeds | — | — | — | — | — | — | (450) | |||||||
| Acquisition related costs | — | — | — | — | 90 | — | 230 | |||||||
| Interest rate swap termination and mark-to-market | — | — | 18 | (582) | (359) | (564) | 5,002 | |||||||
| Pursuit costs | 137 | 38 | 1,127 | — | 38 | 1,302 | 39 | |||||||
| Other miscellaneous items(2) | (28) | 17 | 100 | (4) | (99) | 85 | (103) | |||||||
| Adjusted EBITDA | $ | 32,849 | $ | 31,006 | $ | 30,284 | $ | 27,172 | $ | 27,880 | $ | 121,311 | $ | 96,248 |
(1)Costs are related to a two-year implementation.
(2)Consists of (gain) loss on investments
| S-9 |
|---|
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>Average Interest Rate(1) | |||||||
| 2023 | $ | 41,425 | $ | — | $ | 100,000 | $ | 141,425 | 14.0 | % | 5.11 | % |
| 2024 | — | — | — | — | — | % | — | % | ||||
| 2025 | 31,279 | — | 113,500 | 144,779 | 14.0 | % | 4.03 | % | ||||
| 2026 | 52,023 | — | — | 52,023 | 5.0 | % | 3.73 | % | ||||
| 2027 | 50,933 | — | — | 50,933 | 5.0 | % | 3.47 | % | ||||
| Thereafter | 322,617 | 300,000 | — | 622,617 | 62.0 | % | 3.19 | % | ||||
| Total debt | $ | 498,277 | $ | 300,000 | $ | 213,500 | $ | 1,011,777 | 100.0 | % | 3.62 | % |
(1)Weighted average interest rate of debt that matures during the year, including the effect of interest rate swaps on the term loans and line of credit.
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Debt Balances Outstanding | |||||||||||||||
| Secured fixed rate - mortgages payable - other | $ | 299,427 | $ | 300,956 | $ | 302,360 | $ | 326,113 | $ | 284,934 | |||||
| Secured fixed rate - mortgages payable - Fannie Mae credit facility | 198,850 | 198,850 | 198,850 | 198,850 | 198,850 | ||||||||||
| Unsecured fixed rate line of credit(1) | — | — | — | — | 75,000 | ||||||||||
| Unsecured variable rate line of credit | 113,500 | 171,500 | 73,000 | 46,000 | 1,000 | ||||||||||
| Unsecured term loans | 100,000 | — | — | — | — | ||||||||||
| Unsecured senior notes | 300,000 | 300,000 | 300,000 | 300,000 | 300,000 | ||||||||||
| Debt total | $ | 1,011,777 | $ | 971,306 | $ | 874,210 | $ | 870,963 | $ | 859,784 | |||||
| Quarterly Weighted Average Interest Rates | |||||||||||||||
| Mortgages payable - other rate | 3.85 | % | 3.85 | % | 3.85 | % | 3.85 | % | 3.81 | % | |||||
| Mortgages payable - Fannie Mae Credit Facility rate | 2.78 | % | 2.78 | % | 2.78 | % | 2.78 | % | 2.78 | % | |||||
| Lines of credit rate (rate with swap)(1) | 5.23 | % | 4.13 | % | 3.04 | % | 2.56 | % | 4.22 | % | |||||
| Unsecured term loan rate | 5.57 | % | — | — | — | — | |||||||||
| Unsecured senior notes rate | 3.12 | % | 3.12 | % | 3.12 | % | 3.12 | % | 3.12 | % | |||||
| Total debt | 3.62 | % | 3.45 | % | 3.27 | % | 3.29 | % | 3.26 | % |
(1)The LIBOR exposure on the line of credit was hedged using an interest rate swap with a notional of $75.0 million and a fixed rate of 2.81%. The interest rate swap was terminated in February 2022.
| S-10 |
|---|
CENTERSPACE
CAPITAL ANALYSIS
(in thousands, except per share and unit amounts)
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity Capitalization | |||||||||||||||
| Common shares outstanding | 15,020 | 15,376 | 15,373 | 15,365 | 15,016 | ||||||||||
| Operating partnership units outstanding | 971 | 980 | 995 | 997 | 832 | ||||||||||
| Series E preferred units (as converted) | 2,119 | 2,186 | 2,186 | 2,186 | 2,186 | ||||||||||
| Total common shares and units outstanding | 18,110 | 18,542 | 18,554 | 18,548 | 18,034 | ||||||||||
| Market price per common share (closing price at end of period) | $ | 58.67 | $ | 67.32 | $ | 81.55 | $ | 98.12 | $ | 110.90 | |||||
| Equity capitalization-common shares and units | $ | 1,062,514 | $ | 1,248,247 | $ | 1,513,079 | $ | 1,819,930 | $ | 1,999,971 | |||||
| Recorded book value of preferred shares | $ | 93,530 | $ | 93,530 | $ | 93,530 | $ | 93,530 | $ | 93,530 | |||||
| Total equity capitalization | $ | 1,156,044 | $ | 1,341,777 | $ | 1,606,609 | $ | 1,913,460 | $ | 2,093,501 | |||||
| Series D preferred units | $ | 16,560 | $ | 16,560 | $ | 18,627 | $ | 22,412 | 25,331 | ||||||
| Debt capitalization | |||||||||||||||
| Total debt | 1,011,777 | 971,306 | 874,210 | 870,963 | 859,784 | ||||||||||
| Total capitalization | $ | 2,184,381 | $ | 2,329,643 | $ | 2,499,446 | $ | 2,806,835 | $ | 2,978,616 | |||||
| Total debt to total capitalization(1) | 46.3 | % | 41.7 | % | 35.0 | % | 31.0 | % | 28.9 | % |
(1)Debt to total market capitalization is total debt not adjusted for unamortized deferred financing costs divided by the sum of total debt, market value of common shares and operating partnership units, Series E preferred units, as converted, and book value of Series C preferred shares and Series D preferred units outstanding at the end of the period.
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | |||||||||||||||
| Debt service coverage ratio(1) | 2.99 | x | 3.35 | x | 3.39 | x | 2.93 | x | 3.17 | x | 3.16 | x | 2.77 | x | |||||||
| Adjusted EBITDA/Interest expense plus preferred distributions and principal amortization | 2.58 | x | 2.81 | x | 2.83 | x | 2.50 | x | 2.68 | x | 2.67 | x | 2.34 | x | |||||||
| Net debt/Adjusted EBITDA(2) | 7.62 | x | 7.71 | x | 7.11 | x | 7.89 | x | 7.43 | x | 8.25 | x | 8.61 | x | |||||||
| Net debt and preferred equity/Adjusted EBITDA(2) | 8.46 | x | 8.60 | x | 8.03 | x | 8.96 | x | 8.50 | x | 9.16 | x | 9.84 | x | |||||||
| Distribution Data | |||||||||||||||||||||
| Common shares and units outstanding at record date | 15,991 | 16,354 | 16,367 | 16,363 | 15,848 | 15,991 | 15,848 | ||||||||||||||
| Total common distribution declared | $ | 11,614 | $ | 11,939 | $ | 11,948 | $ | 11,944 | $ | 11,411 | $ | 47,445 | $ | 42,669 | |||||||
| Common distribution per share and unit | $ | 0.73 | $ | 0.73 | $ | 0.73 | $ | 0.73 | $ | 0.72 | $ | 2.92 | $ | 2.84 | |||||||
| Payout ratio (Core FFO per diluted share and unit basis)(3) | 62.4 | % | 63.5 | % | 65.2 | % | 74.5 | % | 66.7 | % | 65.9 | % | 71.2 | % |
(1)Debt service coverage ratio is computed by dividing Adjusted EBITDA by interest expense and principal amortization.
(2)Net debt is the total debt balance less cash and cash equivalents and net tax deferred exchange proceeds (included within restricted cash). For the quarterly period presented, adjusted EBITDA is annualized. Net debt and adjusted EBITDA are non-GAAP 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 on page S-9.
(3)Payout ratio (Core FFO per diluted share and unit basis) is the current quarterly or annual distribution rate per common share and unit divided by quarterly or annual Core FFO per diluted share and unit. Refer to the definition of Core FFO in the Non-GAAP Financial Measures and Reconciliations section on page S-6 for This term is a non-GAAP measure and should not be considered a substitute for operating results determined in accordance with GAAP.
| S-11 |
|---|
CENTERSPACE
SAME-STORE FOURTH QUARTER COMPARISONS
(dollars in thousands)
| Homes Included | Revenues | Expenses | NOI | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Regions | Q42022 | Q42021 | % Change | Q42022 | Q42021 | % Change | Q42022 | Q42021 | % Change | ||||||||||||||||||||
| Denver, CO | 1,457 | $ | 9,262 | $ | 8,163 | 13.5 | % | $ | 2,923 | $ | 2,657 | 10.0 | % | $ | 6,339 | $ | 5,506 | 15.1 | % | ||||||||||
| Minneapolis, MN | 2,538 | 13,217 | 12,572 | 5.1 | % | 5,747 | 5,145 | 11.7 | % | 7,470 | 7,427 | 0.6 | % | ||||||||||||||||
| North Dakota | 2,422 | 8,919 | 8,155 | 9.4 | % | 3,790 | 3,273 | 15.8 | % | 5,129 | 4,882 | 5.1 | % | ||||||||||||||||
| Omaha, NE | 1,370 | 4,729 | 4,222 | 12.0 | % | 2,389 | 1,888 | 26.5 | % | 2,340 | 2,334 | 0.3 | % | ||||||||||||||||
| Rochester, MN | 1,129 | 5,593 | 4,996 | 11.9 | % | 2,365 | 2,174 | 8.8 | % | 3,228 | 2,822 | 14.4 | % | ||||||||||||||||
| St. Cloud, MN | 1,192 | 4,498 | 4,576 | (1.7) | % | 2,079 | 1,820 | 14.2 | % | 2,419 | 2,756 | (12.2) | % | ||||||||||||||||
| Other Mountain West(1) | 1,222 | 5,119 | 4,296 | 19.2 | % | 1,770 | 1,479 | 19.7 | % | 3,349 | 2,817 | 18.9 | % | ||||||||||||||||
| Same-Store Total | 11,330 | $ | 51,337 | $ | 46,980 | 9.3 | % | $ | 21,063 | $ | 18,436 | 14.2 | % | $ | 30,274 | $ | 28,544 | 6.1 | % | ||||||||||
| % of NOI | Weighted Average Occupancy (2) | Average Monthly<br><br>Rental Rate (3) | Average Monthly<br><br>Revenue per Occupied Home (4) | ||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Regions | Q42022 | Q42021 | Growth | Q42022 | Q42021 | % Change | Q42022 | Q42021 | % Change | ||||||||||||||||||||
| Denver, CO | 20.9 | % | 96.6 | % | 93.5 | % | 3.1 | % | $ | 1,949 | $ | 1,797 | 8.5 | % | $ | 2,194 | $ | 1,997 | 9.9 | % | |||||||||
| Minneapolis, MN | 24.7 | % | 94.6 | % | 92.6 | % | 2.0 | % | 1,644 | 1,593 | 3.2 | % | 1,835 | 1,783 | 2.9 | % | |||||||||||||
| North Dakota | 16.9 | % | 96.3 | % | 95.3 | % | 1.0 | % | 1,168 | 1,107 | 5.5 | % | 1,275 | 1,178 | 8.2 | % | |||||||||||||
| Omaha, NE | 7.7 | % | 93.7 | % | 93.9 | % | (0.2) | % | 1,111 | 996 | 11.5 | % | 1,228 | 1,094 | 12.2 | % | |||||||||||||
| Rochester, MN | 10.7 | % | 93.8 | % | 91.7 | % | 2.1 | % | 1,663 | 1,505 | 10.5 | % | 1,760 | 1,608 | 9.5 | % | |||||||||||||
| St. Cloud, MN | 8.0 | % | 91.3 | % | 91.9 | % | (0.6) | % | 1,218 | 1,106 | 10.1 | % | 1,377 | 1,392 | (1.1) | % | |||||||||||||
| Other Mountain West(1) | 11.1 | % | 95.8 | % | 94.5 | % | 1.3 | % | 1,314 | 1,132 | 16.1 | % | 1,458 | 1,240 | 17.6 | % | |||||||||||||
| Same-Store Total | 100.0 | % | 94.9 | % | 93.4 | % | 1.5 | % | $ | 1,438 | $ | 1,333 | 7.9 | % | $ | 1,592 | $ | 1,480 | 7.6 | % |
(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 rent 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 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-12 |
|---|
CENTERSPACE
SAME-STORE SEQUENTIAL QUARTER COMPARISONS(1)
(dollars in thousands)
| Homes Included | Revenues | Expenses | NOI | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Regions | Q42022 | Q32022 | % Change | Q42022 | Q32022 | % Change | Q42022 | Q32022 | % Change | ||||||||||||||||||||
| Denver, CO | 1,457 | $ | 9,262 | $ | 8,922 | 3.8 | % | $ | 2,923 | $ | 3,121 | (6.3) | % | $ | 6,339 | $ | 5,801 | 9.3 | % | ||||||||||
| Minneapolis, MN | 2,538 | 13,217 | 13,057 | 1.2 | % | 5,747 | 5,768 | (0.4) | % | 7,470 | 7,289 | 2.5 | % | ||||||||||||||||
| North Dakota | 2,422 | 8,919 | 8,784 | 1.5 | % | 3,790 | 3,457 | 9.6 | % | 5,129 | 5,327 | (3.7) | % | ||||||||||||||||
| Omaha, NE | 1,370 | 4,729 | 4,703 | 0.6 | % | 2,389 | 2,084 | 14.6 | % | 2,340 | 2,619 | (10.7) | % | ||||||||||||||||
| Rochester, MN | 1,129 | 5,593 | 5,451 | 2.6 | % | 2,365 | 2,039 | 16.0 | % | 3,228 | 3,412 | (5.4) | % | ||||||||||||||||
| St. Cloud, MN | 1,192 | 4,498 | 4,370 | 2.9 | % | 2,079 | 2,154 | (3.5) | % | 2,419 | 2,216 | 9.2 | % | ||||||||||||||||
| Other Mountain West | 1,222 | 5,119 | 4,966 | 3.1 | % | 1,770 | 1,766 | 0.2 | % | 3,349 | 3,200 | 4.7 | % | ||||||||||||||||
| Same-Store Total | 11,330 | $ | 51,337 | $ | 50,253 | 2.2 | % | $ | 21,063 | $ | 20,389 | 3.3 | % | $ | 30,274 | $ | 29,864 | 1.4 | % | ||||||||||
| % of NOI | Weighted Average Occupancy | Average Monthly<br>Rental Rate | Average Monthly<br>Revenue per Occupied Home | ||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Regions | Q42022 | Q32022 | Growth | Q42022 | Q32022 | % Change | Q42022 | Q32022 | % Change | ||||||||||||||||||||
| Denver, CO | 20.9 | % | 96.6 | % | 96.4 | % | 0.2 | % | $ | 1,949 | $ | 1,902 | 2.5 | % | $ | 2,194 | $ | 2,118 | 3.6 | % | |||||||||
| Minneapolis, MN | 24.7 | % | 94.6 | % | 94.2 | % | 0.4 | % | 1,644 | 1,623 | 1.3 | % | 1,835 | 1,821 | 0.8 | % | |||||||||||||
| North Dakota | 16.9 | % | 96.3 | % | 96.2 | % | 0.1 | % | 1,168 | 1,148 | 1.7 | 1,275 | 1,257 | 1.4 | % | ||||||||||||||
| Omaha, NE | 7.7 | % | 93.7 | % | 94.7 | % | (1.1) | % | 1,111 | 1,083 | 2.6 | % | 1,228 | 1,208 | 1.7 | % | |||||||||||||
| Rochester, MN | 10.7 | % | 93.8 | % | 93.5 | % | 0.3 | % | 1,663 | 1,619 | 2.7 | % | 1,760 | 1,721 | 2.3 | % | |||||||||||||
| St. Cloud, MN | 8.0 | % | 91.3 | % | 88.1 | % | 3.6 | % | 1,218 | 1,206 | 1.0 | % | 1,377 | 1,387 | (0.7) | % | |||||||||||||
| Other Mountain West | 11.1 | % | 95.8 | % | 95.7 | % | 0.1 | % | 1,314 | 1,279 | 2.7 | % | 1,458 | 1,415 | 3.0 | % | |||||||||||||
| Same-Store Total | 100.0 | % | 94.9 | % | 94.5 | % | 0.4 | % | $ | 1,438 | $ | 1,411 | 1.9 | % | $ | 1,592 | $ | 1,565 | 1.7 | % |
(1)Refer to footnotes on page S-12.
| S-13 |
|---|
CENTERSPACE
SAME-STORE YEAR-TO-DATE COMPARISONS(1)
(dollars in thousands)
| Homes Included | Revenues | Expenses | NOI | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Regions | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||||
| Denver, CO | 1,457 | $ | 35,309 | $ | 31,712 | 11.3 | % | $ | 11,326 | $ | 10,494 | 7.9 | % | $ | 23,983 | $ | 21,218 | 13.0 | % | ||||||||||
| Minneapolis, MN | 2,538 | 51,576 | 47,659 | 8.2 | % | 22,395 | 20,080 | 11.5 | % | 29,181 | 27,579 | 5.8 | % | ||||||||||||||||
| North Dakota | 2,422 | 34,342 | 32,365 | 6.1 | % | 14,423 | 13,121 | 9.9 | % | 19,919 | 19,244 | 3.5 | % | ||||||||||||||||
| Omaha, NE | 1,370 | 18,297 | 16,451 | 11.2 | % | 8,302 | 7,468 | 11.2 | % | 9,995 | 8,983 | 11.3 | % | ||||||||||||||||
| Rochester, MN | 1,129 | 21,281 | 19,223 | 10.7 | % | 8,639 | 8,021 | 7.7 | % | 12,642 | 11,202 | 12.9 | % | ||||||||||||||||
| St. Cloud, MN | 1,192 | 17,386 | 15,548 | 11.8 | % | 8,309 | 6,788 | 22.4 | % | 9,077 | 8,760 | 3.6 | % | ||||||||||||||||
| Other Mountain West | 1,222 | 19,157 | 16,390 | 16.9 | % | 6,974 | 6,037 | 15.5 | % | 12,183 | 10,353 | 17.7 | % | ||||||||||||||||
| Same-Store Total | 11,330 | $ | 197,348 | $ | 179,348 | 10.0 | % | $ | 80,368 | $ | 72,009 | 11.6 | % | $ | 116,980 | $ | 107,339 | 9.0 | % | ||||||||||
| % of NOI | Weighted Average Occupancy | Average Monthly<br>Rental Rate | Average Monthly<br>Revenue per Occupied Home | ||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Regions | 2022 | 2021 | Growth | 2022 | 2021 | % Change | 2022 | 2021 | % Change | ||||||||||||||||||||
| Denver, CO | 20.6 | % | 95.4 | % | 94.0 | % | 1.5 | % | $ | 1,882 | $ | 1,730 | 8.8 | % | $ | 2,118 | $ | 1,929 | 9.8 | % | |||||||||
| Minneapolis, MN | 24.9 | % | 94.1 | % | 93.6 | % | 0.5 | % | 1,613 | 1,544 | 4.5 | % | 1,800 | 1,672 | 7.7 | % | |||||||||||||
| North Dakota | 17.0 | % | 95.7 | % | 95.4 | % | 0.3 | % | 1,134 | 1,088 | 4.2 | % | 1,234 | 1,167 | 5.7 | % | |||||||||||||
| Omaha, NE | 8.5 | % | 95.1 | % | 94.7 | % | 0.4 | % | 1,055 | 949 | 11.2 | % | 1,170 | 1,056 | 10.8 | % | |||||||||||||
| Rochester, MN | 10.8 | % | 93.9 | % | 93.7 | % | 0.2 | % | 1,581 | 1,429 | 10.6 | % | 1,674 | 1,515 | 10.5 | % | |||||||||||||
| St. Cloud, MN | 7.8 | % | 90.9 | % | 92.6 | % | (1.8) | % | 1,174 | 1,036 | 13.3 | % | 1,336 | 1,174 | 13.8 | % | |||||||||||||
| Other Mountain West | 10.4 | % | 95.5 | % | 96.7 | % | (1.2) | % | 1,238 | 1,053 | 17.6 | % | 1,367 | 1,156 | 18.3 | % | |||||||||||||
| Same-Store Total | 100.0 | % | 94.5 | % | 94.3 | % | 0.2 | % | $ | 1,388 | $ | 1,281 | 8.4 | % | $ | 1,536 | $ | 1,399 | 9.8 | % |
(1)Refer to footnotes on page S-12.
| S-14 |
|---|
CENTERSPACE
PORTFOLIO SUMMARY (1)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | 12/31/2021 | |||||||||||
| Number of Apartment Homes at Period End | |||||||||||||||
| Same-Store | 11,330 | 11,330 | 11,319 | 11,319 | 10,672 | ||||||||||
| Non-Same-Store | 3,735 | 3,734 | 3,519 | 3,519 | 3,769 | ||||||||||
| All Communities | 15,065 | 15,064 | 14,838 | 14,838 | 14,441 | ||||||||||
| Average Monthly Rental Rate(2) | |||||||||||||||
| Same-Store | $ | 1,438 | $ | 1,411 | $ | 1,366 | $ | 1,339 | $ | 1,314 | |||||
| Non-Same-Store | 1,352 | 1,286 | 1,245 | 1,218 | 1,225 | ||||||||||
| All Communities | $ | 1,417 | $ | 1,381 | $ | 1,337 | $ | 1,292 | $ | 1,291 | |||||
| Average Monthly Revenue per Occupied Apartment Home(3) | |||||||||||||||
| Same-Store | $ | 1,592 | $ | 1,565 | $ | 1,518 | $ | 1,471 | $ | 1,463 | |||||
| Non-Same-Store | 1,471 | 1,417 | 1,329 | 1,271 | 1,306 | ||||||||||
| All Communities | $ | 1,562 | $ | 1,530 | $ | 1,473 | $ | 1,424 | $ | 1,423 | |||||
| Weighted Average Occupancy(4) | |||||||||||||||
| Same-Store | 94.9 | % | 94.5 | % | 94.8 | % | 93.9 | % | 93.4 | % | |||||
| Non-Same-Store | 94.7 | % | 94.6 | % | 95.0 | % | 94.5 | % | 94.7 | % | |||||
| All Communities | 94.9 | % | 94.5 | % | 94.8 | % | 94.0 | % | 93.7 | % | |||||
| Operating Expenses as a % of Scheduled Rent | |||||||||||||||
| Same-Store | 43.1 | % | 42.5 | % | 40.3 | % | 41.0 | % | 39.5 | % | |||||
| Non-Same-Store | 51.7 | % | 48.7 | % | 47.1 | % | 50.6 | % | 44.1 | % | |||||
| All Communities | 45.1 | % | 43.9 | % | 41.8 | % | 43.0 | % | 40.6 | % | |||||
| Capital Expenditures | |||||||||||||||
| Total Capital Expenditures per Apartment Home – Same-Store | $ | 364 | $ | 465 | $ | 196 | $ | 145 | $ | 369 |
(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 rent 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 apartment 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 apartment 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 calculation of weighted average occupancy may not be comparable to that disclosed by other real estate companies.
| S-15 |
|---|
CENTERSPACE
CAPITAL EXPENDITURES
(dollars in thousands, except per home amounts)
| Three Months Ended | Twelve Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| 12/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | |||||
| Total Same-Store Apartment Homes | 11,330 | 11,330 | 11,330 | 11,330 | ||||
| Building - Exterior | $ | 601 | $ | 982 | $ | 2,643 | $ | 3,133 |
| Building - Interior | 424 | 1,371 | 490 | 1,719 | ||||
| Mechanical, Electrical, & Plumbing | 627 | 274 | 2,850 | 845 | ||||
| Furniture & Equipment | 126 | 83 | 439 | 186 | ||||
| Landscaping & Grounds | 747 | 354 | 1,737 | 719 | ||||
| Turnover Replacements | 1,353 | 925 | 4,842 | 3,303 | ||||
| Work in progress | 244 | 706 | (520) | 706 | ||||
| Capital Expenditures - Same-Store | $ | 4,122 | $ | 4,695 | $ | 12,481 | $ | 10,611 |
| Capital Expenditures per Apartment Home - Same-Store | $ | 364 | $ | 414 | $ | 1,102 | $ | 937 |
| Value Add | $ | 10,032 | $ | 5,921 | $ | 30,432 | $ | 20,310 |
| Total Capital Spend - Same-Store | $ | 14,154 | $ | 10,616 | $ | 42,913 | $ | 30,921 |
| Total Capital Spend per Apartment Home - Same Store | $ | 1,249 | $ | 937 | $ | 3,788 | $ | 2,729 |
| Three Months Ended | Twelve Months Ended | |||||||
| Capital Expenditures - All Properties | 12/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | ||||
| All Properties - Weighted Average Homes | 15,065 | 14,324 | 14,914 | 12,486 | ||||
| Capital Expenditures | $ | 4,322 | $ | 5,062 | $ | 14,725 | $ | 11,226 |
| Capital Expenditures per Apartment Home | $ | 287 | $ | 353 | $ | 987 | $ | 899 |
| Value Add | 10,698 | 5,922 | 31,361 | 20,328 | ||||
| Acquisition Capital | 6,199 | $ | 1,523 | 11,237 | 2,818 | |||
| Total Capital Spend | $ | 21,219 | $ | 12,507 | $ | 57,323 | $ | 34,372 |
| Total Capital Spend per Apartment Home | $ | 1,408 | $ | 873 | $ | 3,844 | $ | 2,753 |
| Three Months Ended | Twelve Months Ended | |||||||
| Value Add Capital Expenditures | 12/31/2022 | 12/31/2021 | 12/31/2022 | 12/31/2021 | ||||
| Interior - Units | ||||||||
| Same-Store | $ | 4,337 | $ | 1,923 | $ | 18,857 | $ | 11,304 |
| Non-Same-Store | 326 | 1 | 404 | 1 | ||||
| Total Interior Units | $ | 4,663 | $ | 1,924 | $ | 19,261 | $ | 11,305 |
| Common Areas and Exteriors | ||||||||
| Same-Store | $ | 5,425 | $ | 2,433 | $ | 13,241 | $ | 7,070 |
| Non-Same-Store | 340 | — | 536 | 6 | ||||
| Total Common Areas and Exteriors | $ | 5,765 | $ | 2,433 | $ | 13,777 | $ | 7,076 |
| Work in Progress | ||||||||
| Same-Store | $ | 270 | $ | 1,565 | $ | (1,666) | $ | 1,937 |
| Non-Same-Store | — | — | (11) | 11 | ||||
| Total Work in Progress | $ | 270 | $ | 1,565 | $ | (1,677) | $ | 1,948 |
| Total Value-Add Capital Expenditures | ||||||||
| Same-Store | $ | 10,032 | $ | 5,921 | $ | 30,432 | $ | 20,311 |
| Non-Same-Store | 666 | 1 | 929 | 18 | ||||
| Total Portfolio Value-Add | $ | 10,698 | $ | 5,922 | $ | 31,361 | $ | 20,329 |
| S-16 | ||||||||
| --- |
CENTERSPACE
2023 Financial Outlook
(in thousands, except per share amounts)
Centerspace is providing guidance for 2023.
| Twelve Months Ended | 2023 Full-Year Guidance Range | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, 2022 | Low | High | ||||||
| Actual | Amount | Amount | ||||||
| Same-store growth (1) | ||||||||
| Revenue | $ | 220,630 | 6.00 | % | 8.00 | % | ||
| Controllable expenses | 58,571 | 3.00 | % | 4.50 | % | |||
| Non-controllable expenses | 32,682 | 8.00 | % | 9.50 | % | |||
| Total Expenses | $ | 91,253 | 4.75 | % | 6.25 | % | ||
| Same-store NOI (1)(2) | $ | 129,377 | 7.00 | % | 9.00 | % | ||
| Components of NOI(2) | ||||||||
| Same-store(1) | $ | 129,377 | $ | 138,300 | $ | 141,300 | ||
| Non-same-store(1) | 5,892 | 8,900 | 9,100 | |||||
| Other(1) | 2,558 | 2,000 | 2,400 | |||||
| Dispositions(1) | 10,252 | 2,500 | 2,800 | |||||
| Total NOI(2) | $ | 148,079 | $ | 151,700 | $ | 155,600 | ||
| Interest expense | $ | (32,750) | (37,100) | (36,700) | ||||
| Dividends to preferred shareholders | $ | (6,428) | (6,400) | (6,400) | ||||
| Recurring income and expenses | ||||||||
| Interest and other income (loss) | $ | 1,175 | 160 | 350 | ||||
| General and administrative and property management | (27,411) | (29,100) | (28,300) | |||||
| Casualty losses | (1,591) | (1,500) | (1,300) | |||||
| Non-real estate depreciation and amortization | (379) | (375) | (325) | |||||
| Non-controlling interest | (127) | (110) | (100) | |||||
| Total recurring income and expenses | $ | (28,333) | (30,925) | (29,675) | ||||
| FFO(2) | $ | 80,568 | $ | 77,275 | $ | 82,825 | ||
| Non-core income and expenses | ||||||||
| Non-cash casualty (gain) loss | $ | 254 | $ | 500 | $ | 300 | ||
| Technology implementation costs | 873 | — | — | |||||
| Interest rate swap termination, amortization, and mark-to-market | (100) | 900 | 1,000 | |||||
| Pursuit costs | 1,302 | 70 | 60 | |||||
| Other miscellaneous items | (374) | (310) | (350) | |||||
| Total non-core income and expenses | $ | 1,955 | $ | 1,160 | $ | 1,010 | ||
| Core FFO(2) | $ | 82,523 | $ | 78,435 | $ | 83,835 | ||
| Net income (loss) per share - diluted | $ | (1.35) | $ | 2.37 | $ | 3.25 | ||
| FFO per diluted share(2) | $ | 4.32 | $ | 4.21 | $ | 4.50 | ||
| Core FFO per diluted share(2) | $ | 4.43 | $ | 4.27 | $ | 4.56 | ||
| Weighted average shares outstanding - diluted | 18,645 | 18,375 | 18,400 | |||||
| Additional Assumptions | ||||||||
| Same-store capital expenditures (per home) | $ | 1,102 | $ | 1,100 | $ | 1,150 | ||
| Value-add expenditures | 31,361 | 24,500 | 27,500 | |||||
| Proceeds from potential dispositions | — | 155,000 | 165,000 |
(1)Amounts for the year ended December 31, 2022 reflect the 2023 same-store pool.
(2)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-17 |
|---|
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.
| Outlook | ||||||
|---|---|---|---|---|---|---|
| Twelve Months Ended | Twelve Months Ended | |||||
| December 31, 2022 | December 31, 2023 | |||||
| Amount | Low | High | ||||
| Net income (loss) available to common shareholders | $ | (20,537) | $ | 51,339 | $ | 67,707 |
| Noncontrolling interests - Operating Partnership and Series E preferred units | (4,299) | (7,795) | (7,885) | |||
| Depreciation and amortization | 105,257 | 92,556 | 91,768 | |||
| Less depreciation - non real estate | (387) | (375) | (325) | |||
| Less depreciation - partially owned entities | (65) | (110) | (100) | |||
| (Gain) loss on sale of real estate | (41) | (58,980) | (68,980) | |||
| Dividends to preferred unitholders | 640 | 640 | 640 | |||
| FFO applicable to common shares and Units | $ | 80,568 | $ | 77,275 | $ | 82,825 |
| Adjustments to Core FFO: | ||||||
| Non-cash casualty (gain) loss | 254 | 500 | 300 | |||
| Loss on extinguishment of debt | 5 | — | — | |||
| Technology implementation costs | 873 | — | — | |||
| Interest rate swap termination, amortization, and mark-to-market | (100) | 900 | 1,000 | |||
| Pursuit costs | 1,302 | 70 | 60 | |||
| Other miscellaneous items | (379) | (310) | (350) | |||
| Core FFO applicable to common shares and Units | $ | 82,523 | $ | 78,435 | $ | 83,835 |
| Net income (loss) per share - diluted | $ | (1.35) | $ | 2.37 | $ | 3.25 |
| FFO per share - diluted | $ | 4.32 | $ | 4.21 | $ | 4.50 |
| Core FFO per share - diluted | $ | 4.43 | $ | 4.27 | $ | 4.56 |
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.
| Outlook | ||||||
|---|---|---|---|---|---|---|
| 12 Months Ended | 12 Months Ended | |||||
| December 31, 2022 | December 31, 2023 | |||||
| Actual | Low | High | ||||
| Operating income | $ | 13,861 | $ | 87,524 | $ | 103,212 |
| Adjustments: | ||||||
| General and administrative and property management expenses | 27,411 | 29,100 | 28,300 | |||
| Casualty loss | 1,591 | 1,500 | 1,300 | |||
| Depreciation and amortization | 105,257 | 92,556 | 91,768 | |||
| (Gain) loss on sale of real estate and other assets | (41) | (58,980) | (68,980) | |||
| Net Operating Income | $ | 148,079 | $ | 151,700 | $ | 155,600 |
| S-18 | ||||||
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