Centerspace Reports First Quarter 2023 Financial Results and Affirms 2023 Core FFO Guidance

MINNEAPOLIS, May 1, 2023 /PRNewswire/ -- 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 Comparison		Sequential 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

 

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

 

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)

 

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

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)			$     55,691		806.4 %		$     66,508		(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			$         345		0.9 %		$      4,533		13.2 %
Revenue
Same-store	$     58,859		$     58,465		$     53,249			$         394		0.7 %		$      5,610		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			$         345		0.9 %		$      4,533		13.2 %

* Not a meaningful percentage

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		$              468		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		$           1,214		8.4 %
Non-controllable expenses
Real estate taxes	$           6,765		$           5,974		$              791		13.2 %
Insurance	2,112		1,894		218		11.5 %
Total	$           8,877		$           7,868		$           1,009		12.8 %
Property operating expenses, including real estate taxes - non-same-store	$           1,310		$              710		$              600		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		$           3,050		11.8 %

(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.

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.

		(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.

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.

 

CENTERSPACE DEBT ANALYSIS (in thousands)   Debt Maturity Schedule Annual Expirations
		Future Maturities of Debt
		Secured Fixed Debt		Unsecured Fixed Debt		Unsecured Variable Debt		Total Debt		% of Total Debt		Weighted 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 %

 

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.

 

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 Rental Rate (3)						Average Monthly 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.

 

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 Rental Rate						Average Monthly 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.

 

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.

 

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

 

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.

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

 

 

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SOURCE Centerspace