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): April 26, 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 1.01. Entry into a Material Definitive Agreement.
On April 26, 2023 CSR – PARKHOUSE, LLC (the “Borrower”), an indirect subsidiary of Centerspace (the“Company”) entered into a Promissory Note (the “Note”) under which the Borrower promises to pay State Farm Life Insurance Company (the “Lender”) the principal sum of $90,000,000 (“Principal”) together with interest on the unpaid Principal balance outstanding from the date of disbursement until paid at the rate of 5.04% per annum computed on the basis of a 360-day year. The Borrower will make monthly payments of Principal and interest in the amount of $485,342.02 until all outstanding Principal and accrued interest is repaid at maturity on May 1, 2035. Subject to an applicable premium, the Borrower may prepay the entire outstanding Principal and accrued but unpaid interest on any date after May 1, 2026. The Note also contains customary events of default and provides for customary acceleration and remedy rights for the Lender upon the occurrence of an event of default.
In connection with the Note, the Borrower entered into a Deed of Trust, Security Agreement and Fixture Filing with Assignment of Leases and Rents (the “Deed of Trust”) in favor of the Public Trustee of the County of Adams, Colorado, as trustee for the benefit of the Lender. Under the Deed of Trust, the Borrower grants to the Lender a lien and security interest in certain real property and fixtures owned by the Borrower, certain other property of the Borrower, and leases held by and rents owed to the Borrower.
In addition, the Company entered into a Guaranty Agreement (the “Guaranty”), dated April 26, 2023 in favor of the Lender. Under the Guaranty, the Company agreed to guaranty the recourse obligations of the Borrower under the Note.
The foregoing description of the Note, the Deed of Trust, the Guaranty, and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the full and complete terms of the forgoing, which are filed as Exhibit 10.1 through 10.3, respectively, to this Current Report on Form 8-K and incorporated herein by reference.
Item 2.02. Results of Operations and Financial Condition.
The Company issued an earnings release on May 1, 2023, announcing certain financial and operational results for the three months ended March 31, 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 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The disclosures under Item 1.01 of this Current Report on Form 8-K are also responsive to Item 2.03 of this Current Report on Form 8-K and are incorporated by reference into this Item 2.03.
ITEM 9.01 Financial Statements and Exhibits
(d)Exhibits
| Exhibit | |
|---|---|
| Number | Description |
| 10.1 | Promissory Note, dated April 26, 2023, by CSR – PARKHOUSE, LLC in favor of State Farm Life Insurance Company. |
| 10.2 | Deed of Trust, Security Agreement and Fixture Filing with Assignment of Leases and Rents, dated April 26, 2023, by CSR – PARKHOUSE, LLC, in favor of the Public Trustee of the County. |
| 10.3 | Guaranty Agreement, dated April 26, 2023, by Centerspace in favor of State Farm Life. |
| 99.1 | Earnings Release and Supplemental Operating and Financial Data, dated May 1, 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: May 1, 2023 | President and Chief Executive Officer |
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Note (Parkhouse) Final.docx 1 Loan No. 15060 PROMISSORY NOTE $90,000,000.00 April 26, 2023 FOR VALUE RECEIVED, CSR – PARKHOUSE, LLC, a Minnesota limited liability company ("Borrower"), promises to pay to the order of STATE FARM LIFE INSURANCE COMPANY, an Illinois corporation, its successors or assigns ("Lender"), the principal sum of NINETY MILLION and No/100 DOLLARS ($90,000,000.00) ("Principal"), together with interest on the unpaid Principal balance outstanding from the date of disbursement until paid at the rate of Five and Four-One Hundredths percent (5.04%) per annum (the "Note Rate"). Interest shall be computed on the basis of a three hundred sixty (360) day year comprised of twelve (12) thirty (30) day months. Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Deed of Trust (as defined in Section 3 below). 1. Payments. a. On the date of disbursement, Borrower shall pay interest only to Lender for the period from (and including) the date of disbursement to (and including) April 30, 2023. On June 1, 2023, and on the first day of each succeeding month thereafter (a "Regular Payment Date"), to and including April 1, 2035, Borrower shall pay Principal and interest to Lender in fixed monthly installments of Four Hundred Eighty-Five Thousand Three Hundred Forty-Two and 02/100 Dollars ($485,342.02) each (each, a "Monthly Payment"). Borrower shall pay to Lender a final payment of all outstanding Principal and accrued and unpaid interest thereon and all other indebtedness on May 1, 2035 (the "Maturity Date"). If a Regular Payment Date or the Maturity Date falls on a Saturday, Sunday or holiday observed by the Federal Reserve System, then for all purposes hereunder, including the determination of when payment is due, reference to such Regular Payment Date or the Maturity Date shall mean the next succeeding business day. b. All required payments are to be made to Lender at One State Farm Plaza, Bloomington, Illinois 61710-0001, Attention: Investment Accounting, D-3, or at any other place Lender shall designate in writing. c. All Indebtedness is payable in lawful money of the United States of America that is legal tender for public and private debts. d. Each payment under this Note shall be applied first to the payment of any cost, expense or other amount (other than interest and Principal) for which Borrower is liable hereunder or under the other Loan Documents, then to accrued interest and the remainder to the reduction of unpaid Principal. 2. Events of Default; Remedies. a. It shall constitute an event of default (an "Event of Default") of and under this Promissory Note (this "Note") if any of the following events shall occur:
Note (Parkhouse) Final.docx 2 Loan No. 15060 i. Borrower shall fail to pay any Monthly Payment within ten (10) days of the applicable Regular Payment Date; ii. Borrower shall fail to make the final payment of all outstanding Principal and accrued and unpaid interest on the Maturity Date; or iii. An "Event of Default" as defined in any of the Loan Documents shall occur under any of the other Loan Documents. b. If any Monthly Payment payable under this Note is not paid on or before the tenth (10th) day after the applicable Regular Payment Date, Borrower shall pay to Lender an amount equal to the lesser of five percent (5%) of such unpaid Monthly Payment or the maximum amount permitted by Applicable Law (as defined below) to defray the expenses incurred by Lender in handling and processing the delinquent payment and to compensate Lender for the loss of use of the delinquent payment (the "Late Charge"). The Late Charge shall be immediately due and payable in addition to all other rights and remedies available to Lender. c. While any Event of Default exists, the Note Rate shall be increased to the lesser of Ten and Four One-Hundredths percent (10.04%) per annum or the maximum amount permitted by Applicable Law (the "Default Rate"). The Default Rate shall accrue from the date of the first occurrence of the Event of Default to the date upon which the Event of Default is waived in writing by Lender; provided, however, for purposes of calculating the Default Rate the date of the first occurrence of an Event of Default under Section 2.a.i. above shall mean the first day after the Regular Payment Date without regard to any grace period in Section 2.a.i. d. Upon an Event of Default, Lender may, at its option and without further notice, declare the Indebtedness, including the entire Principal balance, together with all accrued and unpaid interest thereon, to be immediately due and payable. Failure to exercise this option for a particular Event of Default shall not constitute a waiver of the right to exercise such right in case of any subsequent Event of Default. 3. Security. This Note is secured by, among other Loan Documents (i) a Deed of Trust, Security Agreement and Fixture Filing with Assignment of Leases and Rents executed by Borrower to and in favor of Lender of even date herewith (the "Deed of Trust") which encumbers and constitutes a lien upon and security interest in certain real property and fixtures located in Adams County, in the State of Colorado (the "State") and certain other property, rights and interests, all as more fully described in the Deed of Trust (the "Secured Property"); and (ii) an Assignment of Rents and Leases executed by Borrower to and in favor of Lender of even date herewith (the "Assignment of Rents and Leases"), in which the Rents and Leases are absolutely and unconditionally assigned by Borrower to Lender. 4. Prepayment. a. This Note shall be closed to prepayment through and including May 1, 2026. Only thereafter, provided Borrower first gives Lender written notice at least thirty (30) days but no more than sixty (60) days before the date selected by Borrower for prepayment (the
Note (Parkhouse) Final.docx 3 Loan No. 15060 "Prepayment Date"), Borrower may prepay the entire outstanding Principal on the Prepayment Date, provided that (i) all other amounts outstanding under the Loan Documents are also paid, and (ii) the amount prepaid is accompanied by a fee (the "Prepayment Fee") equal to the following: i. With respect to any prepayment made after May 1, 2026, but on or prior to May 1, 2031, an amount equal to the greater of the following: A. An amount equal to one percent (1%) of the entire Principal amount to be prepaid, or B. If, at the time of prepayment, the Reinvestment Yield (as defined below) is less than the Note Rate, the Prepayment Fee shall be calculated by: I. Using the Reinvestment Yield corresponding to the payment frequency of this Note, adding the present values of: (i) the scheduled Monthly Payments remaining until the Maturity Date; plus (ii) the final Principal and accrued interest payment due on the Maturity Date; and II. From the sum so obtained, subtracting the outstanding Principal balance of this Note as of the Prepayment Date. The remainder shall be the Prepayment Fee (if such amount is greater than the amount determined by subsection (i) above). "Reinvestment Yield" means fifty (50) basis points in excess of the yield on United States Treasury Securities having the closest maturity (month and year) to the Maturity Date. Should more than one United States Treasury Security be quoted as maturing on the Maturity Date, then the yield of the United States Treasury Security quoted closest to par will be used in the calculation. ii. With respect to any prepayment made after May 1, 2031, but on or prior to May 1, 2032, the Prepayment Fee shall be equal to two percent (2.0%) of the entire Principal amount to be prepaid; iii. With respect to any prepayment made after May 1, 2032, but on or prior to May 1, 2033, the Prepayment Fee shall be equal to one percent (1.0%) of the entire Principal amount to be prepaid; and iv. No Prepayment Fee shall be payable with respect to any prepayment made after May 1, 2033. b. The Prepayment Fee shall be calculated two (2) business days before the Prepayment Date. Failure to prepay on the Prepayment Date shall be considered a waiver by Borrower of the present right to prepay. c. If Lender declares the entire Indebtedness to be immediately due and payable, Borrower agrees that the Prepayment Fee, calculated as if the Prepayment Date were the date of acceleration, shall apply. Lender shall not be obligated to accept any such tender of payment unless such tender of payment includes the Prepayment Fee. Lender shall be entitled at any such
Note (Parkhouse) Final.docx 4 Loan No. 15060 foreclosure sale to include the amount of the Prepayment Fee as part of the Indebtedness. No Prepayment Fee will be charged in the event the Loan is prepaid in whole or in part by the application of insurance or condemnation proceeds as required by the Loan Documents. d. In the event there is a time period during the term of the Loan in which Borrower is prohibited from prepaying the Loan (“Closed Period”), but a prepayment is made during the Closed Period notwithstanding such prohibition, whether as a result of any statutory right of Borrower to repay the Note, upon acceleration, or as permitted by Lender in its sole discretion, the Prepayment Fee shall be calculated in the manner set forth in Section 4(a)(i) above and shall apply to such prepayment and be a condition of Borrower’s right to make such prepayment. This subsection shall not be construed as granting Borrower any right to prepay the Note during the Closed Period. e. Borrower agrees that the manner of calculation of the Prepayment Fee set forth in this Note represents bargained-for consideration to Lender for granting to Borrower the privilege of prepaying the Note prior to the Maturity Date and does not represent a penalty. 5. Limitation of Liability. In consideration of the security provided by Borrower to Lender for repayment of the Indebtedness, including, without limitation, the liens on and security interests in the Secured Property granted pursuant to the Deed of Trust and the assignment of the Rents and Leases made pursuant to the Assignment of Rents and Leases, upon the occurrence of an Event of Default under the Deed of Trust or under any of the other Loan Documents, Lender agrees that it shall not, except as otherwise set forth in this Section, seek to enforce, nor shall Lender be entitled to enforce, any deficiency or monetary judgment against Borrower, any partner of Borrower, any member of Borrower, any shareholder of Borrower or any beneficiary of Borrower (individually, an "Exculpated Party", and collectively, the "Exculpated Parties"), personally, and shall not levy or execute judgment upon any property of the Exculpated Parties, other than the Secured Property; it being expressly agreed, acknowledged and understood, however, that the foregoing limitation of the liability of an Exculpated Party shall not apply to the extent that such Exculpated Party is, pursuant to the further terms hereof, liable for any Losses (as defined below) and nothing contained herein shall in any manner or way release, affect or impair: a. The existence of the Indebtedness and Obligations created in and evidenced by the Loan Documents; b. The enforceability of the liens, security interests and assignments created in and granted by the Loan Documents against the Secured Property; c. The enforceability of the Environmental Indemnification Agreement and any Guaranty Agreement given to Lender or the full recourse liability of Borrower and Guarantor, as applicable, thereunder; d. The full recourse liability of Borrower and any other party that has executed or may hereafter execute a Guaranty Agreement in favor of Lender, including, but not limited to, Centerspace, LP, a North Dakota limited partnership ("Guarantor") (Borrower and Guarantor are sometimes hereafter individually called a "Liable Party" and collectively called the "Liable
Note (Parkhouse) Final.docx 5 Loan No. 15060 Parties"), for all Indebtedness, including Principal, interest and other amounts outstanding under the Loan Documents upon the occurrence of (i) a Transfer in violation of Section 3.11 of the Deed of Trust; and/or (ii) any of the bankruptcy-related Events of Default under Sections 4.1(i)(C), 4.1(j), 4.1(k) (solely with respect to authorizing the action set forth in Section 4.1(i)(C)) or 4.1(l) of the Deed of Trust; or e. The recourse liability of each Liable Party for all Losses (as defined below) incurred by Lender (whether directly or indirectly) arising from or related to the following: i. The failure to apply any Rents received by any of the Exculpated Parties or Liable Parties at any time after an Event of Default (all such Rents received during such period being herein called "Recoverable Rents") to (A) the payment of any amount due under the Loan Documents, including, without limitation, the Indebtedness; (B) the payment of any operating expenses of the Secured Property; or (C) the performance of any Obligations required under the Loan Documents; provided, however, the Liable Parties shall not be liable to Lender under this subsection (i) for any Recoverable Rents in excess of the Recoverable Rents necessary for the payment of the amounts and the performance of the obligations set forth in (A), (B) and (C) above; ii. The misapplication or misappropriation of any tenant security deposits, advance or prepaid Rents, cancellation or termination fees or other similar sums paid to or held by Borrower, any affiliate of Borrower or any other Person (other than Lender) relating to the operation of the Secured Property; iii. The willful or wanton act or omission on the part of any of the Exculpated Parties or Liable Parties resulting in damage to or destruction of all or any portion of the Secured Property, including, without limitation, physical waste or any act of arson or malicious destruction by any of the Exculpated Parties or Liable Parties; iv. The failure to maintain insurance as required by the Loan Documents or any Leases affecting the Secured Property, or the failure to timely pay insurance premiums, real estate taxes, regular or special assessments or utility charges affecting the Secured Property; v. The failure of the Exculpated Parties or Liable Parties to deliver to Lender any Proceeds received by any of them relating to the Secured Property, or to use such Proceeds for Restoration of the Secured Property in accordance with the terms of the Loan Documents; or vi. Any fraud or willful misrepresentation of a material fact by any of the Exculpated Parties or Liable Parties in any document executed or presented to Lender in connection with the Loan. As used herein, "Losses" means any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, costs, fines, penalties, charges, fees, expenses (including, without limitation, reasonable legal fees and expenses and other costs of defense and internal administrative fees assessed by Lender), judgments, awards or amounts paid in settlement of whatever kind or nature.
Note (Parkhouse) Final.docx 6 Loan No. 15060 6. Compliance with Applicable Law. a. It is the intention of Borrower and Lender that this Note and all other Loan Documents shall comply with any Applicable Law. To that end, the parties stipulate and agree that none of the terms and provisions of this Note or the Loan Documents shall ever be construed to create a contract that violates any Applicable Law or exceeds the limits imposed or provided by law for the use or detention of money or for forbearance in seeking its collection. b. In the event that interest paid or received under this Note or the other Loan Documents shall result, because of any reduction of Principal or any other reason, in an effective rate of interest which for any period is in excess of applicable usury limits, such excess interest for the period in question shall, at Lender's option, be refunded to Borrower or be applied upon the outstanding Principal without a Prepayment Fee. c. As used herein, "Applicable Law" means any federal or state statute or other law, including, but not limited to, the applicable usury laws of the State or the United States, as such Applicable Law now exists, is amended or is enacted during the term of this Note. d. Borrower represents and agrees that the Indebtedness evidenced by this Note constitutes a commercial business loan. 7. Lender's Attorneys' Fees. Should the Indebtedness evidenced by this Note or any part thereof be: (i) collected at law or in equity or through any legal, bankruptcy, receivership, probate or other court proceedings; (ii) placed in the hands of attorneys for collection after the occurrence of an Event of Default; (iii) foreclosed by the Public Trustee; or (iv) the subject of any court proceeding involving the lien of the Deed of Trust or its priority, Borrower shall pay to Lender, in addition to the Principal and interest due and payable hereunder and all other Indebtedness due pursuant to the terms of the Loan Documents, reasonable attorneys' and paralegals' fees and collection costs, including those incurred by Lender on any appeal. 8. Borrower's Waivers. To the extent permitted under applicable law, Borrower (on behalf of itself and every person or entity at any time liable for the payment of the Indebtedness) hereby waives presentment for payment, demand and notice of demand, dishonor and notice of dishonor, protest and notice of protest, nonpayment and notice of nonpayment of this Note, and all other notices and demands, including, without limitation, notice of intention to accelerate the maturity of this Note, notice of acceleration of the maturity of this Note, diligence in collection and the bringing of suit against any other party, and Borrower hereby further agrees to all renewals, extensions, modifications, partial payments, releases or substitutions of security, in whole or in part, with or without notice, whether before or after maturity. 9. Payment of Taxes and Fees. Borrower agrees to pay all costs, expenses, fees and taxes on or with respect to the execution, delivery, recordation, existence or possession of this Note, the Deed of Trust and
Note (Parkhouse) Final.docx 7 Loan No. 15060 other Loan Documents, including, without limitation, all recording fees and any documentary stamp tax or intangible personal property tax now or hereafter required by Applicable Law to be affixed or paid with respect to this Note, the Deed of Trust or the other Loan Documents. 10. Waiver of Trial by Jury. Borrower hereby waives, to the fullest extent permitted by Applicable Law, the right to trial by jury in any action, proceeding or counterclaim filed by any party, whether in contract, tort or otherwise relating directly or indirectly to this Note or any acts or omissions of Borrower in connection therewith or contemplated thereby. 11. Releases. Lender may, without notice, and without regard to the consideration, if any, given or paid therefor, release or substitute any part of the Secured Property given as security for the repayment of the Indebtedness without releasing any other property given as security for the Indebtedness, or may release any party liable for the payment of the Indebtedness without releasing any other party liable for the Indebtedness, or may agree with any party liable for the Indebtedness to extend the time for payment of any part or all of the Indebtedness without releasing any party liable for the Indebtedness. Any failure of Lender to exercise any right granted herein, in the Deed of Trust or the other Loan Documents shall not constitute a waiver of such right or preclude the subsequent exercise thereof. 12. Joint and Several Obligations. If this Note is executed by more than one party, the obligations and liabilities of Borrower under this Note shall be joint and several. 13. Successors and Assigns. This Note shall inure to the benefit of and may be enforced by Lender and its successors and assigns. 14. Governing Law. This Note and the rights, duties, obligations and liabilities of the parties hereunder and/or arising from or relating in any way to the Indebtedness or the Loan shall be governed by and construed for all purposes under the law of the State. [Signature appears on the following page]
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Guaranty (Parkhouse) Final.docx 1 Loan No. 15060 GUARANTY AGREEMENT [Recourse Carveouts] THIS GUARANTY AGREEMENT ("Guaranty") is made as of this 26th day of April, 2023, by CENTERSPACE, LP, a North Dakota limited partnership ("Guarantor"), in favor of STATE FARM LIFE INSURANCE COMPANY, an Illinois corporation, its successors and assigns ("Lender"). W I T N E S S E T H: A. CSR – Parkhouse, LLC, a Minnesota limited liability company ("Borrower"), contemporaneously herewith, has executed a Promissory Note ("Note") in the face amount of Ninety Million and 00/100 Dollars ($90,000,000.00) ("Loan"). The Loan is secured by, among other things, a Deed of Trust, Security Agreement and Fixture Filing with Assignment of Leases and Rents ("Deed of Trust") by Borrower to, in favor of, and for the benefit of Lender. Capitalized terms used but not defined herein have the meanings given to them in the Deed of Trust. B. The Loan is evidenced by the Note which is secured by the Deed of Trust, and which documents, together with all other documents evidencing or securing Borrower's indebtedness to Lender are hereafter collectively called the "Loan Documents". C. Guarantor acknowledges that but for the execution and delivery of this Guaranty by Guarantor, Lender would not make the Loan. D. Guarantor will receive direct financial benefits as a result of the Loan. NOW, THEREFORE, in consideration of the premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor, does hereby covenant and agree as follows: ARTICLE 1 COVENANTS AND AGREEMENTS Section 1.1 Guarantor hereby unconditionally, absolutely, and irrevocably guarantees to Lender the full, prompt and complete payment of all amounts for which the Liable Parties (as defined in the Note), or any of them, have recourse liability in accordance with Section 5 of the Note (together with the obligation to pay costs, expenses and fees described in Section 1.5 below, "Guarantor's Obligations"). In the event Borrower fails to pay the Guarantor’s Obligations, Guarantor shall immediately upon written demand of Lender pay for the benefit of Lender all of the Guarantor’s Obligations. The guarantee of Guarantor as set forth in this Section is a continuing guaranty of payment and not a guaranty of collection. Notwithstanding anything to the contrary herein, Borrower’s and Guarantor’s obligations under the Environmental Indemnification Agreement are not guaranteed hereunder and are not included within the Guarantor’s Obligations under this Guaranty, such obligations being the direct obligations of Guarantor thereunder.
Guaranty (Parkhouse) Final.docx 2 Loan No. 15060 Section 1.2 The obligations of Guarantor under this Guaranty are primary, immediate, absolute, unconditional, and not contingent upon pursuit by Lender of any remedies it might have against Borrower or its respective successors and assigns, shall be binding upon Guarantor's successors or assigns, and shall remain in full force and effect until satisfaction of the covenants contained in this Guaranty shall have been accomplished in full. Such obligations shall not be affected, modified or impaired upon the happening from time to time of any event or circumstance which might otherwise constitute a legal or equitable discharge or defense of Borrower or Guarantor as surety, or otherwise, including without limitation any of the following, whether or not with notice to, or the consent of, Guarantor: (a) the compromise, settlement, release or termination of any or all of the obligations, covenants or agreements of Borrower; (b) the waiver of the payment, performance or observance of any of the respective obligations, covenants or agreements contained in the Loan Documents; (c) the extension of the time for performance of any obligations, covenants or agreements under or arising out of the Loan Documents or this Guaranty or the extension or the renewal of any thereof; (d) the modification or amendment (whether material or otherwise) of any obligation, covenant or agreement set forth in the Loan Documents; (e) the taking or the omission to take any of the actions referred to in the Loan Documents and any actions under this Guaranty; (f) any failure, omission, delay or lack of diligence on the part of Lender to enforce, assert or exercise any right, power or remedy conferred on it in this Guaranty or in the Loan Documents, or any other act or acts on the part of Lender; (g) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets, marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition with creditors and readjustment of, or other similar proceedings affecting, Guarantor, Borrower or any of the assets of any of them, or any allegation or contest of the validity of this Guaranty, or the Loan Documents in any such proceeding; (h) the release or discharge of Borrower from the performance or observance of any obligation, covenant or agreement contained in the Loan Documents by operation of law; and (i) the default or failure of Guarantor fully to perform any of the obligations set forth in this Guaranty. Section 1.3 No act of commission or omission of any kind or at any time on the part of Lender or its successors, shall in any way impair the rights of Lender to enforce this Guaranty, and no set off counterclaim, reduction or diminution of any obligation, or any defense of any
Guaranty (Parkhouse) Final.docx 3 Loan No. 15060 kind or nature which Borrower or Guarantor, or any other guarantor of any obligations of Borrower, has or may have against Lender, Borrower or any other guarantor shall be available hereunder to Guarantor against Lender or its successors or assigns. Section 1.4 The Guarantor hereby unconditionally waives diligence, presentment, protest, notice of dishonor and notice of default in the performance of any obligation of Borrower under or in connection with the Loan Documents. Any one or more successive or concurrent actions may be brought against Guarantor either in the same action, if any, brought against Borrower or in separate actions, as often as Lender may deem advisable. Section 1.5 The Guarantor hereby expressly waives notice from Lender of its acceptance and reliance on this Guaranty. The Guarantor agrees to pay all costs, expenses and fees, including all reasonable attorneys' fees, which may be incurred by Lender, or its successors or assigns, as the case may be, in enforcing or attempting to enforce this Guaranty following an Event of Default on the part of Guarantor hereunder, whether the same shall be enforced by suit or otherwise. Section 1.6 The Guarantor agrees that this Guaranty shall inure to the benefit of and may be enforced by Lender or its endorsees, transferees, successors and assigns, and shall be binding upon and enforceable against Guarantor and Guarantor's personal representatives, heirs, successors and assigns, but not, individually, any trustee, beneficiary, officer, director or employee of guarantor. Section 1.7 The Guarantor hereby consents and agrees that Lender may at any time, either with or without consideration, surrender any property or other security of any kind or nature whatsoever held by Lender or by any person, firm or corporation on Lender's behalf or for Lender's account, securing any indebtedness or liability covered by this Guaranty, or substitute for any collateral so held, other collateral of like kind or of any kind, and such surrender, substitution or modification shall not in any way affect the liability of Guarantor hereunder. Section 1.8 The Guarantor hereby waives and agrees not to assert or take advantage of (a) any defense arising by virtue of: (i) the lack of authority, death or disability of any other party, or revocation hereof by any other party, or (ii) the failure of Lender to file or enforce a claim of any kind; (b) notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of Borrower under this or any other instruments, any creditor of Borrower or any other person whomsoever, in connection with any obligation or evidence of indebtedness held by Lender as collateral or in connection with any indebtedness or any obligation hereby guaranteed; (c) any defense based upon an election of remedies by Lender, including without limitation an election to proceed by nonjudicial rather than judicial foreclosure, which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor to proceed against Borrower for reimbursements, it being understood and agreed that Guarantor is fully responsible for being and keeping informed of the financial condition of Borrower of all circumstances bearing on the risk of nonperformance of all obligations hereby guaranteed, and (d) any defense arising by virtue of an election to demand and enforce payment under this Guaranty prior to exercising any rights against any collateral for the Indebtedness. This is an unconditional and irrevocable waiver of
Guaranty (Parkhouse) Final.docx 4 Loan No. 15060 any rights and defenses Guarantor may have because Borrower’s debt is secured by real property. The obligations hereunder are not secured by the Deed of Trust or other Loan Documents. Lender, at its option and in its sole discretion, may proceed against any collateral securing any of the Indebtedness by way of judicial or non-judicial foreclosure or any other lawful remedy for the enforcement of its rights, and the obligations of Guarantor under this Guaranty shall survive Lender’s exercise of any such right or remedy. Guarantor understands that Lender’s exercise of its rights and remedies including a non-judicial foreclosure of the Deed of Trust could impair, eliminate or destroy subrogation, reimbursement, contribution, indemnification and other rights Guarantor may have against Borrower or others for amounts paid by Guarantor under this Guaranty. Nevertheless, Guarantor hereby waives and relinquishes any claim or defense based upon the loss of any such rights, election of remedies, discharge and satisfaction of the Guarantor’s Obligations and, to the fullest extent permitted by Law following a non-judicial foreclosure of the Deed of Trust, any other claim or defense which may arise under applicable law. Section 1.9 In the event Guarantor shall advance any sums to Borrower or in the event Borrower has heretofore or shall hereafter become indebted to Guarantor before the Loan has been paid in full, repayment of all such advances and indebtedness shall be subordinate in all respects to the Loan. Any payment to Guarantor on account of such subordinated debt shall be collected and received by Guarantor in trust for Lender and shall be paid over to Lender on account of the Loan without impairing or releasing the obligations of Guarantor hereunder. Guarantor shall not ask, demand, receive, accept, sue for, set off, enforce or collect any obligations of Borrower to Guarantor or any collateral and security therefor. The Guarantor represents and warrants to Lender that such obligations are unsecured and agrees not to receive or accept any collateral or security for such obligations without the prior written permission of Lender. The Guarantor hereby agrees to execute and deliver to Lender such powers of attorney, assignments, endorsements or other instruments as may be requested by Lender in order to enable Lender to enforce any and all claims upon or with respect to the subordinated obligations, and to collect and receive any and all payments or distributions which may be payable or deliverable at any time upon or with respect thereto including any dividends and payments pursuant to debtor relief or insolvency proceedings referred to below. In the event of receivership, bankruptcy, reorganization, arrangement or other debtor relief or insolvency proceedings involving Borrower as debtor, Lender shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder. Guarantor assigns to Lender all rights Guarantor may have in any such proceeding, whether or not such rights relate to this Guaranty, and Lender shall have the right to receive directly from the receiver, trustee or other custodian, dividends and payments that are payable upon any obligation of Borrower to Guarantor now existing or hereafter arising, and to have all benefits of any security therefor, until the Indebtedness has been fully and finally paid and performed. If, notwithstanding the foregoing provisions, Guarantor should receive any payment, claim or distribution that is prohibited as provided above in this Section, Guarantor shall pay the same to Lender immediately, Guarantor hereby agreeing that it shall receive the payment, claim or distribution in trust for Lender and shall have absolutely no dominion over the same except to pay it immediately to Lender. The Guarantor shall not assign, transfer, hypothecate or dispose of any of the obligations while this Guaranty is in effect. So as to secure the performance by Guarantor of the provisions of this
Guaranty (Parkhouse) Final.docx 5 Loan No. 15060 Guaranty, Guarantor assigns, pledges, and grants to Lender a security interest in, and lien on, the subordinated obligations, all proceeds thereof and all and any security and collateral therefor. Nothing contained in this Guaranty shall be construed to give Guarantor any right of subrogation in or to the Note or any of the other Loan Documents, or all or any part of the interest of Lender therein, until the Loan has been paid in full and Guarantor hereby waives any right of subrogation and any right to participate in any security for the Indebtedness until such time as the Indebtedness is fully and finally paid in full. Section 1.10 Guarantor shall timely furnish to Lender the financial reporting required from Guarantor under the Deed of Trust and such other information, reports or statements as Lender shall from time to time reasonably request. Section 1.11 Guarantor grants Lender a right of setoff against any money, funds, credits or other property of Guarantor now or at any time in the possession of Lender or any affiliate of Lender and Lender may at any time and from time to time at its option and without notice, appropriate and apply toward the payment of any of Guarantor’s Obligations the balance of money, funds, credits or other property. Section 1.12 This Guaranty may not be changed orally, and no obligation of Guarantor can be released or waived by Lender except by a signed writing by an authorized officer of Lender. Guarantor hereby waives any rights it might have under Colorado Revised Statutes Sections 13-50-102 and 13-50-103. ARTICLE 2 REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE GUARANTOR Section 2.1 Representations and Warranties by Guarantor. Guarantor makes the following representations and warranties: (a) Authority. The Guarantor has full power and authority to enter into, execute and deliver this Guaranty and assume all obligations thereunder. No further consent or approval of any other party or public authority or regulatory body is required as a condition to the validity or enforceability of this Guaranty, or if required, the same has been obtained. (b) Binding Agreements. This Guaranty has been duly and properly executed by Guarantor, constitutes the valid and legally binding obligations of such Guarantor and is fully enforceable against Guarantor in accordance with its terms. (c) Litigation. There is no litigation or proceeding pending or, so far as Guarantor knows, threatened, before any court or administrative agency which will materially adversely affect the financial condition of Guarantor or the authority of Guarantor to enter into, or the validity or enforceability of, this Guaranty or the ability of Guarantor to perform Guarantor's obligations hereunder. (d) No Conflicting Agreements. There is (i) no provision in any existing deed of trust, mortgage, indenture, contract or agreement binding on Guarantor or affecting Guarantor's property, and (ii) no provision of law or order of court binding upon Guarantor or
Guaranty (Parkhouse) Final.docx 6 Loan No. 15060 affecting any of Guarantor's property, which would conflict with or in any way prevent the execution, delivery or performance of the terms of this Guaranty, or which would be in default or violated as a result of such execution, delivery or performance. (e) Financial Position. The financial statements of Guarantor heretofore delivered to Lender are complete and correct and fairly present the financial position of Guarantor as of the dates and for the periods referred to therein. There are no material liabilities, direct or indirect, fixed or contingent, of Guarantor, as of the date of such financial statements, which are not reflected therein or in the notes thereto. There has been no material adverse change in the financial condition of Guarantor, since the date of such financial statements and to Guarantor's knowledge, no such material adverse changes are pending or threatened, and Guarantor has not guaranteed the obligations of, or made any investment in or loans to, a person or other entity except as disclosed in such financial statements. The Guarantor has good and marketable title to all of its properties and assets, and all such properties and assets are free and clear of deeds of trust, mortgages, pledges, liens, charges and other encumbrances, except as reflected in such financial statements or in the notes thereto. (f) Taxes. The Guarantor has timely and accurately filed all required federal, state and local tax or information returns. Guarantor is not delinquent in the payment of any income, property or other federal, state or local tax or assessment. ARTICLE 3 JURISDICTION AND WAIVER OF JURY TRIAL Section 3.1 The Guarantor irrevocably (a) agrees that any suit, action or other legal proceedings arising out of this Guaranty may be brought in the courts of record of the State of Colorado in Adams County or the courts of the United States located in the State of Colorado; (b) consents to the jurisdiction of each such court in any such suit, action or proceeding; and (c) waives any objection which it may have to the venue of any such suit, action or proceeding in any of such courts in Adams County. For such time as any performance of Borrower under the Loan Documents, or of Guarantor under the Guaranty shall not be completed, Guarantor irrevocably acknowledges, consents and agrees that service of any and all process in any suit, action or proceeding upon Guarantor addressed, as provided for hereinafter in Section 4.7, by registered or certified mail shall be taken and held to be valid personal service upon Guarantor whether or not Guarantor shall then be doing or at any time shall have done business in the State of Colorado and that any such service of process shall be of the same force and validity and requirements of such service in the State of Colorado and waives all claim of error by reason of any such service. Section 3.2 GUARANTOR AND LENDER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE GUARANTOR AND LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS GUARANTY OR (B) THE LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS GUARANTY. THIS WAIVER IS
Guaranty (Parkhouse) Final.docx 7 Loan No. 15060 KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY GUARANTOR AND LENDER, AND GUARANTOR HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. GUARANTOR FURTHER REPRESENTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. ARTICLE 4 MISCELLANEOUS Section 4.1 No remedy herein conferred upon or reserved to Lender hereunder is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every such remedy now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default, omission or failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right or power may be exercised from time to time and as often as may be deemed expedient. In order to entitle Lender to exercise any remedy reserved to it in this Guaranty it shall not be necessary to give any notice, other than such notice as may be herein expressly required. If any provision contained in this Guaranty should be breached by Guarantor and thereafter duly waived by Lender, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver, amendment, release or modification of this Guaranty shall be established by conduct, custom or course of dealing, but solely by an instrument in writing duly executed by Lender. Section 4.2 Guarantor agrees to pay all costs and expenses, including reasonable attorneys' fees and collection costs incurred by Lender in enforcing this Guaranty against Guarantor. Section 4.3 All payments, whether voluntary or involuntary, received by Lender with respect to the Indebtedness from any source other than Guarantor, including, without limitation, payments from Borrower or any other guarantor and amounts received from any other sources may, for purposes of determining Guarantor’s obligations under this Guaranty, be applied to the Indebtedness in such order as Lender may from time to time determine in its sole discretion. Without limiting the foregoing, Lender may apply such payments first to the Indebtedness (as defined in the Deed of Trust) that is not guaranteed by Guarantor until such Indebtedness is paid in full before applying such payments to Guarantor's Obligations. Section 4.4 This Guaranty constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. This Guaranty may be executed in counterparts by the parties hereto. Section 4.5 The invalidity or unenforceability of any one or more phrases, sentences, clauses or section in this Guaranty shall not affect the validity or enforceability of the remaining portions of this Guaranty, or any part thereof.
Guaranty (Parkhouse) Final.docx 8 Loan No. 15060 Section 4.6 All capitalized terms used herein and not otherwise defined herein shall have the meaning ascribed to them in the Loan Documents. Section 4.7 This Guaranty shall be construed and enforced in accordance with the laws of the State of Colorado. Section 4.8 This is a continuing Guaranty and may not be revoked by Guarantor. Section 4.9 Any notice required or permitted hereunder shall be deemed to have been properly given if in writing and delivered by hand, by nationally recognized overnight delivery service, or by certified mail, postage prepaid, return receipt requested, to the following address or such other address given in writing to the other party: If to Lender: State Farm Life Insurance Company One State Farm Plaza Bloomington, Illinois 61710 Attention: Investment/Legal A-3 (Loan No: 15060) With a copy to: Jameson Pepple Cantu PLLC 801 Second Avenue, Suite 700 Seattle, Washington 98104 Attn: Mark C. Pepple If to Guarantor: c/o Centerspace 800 LaSalle Avenue, Suite 1600 Minneapolis, MN 55402 Attention: Joe McComish With a copy to, which shall not constitute notice: Taft Stettinius & Hollister LLP 2200 IDS Center 80 S. 8th Street Minneapolis, MN 55402 Attn: Steven J. Ryan Section 4.10 Notwithstanding anything to the contrary contained in this Guaranty or in the Note, it is the intent of the parties that any interest for which Guarantor is obligated hereunder shall not exceed the maximum amount of interest permitted to be enforced against Guarantor under the laws of the State of Colorado. [Signature on following page]
Document
Exhibit 99.1
Earnings Release
Centerspace Reports First Quarter 2023 Financial Results and Affirms 2023 Core FFO Guidance
MINNEAPOLIS, MN, May 1, 2023 – Centerspace (NYSE: CSR) announced today its financial and operating results for the three months ended March 31, 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 months ended March 31, 2023; Same-Store Revenues, Expenses, and Net Operating Income (Loss) (“NOI”)1 over comparable periods; and Same-Store Weighted-Average Occupancy for each of the three months ended March 31, 2023, December 31, 2022, and March 31, 2022.
| Three Months Ended March 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| Per Common Share | 2023 | 2022 | ||||||
| Net income (loss) - diluted | $ | 2.76 | $ | (0.68) | ||||
| FFO - diluted | $ | 0.89 | $ | 1.01 | ||||
| Core FFO - diluted | $ | 1.07 | $ | 0.98 | Year-Over-Year<br>Comparison | Sequential<br>Comparison | ||
| --- | --- | --- | ||||||
| Same-Store Results | Q1 2023 vs. Q1 2022 | Q1 2023 vs. Q4 2022 | ||||||
| Revenues | 10.5% | 0.7% | ||||||
| Expenses | 9.9% | — | ||||||
| NOI | 11.0% | 1.1% | Three months ended | |||||
| --- | --- | --- | --- | |||||
| Same-Store Results | March 31, 2023 | December 31, 2022 | March 31, 2022 | |||||
| Weighted Average Occupancy | 94.8% | 94.9% | 94.1% |
(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.
Highlights
•During the three months ended March 31, 2023, we successfully executed the sale of nine non-core apartment communities located in Minnesota and Nebraska for an aggregate sales price of $144.3 million, resulting in a gain on sale of $60.2 million. We primarily used the proceeds to pay down floating rate debt, including full repayment of our $100.0 million variable rate term loan. Additionally, during and subsequent to the three months ended March 31, 2023, we repurchased 123,967 common share at an average price of $54.17 per share to capitalize on the dislocation between our current share price and the underlying value of our portfolio, as demonstrated by our sale of non-core apartment communities at a value significantly above the implied value of our portfolio at the current share price.
•Net income was $2.76 per diluted share for the first quarter of 2023, compared to Net loss of $0.68 per diluted share for the same period of 2022;
•Core FFO per diluted share increased 9.2% to $1.07 for the three months ended March 31, 2023, compared to $0.98 for the three months ended March 31, 2022; and
•Same-store revenues increased by 10.5% for the first quarter of 2023 compared to the first quarter of 2022, driving an 11.0% increase in NOI compared to the same period of the prior year.
Dispositions
During the three months ended March 31, 2023, we disposed of nine apartment communities located in Minnesota and Nebraska, in four exchange transactions, for an aggregate sales price of $144.3 million.
Subsequent Events
Subsequent to March 31, 2023, Centerspace repurchased 104,503 common shares for total consideration of $5.7 million at an average price of $54.51 per share.
On April 26, 2023, Centerspace closed on a $90.0 million secured note payable with an interest rate of 5.04% and a term of 12 years.
Subsequent to March 31, 2023, $47.8 million of net tax-deferred exchange proceeds were released from restricted cash. Proceeds from the note payable and the release of the restricted cash will be used to pay down floating rate debt.
Balance Sheet
At the end of the first quarter, Centerspace had $121.4 million of total liquidity on its balance sheet, consisting of $112.5 million available under the lines of credit and cash and cash equivalents of $8.9 million.
Revised 2023 Financial Outlook
Centerspace revised its 2023 financial outlook. For additional information, see S-15 of the Supplemental Financial and Operating Data for the quarter ended March 31, 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 (loss) per Share – diluted | $ | 2.37 | $ | 3.25 | $ | 2.73 | $ | 3.62 | ||||
| Same-Store Revenue | 6.00 | % | 8.00 | % | 6.00 | % | 8.00 | % | ||||
| Same-Store Expenses | 4.75 | % | 6.25 | % | 4.75 | % | 6.25 | % | ||||
| Same-Store NOI | 7.00 | % | 9.00 | % | 7.00 | % | 9.00 | % | ||||
| FFO per Share – diluted | $ | 4.21 | $ | 4.50 | $ | 4.03 | $ | 4.33 | ||||
| Core FFO per Share – diluted | $ | 4.27 | $ | 4.56 | $ | 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
Upcoming Events
On May 16, 2023, at 9:00 a.m. CDT, Centerspace will be holding its 2023 Annual Meeting of Shareholders live via the internet. Shareholders can participate in and/or vote at the Annual Meeting via live webcast by visiting www.virtualshareholdermeeting.com/CSR2023. Shareholders must enter their 16-digit control number found in their proxy materials, either on the Notice of Internet Availability of Proxy Materials, the proxy card, or in the instructions that accompanied the proxy material to enter the 2023 Annual Meeting. The company urges the shareholders to vote and submit proxies in advance of the Annual Meeting by one of the methods described in the proxy materials for the Annual Meeting. The Annual Meeting webcast will begin promptly at 9:00 a.m. CDT. On the day of the Annual Meeting, the company recommends that you log into its virtual meeting at least 15 minutes prior to the scheduled start time to ensure you can access the meeting.
Centerspace is scheduled to participate in the upcoming National Association of Real Estate Investment Trusts (“Nareit”) REITweek: 2023 Investor Conference which will be held in New York, NY June 6-8, 2023.
Earnings Call
| Live webcast and replay: https://ir.centerspacehomes.com | |||
|---|---|---|---|
| Live Conference Call | Conference Call Replay | ||
| Tuesday, May 2, 2023, at 10:00 AM ET | Replay available until May 16, 2023 | ||
| USA Toll Free Number | 1-833-470-1428 | 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 | 909832 | Conference Number | 530926 |
Supplemental Information
Supplemental Operating and Financial Data for the quarter ended March 31, 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 March 31, 2023, Centerspace owned interests in 75 apartment communities consisting of 13,497 apartment 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 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
Joe McComish
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
March 31, 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-5 |
| Funds From Operations and Core Funds From Operations | S-5 |
| Adjusted EBITDA | S-8 |
| Debt and Capital Analysis | |
| Debt Analysis | S-9 |
| Capital Analysis | S-10 |
| Portfolio Analysis | |
| Same-Store Comparisons | S-11 |
| Portfolio Summary | S-13 |
| Capital Expenditures | S-14 |
| 2023 Financial Outlook | S-15 |
Common Share Data (NYSE: CSR)
| 1st Quarter | 4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2022 | 2022 | 2022 | |||||||||||
| High closing price | $ | 71.07 | $ | 70.20 | $ | 89.71 | $ | 103.17 | $ | 108.27 | |||||
| Low closing price | $ | 51.39 | $ | 58.50 | $ | 65.85 | $ | 76.65 | $ | 89.01 | |||||
| Average closing price | $ | 61.68 | $ | 64.64 | $ | 79.40 | $ | 87.61 | $ | 97.15 | |||||
| Closing price at end of quarter | $ | 54.63 | $ | 58.67 | $ | 67.32 | $ | 81.55 | $ | 98.12 | |||||
| Common share distributions – annualized | $ | 2.92 | $ | 2.92 | $ | 2.92 | $ | 2.92 | $ | 2.92 | |||||
| Closing dividend yield – annualized | 5.3 | % | 5.0 | % | 4.3 | % | 3.6 | % | 3.0 | % | |||||
| Closing common shares outstanding (thousands) | 15,032 | 15,020 | 15,376 | 15,373 | 15,366 | ||||||||||
| Closing limited partnership units outstanding (thousands) | 967 | 971 | 980 | 995 | 997 | ||||||||||
| Closing Series E preferred units outstanding, as converted (thousands) | 2,103 | 2,119 | 2,186 | 2,186 | 2,186 | ||||||||||
| Total closing common shares, limited partnership units, and Series E preferred units, as converted, outstanding (thousands) | 18,102 | 18,110 | 18,542 | 18,554 | 18,549 | ||||||||||
| 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) | $ | 988,912 | $ | 1,062,514 | $ | 1,248,247 | $ | 1,513,079 | $ | 1,820,028 | |||||
| S-1 | |||||||||||||||
| --- |
CENTERSPACE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands)
| Three Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | ||||||||
| REVENUE | $ | 67,897 | $ | 67,848 | $ | 65,438 | $ | 63,116 | $ | 60,314 | ||
| EXPENSES | ||||||||||||
| Property operating expenses, excluding real estate taxes | 21,342 | 21,755 | 20,290 | 19,011 | 19,014 | |||||||
| Real estate taxes | 7,581 | 7,464 | 7,039 | 7,205 | 6,859 | |||||||
| Property management expense | 2,568 | 2,358 | 2,563 | 2,721 | 2,253 | |||||||
| Casualty (gain) loss | 252 | 335 | 276 | 382 | 598 | |||||||
| Depreciation and amortization | 25,993 | 25,768 | 23,720 | 24,768 | 31,001 | |||||||
| General and administrative expenses | 7,723 | 3,276 | 4,519 | 5,221 | 4,500 | |||||||
| TOTAL EXPENSES | $ | 65,459 | $ | 60,956 | $ | 58,407 | $ | 59,308 | $ | 64,225 | ||
| Gain (loss) on sale of real estate and other investments | 60,159 | 14 | — | 27 | — | |||||||
| Operating income (loss) | 62,597 | 6,906 | 7,031 | 3,835 | (3,911) | |||||||
| Interest expense | (10,319) | (9,603) | (7,871) | (7,561) | (7,715) | |||||||
| Interest and other income (loss) | 49 | 132 | 70 | (17) | 1,063 | |||||||
| Net income (loss) | $ | 52,327 | $ | (2,565) | $ | (770) | $ | (3,743) | $ | (10,563) | ||
| Dividends to Series D preferred unitholders | (160) | (160) | (160) | (160) | (160) | |||||||
| Net (income) loss attributable to noncontrolling interest – Operating Partnership and Series E preferred units | (8,566) | 753 | 439 | 950 | 2,157 | |||||||
| Net (income) loss attributable to noncontrolling interests – consolidated real estate entities | (30) | (34) | (32) | (38) | (23) | |||||||
| Net income (loss) attributable to controlling interests | 43,571 | (2,006) | (523) | (2,991) | (8,589) | |||||||
| Dividends to preferred shareholders | (1,607) | (1,607) | (1,607) | (1,607) | (1,607) | |||||||
| NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | 41,964 | $ | (3,613) | $ | (2,130) | $ | (4,598) | $ | (10,196) | ||
| Per Share Data - Basic | ||||||||||||
| Net income (loss) per common share – basic | $ | 2.79 | $ | (0.24) | $ | (0.14) | $ | (0.30) | $ | (0.68) | ||
| Per Share Data - Diluted | ||||||||||||
| Net income (loss) per common share – diluted | $ | 2.76 | $ | (0.24) | $ | (0.14) | $ | (0.30) | $ | (0.68) | S-2 | |
| --- |
CENTERSPACE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
| 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||||||
| Real estate investments | ||||||||||||
| Property owned | $ | 2,420,911 | $ | 2,534,124 | $ | 2,513,470 | $ | 2,401,427 | $ | 2,390,952 | ||
| Less accumulated depreciation | (519,167) | (535,401) | (511,000) | (487,834) | (465,752) | |||||||
| Total real estate investments | 1,901,744 | 1,998,723 | 2,002,470 | 1,913,593 | 1,925,200 | |||||||
| Cash and cash equivalents | 8,939 | 10,458 | 14,957 | 13,156 | 13,313 | |||||||
| Restricted cash | 48,903 | 1,433 | 1,417 | 1,914 | 2,409 | |||||||
| Other assets | 19,298 | 22,687 | 19,742 | 18,950 | 24,651 | |||||||
| TOTAL ASSETS | $ | 1,978,884 | $ | 2,033,301 | $ | 2,038,586 | $ | 1,947,613 | $ | 1,965,573 | ||
| LIABILITIES, MEZZANINE EQUITY, AND EQUITY | ||||||||||||
| LIABILITIES | ||||||||||||
| Accounts payable and accrued expenses | $ | 56,639 | $ | 58,812 | $ | 58,322 | $ | 48,077 | $ | 50,360 | ||
| Revolving lines of credit | 143,469 | 113,500 | 171,500 | 73,000 | 46,000 | |||||||
| Notes payable, net of unamortized loan costs | 299,412 | 399,007 | 299,388 | 299,374 | 299,359 | |||||||
| Mortgages payable, net of unamortized loan costs | 474,999 | 495,126 | 496,530 | 497,917 | 521,536 | |||||||
| TOTAL LIABILITIES | $ | 974,519 | $ | 1,066,445 | $ | 1,025,740 | $ | 918,368 | $ | 917,255 | ||
| SERIES D PREFERRED UNITS | $ | 16,560 | $ | 16,560 | $ | 16,560 | $ | 18,627 | $ | 22,412 | ||
| EQUITY | ||||||||||||
| Series C Preferred Shares of Beneficial Interest | 93,530 | 93,530 | 93,530 | 93,530 | 93,530 | |||||||
| Common Shares of Beneficial Interest | 1,176,059 | 1,177,484 | 1,209,732 | 1,207,849 | 1,203,685 | |||||||
| Accumulated distributions in excess of net income | (508,420) | (539,422) | (524,905) | (511,552) | (495,732) | |||||||
| Accumulated other comprehensive income (loss) | (1,917) | (2,055) | (2,158) | (2,362) | (2,550) | |||||||
| Total shareholders’ equity | $ | 759,252 | $ | 729,537 | $ | 776,199 | $ | 787,465 | $ | 798,933 | ||
| Noncontrolling interests – Operating Partnership and Series E preferred units | 227,920 | 220,132 | 219,466 | 222,528 | 226,302 | |||||||
| Noncontrolling interests – consolidated real estate entities | 633 | 627 | 621 | 625 | 671 | |||||||
| TOTAL EQUITY | $ | 987,805 | $ | 950,296 | $ | 996,286 | $ | 1,010,618 | $ | 1,025,906 | ||
| TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY | $ | 1,978,884 | $ | 2,033,301 | $ | 2,038,586 | $ | 1,947,613 | $ | 1,965,573 | 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 full period-over-period operating comparisons for 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.
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 (loss), net income (loss) available for common shareholders, or cash flow from operating activities as a measure of financial performance.
| (in thousands, except percentages) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | Sequential | Year-Over-Year | ||||||||||
| 3/31/2023 | 12/31/2022 | 3/31/2022 | Change | % Change | Change | % Change | ||||||
| Operating income (loss) | $ | 62,597 | $ | 6,906 | $ | (3,911) | 806.4 | % | (1,700.5) | % | ||
| Adjustments: | ||||||||||||
| Property management expenses | 2,568 | 2,358 | 2,253 | 210 | 8.9 | % | 315 | 14.0 | % | |||
| Casualty (gain) loss | 252 | 335 | 598 | (83) | (24.8) | % | (346) | (57.9) | % | |||
| Depreciation and amortization | 25,993 | 25,768 | 31,001 | 225 | 0.9 | % | (5,008) | (16.2) | % | |||
| General and administrative expenses | 7,723 | 3,276 | 4,500 | 4,447 | 135.7 | % | 3,223 | 71.6 | % | |||
| (Gain) loss on sale of real estate and other investments | (60,159) | (14) | — | (60,145) | * | (60,159) | N/A | |||||
| Net operating income | $ | 38,974 | $ | 38,629 | $ | 34,441 | 0.9 | % | 13.2 | % | ||
| Revenue | ||||||||||||
| Same-store | $ | 58,859 | $ | 58,465 | $ | 53,249 | 0.7 | % | 10.5 | % | ||
| Non-same-store | 3,639 | 3,497 | 1,667 | 142 | 4.1 | % | 1,972 | 118.3 | % | |||
| Other properties | 1,002 | 900 | 916 | 102 | 11.3 | % | 86 | 9.4 | % | |||
| Dispositions | 4,397 | 4,986 | 4,482 | (589) | (11.8) | % | (85) | (1.9) | % | |||
| Total | 67,897 | 67,848 | 60,314 | 49 | 0.1 | % | 7,583 | 12.6 | % | |||
| Property operating expenses, including real estate taxes | ||||||||||||
| Same-store | 24,593 | 24,586 | 22,370 | 7 | — | % | 2,223 | 9.9 | % | |||
| Non-same-store | 1,310 | 1,267 | 710 | 43 | 3.4 | % | 600 | 84.5 | % | |||
| Other properties | 151 | 317 | 329 | (166) | (52.4) | % | (178) | (54.1) | % | |||
| Dispositions | 2,869 | 3,049 | 2,464 | (180) | (5.9) | % | 405 | 16.4 | % | |||
| Total | 28,923 | 29,219 | 25,873 | (296) | (1.0) | % | 3,050 | 11.8 | % | |||
| Net operating income | ||||||||||||
| Same-store | 34,266 | 33,879 | 30,879 | 387 | 1.1 | % | 3,387 | 11.0 | % | |||
| Non-same-store | 2,329 | 2,230 | 957 | 99 | 4.4 | % | 1,372 | 143.4 | % | |||
| Other properties | 851 | 583 | 587 | 268 | 46.0 | % | 264 | 45.0 | % | |||
| Dispositions | 1,528 | 1,937 | 2,018 | (409) | (21.1) | % | (490) | (24.3) | % | |||
| Total | $ | 38,974 | $ | 38,629 | $ | 34,441 | 0.9 | % | 13.2 | % |
All values are in US Dollars.
* Not a meaningful percentage
| S-4 |
|---|
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 March 31, | |||||||
| 2023 | 2022 | Change | % Change | ||||
| Controllable expenses | |||||||
| On-site compensation(1) | $ | 6,017 | $ | 5,549 | 8.4 | % | |
| Repairs and maintenance | 3,469 | 2,946 | 523 | 17.8 | % | ||
| Utilities | 4,978 | 4,784 | 194 | 4.1 | % | ||
| Administrative and marketing | 1,252 | 1,223 | 29 | 2.4 | % | ||
| Total | $ | 15,716 | $ | 14,502 | 8.4 | % | |
| Non-controllable expenses | |||||||
| Real estate taxes | $ | 6,765 | $ | 5,974 | 13.2 | % | |
| Insurance | 2,112 | 1,894 | 218 | 11.5 | % | ||
| Total | $ | 8,877 | $ | 7,868 | 12.8 | % | |
| Property operating expenses, including real estate taxes - non-same-store | $ | 1,310 | $ | 710 | 84.5 | % | |
| Property operating expenses, including real estate taxes - other | 151 | 329 | (178) | (54.1) | % | ||
| Property operating expenses, including real estate taxes - dispositions | 2,869 | 2,464 | 405 | 16.4 | % | ||
| Total property operating expenses, including real estate taxes | $ | 28,923 | $ | 25,873 | 11.8 | % |
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-5 |
|---|
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-6 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share amounts) | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Three Months Ended | ||||||||||
| 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | ||||||
| Funds From Operations | ||||||||||
| Net income (loss) available to common shareholders | $ | 41,964 | $ | (3,613) | $ | (2,130) | $ | (4,598) | $ | (10,196) |
| Adjustments: | ||||||||||
| Noncontrolling interests – Operating Partnership and Series E preferred units | 8,566 | (753) | (439) | (950) | (2,157) | |||||
| Depreciation and amortization | 25,993 | 25,768 | 23,720 | 24,768 | 31,001 | |||||
| Less depreciation – non real estate | (91) | (91) | (94) | (101) | (101) | |||||
| Less depreciation – partially owned entities | (19) | (19) | (18) | (7) | (21) | |||||
| (Gain) loss on sale of real estate and other investments | (60,159) | (14) | — | (27) | — | |||||
| FFO applicable to common shares and Units | $ | 16,254 | $ | 21,278 | $ | 21,039 | $ | 19,085 | $ | 18,526 |
| Adjustments to Core FFO: | ||||||||||
| Non-cash casualty (gain) loss | 13 | 20 | 46 | 163 | 25 | |||||
| Loss on extinguishment of debt | — | — | — | 5 | — | |||||
| Technology implementation costs(1) | — | 89 | 234 | 447 | 103 | |||||
| Interest rate swap termination, amortization, and mark-to-market | 138 | 104 | 204 | 205 | (613) | |||||
| Amortization of assumed debt | (116) | (117) | (116) | (116) | (115) | |||||
| Pursuit costs | 5 | 137 | 38 | 1,127 | — | |||||
| Severance and transition related costs | 3,199 | — | — | — | — | |||||
| Other miscellaneous items(2) | 49 | (28) | 17 | 100 | (4) | |||||
| Core FFO applicable to common shares and Units | $ | 19,542 | $ | 21,483 | $ | 21,462 | $ | 21,016 | $ | 17,922 |
| FFO applicable to common shares and Units | $ | 16,254 | $ | 21,278 | $ | 21,039 | $ | 19,085 | $ | 18,526 |
| Dividends to preferred unitholders | 160 | 160 | 160 | 160 | 160 | |||||
| FFO applicable to common shares and Units - diluted | $ | 16,414 | $ | 21,438 | $ | 21,199 | $ | 19,245 | $ | 18,686 |
| Core FFO applicable to common shares and Units | $ | 19,542 | $ | 21,483 | $ | 21,462 | $ | 21,016 | $ | 17,922 |
| Dividends to preferred unitholders | 160 | 160 | 160 | 160 | 160 | |||||
| Core FFO applicable to common shares and Units - diluted | $ | 19,702 | $ | 21,643 | $ | 21,622 | $ | 21,176 | $ | 18,082 |
| Per Share Data | ||||||||||
| Net income (loss) per share and Unit - diluted | $ | 2.76 | $ | (0.24) | $ | (0.14) | $ | (0.30) | $ | (0.68) |
| FFO per share and Unit - diluted | $ | 0.89 | $ | 1.16 | $ | 1.13 | $ | 1.02 | $ | 1.01 |
| Core FFO per share and Unit - diluted | $ | 1.07 | $ | 1.17 | $ | 1.15 | $ | 1.12 | $ | 0.98 |
| Weighted average shares - basic | 15,025 | 15,027 | 15,373 | 15,369 | 15,097 | |||||
| Effect of redeemable operating partnership Units | 968 | 974 | 984 | 995 | 965 | |||||
| Effect of Series D preferred units | 228 | 228 | 228 | 228 | 228 | |||||
| Effect of Series E preferred units | 2,118 | 2,185 | 2,186 | 2,186 | 2,186 | |||||
| Effect of dilutive restricted stock units and stock options | 20 | 9 | 30 | 48 | 66 | |||||
| Weighted average shares and Units - diluted | 18,359 | 18,423 | 18,801 | 18,826 | 18,542 |
(1)Costs are related to a two-year implementation.
(2)Consists of (gain) loss on investments.
| S-7 |
|---|
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 | ||||||||||
| 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | ||||||
| Adjusted EBITDA | ||||||||||
| Net income (loss) available to controlling interests | $ | 43,571 | $ | (2,006) | $ | (523) | $ | (2,991) | $ | (8,589) |
| Adjustments: | ||||||||||
| Dividends to Series D preferred unitholders | 160 | 160 | 160 | 160 | 160 | |||||
| Noncontrolling interests – Operating Partnership and Series E preferred units | 8,566 | (753) | (439) | (950) | (2,157) | |||||
| Income (loss) before noncontrolling interests – Operating Partnership and Series E preferred units | $ | 52,297 | $ | (2,599) | $ | (802) | $ | (3,781) | $ | (10,586) |
| Adjustments: | ||||||||||
| Interest expense | 10,305 | 9,589 | 7,856 | 7,547 | 7,700 | |||||
| Loss on extinguishment of debt | — | — | — | 5 | — | |||||
| Depreciation and amortization related to real estate investments | 25,971 | 25,747 | 23,699 | 24,759 | 30,980 | |||||
| Non-cash casualty (gain) loss | 13 | 20 | 46 | 163 | 25 | |||||
| Interest income | (92) | (92) | (82) | (74) | (464) | |||||
| (Gain) loss on sale of real estate and other investments | (60,159) | (14) | — | (27) | — | |||||
| Technology implementation costs(1) | — | 89 | 234 | 447 | 103 | |||||
| Interest rate swap termination and mark-to-market | — | — | — | 18 | (582) | |||||
| Pursuit costs | 5 | 137 | 38 | 1,127 | — | |||||
| Severance and transition related costs | 3,199 | — | — | — | — | |||||
| Other miscellaneous items(2) | 49 | (28) | 17 | 100 | (4) | |||||
| Adjusted EBITDA | $ | 31,588 | $ | 32,849 | $ | 31,006 | $ | 30,284 | $ | 27,172 |
(1)Costs are related to a two-year implementation.
(2)Consists of (gain) loss on investments.
| S-8 |
|---|
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) | $ | 22,560 | $ | — | $ | — | $ | 22,560 | 2.4 | % | 4.12 | % |
| 2024 | — | — | 3,969 | 3,969 | 0.4 | % | 7.23 | % | ||||
| 2025 | 31,066 | — | 139,500 | 170,566 | 18.5 | % | 5.54 | % | ||||
| 2026 | 51,648 | — | — | 51,648 | 5.6 | % | 3.73 | % | ||||
| 2027 | 50,623 | — | — | 50,623 | 5.5 | % | 3.47 | % | ||||
| Thereafter | 322,293 | 300,000 | — | 622,293 | 67.6 | % | 3.19 | % | ||||
| Total debt | $ | 478,190 | $ | 300,000 | $ | 143,469 | $ | 921,659 | 100.0 | % | 3.71 | % |
(1)Weighted average interest rate of debt that matures during the year.
| 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Debt Balances Outstanding | |||||||||||||||
| Secured fixed rate - mortgages payable - other | $ | 279,340 | $ | 299,427 | $ | 300,956 | $ | 302,360 | $ | 326,113 | |||||
| Secured fixed rate - Fannie Mae credit facility | 198,850 | 198,850 | 198,850 | 198,850 | 198,850 | ||||||||||
| Unsecured variable rate lines of credit | 143,469 | 113,500 | 171,500 | 73,000 | 46,000 | ||||||||||
| Unsecured term loans | — | 100,000 | — | — | — | ||||||||||
| Unsecured senior notes | 300,000 | 300,000 | 300,000 | 300,000 | 300,000 | ||||||||||
| Debt total | $ | 921,659 | $ | 1,011,777 | $ | 971,306 | $ | 874,210 | $ | 870,963 | |||||
| Mortgages payable - other rate | 3.85 | % | 3.85 | % | 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 | 6.39 | % | 5.23 | % | 4.13 | % | 3.04 | % | 2.56 | % | |||||
| Unsecured term loan rate | — | 5.57 | % | — | — | — | |||||||||
| Unsecured senior notes rate | 3.12 | % | 3.12 | % | 3.12 | % | 3.12 | % | 3.12 | % | |||||
| Total debt | 3.71 | % | 3.62 | % | 3.45 | % | 3.27 | % | 3.29 | % | |||||
| S-9 | |||||||||||||||
| --- |
CENTERSPACE
CAPITAL ANALYSIS
(in thousands, except per share and unit amounts)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | |||||||||||
| Equity Capitalization | |||||||||||||||
| Common shares outstanding | 15,032 | 15,020 | 15,376 | 15,373 | 15,366 | ||||||||||
| Operating partnership units outstanding | 967 | 971 | 980 | 995 | 997 | ||||||||||
| Series E preferred units (as converted) | 2,103 | 2,119 | 2,186 | 2,186 | 2,186 | ||||||||||
| Total common shares, Units, and Series E preferred units, as converted, outstanding | 18,102 | 18,110 | 18,542 | 18,554 | 18,549 | ||||||||||
| Market price per common share (closing price at end of period) | $ | 54.63 | $ | 58.67 | $ | 67.32 | $ | 81.55 | $ | 98.12 | |||||
| Equity capitalization-common shares and units | $ | 988,912 | $ | 1,062,514 | $ | 1,248,247 | $ | 1,513,079 | $ | 1,820,028 | |||||
| Recorded book value of preferred shares | $ | 93,530 | $ | 93,530 | $ | 93,530 | $ | 93,530 | $ | 93,530 | |||||
| Total equity capitalization | $ | 1,082,442 | $ | 1,156,044 | $ | 1,341,777 | $ | 1,606,609 | $ | 1,913,558 | |||||
| Series D Preferred Units | $ | 16,560 | $ | 16,560 | $ | 16,560 | $ | 18,627 | $ | 22,412 | |||||
| Debt Capitalization | |||||||||||||||
| Total debt | $ | 921,659 | $ | 1,011,777 | $ | 971,306 | $ | 874,210 | $ | 870,963 | |||||
| Total capitalization | $ | 2,020,661 | $ | 2,184,381 | $ | 2,329,643 | $ | 2,499,446 | $ | 2,806,933 | |||||
| Total debt to total capitalization(1) | 45.6 | % | 46.3 | % | 41.7 | % | 35.0 | % | 31.0 | % |
(1)Total debt to total market capitalization 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.
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | |||||||||||
| Debt service coverage ratio(1) | 2.70 | x | 2.99 | x | 3.35 | x | 3.39 | x | 2.93 | x | |||||
| Adjusted EBITDA/Interest expense plus preferred distributions and principal amortization | 2.35 | x | 2.58 | x | 2.81 | x | 2.83 | x | 2.50 | x | |||||
| Net debt/Adjusted EBITDA(2) | 7.22 | x | 7.62 | x | 7.71 | x | 7.11 | x | 7.89 | x | |||||
| Net debt and preferred equity/Adjusted EBITDA(2) | 8.09 | x | 8.46 | x | 8.60 | x | 8.03 | x | 8.96 | x | |||||
| Distribution Data | |||||||||||||||
| Common shares and Units outstanding at record date | 15,999 | 15,991 | 16,356 | 16,368 | 16,363 | ||||||||||
| Total common distribution declared | $ | 11,668 | $ | 11,614 | $ | 11,939 | $ | 11,948 | $ | 11,944 | |||||
| Common distribution per share and Unit | $ | 0.73 | $ | 0.73 | $ | 0.73 | $ | 0.73 | $ | 0.73 | |||||
| Payout ratio (Core FFO per diluted share and unit basis)(3) | 68.2 | % | 62.4 | % | 63.5 | % | 65.2 | % | 74.5 | % |
(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 and net tax deferred exchange proceeds (included within restricted cash). 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.
(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-10 |
|---|
CENTERSPACE
SAME-STORE FIRST QUARTER COMPARISONS
(in thousands, except property data amounts and percentages)
| Apartment Homes Included | Revenues | Expenses | NOI | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Regions | Q1 2023 | Q1 2022 | % Change | Q1 2023 | Q1 2022 | % Change | Q1 2023 | Q1 2022 | % Change | ||||||||||||||||||||
| Denver, CO | 1,889 | $ | 11,740 | $ | 10,624 | 10.5 | % | $ | 4,035 | $ | 3,176 | 27.0 | % | $ | 7,705 | $ | 7,448 | 3.5 | % | ||||||||||
| Minneapolis, MN | 4,519 | 20,805 | 19,004 | 9.5 | % | 9,588 | 9,000 | 6.5 | % | 11,217 | 10,004 | 12.1 | % | ||||||||||||||||
| North Dakota | 2,422 | 8,879 | 8,157 | 8.9 | % | 3,814 | 3,653 | 4.4 | % | 5,065 | 4,504 | 12.5 | % | ||||||||||||||||
| Omaha, NE | 872 | 3,356 | 3,058 | 9.7 | % | 1,433 | 1,328 | 7.9 | % | 1,923 | 1,730 | 11.2 | % | ||||||||||||||||
| Rochester, MN | 1,129 | 5,648 | 5,003 | 12.9 | % | 2,228 | 2,096 | 6.3 | % | 3,420 | 2,907 | 17.6 | % | ||||||||||||||||
| St. Cloud, MN | 832 | 3,351 | 3,049 | 9.9 | % | 1,691 | 1,499 | 12.8 | % | 1,660 | 1,550 | 7.1 | % | ||||||||||||||||
| Other Mountain West(1) | 1,222 | 5,080 | 4,354 | 16.7 | % | 1,804 | 1,618 | 11.5 | % | 3,276 | 2,736 | 19.7 | % | ||||||||||||||||
| Same-Store Total | 12,885 | $ | 58,859 | $ | 53,249 | 10.5 | % | $ | 24,593 | $ | 22,370 | 9.9 | % | $ | 34,266 | $ | 30,879 | 11.0 | % | ||||||||||
| % of NOI Contribution | Weighted Average Occupancy (2) | Average Monthly<br><br>Rental Rate (3) | Average Monthly<br>Revenue per Occupied Home (4) | ||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Regions | Q1 2023 | Q1 2022 | Growth | Q1 2023 | Q1 2022 | % Change | Q1 2023 | Q1 2022 | % Change | ||||||||||||||||||||
| Denver, CO | 22.5 | % | 95.8 | % | 94.1 | % | 1.7 | % | $ | 1,912 | $ | 1,792 | 6.7 | % | $ | 2,162 | $ | 1,993 | 8.5 | % | |||||||||
| Minneapolis, MN | 32.7 | % | 94.6 | % | 94.1 | % | 0.5 | % | 1,454 | 1,373 | 5.9 | % | 1,622 | 1,490 | 8.9 | % | |||||||||||||
| North Dakota | 14.8 | % | 95.9 | % | 94.8 | % | 1.1 | % | 1,175 | 1,103 | 6.5 | % | 1,274 | 1,184 | 7.6 | % | |||||||||||||
| Omaha, NE | 5.6 | % | 94.0 | % | 95.5 | % | (1.5) | % | 1,234 | 1,095 | 12.7 | % | 1,364 | 1,224 | 11.4 | % | |||||||||||||
| Rochester, MN | 10.0 | % | 94.8 | % | 92.9 | % | 1.9 | % | 1,664 | 1,507 | 10.4 | % | 1,759 | 1,590 | 10.6 | % | |||||||||||||
| St. Cloud, MN | 4.8 | % | 90.1 | % | 92.3 | % | (2.2) | % | 1,315 | 1,199 | 9.7 | % | 1,490 | 1,323 | 12.6 | % | |||||||||||||
| Other Mountain West(1) | 9.6 | % | 95.1 | % | 94.0 | % | 1.1 | % | 1,319 | 1,154 | 14.3 | % | 1,457 | 1,263 | 15.4 | % | |||||||||||||
| Same-Store Total | 100.0 | % | 94.8 | % | 94.1 | % | 0.7 | % | $ | 1,450 | $ | 1,345 | 7.8 | % | $ | 1,606 | $ | 1,465 | 9.6 | % |
(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 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-11 |
|---|
CENTERSPACE
SAME-STORE SEQUENTIAL QUARTER COMPARISONS(1)
(in thousands, except property data amounts and percentages)
| Apartment Homes Included | Revenues | Expenses | NOI | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Regions | Q1 2023 | Q4 2022 | % Change | Q1 2023 | Q4 2022 | % Change | Q1 2023 | Q4 2022 | % Change | ||||||||||||||||||||
| Denver, CO | 1,889 | $ | 11,740 | $ | 11,557 | 1.6 | % | $ | 4,035 | $ | 3,692 | 9.3 | % | $ | 7,705 | $ | 7,865 | (2.0) | % | ||||||||||
| Minneapolis, MN | 4,519 | 20,805 | 20,689 | 0.6 | % | 9,588 | 9,891 | (3.1) | % | 11,217 | 10,798 | 3.9 | % | ||||||||||||||||
| North Dakota | 2,422 | 8,879 | 8,919 | (0.4) | % | 3,814 | 3,790 | 0.6 | % | 5,065 | 5,129 | (1.2) | % | ||||||||||||||||
| Omaha, NE | 872 | 3,356 | 3,279 | 2.3 | % | 1,433 | 1,597 | (10.3) | % | 1,923 | 1,682 | 14.3 | % | ||||||||||||||||
| Rochester, MN | 1,129 | 5,648 | 5,593 | 1.0 | % | 2,228 | 2,365 | (5.8) | % | 3,420 | 3,228 | 5.9 | % | ||||||||||||||||
| St. Cloud, MN | 832 | 3,351 | 3,309 | 1.3 | % | 1,691 | 1,481 | 14.2 | % | 1,660 | 1,828 | (9.2) | % | ||||||||||||||||
| Other Mountain West | 1,222 | 5,080 | 5,119 | (0.8) | % | 1,804 | 1,770 | 1.9 | % | 3,276 | 3,349 | (2.2) | % | ||||||||||||||||
| Same-Store Total | 12,885 | $ | 58,859 | $ | 58,465 | 0.7 | % | $ | 24,593 | $ | 24,586 | — | % | $ | 34,266 | $ | 33,879 | 1.1 | % | ||||||||||
| % of NOI Contribution | Weighted Average Occupancy | Average Monthly<br>Rental Rate | Average Monthly<br>Revenue per Occupied Home | ||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Regions | Q1 2023 | Q4 2022 | Growth | Q1 2023 | Q4 2022 | % Change | Q1 2023 | Q4 2022 | % Change | ||||||||||||||||||||
| Denver, CO | 22.5 | % | 95.8 | % | 96.2 | % | (0.4) | % | $ | 1,912 | $ | 1,902 | 0.5 | % | $ | 2,162 | $ | 2,120 | 2.0 | % | |||||||||
| Minneapolis, MN | 32.7 | % | 94.6 | % | 94.7 | % | (0.1) | % | 1,454 | 1,450 | 0.3 | % | 1,622 | 1,611 | 0.7 | % | |||||||||||||
| North Dakota | 14.8 | % | 95.9 | % | 96.3 | % | (0.4) | % | 1,175 | 1,168 | 0.6 | % | 1,274 | 1,275 | (0.1) | % | |||||||||||||
| Omaha, NE | 5.6 | % | 94.0 | % | 93.0 | % | 1.0 | % | 1,234 | 1,223 | 0.9 | % | 1,364 | 1,348 | 1.2 | % | |||||||||||||
| Rochester, MN | 10.0 | % | 94.8 | % | 93.8 | % | 1.0 | % | 1,664 | 1,663 | 0.1 | % | 1,759 | 1,760 | (0.1) | % | |||||||||||||
| St. Cloud, MN | 4.8 | % | 90.1 | % | 90.1 | % | — | 1,315 | 1,313 | 0.2 | % | 1,490 | 1,471 | 1.3 | % | ||||||||||||||
| Other Mountain West | 9.6 | % | 95.1 | % | 95.8 | % | (0.7) | % | 1,319 | 1,314 | 0.4 | % | 1,457 | 1,458 | (0.1) | % | |||||||||||||
| Same-Store Total | 100.0 | % | 94.8 | % | 94.9 | % | (0.1) | % | $ | 1,450 | $ | 1,445 | 0.3 | % | $ | 1,606 | $ | 1,594 | 0.8 | % |
(1)Refer to footnotes on page S-11.
| S-12 |
|---|
CENTERSPACE
PORTFOLIO SUMMARY(1)
| Three Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 3/31/2023 | 12/31/2022 | 9/30/2022 | 6/30/2022 | 3/31/2022 | |||||||||||
| Number of Apartment Homes at Period End | |||||||||||||||
| Same-Store | 12,885 | 11,330 | 11,330 | 11,319 | 11,319 | ||||||||||
| Non-Same-Store | 612 | 3,735 | 3,734 | 3,519 | 3,519 | ||||||||||
| All Communities | 13,497 | 15,065 | 15,064 | 14,838 | 14,838 | ||||||||||
| Average Monthly Rental Rate(2) | |||||||||||||||
| Same-Store | $ | 1,450 | $ | 1,438 | $ | 1,411 | $ | 1,366 | $ | 1,339 | |||||
| Non-Same-Store | 1,890 | 1,352 | 1,286 | 1,245 | 1,218 | ||||||||||
| All Communities | $ | 1,470 | $ | 1,417 | $ | 1,381 | $ | 1,337 | $ | 1,292 | |||||
| Average Monthly Revenue per Occupied Apartment Home(3) | |||||||||||||||
| Same-Store | $ | 1,606 | $ | 1,592 | $ | 1,565 | $ | 1,518 | $ | 1,471 | |||||
| Non-Same-Store | 2,066 | 1,471 | 1,417 | 1,329 | 1,271 | ||||||||||
| All Communities | $ | 1,627 | $ | 1,562 | $ | 1,530 | $ | 1,473 | $ | 1,424 | |||||
| Weighted Average Occupancy(4) | |||||||||||||||
| Same-Store | 94.8 | % | 94.9 | % | 94.5 | % | 94.8 | % | 93.9 | % | |||||
| Non-Same-Store | 95.9 | % | 94.7 | % | 94.6 | % | 95.0 | % | 94.5 | % | |||||
| All Communities | 94.9 | % | 94.9 | % | 94.5 | % | 94.8 | % | 94.0 | % | |||||
| Operating Expenses as a % of Scheduled Rent | |||||||||||||||
| Same-Store | 43.9 | % | 43.1 | % | 42.5 | % | 40.3 | % | 41.0 | % | |||||
| Non-Same-Store | 37.8 | % | 51.7 | % | 48.7 | % | 47.1 | % | 50.6 | % | |||||
| All Communities | 43.5 | % | 45.1 | % | 43.9 | % | 41.8 | % | 43.0 | % | |||||
| Capital Expenditures | |||||||||||||||
| Total Capital Expenditures per Apartment Home – Same-Store | $ | 115 | $ | 364 | $ | 465 | $ | 196 | $ | 145 |
(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-13 |
|---|
CENTERSPACE
CAPITAL EXPENDITURES
($ in thousands, except per home amounts)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| Same Store Capital Expenditures | 3/31/2023 | 3/31/2022 | ||||
| Total Same-Store Apartment Homes | 12,885 | 12,885 | ||||
| Building - Exterior | $ | — | $ | 534 | ||
| Building - Interior | — | 5 | ||||
| Mechanical, Electrical, & Plumbing | 285 | 225 | ||||
| Furniture & Equipment | 24 | 80 | ||||
| Landscaping & Grounds | — | 84 | ||||
| Turnover replacements | 779 | 734 | ||||
| Work in progress | 397 | (511) | ||||
| Capital Expenditures - Same-Store | $ | 1,485 | $ | 1,151 | ||
| Capital Expenditures per Apartment Home - Same-Store | $ | 115 | $ | 89 | ||
| Value Add | $ | 2,537 | $ | 3,684 | ||
| Total Capital Spend - Same-Store | $ | 4,022 | $ | 4,835 | ||
| Total Capital Spend per Apartment Home - Same-Store | $ | 312 | $ | 375 | ||
| Three Months Ended | ||||||
| Capital Expenditures - All Properties | 3/31/2023 | 3/31/2022 | ||||
| All Properties - Weighted Average Apartment Homes | 14,542 | 14,839 | ||||
| Capital Expenditures | $ | 1,730 | $ | 1,326 | ||
| Capital Expenditures per Apartment Home | $ | 119 | $ | 89 | ||
| Value Add | 2,630 | 3,684 | ||||
| Acquisition Capital | 4,673 | 1,199 | ||||
| Total Capital Spend | 9,033 | 6,209 | ||||
| Total Capital Spend per Apartment Home | $ | 621 | $ | 418 | ||
| Three Months Ended | ||||||
| Value Add Capital Expenditures | 3/31/2023 | 3/31/2022 | ||||
| Interior - Units | ||||||
| Same-Store | $ | 1,219 | $ | 2,638 | ||
| Non-Same-Store | — | — | ||||
| Total Interior Units | $ | 1,219 | $ | 2,638 | ||
| Common Areas and Exteriors | ||||||
| Same-Store | $ | 1,225 | $ | 2,933 | ||
| Non-Same-Store | 93 | — | ||||
| Total Common Areas and Exteriors | $ | 1,318 | $ | 2,933 | ||
| Work in Progress | ||||||
| Same-Store | $ | 93 | $ | (1,887) | ||
| Non-Same-Store | — | — | ||||
| Total Work in Progress | $ | 93 | $ | (1,887) | ||
| Total Value-Add Capital Expenditures | ||||||
| Same-Store | $ | 2,537 | $ | 3,684 | ||
| Non-Same-Store | 93 | — | ||||
| Total Portfolio Value-Add | $ | 2,630 | $ | 3,684 | S-14 | |
| --- |
CENTERSPACE
2023 Financial Outlook
(in thousands, except per share and per home amounts)
Centerspace revised its outlook for 2023 in the table below.
| Three Months Ended | 2023 Previous Outlook Range | 2023 Revised Outlook Range | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, 2023 | Low | High | Low | High | ||||||||||
| YTD Actual | Amount | Amount | Amount | Amount | ||||||||||
| Same-store growth | ||||||||||||||
| Revenue | $ | 58,859 | 6.00 | % | 8.00 | % | 6.00 | % | 8.00 | % | ||||
| Controllable expenses | 15,716 | 3.00 | % | 4.50 | % | 3.00 | % | 4.50 | % | |||||
| Non-controllable expenses | 8,877 | 8.00 | % | 9.50 | % | 8.00 | % | 9.50 | % | |||||
| Total Expenses | $ | 24,593 | 4.75 | % | 6.25 | % | 4.75 | % | 6.25 | % | ||||
| Same-store NOI(1) | $ | 34,266 | 7.00 | % | 9.00 | % | 7.00 | % | 9.00 | % | ||||
| Components of NOI(1) | ||||||||||||||
| Same-store | $ | 34,266 | $ | 138,300 | $ | 141,300 | $ | 138,300 | $ | 141,300 | ||||
| Non-same-store | 2,329 | 8,900 | 9,100 | 8,900 | 9,100 | |||||||||
| Other | 851 | 2,000 | 2,400 | 2,000 | 2,400 | |||||||||
| Dispositions | 1,528 | 2,500 | 2,800 | $ | 2,500 | $ | 2,800 | |||||||
| Total NOI(1) | $ | 38,974 | $ | 151,700 | $ | 155,600 | $ | 151,700 | $ | 155,600 | ||||
| Other operating income and expenses | ||||||||||||||
| General and administrative and property management | (10,291) | (29,100) | (28,300) | (32,300) | (31,500) | |||||||||
| Casualty losses | (252) | (1,500) | (1,300) | (1,500) | (1,300) | |||||||||
| Non-real estate depreciation and amortization | (91) | (375) | (325) | (375) | (325) | |||||||||
| Non-controlling interest | (19) | (110) | (100) | (110) | (100) | |||||||||
| Total other operating income and expenses | $ | (10,653) | $ | (31,085) | $ | (30,025) | $ | (34,285) | $ | (33,225) | ||||
| Interest expense | $ | (10,319) | (37,100) | (36,700) | (37,400) | (36,900) | ||||||||
| Interest and other income | $ | 19 | $ | 160 | $ | 350 | $ | 160 | $ | 350 | ||||
| Dividends to preferred shareholders | $ | (1,607) | (6,400) | (6,400) | (6,400) | (6,400) | ||||||||
| FFO applicable to common shares and Units - diluted(1) | $ | 16,414 | $ | 77,275 | $ | 82,825 | $ | 73,775 | $ | 79,425 | ||||
| Non-core income and expenses | ||||||||||||||
| Non-cash casualty (gain) loss | $ | 13 | $ | 500 | $ | 300 | $ | 500 | $ | 300 | ||||
| Interest rate swap termination, amortization, and mark-to-market | 138 | 900 | 1,000 | 900 | 1,000 | |||||||||
| Amortization of assumed debt | (116) | — | — | — | — | |||||||||
| Pursuit costs | 5 | 70 | 60 | 70 | 60 | |||||||||
| Severance and transition related costs | 3,199 | — | — | 3,200 | 3,200 | |||||||||
| Other miscellaneous items | 49 | (310) | (350) | (310) | (350) | |||||||||
| Total non-core income and expenses | $ | 3,288 | $ | 1,160 | $ | 1,010 | $ | 4,360 | $ | 4,210 | ||||
| Core FFO applicable to common shares and Units - diluted(1) | $ | 19,702 | $ | 78,435 | $ | 83,835 | $ | 78,135 | $ | 83,635 | ||||
| EPS - Diluted | $ | 2.76 | $ | 2.37 | $ | 3.25 | $ | 2.73 | $ | 3.62 | ||||
| FFO per diluted share(1) | $ | 0.89 | $ | 4.21 | $ | 4.50 | $ | 4.03 | $ | 4.33 | ||||
| Core FFO per diluted share(1) | $ | 1.07 | $ | 4.27 | $ | 4.56 | $ | 4.27 | $ | 4.56 | ||||
| Weighted average shares outstanding - diluted | 18,359 | 18,375 | 18,400 | 18,300 | 18,325 | |||||||||
| Additional Assumptions | ||||||||||||||
| Same-store capital expenditures (per home) | $ | 115 | $ | 1,100 | 1,150 | $ | 1,100 | 1,150 | ||||||
| Value-add expenditures | $ | 2,630 | $ | 24,500 | $ | 27,500 | $ | 24,500 | $ | 27,500 | ||||
| Dispositions | $ | 144,255 | $ | 155,000 | $ | 165,000 | $ | 155,000 | $ | 165,000 |
(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-15 |
|---|
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 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | 12 Months Ended | 12 Months Ended | ||||||||
| March 31, 2023 | December 31, 2023 | December 31, 2023 | ||||||||
| Actual | Low | High | Low | High | ||||||
| Net income (loss) available to common shareholders | $ | 41,964 | $ | 51,339 | $ | 67,707 | $ | 57,839 | $ | 74,307 |
| Noncontrolling interests - Operating Partnership and Series E preferred units | 8,566 | (7,795) | (7,885) | (7,795) | (7,885) | |||||
| Depreciation and amortization | 25,993 | 92,556 | 91,768 | 92,556 | 91,768 | |||||
| Less depreciation - non real estate | (91) | (375) | (325) | (375) | (325) | |||||
| Less depreciation - partially owned entities | (19) | (110) | (100) | (110) | (100) | |||||
| (Gain) loss on sale of real estate | (60,159) | (58,980) | (68,980) | (68,980) | (78,980) | |||||
| Dividends to preferred unitholders | 160 | 640 | 640 | 640 | 640 | |||||
| FFO applicable to common shares and Units | $ | 16,414 | $ | 77,275 | $ | 82,825 | $ | 73,775 | $ | 79,425 |
| Adjustments to Core FFO: | ||||||||||
| Non-cash casualty (gain) loss | 13 | 500 | 300 | 500 | 300 | |||||
| Interest rate swap termination, amortization, and mark-to-market | 138 | 900 | 1,000 | 900 | 1,000 | |||||
| Amortization of assumed debt | (116) | — | — | — | — | |||||
| Pursuit costs | 5 | 70 | 60 | 70 | 60 | |||||
| Severance and transition related costs | 3,199 | — | — | 3,200 | 3,200 | |||||
| Other miscellaneous items | 49 | (310) | (350) | (310) | (350) | |||||
| Core FFO applicable to common shares and Units | $ | 19,702 | $ | 78,435 | $ | 83,835 | $ | 78,135 | $ | 83,635 |
| Net income per share - diluted | $ | 2.76 | $ | 2.37 | $ | 3.25 | $ | 2.73 | $ | 3.62 |
| FFO per share - diluted | $ | 0.89 | $ | 4.21 | $ | 4.50 | $ | 4.03 | $ | 4.33 |
| Core FFO per share - diluted | $ | 1.07 | $ | 4.27 | $ | 4.56 | $ | 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 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 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended | 12 Months Ended | 12 Months Ended | ||||||||||
| March 31, 2023 | December 31, 2023 | December 31, 2023 | ||||||||||
| Actual | Low | High | Low | High | ||||||||
| Operating income (loss) | $ | 62,597 | $ | 87,524 | $ | 103,212 | $ | 94,324 | $ | 110,012 | ||
| Adjustments: | ||||||||||||
| General and administrative and property management expenses | 10,291 | 29,100 | 28,300 | 32,300 | 31,500 | |||||||
| Casualty loss | 252 | 1,500 | 1,300 | 1,500 | 1,300 | |||||||
| Depreciation and amortization | 25,993 | 92,556 | 91,768 | 92,556 | 91,768 | |||||||
| (Gain) loss on sale of real estate and other investments | (60,159) | (58,980) | (68,980) | (68,980) | (78,980) | |||||||
| Net operating income | $ | 38,974 | $ | 151,700 | $ | 155,600 | $ | 151,700 | $ | 155,600 | S-16 | |
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