CENTERSPACE EXPANDS PRESENCE IN DENVER MARKET & PROVIDES UPDATE ON THIRD QUARTER 2024 BALANCE SHEET ACTIVITY

Rhea-AI Summary

Centerspace (NYSE: CSR) announced the acquisition of The Lydian in Denver, CO, for $54 million on October 1, 2024. The 129-home apartment community includes 23,000 square feet of leased office and retail space. The acquisition was financed through a $35 million mortgage assumption, $14.5 million in common operating partnership units, and cash.

The company also completed the redemption of all outstanding 6.625% Series C Cumulative Redeemable Preferred Shares on September 30, 2024. Additionally, Centerspace sold approximately 1.59 million shares through its ATM program, generating gross proceeds of about $113.73 million, which was used to fund the preferred share redemption and reduce line of credit debt.

With this acquisition, Centerspace now provides 2,536 homes across nine communities in the Denver and Fort Collins regions.

Positive

• Acquisition of The Lydian expands Centerspace's presence in the Denver market
• Assumed mortgage debt of $35 million at a favorable 3.72% interest rate
• Gross proceeds of $113.73 million from ATM share sales
• Redemption of all outstanding 6.625% Series C Cumulative Redeemable Preferred Shares

Negative

• Potential dilution from issuance of $14.5 million in common operating partnership units
• Increased debt load from assumed $35 million mortgage

Insights

Real Estate Investment Analyst

Centerspace's acquisition of The Lydian in Denver for $54 million is a strategic move that expands their portfolio in a key market. The 129-home community, along with commercial space, enhances their presence in Denver's Downtown submarket. The financing structure, including $35 million in assumed debt at a favorable 3.72% interest rate and $14.5 million in operating partnership units, demonstrates financial acumen. This acquisition, combined with the redemption of preferred shares and ATM equity raises, showcases Centerspace's ability to optimize its capital structure while growing its asset base. The transaction aligns with their strategy of creating value through targeted acquisitions in strong markets.

Financial Analyst

Centerspace's recent financial activities demonstrate a proactive approach to balance sheet management. The redemption of 6.625% Series C Preferred Shares, funded partly by $113.73 million in ATM equity raises, likely reduces the company's overall cost of capital. The acquisition financing, particularly the assumed $35 million mortgage at 3.72%, is notably favorable in the current interest rate environment. The use of operating partnership units at $76.42 per unit for $14.5 million of the purchase price is an efficient, non-dilutive method of funding. These moves collectively suggest a strategic focus on improving financial flexibility and optimizing capital structure, which should positively impact the company's financial health and future growth potential.

MINNEAPOLIS, Oct. 2, 2024 /PRNewswire/ -- Centerspace (NYSE: CSR) announced that on October 1, 2024, it closed on the acquisition of The Lydian in Denver, CO, for total consideration of $54 million.

Centerspace also announced the completed redemption of all outstanding 6.625% Series C Cumulative Redeemable Preferred Shares on September 30, 2024. The Company also announced that year-to-date through September 30, 2024, it has sold approximately 1.59 million shares under its ATM program. Gross proceeds from these ATM sales were approximately $113.73 million, before fees and expenses, which was used to fund the preferred share redemption and pay down line of credit debt.

The Lydian is a 129-home apartment community in Denver, CO, that also includes 23,000 square feet of fully leased office and street-level retail space. The property was constructed in 2018 and sits adjacent to the 25^th and Welton light rail station in the Five Points neighborhood of Denver's Downtown submarket. Centerspace entered the Denver market in 2017 and now provides 2,536 homes in nine communities throughout the Denver and Fort Collins regions.

The acquisition was financed through the assumption of $35 million of mortgage debt, the issuance of $14.5 million of common operating partnership units, and cash. The assumed debt carries an interest rate of 3.72%, is interest-only through January 2032, and matures in February 2037. Operating partnership units were issued at a negotiated value of $76.42 per unit. As part of the transaction consideration, the Company will provide tax protection to the holders of the common operating partnership units.

"We are excited to add The Lydian to our portfolio. Its proximity to our existing Denver communities will allow us to more efficiently create Better Every Days for our residents and team members," said Anne Olson, Centerspace's President and CEO." At the same time, the strategic financing undertaken to complete this acquisition, combined with our recent preferred redemption, highlight the levers available to Centerspace to continue to add value for our shareholders while improving our balance sheet."

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, the company currently owns 71 apartment communities consisting of 13,012 homes located in Colorado, Minnesota, Montana, Nebraska, North Dakota, and South Dakota. Centerspace was named a top workplace for the fifth consecutive year in 2024 by the Minneapolis Star Tribune. For more information, please visit https://www.centerspacehomes.com.

If you would like more information about this topic, please contact Josh Klaetsch, Investor Relations, at (701) 837-7104 or IR@centerspacehomes.com.

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SOURCE Centerspace

FAQ

What property did Centerspace (CSR) acquire in Denver on October 1, 2024?

Centerspace acquired The Lydian, a 129-home apartment community with 23,000 square feet of office and retail space, for $54 million.

How did Centerspace (CSR) finance the acquisition of The Lydian?

The acquisition was financed through a $35 million mortgage assumption, $14.5 million in common operating partnership units, and cash.

How many shares did Centerspace (CSR) sell through its ATM program in 2024?

Centerspace sold approximately 1.59 million shares through its ATM program, generating gross proceeds of about $113.73 million.

What did Centerspace (CSR) use the proceeds from its ATM share sales for?

The proceeds were used to fund the preferred share redemption and pay down line of credit debt.