Centerspace 8-K, filed Nov 9, 2021
Centerspace (CSR)
8-K
2021-11-09
For: 2021-11-09
View Original
Added on
April 04, 2026
About this 8-K
Centerspace filed this 8-K on November 9, 2021.
Items reported
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
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): November 9, 2021
(Exact name of Registrant as specified in its charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
(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:
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 | ||||||
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 7.01. Regulation FD Disclosure.
On November 9-11, 2021, Centerspace (the “Company”) will participate in the Nareit REITworld 2021 Investor Conference, which will occur virtually. Management will provide a presentation to certain participants in attendance regarding certain matter impacting the Company and its operating results. A copy of that investor presentation is furnished as Exhibit 99.1 and incorporated herein by reference. The presentation has been posted to the Company’s website.
The information in this Item 7.01 and item 9.01, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any Company filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such filing.
ITEM 9.01 Financial Statements and Exhibits
(d)Exhibits
| Exhibit | |||||
| Number | Description | ||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL Document. | ||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Centerspace | ||||||||
| By | /s/ Mark O. Decker, Jr. | |||||||
| Mark O. Decker, Jr. | ||||||||
| Date: November 9, 2021 | President and Chief Executive Officer | |||||||
Investor Presentation November 2021
centerspacehomes.com 2 SAFE HARBOR STATEMENT AND LEGAL DISCLOSURE Certain statements in this presentation are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from expected results. These statements may be identified by our use of words such as “expects,” “plans,” “estimates,” “anticipates,” “projects,” “intends,” “believes,” and similar expressions that do not relate to historical matters. Such risks, uncertainties, and other factors include, but are not limited to, changes in general and local economic and real estate market conditions, rental conditions in our markets, fluctuations in interest rates, the effect of government regulations, the availability and cost of capital and other financing risks, risks associated with our value-add and redevelopment opportunities, the failure of our property acquisitions and disposition activities to achieve expected results, competition in our markets, our ability to attract and retain skilled personnel, our ability to maintain our tax status as a real estate investment trust (REIT), and those risks and uncertainties detailed from time to time in our 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 our Form 10- K for the period ended December 31, 2020. We assume no obligation to update or supplement forward- looking statements that become untrue due to subsequent events.
centerspacehomes.com 3 Strong Operating Results Driven by Consistent Occupancy and Accelerating Rent Growth Same-store lease over lease growth held steady at 10.8% in Q3 compared to 10.0% in Q2 2021 and 0.7% in Q1 2021 Same-store renewal lease growth accelerated to 7.2% in Q3 compared to 5.6% in Q2 2021 up from 4.0% in Q1 2021 Same-store occupancy remains strong at 94.3% in Q3 compared to 94.3% in Q3 2020 Acquisition and Disposition Activity Continues September 2021 acquisition of 2,696 homes in Minneapolis and St. Cloud for a purchase price of $359.9 million financed with issuance of convertible preferred operating partnership units and favorable long-term debt October 2021 disposition of sole remaining commercial property, Minot IPS in Minot, ND for an aggregate sale price of $2.3M May 2021 disposition of 596 homes in Rochester, Minnesota for a sale price of $60.0M January 2021 acquisition of Union Pointe for an aggregate purchase price of $76.9M enhanced scale in Denver to 1,713 homes in 5 communities Operating Initiatives Progress to Enhance Customer Experience and Margin Enhancement Technology implementation underway to further operating efficiencies across the portfolio Value add opportunities include unit and common area renovations as well as adding amenities such as clubhouses, fitness centers, dog parks and package locker solutions Better Every Days A lot has changed since our business began, and the change of our name to Centerspace is a reflection of who we have become. The rebrand of the company reflects our mission to provide great homes for our residents, our teams, and our investors. It is about coming together for the benefit of everyone – something in which each and every member of our team believes. CENTERSPACE B u i l d i n g o n a S t r o n g F o u n d a t i o n
centerspacehomes.com 4 Differentiated Markets Strong Midwest markets led by Minneapolis and Denver Nashville a new target market Internal Growth Opportunity Enhanced operating platform Value-Add Opportunity Deep value-add pipeline Balance Sheet Flexibility Strong balance sheet with sufficient liquidity to capitalize on future opportunities Experienced Leadership High caliber management and board executing a sound strategic plan COMPANY SNAPSHOT F o c u s e d o n G r o w t h i n M u l t i f a m i l y PORTFOLIO SUMMARY Founded in 1970, celebrating over 50 Years Apartment owner/operator with 14,275 homes Publicly traded since 1997 Portfolio transformation from diversified to focused multifamily from 2017-2019 Total capitalization of $2.6 billion(1) Added to the S&P SmallCap 600 Index in 2020 0% 50% 100% 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 Multifamily and Other % of Gross Real Estate Assets Multifamily Other (1) See page 18 for breakdown
centerspacehomes.com 5 Region Homes Q3 Avg. Rev per Occ. Home(1) Denver, CO 1,713 $2,110 Minneapolis, MN (3) 4,901 $1,593 North Dakota 2,422 $1,305 Omaha, NE 1,370 $1,174 Rochester, MN 1,122 $1,680 St. Cloud, MN (3) 1,524 $1,194 Other Mountain West(2) 1,223 $1,267 Total / Average 14,275 $1,503 (3) Multifamily Acquisitions and Dispositions Since 2017 % of NOI by Market – September 2021 vs 2017 (3) Acquired 27 new communities in our target markets for $1.1 billion $355 million in dispositions including 35 communities as we reduce our exposure to less efficient communities in lower- growth markets Percent of NOI by State (3) 4% 57% 3% 6% 17% 13% Denver Minneapolis St. Cloud Rochester Billings Bismarck Minot Rapid City Grand Forks Omaha Target Markets Nashville New Target Market PORTFOLIO OVERVIEW D i f f e r e n t i a t e d P o r t f o l i o - S t r o n g M i d w e s t M a r k e t s (1) Average monthly revenue per occupied home is defined as total rental revenues divided by the financial occupancy of apartment homes for the period (2) Includes Rapid City, SD and Billings, MT (3) Proforma including 2021 acqusitions 0% 10% 20% 30% 40% 50% Minneapolis Denver Rochester St. Cloud Omaha ND Market Other Mountain West 2021 2017
centerspacehomes.com 6 Range for 2021 2020 Actual Low High Mid-Point Earnings per Share $(0.15) $0.10 $0.50 $0.30 Revenue $167,807 0.0% 3.0% 1.5% Total Expenses $67,892 3.0% 5.0% 4.0% NOI $97,915 (1.5%) 1.5% 0.0% FFO per Share $3.47 $3.38 $3.62 $3.50 Core FFO per Share $3.78 $3.48 $3.72 $3.60 Range for 2021 Low High Mid-Point Earnings per Share $0.58 $0.76 $0.67 Revenue 2.0% 3.5% 2.8% Total Expenses 4.0% 6.0% 5.0% NOI 0.5% 2.0% 1.3% FFO per Share $3.64 $3.83 $3.74 Core FFO per Share $3.78 $3.94 $3.86 REVISED 2021 FINANCIAL OUTLOOK U p d a t e d O u t l o o k Outlook: May 3, 2021 Outlook: August 2, 2021 No changes to additional 2021 full-year assumptions Increased mid-point of Core FFO by 3.0% since May Range for 2021 Low High Mid-Point Earnings per Share $(0.36) $(0.24) $(0.30) Revenue 3.5% 4.0% 3.8% Total Expenses 4.5% 5.0% 4.8% NOI 3.0% 3.5% 3.3% FFO per Share $3.40 $3.52 $3.46 Core FFO per Share $3.92 $4.02 $3.97 Outlook: November 2, 2021
centerspacehomes.com 7 -2.6% 0.0% -1.2% -4.2% 7.0% 10.8% 10.0% 0.7% October Q3 Q2 Q1 Same Store New Lease Rate Growth 2020 2021 OPERATIONS UPDATE L e a s i n g T r e n d s R e m a i n S t r o n g 2.9% 0.6% 3.2% 3.3% 7.4% 7.2% 5.6% 4.0% October Q3 Q2 Q1 Same Store Renewal Rate Growth 2020 2021 0.5% 0.4% 1.3% -1.4% 7.1% 9.0% 7.5% 2.0% October Q3 Q2 Q1 Same Store Blended Rental Rate Growth 2020 2021 94.3% 94.3% 94.5% 95.3% 94.0% 94.3% 94.9% 94.9% October Q3 Q2 Q1 Same Store Weighted Average Occupancy 2020 2021
centerspacehomes.com 8 Description Enterprise Highlights Community Highlights KMS communities well located within their submarkets with proximity to jobs, retail and amenities Rent level attainable to large pool of renters Majority of communities in portfolio are low density with attractive garden style feel and select densification opportunities Strong historical occupancy Accretive equity issuance Deepens value add pipeline Increases % of NOI from target market Attractive rents relative to new supply for-sale housing in the Twin Cities Accretive to enterprise cash flow growth $323,800,000 purchase price ($120k/home) 2,696 homes, 95.9% occupied Strong submarket locations in Minneapolis and St. Cloud regions Growth opportunity through revenue optimization initiatives and future value-add implementations MINNEAPOLIS/ST. CLOUD 2,696 HOME ACQUISITION P o r t f o l i o A c q u i s i t i o n O v e r v i e w
centerspacehomes.com 9 Preferred Units at Par Current Property Debt Acq Cap Other Paydown Line Assumed Loan Preferred Units at Par Current Property Debt Acq Cap Other Existing property debt has been assumed and refinanced $198,850,000 refinanced under a Fannie Mae credit facility with a weighted average interest rate of 2.78% and maturities at 9.81 years $20M loan assumed with an interest rate of 4.31% Additional Fannie Mae proceeds used to pay down existing indebtedness Acquisition is leverage neutral to current capital stack Terms on Preferred Units are: 3.875% of par value per annum fixed dividend payment $83.00 per common operating partnership unit conversion price (conversion from convertible preferred units to common operating partnership units at Seller’s election); 2.38M common share equivalents if converted CSR can convert, at its sole election, Seller’s convertible preferred units into common operating partnership units if CSR’s stock price had traded at $83.00/share or greater for 15 of 30 consecutive trading days, AND CSR’s common dividend has been paid at a level for three consecutive quarters where Seller’s as- converted common operating partnership units would earn the equivalent of at least 3.875% yield on Seller’s convertible preferred units ($3.22 per share annual dividend threshold) ACQUSITION PORTFOLIO PLAN A c q u i s i t i o n A c c r e t i v e t o E a r n i n g s Capital Spend Approximately $40.0 million of capital will be spent into repositioning the communities over the next 24- 36 months At Announcement At Closing
centerspacehomes.com 10 Property Market Homes Palisades Minneapolis 330 River Pointe Minneapolis 301 Woodland Pointe Minneapolis 288 Burgundy/Hillsboro Court Minneapolis 251 Windsor Gates Minneapolis 200 Woodhaven Minneapolis 178 New Hope Garden/New Hope Village Minneapolis 151 Wingate Minneapolis 136 Bayberry Place Minneapolis 120 Gatewood St. Cloud 120 Legacy St. Cloud 119 Venue on Knox Minneapolis 97 Plymouth Pointe Minneapolis 96 Pointe West St. Cloud 93 Grove Ridge Minneapolis 84 Southdale Parc Minneapolis 70 The Portage Minneapolis 62 Total 2,696 Venue on Knox, Minneapolis MN Venue on Knox rooftop deck River Pointe Aerial Woodland Pointe, Woodbury MN MINNEAPOLIS/ST.CLOUD ACQUSITION C o m m u n i t i e s
centerspacehomes.com 11 Name Address City Built Units 1 Palisades 560 W Sandhurst Dr Roseville 1970 330 2 River Pointe 7855 E River Rd Fridley 1971 301 3 Woodland Pointe 6850 Ashwood Rd Woodbury 1974 288 4 Windsor Gates 7821 Zane Ave N Brooklyn Park 1970 200 5 Woodhaven 6045 Lyndale Ave S Minneapolis 1974 178 6 Burgundy/Hillsboro Court 2911 Hillsboro Ave N New Hope 1968 251 7 Wingate 7700 49th Ave N New Hope 1967 136 8 Bayberry Place 3395 Yankee Doodle Ln Eagan 1995 120 9 Venue on Knox 2893 Knox Ave S Minneapolis 1959 97 10 Plymouth Pointe 9630 37th Pl N Plymouth 1968 96 11 Grove Ridge 8120 E Point Douglas Rd S Cottage Grove 1973 84 12 New Hope Garden/New Hope Village 5600 Zealand Ave N New Hope 1969 151 13 Southdale Parc 2720 W 66th St Richfield 1962 70 14 The Portage 3146 Calhoun Blvd W Minneapolis 1951 62 Acqusition Total 2,364 A Park Place 14550 34th Ave N Plymouth 1985 500 B SouthFork 18001 Jubilee Way Lakeville 1988 272 C 71 France 7161 France Ave S Edina 2016 241 D Connelly on Eleven 2003 121st St E Burnsville 1970 239 E Oxbo 202 7th St W St. Paul 2017 191 F Ironwood Apartments 8400 Bass Lake Rd New Hope 2018 182 G Arcata 901 Xenia Ave S Golden Valley 2014 165 H Red 20 20 6th St NE Minneapolis 2014 130 I Boulder Court 4182 Rahn Rd Eagan 1970 115 J FreightYard 50 N 4th Avenue Minneapolis 1900 96 CSR Total (1) 2,131 6 1 2 4 3 5 10 8 7 12 914 11 Not pictured CSR communities located outside map boundary: Evergreen and Rum River (Isanti), and Monticello Crossings and Monticello Village (Monticello) (1) CSR Total does not include 406 homes located outside the map boundary: Evergreen and Rum River (Isanti), and Monticello Crossings and Monticello Village (Monticello) A B D E F G H I J 13 PORTFOLIO ACQUSITION ADDS KEY SUBMARKET EXPOSURE IN TWIN CITIES M i n n e a p o l i s M a p C
centerspacehomes.com 12 Name Address City Built Units 1 Legacy 248 3rd St S Waite Park 1983 119 2 Pointe West 3225 Maine Prairie Rd Saint Cloud 1975 93 3 Gatewood 813 7th St S Waite Park 1987 120 Acquisiton Total 332 A Park Meadows 408 Park Meadows Dr Waite Park 1982 360 B West Stonehill 690 Prosper Dr Waite Park 1989 313 C Cypress Court 906 Cypress Rd St. Cloud 2015 196 D Regency Park Estates 1615 15th Ave SE St. Cloud 1994 149 E Grand Gateway 4005 24th St S St. Cloud 2002 116 F Ponds 1211 7th Ave S Sartell 2008 58 CSR Total 1,192 1 23 A B C D E F Same-Store Minneapolis and St. Cloud NOI Growth 2018 2019 2020 3 Year CAGR 6.5% 12.5% 3.2% 8.6% Same-Store Minneapolis and St. Cloud Rent Growth 2018 2019 2020 3 Year CAGR 6.4% 8.6% 2.3% 4.1% PORTFOLIO ACQUSITION ADDS TO STRONG PERFORMING TEAM AND PORTFOLIO S t . C l o u d M a p
centerspacehomes.com 13 Minneapolis Minneapolis MSA boasts a diversified economy being home to 17 Fortune 500 companies including UnitedHealth Group, Target and Best Buy The Twin Cities was well-positioned heading into the pandemic with a tight vacancy rate, strong demand, and solid rent growth The urban core has struggled with social distancing, business and office closures, and social unrest With roughly 10,000 units under construction, vacancy in the market is expected to continue to climb in urban class A properties Asking rent in 3-star (class B) properties has consistently outperformed 4- & 5-star (class A) properties since 2011 – this has been even more pronounced in the current economic environment as new deliveries have been concentrated in the urban core St. Cloud St. Cloud boasts a low vacancy rate of 2.6% 154 units under construction is only ~1% of inventory Tight vacancy and low new supply is likely to lead to strong near-term rent growth St. Cloud’s economy has benefitted from higher employment concentrations in manufacturing and education and health services CSR St. Cloud communities achieved 17.8% rent growth on new leases and 5.1% rent growth on renewals in Q3 2021 -5.0% 0.0% 5.0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Year-Over-Year Rent Growth Minneapolis 4 & 5 Star Minneapolis 3 Star St. Cloud 0.0% 20.0% 40.0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Vacancy Minneapolis 4 & 5 Star Minneapolis 3 Star St. Cloud St. Cloud market and Minneapolis class B properties have consistently outperformed Minneapolis class A properties Source: CoStar MARKET OVERVIEW M i n n e a p o l i s a n d S t . C l o u d B P r o p e r t i e s D e m o n s t r a b l y O u t p e r f o r m L u x u r y T h r o u g h o u t t h e C y c l e CSR Minneapolis Source: CoStar CSR St.CloudSource: US Census Bureau ACS 343,552 Units 4,901 (1.4%) 17,556 Units 1,524 (8.7%)
centerspacehomes.com 14 Strong Operating Platform RISE BY 5 M a r g i n s C o n t i n u e t o I m p r o v e Same-Store communities continue to see NOI margin growth Buying Efficient Communities Communities acquired have a weighted average margin of 57.2% Selling Inefficient Communities Communities sold have a weighted average margin of 49.9% Dispositions NOI Margin % CapEx per Unit NCF Margin % Average Rent Weighted Average 49.9% $1,196 37.8% $818 Average Monthly Revenue/Home Includes rent and other income $992 $1,347 $1,308 Apr-18 Same-Store Pool Current Same-Store Pool Current Non- Same-Store Pool Including KMS 55% 56% 57% 58% 59% 60% 61% 62% 63% 64% 65% (1) Gross Margin is calculated as revenue less controllable expenses as a % of revenue; controllable expenses include repairs & maintenance, utilities, administrative and marketing (2) When T12 not available, T3 annualized, or underwriting (3) Proforma including 2021 acqusitions Same-Store NOI Margin 4.0% increase in NOI margin Acquisitions(3) T12(2) NOI Margin % CapEx per Unit NCF Margin % Average Rent Weighted Average 57.9% $1,071 53.9% $1,334
centerspacehomes.com 15 Property Region Homes to Renovate Renovated Date Complete Avg. Cost per Unit (1) Achieved Premium(2) Estimated ROI(3) Park Place Minneapolis, MN 500 337 In process $17,497 $252 18.20% Connelly on Eleven Minneapolis, MN 240 208 In process $10,332 $139 18.70% SouthFork Minneapolis, MN 272 145 In process $16,903 $271 21.70% Whispering Ridge Omaha, NE 336 174 In process $6,532 $135 28.50% Greenfield Omaha, NE 96 24 In process $12,902 $125 13.70% Lakeside Village Omaha, NE 208 52 In process $16,668 $217 17.90% Colony Omaha, NE 232 28 In process $24,626 $216 12.30% Grandeville Rochester, MN 275 105 In process $14,365 $240 23.30% Quarry Ridge Rochester, MN 154 58 In process $17,140 $215 16.80% Woodridge Rochester, MN 110 37 In process $7,023 $82 16.10% Regency Park Estates St. Cloud, MN 147 53 In process $16,863 $239 19.60% West Stonehill St. Cloud, MN 312 132 In process $13,868 $239 22.50% Total 2,882 1,353 Highlights VALUE-ADD OPPORTUNITY E n h a n c i n g P o r t f o l i o T h r o u g h R e n o v a t i o n P r o j e c t s 12 communities are in the value-add process Value-add opportunities across the portfolio feature unit renovations, common areas, and adding amenities including clubhouses, fitness centers, dog park, outdoor kitchens, package locker solutions Enhancements improve asset position within the market and maintain competitive advantage New Regency Lobby Unit Renovations thru September 30 (1) Does not include costs related to amenity or common area upgrades (2) Achieved premium is reflective of the completed and leased homes and does not include market rent changes (3) ROI is defined by (premium X 12 months) plus turnover savings divided by (renovation vacancy loss plus total unit cost)
centerspacehomes.com 16 $29,822 $42,875 $89,316 $53,845 $52,447 $110,000 $95,000 $85,000 $169,900 $25,000 $78,850 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Common Equity 58% Secured Debt 18% Unsecured Debt 13% Series C Preferred 3% Series D Preferred 1%Series E Preferred 7% Debt Summary Amount % of Total Wtd Avg Int Rate Wtd Avg Maturity Total Secured Debt 490,056,042 58% 3.40% 6.99 Total Unsecured Debt 357,000,000 42% 2.99% 8.10 Private Placement 300,000,000 35% 3.12% 8.88 Line of Credit 57,000,000 7% 2.34% 4.00 Total Debt 847,056,043 100% 3.23% 7.46 Fixed Rate 847,056,043 100% 3.23% 7.46 Variable Rate 0 0% 0.00% 0.00 *Share price $94.50 as of 9/30/2021 BALANCE SHEET S e p t e m b e r 3 0 , 2 0 2 1 $2.6B Total Capitalization $847M Total Debt $1.6B Common Equity $297M Preferred Equity % of Total Maturing 3.5% 5.1% 0.0% 10.5% 6.4% 6.2% 13.0% 11.2% 10.0% 20.1% 3.0% 9.3% 1.8% Weighted Average Interest Rate 4.1% 4.0% 0.0% 2.8% 3.7% 3.5% 3.1% 3.9% 2.6% 3.1% 2.7% 2.9% 2.8% $15,000
centerspacehomes.com 17 Multifamily portfolio quality has improved since 2017 We focus our energy and capital on improving 3 long-term metrics CAPITAL RECYCLING I m p r o v i n g P o r t f o l i o M e t r i c s Portfolio Quality Distributable Cash Growth NAV per Share Our capital recycling program has enhanced the quality of our business by improving: The efficiency and growth potential of our communities Core FFO per share Our leverage metrics and overall balance sheet flexibility NAV per share Homes per Community Buildings 132 709 Avg Monthly Rent $980 Communities 100 % of NOI in Top-50 MSA 13% 2017 Homes 13,212 NOI Margin % 57.2% Homes per Community Buildings 180 515 Avg Monthly Rent $1, 336 Communities 79 % of NOI in Top-50 MSA 74% Today (1) Homes 14,275 NOI Margin % 57.8% (1) Proforma including 2021 acquisitions
centerspacehomes.com 18 RECENT ACQUISITIONS F o c u s o n E x p a n d i n g o u r P o r t f o l i o i n T a r g e t M a r k e t s o f M i n n e a p o l i s a n d D e n v e r • A 256-home community built in 2019 • Conveniently located Longmont with close proximity to Boulder • Amenities include fitness center, workstations and a laptop bar, resort-style pool and bike and ski repair room • One, two and three-bedroom homes feature quartz countertops, tile backsplash, stainless steel appliances, full size washer and dryers, and ample closet space U N I O N P O I N T E A P A R T M E N T S D E N V E R , C O / $ 1 4 4 . 7 M I L L I O N I R O N W O D D A P A R T M E N T S M I N N E A P O L I S , M N / $ 4 6 . 3 M I L L I O N • A 465-home community built in 2016 • Conveniently located in the north metro of Denver with close proximity to employment centers and amenities • Amenities include two fitness centers, two billiard room, community garden, and resort style pool • One, two and three-bedroom homes feature contemporary granite countertops, stainless steel appliances, walk-in closets, floor-to- ceiling windows P A R K H O U S E A P A R T M E N T S D E N V E R , C O / $ 7 6 . 9 M I L L I O N • A 182‐home community built in 2018; first new product in submarket in 20 years • Conveniently located to multiple employment centers and amenities • Previously financed the development with a $16.6 million mezzanine note, acquiring the asset after stabilization • One, two and three-bedroom homes feature quartz countertops, stainless steel appliances, and private balconies with views of golf course and pool deck
centerspacehomes.com 19 MIDWEST HAS STRONG FUNDAMENTALS C e n t e r s p a c e L o w e s t U n e m p l o y m e n t R a t e A m o n g P e e r s a n d 2 3 % B e l o w t h e U S A v e r a g e Centerspace portfolio has lower unemployment among peers and the national average Low unemployment in our portfolio relative to all housing sectors- apartment, manufactured housing, and single-family rentals, is leading to strong collections rates Source: SNL, BLS, Company Data 3.7% 4.2% 4.6% 4.7% 4.8% 4.9% 5.1% 5.1% 5.2% 5.3% 5.4% 5.5% 5.8% 5.8% 6.4% 6.4% 7.0% CSR IRT MAA AMH US Average BRG NXRT SUI CPT INVH ELS UMH UDR AIV AVB EQR ESS September 2021 Weighted Average Unemployment Rate state unemployment rate weighted by unit count
centerspacehomes.com 20 MIDWEST HAS STRONG FUNDAMENTALS C e n t e r s p a c e M a i n t a i n s L o w e s t U n d e r C o n s t r u c t i o n P o r t f o l i o A m o n g P e e r s Centerspace’s markets have the lowest percentage of construction among multifamily peers Low supply in CSR portfolio allows for opportunity to drive rent and maintain occupancy Source: SNL, CoStar 2.4% 3.6% 3.8% 4.4% 4.4% 4.6% 4.7% 4.8% 5.2% 5.3% CSR ESS IRT EQR AVB CPT MAA UDR BRG NXRT Weighted Average Portfolio Under Construction % Weighted by Unit Count in Metro
centerspacehomes.com 21 OPERATIONS REVIEW S e c o n d a r y M a r k e t s S e e L o w S u p p l y Region % of NOI(1) Population Market Units(2) Median HH Income Unemployment Rate(3) 3-Month Avg Job Growth(3) Median Home Value T12 Deliveries(4) Market Vacancy(5) Market Rent Growth(5) Under Construction(4) Minneapolis 41.9% 3,640,043 343,552 $83,698 3.0% 7.7% $349,509 9,051 5.3% 2.2% 11,553 Denver 16.8% 2,967,239 334,181 $85,641 4.8% 8.0% $563,161 6,017 5.5% 10.0% 18,420 Rochester 7.7% 221,921 13,748 $75,926 2.3% 7.6% $273,275 97 5.4% 3.3% 0 St. Cloud 7.4% 201,964 17,556 $66,076 2.9% 6.7% $249,720 418 2.0% 4.1% 243 Grand Forks 4.8% 100,815 13,934 $57,301 2.4% 6.6% $218,234 0 6.0% 1.7% 0 Bismarck 5.0% 128,949 12,356 $70,979 2.3% 7.3% $299,963 108 2.7% 1.9% 89 Billings 4.4% 181,667 8,715 $60,962 1.9% 5.7% $299,055 0 1.7% 12.2% 0 Minot 3.4% 75,713 8,797 $71,343 3.5% -8.0% $201,393 0 2.7% (6) 1.9% (6) 0 Lincoln 6.1% 336,374 35,115 $61,539 1.3% 6.6% $243,501 319 2.9% 4.6% 588 Omaha 6.1% 949,442 81,150 $70,373 1.7% 6.0% $236,619 852 4.2% 4.6% 2,252 Rapid City 2.5% 142,107 8,962 $58,361 2.3% 8.7% $270,281 96 2.5% 8.0% 15 Sources: US Census Bureau, Bureau of Labor Statistics, Zillow, CoStar (1) As of September 30, 2021, KMS Underwriting (2) Total units in housing structures with 5+ units per US Census Bureau (3) September 2021 (4) As of 9/30/2021 (5) Q3 2021 average from CoStar (6) Bismarck rent growth and vacancy used as a proxy for Minot
centerspacehomes.com 22 BEST-IN-CLASS GOVERNANCE H i g h C a l i b e r L e a d e r s h i p F o c u s e d o n H i g h Q u a l i t y G o v e r n a n c e Executive Management Team Mark O. Decker, Jr. PRESIDENT AND CEO John A. Kirchmann EVP AND CFO Anne M. Olson EVP AND COO Bhairav Patel is joining the Company as Executive Vice President and will transition into the role of Chief Financial Officer (“CFO”) in the first quarter of 2022. Jeffrey P. Caira Since 2015 Michael T. Dance Since 2016 Mark O. Decker Jr. Since 2017 Emily Nagle Green Since 2018 Linda J. Hall Since 2011 John A. Schissel Since 2016 Mary J. Twinem Since 2018 CSR rated ISS’s top score of 1 - indicating highest quality corporate governance practices and lowest governance risk
centerspacehomes.com 23 ESG HIGHLIGHTS S t r o n g F o c u s o n E n v i r o n m e n t a l , S o c i a l a n d C o r p o r a t e G o v e r n a n c e Energy Efficiency Completed installation of 3,323 LED light bulbs Only ENERGY STAR rated appliances used for replacement Water Conservation Provide shared cost water services encouraging lower consumption Installed new common area laundry equipment at 10 communities; compliant with the US-DOE for energy + water Air Quality Utilize low VOC flooring, paints, adhesives and sealants Non-smoking communities Serving the broader communities in which we operate and supporting our team members’ community involvement is important to us. Here are some organizations that have received sponsorships and financial donations through CSR’s Corporate Giving Initiative: Habitat for Humanity Homes for Our Troops YMCA United Way Local Chapter Feed My Starving Children Ronald McDonald House Charities Cristo Rey High School
centerspacehomes.com 24 INVESTMENT HIGHLIGHTS Best-In-Class Governance
centerspacehomes.com 25 APPENDIX
centerspacehomes.com 26 RECONCILIATION TO NON-GAAP MEASURES Reconciliation of Net Income (Loss) Available to Common Shareholders to Funds From Operations and Core Funds From Operations We use 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; and 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. Due to the limitations of the Nareit FFO definition, we have made certain interpretations in applying this definition. We believe 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. We believe that FFO, which is a standard supplemental measure for equity real estate investment trusts, is helpful to investors in understanding our operating performance, primarily because its calculation excludes depreciation and amortization expense on real estate assets, thereby providing an additional perspective on our operating results. We believe that GAAP historical cost depreciation of real estate assets is not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. The exclusion in Nareit’s definition of FFO of impairment write-downs and gains and losses from the sale of real estate assets helps to identify the operating results of the long-term assets that form the base of our investments, and assists management and investors in comparing those operating results between periods. While FFO is widely used by us 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 and is not necessarily indicative of sufficient cash flow to fund all of our needs or our ability to service indebtedness or make distributions. Core Funds from Operations ("Core FFO") is FFO as adjusted for non-routine items or items not considered core to our business operations. By further adjusting for items that are not considered part of our core business operations, we believe that Core FFO provides investors with additional information to compare our core operating and financial performance between periods. Core FFO should not be considered as an alternative to net income as an indication of financial performance, or as an alternative to cash flows from operations as a measure of liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions to shareholders. Core FFO is a non-GAAP and non-standardized measure that may be calculated differently by other REITs and should not be considered a substitute for operating results determined in accordance with GAAP.
centerspacehomes.com 27 RECONCILIATION TO NON-GAAP MEASURES
centerspacehomes.com 28 RECONCILIATION TO NON-GAAP MEASURES Reconciliation of Net Income (Loss) Available to Common Shareholders 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 on litigation settlement, and gain/ loss from involuntary conversion. We consider Adjusted EBITDA to be an appropriate supplemental performance measure because it permits investors to view income from operations without the effect of depreciation, the cost of debt, or nonoperating gains and losses. Adjusted EBITDA is a non-GAAP measure and should not be considered a substitute for operating results determined in accordance with GAAP.