Centerspace Reports Second Quarter 2022 Financial Results
Centerspace (NYSE: CSR) reported its Q2 2022 financial results, showing a net loss of $0.30 per diluted share, compared to a net income of $1.48 per share in Q2 2021. Core FFO rose by 14.3% to $1.12 per diluted share. Same-store revenues increased 11.7% year-over-year, contributing to an 11.5% rise in NOI. Centerspace revised its 2022 outlook, adjusting the net loss guidance to a range of $0.31 to $0.14 and increasing the same-store NOI growth guidance to 10.0% to 12.0%. As of June 30, the company held $196.2 million in liquidity.
- Core FFO increased 14.3% to $1.12 per diluted share.
- Same-store revenues rose 11.7% compared to Q2 2021.
- Same-store NOI increased 11.5% year-over-year.
- Increased 2022 guidance: net loss per share revised to $0.31 to $0.14.
- Same-store NOI growth guidance raised to 10.0% to 12.0%.
- Net loss of $0.30 per diluted share, a decline from net income of $1.48 in Q2 2021.
- Revised earnings outlook still shows a projected loss.
MINNEAPOLIS, Aug. 1, 2022 /PRNewswire/ -- Centerspace (NYSE: CSR) announced today its financial and operating results for the three and six months ended June 30, 2022. The tables below show Net Income, Funds from Operations ("FFO")1, and Core FFO1, all on a per share basis, for the three and six months ended June 30, 2022; Same-Store Revenues, Expenses, and Net Operating Income ("NOI")1 over comparable periods; and Same-Store Weighted-Average Occupancy for each of the three months ended June 30, 2022, March 31, 2022, and June 30, 2021.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
Per Share | 2022 | 2021 | 2022 | 2021 | ||||
Net income (loss) - diluted | $ (0.30) | $ 1.48 | $ (0.97) | $ 1.02 | ||||
FFO - diluted | $ 1.02 | $ 0.95 | $ 2.03 | $ 1.87 | ||||
Core FFO - diluted | $ 1.12 | $ 0.98 | $ 2.10 | $ 1.93 | ||||
Year-Over-Year Comparison | Sequential Comparison | YTD Comparison | ||||
Same-Store Results | Q2 2022 vs. Q2 2021 | Q2 2022 vs. Q1 2022 | 2022 vs. 2021 | |||
Revenues | 11.7 % | 4.2 % | 10.1 % | |||
Expenses | 11.9 % | 2.5 % | 10.7 % | |||
NOI | 11.5 % | 5.4 % | 9.7 % |
Three months ended | ||||||
Same-Store Results | June 30, 2022 | March 31, 2022 | June 30, 2021 | |||
Weighted Average Occupancy | 94.8 % | 93.9 % | 94.9 % | |||
(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" below. |
Highlights
- Net Loss was
$0.30 per diluted share for the second quarter of 2022, compared to Net Income of$1.48 per diluted share for the same period of 2021; - Core FFO increased
14.3% to$1.12 per diluted share for the three months ended June 30, 2022, compared to$0.98 for the three months ended June 30, 2021; - Same-store revenues increased by
11.7% for the second quarter of 2022 compared to the second quarter of 2021, driving an11.5% increase in NOI compared to the same period of the prior year; and - Revised 2022 financial outlook, increasing our guidance range for net loss per share to
$0.31 to$0.14 per diluted share. We also increased our same-store NOI growth guidance for 2022 to10.0% to12.0% , an increase of2% over our previous guidance range. This resulted in an increase in the Core FFO guidance range to$4.45 to$4.61 per diluted share.
Balance Sheet
At the end of the second quarter, Centerspace had
Revised 2022 Financial Outlook
Centerspace revised its 2022 financial outlook and increased its earnings per share, Core FFO and same-store NOI guidance. For additional information, see S-17 of the Supplemental Financial and Operating Data for the quarter ended June 30, 2022 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 2022 | Updated Outlook for 2022 | |||
Low | High | Low | High | |
Earnings per Share – diluted | $ (0.37) | $ (0.11) | $ (0.31) | $ (0.14) |
Same-Store Revenue | 7.0 % | 9.0 % | 9.0 % | 10.5 % |
Same-Store Expenses | 5.5 % | 7.5 % | 7.5 % | 8.5 % |
Same-Store NOI | 8.0 % | 10.0 % | 10.0 % | 12.0 % |
FFO per Share – diluted | $ 4.26 | $ 4.52 | $ 4.32 | $ 4.49 |
Core FFO per Share – diluted | $ 4.33 | $ 4.57 | $ 4.45 | $ 4.61 |
Earnings Call
Live webcast and replay: https://ir.centerspacehomes.com | ||||
Live Conference Call | Conference Call Replay | |||
Tuesday, August 2, 2022, at 10:00 AM ET | Replay available until August 16, 2022 | |||
USA Toll Free Number | 1-844-200-6205 | USA Toll Free Number | 1-866-813-9403 | |
International Toll Free Number | 1-929-526-1599 | International Toll Free Number | 44-204-525-0658 | |
Canada Toll Free Number | 1-833-950-0062 | Canada Toll Free Number | 1-226-828-7578 | |
Conference Number | 753198 | Conference Number | 920238 | |
Supplemental Information
Supplemental Operating and Financial Data for the quarter ended June 30, 2022 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 June 30, 2022, Centerspace owned 83 apartment communities consisting of 14,838 apartment homes located in Colorado, Minnesota, Montana, Nebraska, North Dakota, and South Dakota. Centerspace was named a Top Workplace for 2021 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. 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. 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, 2021, 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
IR@centerspacehomes.com
Marketing & Media
Kelly Weber
Phone: 701-837-7104
kweber@centerspacehomes.com
Common Share Data (NYSE: CSR) | ||||||||||
2nd Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | 2nd Quarter | ||||||
2022 | 2022 | 2021 | 2021 | 2021 | ||||||
High closing price | $ 103.17 | $ 108.27 | $ 111.26 | $ 105.42 | $ 79.71 | |||||
Low closing price | $ 76.65 | $ 89.01 | $ 96.58 | $ 78.42 | $ 67.28 | |||||
Average closing price | $ 87.61 | $ 97.15 | $ 103.29 | $ 94.10 | $ 71.99 | |||||
Closing price at end of quarter | $ 81.55 | $ 98.12 | $ 110.90 | $ 94.50 | $ 78.90 | |||||
Common share distributions – annualized | $ 2.92 | $ 2.92 | $ 2.88 | $ 2.88 | $ 2.80 | |||||
Closing dividend yield – annualized | 3.6 % | 3.0 % | 2.6 % | 3.1 % | 3.6 % | |||||
Closing common shares outstanding (thousands) | 15,373 | 15,365 | 15,016 | 14,281 | 14,045 | |||||
Closing limited partnership units outstanding (thousands) | 995 | 997 | 832 | 845 | 881 | |||||
Closing Series E preferred units outstanding, as converted | 2,186 | 2,186 | 2,186 | 2,186 | — | |||||
Closing market value of outstanding common shares, plus | $ 1,513,079 | $ 1,819,930 | $ 1,999,971 | $ 1,635,984 | $ 1,177,661 | |||||
CENTERSPACE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (in thousands) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 6/30/2022 | 6/30/2021 | |||||||||
REVENUE | $ 63,116 | $ 60,314 | $ 57,988 | $ 50,413 | $ 46,656 | $ 123,430 | $ 93,304 | ||||||||
EXPENSES | |||||||||||||||
Property operating expenses, | 19,011 | 19,014 | 16,852 | 14,434 | 13,018 | 38,025 | 26,467 | ||||||||
Real estate taxes | 7,205 | 6,859 | 6,654 | 5,916 | 5,742 | 14,064 | 11,534 | ||||||||
Property management expense | 2,721 | 2,253 | 2,697 | 2,203 | 2,085 | 4,974 | 3,852 | ||||||||
Casualty (gain) loss | 382 | 598 | 280 | (10) | (27) | 980 | 74 | ||||||||
Depreciation/amortization | 24,768 | 31,001 | 30,418 | 22,447 | 19,308 | 55,769 | 39,300 | ||||||||
General and administrative expenses | 5,221 | 4,500 | 4,231 | 4,279 | 3,797 | 9,721 | 7,703 | ||||||||
TOTAL EXPENSES | $ 59,308 | $ 64,225 | $ 61,132 | $ 49,269 | $ 43,923 | $ 123,533 | $ 88,930 | ||||||||
Gain (loss) on sale of real estate and | 27 | — | 678 | — | 26,840 | 27 | — | ||||||||
Operating income (loss) | 3,835 | (3,911) | (2,466) | 1,144 | 29,573 | (76) | 4,374 | ||||||||
Interest expense | (7,561) | (7,715) | (7,456) | (7,302) | (7,089) | (15,276) | (14,320) | ||||||||
Interest and other income (loss) | (17) | 1,063 | 1,117 | (5,082) | 619 | 1,046 | 1,050 | ||||||||
Net income (loss) | $ (3,743) | $ (10,563) | $ (8,805) | $ (11,240) | $ 23,103 | $ (14,306) | $ (8,896) | ||||||||
Dividends to Series D preferred | (160) | (160) | (160) | (160) | (160) | (320) | (320) | ||||||||
Net (income) loss attributable to | 950 | 2,157 | 1,793 | 1,930 | (1,386) | 3,107 | (917) | ||||||||
Net (income) loss attributable to | (38) | (23) | (36) | (22) | (19) | (61) | (36) | ||||||||
Net income (loss) attributable to | (2,991) | (8,589) | (7,208) | (9,492) | 21,538 | (11,580) | (10,169) | ||||||||
Dividends to preferred shareholders | (1,607) | (1,607) | (1,607) | (1,607) | (1,607) | (3,214) | (3,214) | ||||||||
NET INCOME (LOSS) AVAILABLE | $ (4,598) | $ (10,196) | $ (8,815) | $ (11,099) | $ 19,931 | $ (14,794) | $ (13,383) | ||||||||
Per Share Data - Basic | |||||||||||||||
Net earnings (loss) per common share – | $ (0.30) | $ (0.68) | $ (0.61) | $ (0.79) | $ 1.49 | $ (0.97) | $ 1.02 | ||||||||
Per Share Data - Diluted | |||||||||||||||
Net earnings (loss) per common share – | $ (0.30) | $ (0.68) | $ (0.61) | $ (0.79) | $ 1.48 | $ (0.97) | $ 1.02 | ||||||||
CENTERSPACE CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands) | ||||||||||
6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | ||||||
ASSETS | ||||||||||
Real estate investments | ||||||||||
Property owned | $ 2,401,427 | $ 2,390,952 | $ 2,271,170 | $ 2,203,606 | $ 1,838,837 | |||||
Less accumulated depreciation | (487,834) | (465,752) | (443,592) | (426,926) | (407,400) | |||||
1,913,593 | 1,925,200 | 1,827,578 | 1,776,680 | 1,431,437 | ||||||
Mortgage loans receivable | — | — | 43,276 | 42,160 | 37,457 | |||||
Total real estate investments | 1,913,593 | 1,925,200 | 1,870,854 | 1,818,840 | 1,468,894 | |||||
Cash and cash equivalents | 13,156 | 13,313 | 31,267 | 20,816 | 5,194 | |||||
Restricted cash | 1,914 | 2,409 | 7,358 | 2,376 | 8,444 | |||||
Other assets | 18,950 | 24,651 | 30,582 | 34,919 | 17,218 | |||||
TOTAL ASSETS | $ 1,947,613 | $ 1,965,573 | $ 1,940,061 | $ 1,876,951 | $ 1,499,750 | |||||
LIABILITIES, MEZZANINE EQUITY, AND EQUITY | ||||||||||
LIABILITIES | ||||||||||
Accounts payable and accrued expenses | $ 48,077 | $ 50,360 | $ 62,403 | $ 58,092 | $ 52,413 | |||||
Revolving line of credit | 73,000 | 46,000 | 76,000 | 57,000 | 87,000 | |||||
Notes payable, net of loan costs | 299,374 | 299,359 | 299,344 | 299,454 | 319,286 | |||||
Mortgages payable, net of loan costs | 497,917 | 521,536 | 480,703 | 489,140 | 287,143 | |||||
TOTAL LIABILITIES | $ 918,368 | $ 917,255 | $ 918,450 | $ 903,686 | $ 745,842 | |||||
SERIES D PREFERRED UNITS | $ 18,627 | $ 22,412 | $ 25,331 | $ 21,585 | $ 18,022 | |||||
EQUITY | ||||||||||
Series C Preferred Shares of Beneficial Interest | 93,530 | 93,530 | 93,530 | 93,530 | 93,530 | |||||
Common Shares of Beneficial Interest | 1,207,849 | 1,203,685 | 1,157,255 | 1,092,130 | 1,033,940 | |||||
Accumulated distributions in excess of net income | (511,552) | (495,732) | (474,318) | (454,691) | (433,310) | |||||
Accumulated other comprehensive income (loss) | (2,362) | (2,550) | (4,435) | (5,784) | (12,064) | |||||
Total shareholders' equity | $ 787,465 | $ 798,933 | $ 772,032 | $ 725,185 | $ 682,096 | |||||
Noncontrolling interests – Operating Partnership and Series E preferred units | 222,528 | 226,302 | 223,600 | 225,850 | 53,133 | |||||
Noncontrolling interests – consolidated real estate entities | 625 | 671 | 648 | 645 | 657 | |||||
Total equity | $ 1,010,618 | $ 1,025,906 | $ 996,280 | $ 951,680 | $ 735,886 | |||||
TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY | $ 1,947,613 | $ 1,965,573 | $ 1,940,061 | $ 1,876,951 | $ 1,499,750 | |||||
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 us, 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
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, amortization, financing, property management overhead, casualty losses, and general and administrative expenses. NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income, net income available for common shareholders, or cash flow from operating activities as a measure of financial performance.
(in thousands, except percentages) | ||||||||||||||
Three Months Ended | Sequential | Year-Over-Year | ||||||||||||
6/30/2022 | 3/31/2022 | 6/30/2021 | $ Change | % Change | $ Change | % Change | ||||||||
Operating income (loss) | $ 3,835 | $ (3,911) | $ 29,573 | $ 7,746 | (198.1) % | $ (25,738) | (87.0) % | |||||||
Adjustments: | ||||||||||||||
Property management expenses | 2,721 | 2,253 | 2,085 | 468 | 20.8 % | 636 | 30.5 % | |||||||
Casualty (gain) loss | 382 | 598 | (27) | (216) | (36.1) % | 409 | * | |||||||
Depreciation and amortization | 24,768 | 31,001 | 19,308 | (6,233) | (20.1) % | 5,460 | 28.3 % | |||||||
General and administrative expenses | 5,221 | 4,500 | 3,797 | 721 | 16.0 % | 1,424 | 37.5 % | |||||||
(Gain) loss on sale of real estate and other | (27) | — | (26,840) | (27) | N/A | 26,813 | (99.9) % | |||||||
Net operating income | $ 36,900 | $ 34,441 | $ 27,896 | $ 2,459 | 7.1 % | $ 9,004 | 32.3 % | |||||||
Revenue | ||||||||||||||
Same-store | $ 48,867 | $ 46,891 | $ 43,762 | $ 1,976 | 4.2 % | $ 5,105 | 11.7 % | |||||||
Non-same-store | 13,334 | 12,507 | 1,195 | 827 | 6.6 % | 12,139 | 1,015.8 % | |||||||
Other properties | 915 | 916 | 664 | (1) | (0.1) % | 251 | 37.8 % | |||||||
Dispositions | — | — | 1,035 | — | — | (1,035) | (100.0) % | |||||||
Total | 63,116 | 60,314 | 46,656 | 2,802 | 4.6 % | 16,460 | 35.3 % | |||||||
Property operating expenses, including real estate | ||||||||||||||
Same-store | 19,700 | 19,215 | 17,610 | 485 | 2.5 % | 2,090 | 11.9 % | |||||||
Non-same-store | 6,286 | 6,329 | 357 | (43) | (0.7) % | 5,929 | 1,660.8 % | |||||||
Other properties | 230 | 329 | 258 | (99) | (30.1) % | (28) | (10.9) % | |||||||
Dispositions | — | — | 535 | — | — | (535) | (100.0) % | |||||||
Total | 26,216 | 25,873 | 18,760 | 343 | 1.3 % | 7,456 | 39.7 % | |||||||
Net operating income | ||||||||||||||
Same-store | 29,167 | 27,676 | 26,152 | 1,491 | 5.4 % | 3,015 | 11.5 % | |||||||
Non-same-store | 7,048 | 6,178 | 838 | 870 | 14.1 % | 6,210 | 741.1 % | |||||||
Other properties | 685 | 587 | 406 | 98 | 16.7 % | 279 | 68.7 % | |||||||
Dispositions | — | — | 500 | — | — | (500) | (100.0) % | |||||||
Total | $ 36,900 | $ 34,441 | $ 27,896 | $ 2,459 | 7.1 % | $ 9,004 | 32.3 % | |||||||
* Not a meaningful percentage
Six Months Ended June 30, | |||||||
2022 | 2021 | $ Change | % Change | ||||
Operating income (loss) | $ (76) | $ 31,214 | $ (31,290) | (100.2) % | |||
Adjustments: | |||||||
Property management expenses | 4,974 | 3,852 | 1,122 | 29.1 % | |||
Casualty (gain) loss | 980 | 74 | 906 | * | |||
Depreciation and amortization | 55,769 | 39,300 | 16,469 | 41.9 % | |||
General and administrative expenses | 9,721 | 7,703 | 2,018 | 26.2 % | |||
(Gain) loss on sale of real estate and other investments | (27) | (26,840) | 26,813 | (99.9) % | |||
Net operating income | $ 71,341 | $ 55,303 | $ 16,038 | 29.0 % | |||
Revenue | |||||||
Same-store | $ 95,758 | $ 86,956 | $ 8,802 | 10.1 % | |||
Non-same-store | 25,841 | 2,242 | 23,599 | 1,052.6 % | |||
Other properties | 1,831 | 1,332 | 499 | 37.5 % | |||
Dispositions | — | 2,774 | (2,774) | (100.0) % | |||
Total | 123,430 | 93,304 | 30,126 | 32.3 % | |||
Property operating expenses, including real estate taxes | |||||||
Same-store | 38,915 | 35,140 | 3,775 | 10.7 % | |||
Non-same-store | 12,614 | 701 | 11,913 | 1,699.4 % | |||
Other properties | 560 | 521 | 39 | 7.5 % | |||
Dispositions | — | 1,639 | (1,639) | (100.0) % | |||
Total | 52,089 | 38,001 | 14,088 | 37.1 % | |||
Net operating income | |||||||
Same-store | 56,843 | 51,816 | 5,027 | 9.7 % | |||
Non-same-store | 13,227 | 1,541 | 11,686 | 758.3 % | |||
Other properties | 1,271 | 811 | 460 | 56.7 % | |||
Dispositions | — | 1,135 | (1,135) | (100.0) % | |||
Total | $ 71,341 | $ 55,303 | $ 16,038 | 29.0 % | |||
* Not a meaningful percentage
Reconciliation of Same-Store Controllable Expenses to Total Property Operating Expenses, Including Real Estate Taxes
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.
(in thousands, except percentages) | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | $ Change | % Change | 2022 | 2021 | $ Change | % Change | |||||||||
Controllable expenses | ||||||||||||||||
On-site compensation(1) | $ 5,234 | $ 4,676 | $ 558 | 11.9 % | $ 9,978 | $ 9,199 | $ 779 | 8.5 % | ||||||||
Repairs and maintenance | 3,055 | 2,534 | 521 | 20.6 % | 5,627 | 4,730 | 897 | 19.0 % | ||||||||
Utilities | 3,089 | 2,519 | 570 | 22.6 % | 7,035 | 5,678 | 1,357 | 23.9 % | ||||||||
Administrative and marketing | 1,059 | 923 | 136 | 14.7 % | 2,105 | 1,857 | 248 | 13.4 % | ||||||||
Total | $ 12,437 | $ 10,652 | $ 1,785 | 16.8 % | $ 24,745 | $ 21,464 | $ 3,281 | 15.3 % | ||||||||
Non-controllable expenses | ||||||||||||||||
Real estate taxes | $ 5,521 | $ 5,391 | $ 130 | 2.4 % | $ 10,763 | $ 10,741 | $ 22 | 0.2 % | ||||||||
Insurance | 1,742 | 1,567 | 175 | 11.2 % | 3,407 | 2,935 | 472 | 16.1 % | ||||||||
Total | $ 7,263 | $ 6,958 | $ 305 | 4.4 % | $ 14,170 | $ 13,676 | $ 494 | 3.6 % | ||||||||
Property operating expenses, including real estate | $ 6,286 | $ 357 | $ 5,929 | 1,660.8 % | $ 12,614 | $ 701 | $ 11,913 | 1,699.4 % | ||||||||
Property operating expenses, including real estate | 230 | 258 | (28) | (10.9) % | 560 | 521 | 39 | 7.5 % | ||||||||
Property operating expenses, including real estate | — | 535 | (535) | (100.0) % | — | 1,639 | (1,639) | (100.0) % | ||||||||
Total property operating expenses, including | $ 26,216 | $ 18,760 | $ 7,456 | 39.7 % | $ 52,089 | $ 38,001 | $ 14,088 | 37.1 % | ||||||||
(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.
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; 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.
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 | Six Months Ended | ||||||||||||||
6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 6/30/2022 | 6/30/2021 | |||||||||
Funds From Operations | |||||||||||||||
Net income (loss) available to common shareholders | $ (4,598) | $ (10,196) | $ (8,815) | $ (11,099) | $ 19,931 | $ (14,794) | $ 13,457 | ||||||||
Adjustments: | |||||||||||||||
Noncontrolling interests – Operating Partnership | (950) | (2,157) | (1,793) | (1,930) | 1,386 | (3,107) | 917 | ||||||||
Depreciation and amortization | 24,768 | 31,001 | 30,418 | 22,447 | 19,308 | 55,769 | 39,300 | ||||||||
Less depreciation – non real estate | (101) | (101) | (101) | (80) | (87) | (202) | (185) | ||||||||
Less depreciation – partially owned entities | (7) | (21) | (21) | (24) | (24) | (28) | (48) | ||||||||
(Gain) loss on sale of real estate | (27) | — | (678) | — | (26,840) | (27) | (26,840) | ||||||||
FFO applicable to common shares and Units | $ 19,085 | $ 18,526 | $ 19,010 | $ 9,314 | $ 13,674 | $ 37,611 | $ 26,601 | ||||||||
Adjustments to Core FFO: | |||||||||||||||
Non-cash casualty (gain) loss | 163 | 25 | — | — | — | 188 | — | ||||||||
Loss on extinguishment of debt | 5 | — | 2 | 530 | 3 | 5 | — | ||||||||
Technology implementation costs(1) | 447 | 103 | 535 | 625 | 447 | 550 | 860 | ||||||||
Commercial lease termination proceeds | — | — | — | (450) | — | — | — | ||||||||
Acquisition related costs | — | — | 90 | 140 | — | — | — | ||||||||
Interest rate swap termination, amortization, and | 205 | (613) | (411) | 5,353 | — | (408) | — | ||||||||
Amortization of assumed debt | (116) | (115) | (26) | (27) | — | (231) | — | ||||||||
Pursuit costs | 1,127 | — | — | — | — | 1,127 | — | ||||||||
Other miscellaneous items | 100 | (4) | (61) | (3) | — | 96 | 3 | ||||||||
Core FFO applicable to common shares and Units | $ 21,016 | $ 17,922 | $ 19,139 | $ 15,482 | $ 14,124 | $ 38,938 | $ 27,464 | ||||||||
Funds from operations applicable to common shares | $ 19,085 | $ 18,526 | $ 19,010 | $ 9,314 | $ 13,674 | $ 37,611 | $ 26,601 | ||||||||
Dividends to preferred unitholders | 160 | 160 | 160 | 160 | 160 | 320 | 320 | ||||||||
Funds from operations applicable to common shares | $ 19,245 | $ 18,686 | $ 19,170 | $ 9,474 | $ 13,834 | $ 37,931 | $ 26,921 | ||||||||
Core funds from operations applicable to common | $ 21,016 | $ 17,922 | $ 19,139 | $ 15,482 | $ 14,124 | $ 38,938 | $ 27,464 | ||||||||
Dividends to preferred unitholders | 160 | 160 | 160 | 160 | 160 | 320 | 320 | ||||||||
Core funds from operations applicable to common | $ 21,176 | $ 18,082 | $ 19,299 | $ 15,642 | $ 14,284 | $ 39,258 | $ 27,784 | ||||||||
Per Share Data | |||||||||||||||
Earnings (loss) per share and Unit - diluted | $ (0.30) | $ (0.68) | $ (0.61) | $ (0.81) | $ 1.48 | $ (0.97) | $ 1.02 | ||||||||
FFO per share and Unit - diluted | $ 1.02 | $ 1.01 | $ 1.07 | $ 0.60 | $ 0.95 | $ 2.03 | $ 1.87 | ||||||||
Core FFO per share and Unit - diluted | $ 1.12 | $ 0.98 | $ 1.08 | $ 0.98 | $ 0.98 | $ 2.10 | $ 1.93 | ||||||||
Weighted average shares - basic | 15,369 | 15,097 | 14,541 | 14,065 | 13,353 | 15,233 | 13,216 | ||||||||
Effect of redeemable operating partnership units | 995 | 965 | 838 | 865 | 916 | 978 | 939 | ||||||||
Effect of Series D preferred units | 228 | 228 | 228 | 228 | 228 | 228 | 228 | ||||||||
Effect of Series E preferred units | 2,186 | 2,186 | 2,186 | 705 | — | 2,186 | — | ||||||||
Effect of dilutive restricted stock units and stock | 48 | 66 | 75 | 59 | 17 | 57 | 18 | ||||||||
Weighted average shares and Units - diluted | 18,826 | 18,542 | 17,868 | 15,922 | 14,514 | 18,682 | 14,401 | ||||||||
(1) | Costs are related to a two-year implementation. |
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/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, the cost of debt, 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 | Six Months Ended | ||||||||||||||
6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 6/30/2022 | 6/30/2021 | |||||||||
Adjusted EBITDA | |||||||||||||||
Net income (loss) available to common shareholders | $ (2,991) | $ (8,589) | $ (7,208) | $ (9,492) | $ 21,538 | $ (11,580) | $ 16,671 | ||||||||
Adjustments: | |||||||||||||||
Dividends to preferred unitholders | 160 | 160 | 160 | 160 | 160 | 320 | 320 | ||||||||
Noncontrolling interests – Operating Partnership | (950) | (2,157) | (1,793) | (1,930) | 1,386 | (3,107) | 917 | ||||||||
Income (loss) before noncontrolling interests – | $ (3,781) | $ (10,586) | $ (8,841) | $ (11,262) | $ 23,084 | $ (14,367) | $ 17,908 | ||||||||
Adjustments: | |||||||||||||||
Interest expense | 7,547 | 7,700 | 7,440 | 7,287 | 7,075 | 15,247 | 14,291 | ||||||||
Loss on extinguishment of debt | 5 | — | 2 | 530 | 3 | 5 | 3 | ||||||||
Depreciation/amortization related to real estate | 24,759 | 30,980 | 30,397 | 22,423 | 19,284 | 55,739 | 39,253 | ||||||||
Non-cash casualty (gain) loss | 163 | 25 | — | — | — | 188 | — | ||||||||
Interest income | (74) | (464) | (644) | (769) | (583) | (538) | (990) | ||||||||
(Gain) loss on sale of real estate and other | (27) | — | (678) | — | (26,840) | (27) | (26,840) | ||||||||
Technology implementation costs | 447 | 103 | 534 | 625 | 447 | 550 | 860 | ||||||||
Commercial lease termination proceeds | — | — | — | (450) | — | — | — | ||||||||
Acquisition related costs | — | — | 90 | 140 | — | — | — | ||||||||
Interest rate swap termination and mark-to-market | 18 | (582) | (359) | 5,361 | — | (564) | — | ||||||||
Pursuit costs | 1,127 | — | — | — | — | 1,127 | — | ||||||||
Other miscellaneous items | 100 | (4) | (61) | (3) | — | 96 | — | ||||||||
Adjusted EBITDA | $ 30,284 | $ 27,172 | $ 27,880 | $ 23,882 | $ 22,470 | $ 57,456 | $ 44,485 | ||||||||
CENTERSPACE DEBT ANALYSIS (in thousands) | ||||||||||||
Debt Maturity Schedule Annual Expirations | ||||||||||||
Future Maturities of Debt | ||||||||||||
Secured Fixed Debt | Unsecured Fixed Debt | Unsecured | Total Debt | % of Total Debt | Weighted Average Interest | |||||||
2022 (remainder) | $ — | $ — | $ — | $ — | — | — | ||||||
2023 | 42,015 | — | — | 42,015 | 4.8 % | 4.02 % | ||||||
2024 | — | — | — | — | — | — | ||||||
2025 | 31,699 | — | 73,000 | 104,699 | 12.0 % | 3.08 % | ||||||
2026 | 52,762 | — | — | 52,762 | 6.0 % | 3.74 % | ||||||
Thereafter | 374,734 | 300,000 | — | 674,734 | 77.2 % | 3.21 % | ||||||
Total debt | $ 501,210 | $ 300,000 | $ 73,000 | $ 874,210 | 100.0 % | 3.27 % | ||||||
(1) | Weighted average interest rate of debt that matures during the year. |
6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | ||||||
Debt Balances Outstanding | ||||||||||
Secured fixed rate - other mortgages | $ 302,360 | $ 326,113 | $ 284,934 | $ 293,547 | $ 288,363 | |||||
Secured fixed rate - Fannie Mae credit facility | 198,850 | 198,850 | 198,850 | 198,850 | — | |||||
Unsecured fixed rate line of credit(1) | — | — | 75,000 | 57,000 | 50,000 | |||||
Unsecured variable rate line of credit | 73,000 | 46,000 | 1,000 | — | 37,000 | |||||
Unsecured term loans | — | — | — | — | 145,000 | |||||
Unsecured senior notes | 300,000 | 300,000 | 300,000 | 300,000 | 175,000 | |||||
Debt total | $ 874,210 | $ 870,963 | $ 859,784 | $ 849,397 | $ 695,363 | |||||
Other mortgages rate | 3.85 % | 3.85 % | 3.81 % | 3.83 % | 3.90 % | |||||
Fannie Mae Credit Facility rate | 2.78 % | 2.78 % | 2.78 % | 2.78 % | — | |||||
Lines of credit rate (rate with swap)(1) | 3.04 % | 2.56 % | 4.22 % | 2.79 % | 2.24 % | |||||
Term loan rate (rate with swap) | — | — | — | — | 4.19 % | |||||
Senior notes rate | 3.12 % | 3.12 % | 3.12 % | 3.12 % | 3.47 % | |||||
Total debt | 3.27 % | 3.29 % | 3.26 % | 3.23 % | 3.70 % |
(1) | The current rate on our line of credit is LIBOR plus 150 basis points. The LIBOR exposure on the line of credit was hedged using an interest rate swap with a notional of |
CENTERSPACE CAPITAL ANALYSIS (in thousands, except per share and unit amounts) | ||||||||||
Three Months Ended | ||||||||||
6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | ||||||
Equity Capitalization | ||||||||||
Common shares outstanding | 15,373 | 15,365 | 15,016 | 14,281 | 14,045 | |||||
Operating partnership units outstanding | 995 | 997 | 832 | 845 | 881 | |||||
Series E preferred units (as converted) | 2,186 | 2,186 | 2,186 | 2,186 | — | |||||
Total common shares and units outstanding | 18,554 | 18,548 | 18,034 | 17,312 | 14,926 | |||||
Market price per common share (closing price at end of period) | $ 81.55 | $ 98.12 | $ 110.90 | $ 94.50 | $ 78.90 | |||||
Equity capitalization-common shares and units | $ 1,177,661 | |||||||||
Recorded book value of preferred shares | $ 93,350 | $ 93,530 | $ 93,530 | $ 93,530 | $ 93,530 | |||||
Total equity capitalization | $ 1,271,191 | |||||||||
Series D Preferred Units | $ 18,627 | $ 22,412 | $ 25,331 | $ 21,585 | $ 18,022 | |||||
Debt Capitalization | ||||||||||
Total debt | $ 874,210 | $ 870,963 | $ 859,784 | $ 849,397 | $ 695,363 | |||||
Total capitalization | $ 1,984,576 | |||||||||
Total debt to total capitalization(1) | 35.0 % | 31.0 % | 28.9 % | 33.1 % | 35 % | |||||
(1) | Total debt to total market capitalization is total debt 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 | Six Months Ended | ||||||||||||||
6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 6/30/2022 | 6/30/2021 | |||||||||
Debt service coverage ratio(1) | 3.39 x | 2.93 x | 3.17 x | 2.75 x | 2.62 x | 3.16 x | 2.58 x | ||||||||
Adjusted EBITDA/Interest expense plus preferred | 2.83 x | 2.50 x | 2.68 x | 2.32 x | 2.21 x | 2.64 x | 2.17 x | ||||||||
Net debt/Adjusted EBITDA(2) | 7.11 x | 7.89 x | 7.43 x | 8.67 x | 7.68 x | 7.49 x | 7.76 x | ||||||||
Net debt and preferred equity/Adjusted EBITDA(2) | 8.03 x | 8.96 x | 8.50 x | 9.88 x | 8.92 x | 8.47 x | 9.01 x | ||||||||
Distribution Data | |||||||||||||||
Common shares and Units outstanding at record date | 16,367 | 16,363 | 15,848 | 15,126 | 14,926 | 16,367 | 14,926 | ||||||||
Total common distribution declared | $ 10,448 | ||||||||||||||
Common distribution per share and Unit | $ 0.73 | $ 0.73 | $ 0.72 | $ 0.72 | $ 0.70 | $ 1.46 | $ 1.40 | ||||||||
Payout ratio (Core FFO per diluted share and unit basis)(3) | 65.2 % | 74.5 % | 66.7 % | 73.5 % | 71.4 % | 69.5 % | 72.5 % | ||||||||
(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 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. |
CENTERSPACE SAME-STORE SECOND QUARTER COMPARISONS (in thousands, except property data amounts and percentages) | ||||||||||||||||||||
Apartment | Revenues | Expenses | NOI | |||||||||||||||||
Regions | Q2 2022 | Q2 2021 | % Change | Q2 2022 | Q2 2021 | % Change | Q2 2022 | Q2 2021 | % Change | |||||||||||
Denver, CO | 1,457 | $ 8,667 | $ 7,870 | 10.1 % | $ 2,816 | $ 2,504 | 12.5 % | $ 5,851 | $ 5,366 | 9.0 % | ||||||||||
Minneapolis, MN | 2,537 | 12,911 | 11,395 | 13.3 % | 5,480 | 5,064 | 8.2 % | 7,431 | 6,331 | 17.4 % | ||||||||||
North Dakota | 2,421 | 8,482 | 8,078 | 5.0 % | 3,523 | 3,199 | 10.1 % | 4,959 | 4,879 | 1.6 % | ||||||||||
Omaha, NE | 1,370 | 4,501 | 4,037 | 11.5 % | 1,931 | 1,885 | 2.4 % | 2,570 | 2,152 | 19.4 % | ||||||||||
Rochester, MN | 1,121 | 5,235 | 4,709 | 11.2 % | 2,138 | 1,937 | 10.4 % | 3,097 | 2,772 | 11.7 % | ||||||||||
St. Cloud, MN | 1,192 | 4,353 | 3,634 | 19.8 % | 1,992 | 1,582 | 25.9 % | 2,361 | 2,052 | 15.1 % | ||||||||||
Other Mountain West | 1,221 | 4,718 | 4,039 | 16.8 % | 1,820 | 1,439 | 26.5 % | 2,898 | 2,600 | 11.5 % | ||||||||||
Same-Store Total | 11,319 | $ 48,867 | $ 43,762 | 11.7 % | $ 19,700 | $ 17,610 | 11.9 % | $ 29,167 | $ 26,152 | 11.5 % | ||||||||||
% of NOI | Weighted Average Occupancy (1) | Average Monthly | Average Monthly | |||||||||||||||||
Regions | Q2 2022 | Q2 2021 | Growth | Q2 2022 | Q2 2021 | % Change | Q2 2022 | Q2 2021 | % Change | |||||||||||
Denver, CO | 20.1 % | 94.0 % | 94.3 % | (0.3) % | $ 1,856 | $ 1,693 | 9.6 % | $ 2,109 | $ 1,909 | 10.5 % | ||||||||||
Minneapolis, MN | 25.5 % | 94.2 % | 94.2 % | — | 1,601 | 1,519 | 5.4 % | 1,800 | 1,589 | 13.3 % | ||||||||||
North Dakota | 17.0 % | 95.6 % | 95.9 % | (0.3) % | 1,119 | 1,078 | 3.8 % | 1,222 | 1,159 | 5.4 % | ||||||||||
Omaha, NE | 8.8 % | 97.1 % | 95.5 % | 1.6 % | 1,028 | 927 | 10.9 % | 1,128 | 1,029 | 9.6 % | ||||||||||
Rochester, MN | 10.6 % | 95.2 % | 94.5 % | 0.7 % | 1,547 | 1,404 | 10.2 % | 1,635 | 1,482 | 10.3 % | ||||||||||
St. Cloud, MN | 8.1 % | 91.5 % | 92.7 % | (1.2) % | 1,150 | 1,005 | 14.4 % | 1,330 | 1,097 | 21.2 % | ||||||||||
Other Mountain West | 9.9 % | 96.5 % | 98.1 % | (1.6) % | 1,208 | 1,015 | 19.0 % | 1,334 | 1,124 | 18.7 % | ||||||||||
Same-Store Total | 100.0 % | 94.8 % | 94.9 % | (0.1) % | $ 1,366 | $ 1,256 | 8.8 % | $ 1,518 | $ 1,358 | 11.8 % | ||||||||||
(1) | 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 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. |
(2) | Average monthly rental rate is scheduled rent divided by the total number of 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. |
CENTERSPACE SAME-STORE SEQUENTIAL QUARTER COMPARISONS (in thousands, except property data amounts and percentages) | ||||||||||||||||||||
Apartment | Revenues | Expenses | NOI | |||||||||||||||||
Regions | Q2 2022 | Q1 2022 | % Change | Q2 2022 | Q1 2022 | % Change | Q2 2022 | Q1 2022 | % Change | |||||||||||
Denver, CO | 1,457 | $ 8,667 | $ 8,458 | 2.5 % | $ 2,816 | $ 2,468 | 14.1 % | $ 5,851 | $ 5,990 | 0.4 % | ||||||||||
Minneapolis, MN | 2,537 | 12,911 | 12,391 | 4.2 % | 5,480 | 5,398 | 1.5 % | 7,431 | 6,993 | 6.3 % | ||||||||||
North Dakota | 2,421 | 8,482 | 8,157 | 4.0 % | 3,523 | 3,653 | (3.6) % | 4,959 | 4,504 | 10.1 % | ||||||||||
Omaha, NE | 1,370 | 4,501 | 4,363 | 3.2 % | 1,931 | 1,898 | 1.7 % | 2,570 | 2,465 | 4.3 % | ||||||||||
Rochester, MN | 1,121 | 5,235 | 5,003 | 4.6 % | 2,138 | 2,096 | 2.0 % | 3,097 | 2,907 | 6.5 % | ||||||||||
St. Cloud, MN | 1,192 | 4,353 | 4,165 | 4.5 % | 1,992 | 2,084 | (4.4) % | 2,361 | 2,081 | 13.5 % | ||||||||||
Other Mountain West | 1,221 | 4,718 | 4,354 | 8.4 % | 1,820 | 1,618 | 12.5 % | 2,898 | 2,736 | 5.9 % | ||||||||||
Same-Store Total | 11,319 | $ 48,867 | $ 46,891 | 4.2 % | $ 19,700 | $ 19,215 | 2.5 % | $ 29,167 | $ 27,676 | 5.4 % | ||||||||||
% of NOI | Weighted Average Occupancy | Average Monthly Rental Rate | Average Monthly Revenue per Occupied Home | |||||||||||||||||
Regions | Q2 2022 | Q1 2022 | Growth | Q2 2022 | Q1 2022 | % Change | Q2 2022 | Q1 2022 | % Change | |||||||||||
Denver, CO | 20.1 % | 94.0 % | 94.3 % | (0.3) % | $ 1,856 | $ 1,819 | 2.0 % | $ 2,109 | $ 2,052 | 2.8 % | ||||||||||
Minneapolis, MN | 25.5 % | 94.2 % | 93.3 % | 0.9 % | 1,601 | 1,583 | 1.1 % | 1,800 | 1,744 | 3.2 % | ||||||||||
North Dakota | 17.0 % | 95.6 % | 94.8 % | 0.8 % | 1,119 | 1,103 | 1.5 % | 1,222 | 1,185 | 3.1 % | ||||||||||
Omaha, NE | 8.8 % | 97.1 % | 94.9 % | 2.2 % | 1,028 | 1,000 | 2.8 % | 1,128 | 1,118 | 0.9 % | ||||||||||
Rochester, MN | 10.6 % | 95.2 % | 92.9 % | 2.3 % | 1,547 | 1,518 | 1.9 % | 1,635 | 1,601 | 2.1 % | ||||||||||
St. Cloud, MN | 8.1 % | 91.5 % | 93.0 % | (1.5) % | 1,150 | 1,120 | 2.7 % | 1,330 | 1,252 | 6.2 % | ||||||||||
Other Mountain West | 9.9 % | 96.5 % | 94.0 % | 2.5 % | 1,208 | 1,155 | 4.6 % | 1,334 | 1,264 | 5.5 % | ||||||||||
Same-Store Total | 100.0 % | 94.8 % | 93.9 % | 0.9 % | $ 1,366 | $ 1,339 | 2.0 % | $ 1,518 | $ 1,471 | 3.2 % | ||||||||||
CENTERSPACE SAME-STORE YEAR-TO-DATE COMPARISONS (in thousands, except property data amounts and percentages) | ||||||||||||||||||||
Apartment | Revenues | Expenses | NOI | |||||||||||||||||
Regions | 2022 | 2021 | % Change | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||
Denver, CO | 1,457 | $ 17,124 | $ 15,536 | 10.2 % | $ 5,283 | $ 5,074 | 4.1 % | $ 11,841 | $ 10,462 | 13.2 % | ||||||||||
Minneapolis, MN | 2,537 | 25,302 | 22,796 | 11.0 % | 10,879 | 9,944 | 9.4 % | 14,423 | 12,852 | 12.2 % | ||||||||||
North Dakota | 2,421 | 16,639 | 16,027 | 3.8 % | 7,176 | 6,470 | 10.9 % | 9,463 | 9,557 | (1.0) % | ||||||||||
Omaha, NE | 1,370 | 8,865 | 8,063 | 9.9 % | 3,828 | 3,647 | 5.0 % | 5,037 | 4,416 | 14.1 % | ||||||||||
Rochester, MN | 1,121 | 10,238 | 9,353 | 9.5 % | 4,235 | 3,923 | 8.0 % | 6,003 | 5,430 | 10.6 % | ||||||||||
St. Cloud, MN | 1,192 | 8,518 | 7,289 | 16.9 % | 4,076 | 3,217 | 26.7 % | 4,442 | 4,072 | 9.1 % | ||||||||||
Other Mountain West | 1,221 | 9,072 | 7,892 | 15.0 % | 3,438 | 2,865 | 20.0 % | 5,634 | 5,027 | 12.1 % | ||||||||||
Same-Store Total | 11,319 | $ 95,758 | $ 86,956 | 10.1 % | $ 38,915 | $ 35,140 | 10.7 % | $ 56,843 | $ 51,816 | 9.7 % | ||||||||||
% of NOI | Weighted Average Occupancy | Average Monthly Rental Rate | Average Monthly Revenue per Occupied Home | |||||||||||||||||
Regions | 2022 | 2021 | Growth | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||
Denver, CO | 20.8 % | 94.2 % | 94.0 % | 0.2 % | $ 1,838 | $ 1,688 | 8.9 % | $ 2,080 | $ 1,891 | 10.0 % | ||||||||||
Minneapolis, MN | 25.4 % | 93.8 % | 93.6 % | 0.2 % | 1,592 | 1,511 | 5.4 % | 1,772 | 1,600 | 10.8 % | ||||||||||
North Dakota | 16.6 % | 95.2 % | 96.0 % | (0.8) % | 1,111 | 1,070 | 3.8 % | 1,203 | 1,149 | 4.7 % | ||||||||||
Omaha, NE | 8.9 % | 96.0 % | 95.3 % | 0.7 % | 1,014 | 919 | 10.3 % | 1,123 | 1,029 | 9.1 % | ||||||||||
Rochester, MN | 10.6 % | 94.1 % | 95.0 % | (0.9) % | 1,532 | 1,390 | 10.2 % | 1,618 | 1,464 | 10.5 % | ||||||||||
St. Cloud, MN | 7.8 % | 92.3 % | 93.6 % | (1.3) % | 1,135 | 988 | 14.9 % | 1,291 | 1,089 | 18.5 % | ||||||||||
Other Mountain West | 9.9 % | 95.3 % | 97.9 % | (2.6) % | 1,181 | 1,001 | 18.0 % | 1,299 | 1,100 | 18.1 % | ||||||||||
Same-Store Total | 100.0 % | 94.3 % | 94.8 % | (0.5) % | $ 1,353 | $ 1,246 | 8.6 % | $ 1,494 | $ 1,351 | 10.6 % | ||||||||||
CENTERSPACE PORTFOLIO SUMMARY(1) | ||||||||||
Three Months Ended | ||||||||||
6/30/2022 | 3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | ||||||
Number of Apartment Homes at Period End | ||||||||||
Same-Store | 11,319 | 11,319 | 10,672 | 10,676 | 10,676 | |||||
Non-Same-Store | 3,519 | 3,519 | 3,769 | 3,599 | 903 | |||||
All Communities | 14,838 | 14,838 | 14,441 | 14,275 | 11,579 | |||||
Average Monthly Rental Rate(2) | ||||||||||
Same-Store | $ 1,366 | $ 1,339 | $ 1,314 | $ 1,279 | $ 1,233 | |||||
Non-Same-Store | 1,245 | 1,218 | 1,225 | 1,506 | 1,617 | |||||
All Communities | $ 1,337 | $ 1,292 | $ 1,291 | $ 1,293 | $ 1,263 | |||||
Average Monthly Revenue per Occupied Apartment Home(3) | ||||||||||
Same-Store | $ 1,518 | $ 1,471 | $ 1,463 | $ 1,392 | $ 1,333 | |||||
Non-Same-Store | 1,329 | 1,271 | 1,306 | 1,606 | 1,739 | |||||
All Communities | $ 1,473 | $ 1,424 | $ 1,423 | $ 1,397 | $ 1,365 | |||||
Weighted Average Occupancy(4) | ||||||||||
Same-Store | 94.8 % | 93.9 % | 93.4 % | 94.3 % | 94.9 % | |||||
Non-Same-Store | 95.0 % | 94.5 % | 94.7 % | 95.1 % | 94.2 % | |||||
All Communities | 94.8 % | 94.0 % | 93.7 % | 94.4 % | 94.8 % | |||||
Operating Expenses as a % of Scheduled Rent | ||||||||||
Same-Store | 40.3 % | 41.0 % | 39.5 % | 41.8 % | 41.9 % | |||||
Non-Same-Store | 47.1 % | 50.6 % | 44.1 % | 39.9 % | 32.9 % | |||||
All Communities | 41.8 % | 43.0 % | 40.6 % | 41.6 % | 41.0 % | |||||
Capital Expenditures | ||||||||||
Total Capital Expenditures per Apartment Home – Same-Store | $ 196 | $ 145 | $ 369 | $ 255 | $ 159 | |||||
(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 | Six Months Ended | ||||||||
Same Store Capital Expenditures | 6/30/2022 | 6/30/2021 | 6/30/2022 | 6/30/2021 | |||||
Total Same-Store Apartment Homes | 11,319 | 11,319 | 11,319 | 11,319 | |||||
Building - Exterior | $ 72 | $ 416 | $ 598 | $ 900 | |||||
Building - Interior | 35 | 50 | 36 | 142 | |||||
Mechanical, Electrical, & Plumbing | 591 | 270 | 861 | 417 | |||||
Furniture & Equipment | 113 | 41 | 192 | 107 | |||||
Landscaping & Grounds | 133 | 87 | |||||||
Turnover | 1,279 | 851 | 1,946 | 1,386 | |||||
Capital Expenditures - Same-Store | $ 2,223 | $ 1,715 | $ 3,858 | $ 3,106 | |||||
Capital Expenditures per Apartment Home - Same-Store | $ 196 | $ 152 | $ 341 | $ 274 | |||||
Value Add | $ 6,229 | $ 4,549 | $ 11,800 | $ 7,180 | |||||
Total Capital Spend - Same-Store | $ 8,452 | $ 6,264 | $ 15,658 | $ 10,286 | |||||
Total Capital Spend per Apartment Home - Same-Store | $ 747 | $ 553 | $ 1,383 | $ 909 | |||||
Three Months Ended | Six Months Ended | ||||||||
Capital Expenditures - All Properties | 6/30/2022 | 6/30/2021 | 6/30/2022 | 6/30/2021 | |||||
All Properties - Weighted Average Apartment Homes | 14,839 | 11,575 | 14,839 | 11,575 | |||||
Capital Expenditures | $ 2,499 | $ 1,793 | $ 4,340 | $ 3,348 | |||||
Capital Expenditures per Apartment Home | $ 168 | $ 155 | $ 292 | $ 289 | |||||
Value Add | 6,288 | 4,555 | 11,858 | 7,186 | |||||
Acquisition Capital | 1,397 | 402 | 2,986 | 960 | |||||
Total Capital Spend | 10,184 | 6,750 | 19,184 | 11,494 | |||||
Total Capital Spend per Apartment Home | $ 686 | $ 583 | $ 1,293 | $ 993 | |||||
Three Months Ended | Six Months Ended | ||||||||
Value Add Capital Expenditures | 6/30/2022 | 6/30/2021 | 6/30/2022 | 6/30/2021 | |||||
Interior - Units | |||||||||
Same-Store | $ 4,317 | $ 3,115 | $ 6,955 | $ 4,806 | |||||
Non-Same-Store | — | — | — | — | |||||
Total Interior Units | $ 4,317 | $ 3,115 | $ 6,955 | $ 4,806 | |||||
Common Areas and Exteriors | |||||||||
Same-Store | $ 1,912 | $ 1,434 | $ 4,845 | $ 2,374 | |||||
Non-Same-Store | 59 | 6 | 58 | 6 | |||||
Total Common Areas and Exteriors | $ 1,971 | $ 1,440 | $ 4,903 | $ 2,380 | |||||
Total Value-Add Capital Expenditures | |||||||||
Same-Store | $ 6,229 | $ 4,549 | $ 11,800 | $ 7,180 | |||||
Non-Same-Store | 59 | 6 | 58 | 6 | |||||
Total Portfolio Value-Add | $ 6,288 | $ 4,555 | $ 11,858 | $ 7,186 | |||||
CENTERSPACE 2022 Financial Outlook (in thousands, except per share and per home amounts) | |||||||||
Centerspace revised its outlook for 2022 in the table below. | |||||||||
Six Months Ended | 2022 Previous Outlook Range | 2022 Revised Outlook Range | |||||||
June 30, 2022 | Low | High | Low | High | |||||
YTD Actual | Amount | Amount | Amount | Amount | |||||
Same-store growth | |||||||||
Revenue | $ 95,758 | 7.0 % | 9.0 % | 9.0 % | 10.5 % | ||||
Controllable expenses | 24,745 | 7.0 % | 9.0 % | 10.0 % | 11.5 % | ||||
Non-controllable expenses | 14,170 | 3.0 % | 4.5 % | 3.0 % | 3.5 % | ||||
Total Expenses | $ 38,915 | 5.5 % | 7.5 % | 7.5 % | 8.5 % | ||||
Same-store NOI | $ 56,843 | 8.0 % | 10.0 % | 10.0 % | 12.0 % | ||||
Components of NOI | |||||||||
Same-store NOI | $ 56,843 | $ 115,850 | $ 118,150 | $ 118,200 | $ 119,800 | ||||
Non-same-store NOI (1) | 13,227 | 29,200 | 29,900 | 29,200 | 29,700 | ||||
Other Commercial NOI | 1,271 | 2,100 | 2,300 | 2,200 | 2,300 | ||||
Total NOI | $ 71,341 | $ 147,150 | $ 150,350 | $ 149,600 | $ 151,800 | ||||
Accretion (dilution) from investments and capital market | $ — | — | — | — | — | ||||
Interest expense | $ (15,276) | (32,200) | (31,700) | (32,200) | (31,800) | ||||
Preferred dividends | $ (3,214) | (6,400) | (6,400) | (6,400) | (6,400) | ||||
Gain loss on sale of real estate and other investments | $ (27) | — | — | — | — | ||||
Recurring income and expenses | |||||||||
Interest and other income | $ 1,012 | $ 1,580 | $ 1,750 | $ 1,380 | $ 1,550 | ||||
General and administrative and property management | (14,695) | (27,625) | (26,975) | (28,900) | (28,600) | ||||
Casualty losses | (980) | (1,900) | (1,600) | (1,800) | (1,700) | ||||
Non-real estate depreciation and amortization | (202) | (375) | (325) | (375) | (325) | ||||
Non-controlling interest | (28) | (110) | (100) | (110) | (100) | ||||
Total recurring income and expenses | $ (14,893) | $ (28,430) | $ (27,250) | $ (29,805) | $ (29,175) | ||||
FFO | $ 37,931 | $ 80,120 | $ 85,000 | $ 81,195 | $ 84,425 | ||||
Non-core income and expenses | |||||||||
Non-cash casualty (gain) loss | $ 188 | $ 500 | $ 350 | $ 500 | $ 400 | ||||
Technology implementation costs | 550 | 950 | 850 | 1,000 | 900 | ||||
Interest rate swap termination, amortization, and mark-to-market | (408) | 200 | 200 | (100) | (100) | ||||
Pursuit costs | 1,127 | — | — | 1,100 | 1,100 | ||||
Other miscellaneous items | (130) | (300) | (400) | (100) | — | ||||
Total non-core income and expenses | $ 1,327 | $ 1,350 | $ 1,000 | $ 2,400 | $ 2,300 | ||||
Core FFO | $ 39,258 | $ 81,470 | $ 86,000 | $ 83,595 | $ 86,725 | ||||
EPS - Diluted | $ (0.97) | $ (0.37) | $ (0.11) | $ (0.31) | $ (0.14) | ||||
FFO per diluted share | $ 2.03 | $ 4.26 | $ 4.52 | $ 4.32 | $ 4.49 | ||||
Core FFO per diluted share | $ 2.10 | $ 4.33 | $ 4.57 | $ 4.45 | $ 4.61 | ||||
Weighted average shares outstanding - diluted | 18,682 | 18,800 | 18,800 | 18,800 | 18,800 | ||||
Additional Assumptions | |||||||||
Same-store capital expenditures (per home) | $ 341 | $ 925 | 975 | $ 950 | 1,000 | ||||
Value-add expenditures | $ 11,858 | $ 21,000 | $ 24,000 | $ 26,000 | $ 29,000 | ||||
Investments | $ 116,874 | $ 116,874 | $ 116,874 | $ 116,874 | $ 116,874 | ||||
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 | ||||||||
Six Months Ended | 12 Months Ended | 12 Months Ended | |||||||
June 30, 2022 | December 31, 2022 | December 31, 2022 | |||||||
Actual | Low | High | Low | High | |||||
Net income (loss) available to common shareholders | $ (14,794) | $ 282 | $ 4,922 | $ 2,002 | $ 5,172 | ||||
Noncontrolling interests - Operating Partnership and Series E | (3,107) | (7,885) | (7,885) | (7,885) | (7,885) | ||||
Depreciation and amortization | 55,769 | 86,923 | 86,923 | 86,923 | 86,923 | ||||
Less depreciation - non real estate | (202) | (430) | (390) | (375) | (325) | ||||
Less depreciation - partially owned entities | (28) | (70) | (90) | (110) | (100) | ||||
Dividends to preferred unitholders | 320 | 640 | 640 | 640 | 640 | ||||
FFO applicable to common shares and Units | $ 37,931 | $ 79,460 | $ 84,120 | $ 81,195 | $ 84,425 | ||||
Adjustments to Core FFO: | |||||||||
Casualty loss write off | 188 | 600 | 500 | 500 | 400 | ||||
Technology implementation costs | 550 | 990 | 890 | 1,000 | 900 | ||||
Interest rate swap termination and amortization | (408) | — | — | (100) | (100) | ||||
Pursuit costs | 1,127 | — | — | 1,100 | 1,100 | ||||
Other miscellaneous items | (130) | — | — | (100) | — | ||||
Core FFO applicable to common shares and Units | $ 39,258 | $ 81,050 | $ 85,510 | $ 83,595 | $ 86,725 | ||||
Earnings per share - diluted | $ (0.97) | $ (0.37) | $ (0.11) | $ (0.31) | $ (0.14) | ||||
FFO per share - diluted | $ 2.03 | $ 4.26 | $ 4.52 | $ 4.32 | $ 4.49 | ||||
Core FFO per share - diluted | $ 2.10 | $ 4.33 | $ 4.57 | $ 4.45 | $ 4.61 | ||||
Reconciliation of Operating Income to Net Operating Income
Net operating income, or NOI, is a non-GAAP financial measure which the company defines as total real estate revenues less property operating expenses, including real estate taxes. Centerspace believes that NOI is an important supplemental measure of operating performance for real estate because it provides a measure of operations that is unaffected by depreciation, amortization, financing, property management overhead, casualty losses, and general and administrative expenses. NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income, net income available for common shareholders, or cash flow from operating activities as a measure of financial performance.
Previous Outlook | Revised Outlook | ||||||||
Six Months Ended | 12 Months Ended | 12 Months Ended | |||||||
June 30, 2022 | December 31, 2021 | December 31, 2021 | |||||||
Actual | Low | High | Low | High | |||||
Operating income (loss) | $ (76) | $ 30,977 | $ 35,077 | $ 31,977 | $ 34,577 | ||||
Adjustments: | |||||||||
General and administrative and property management | 14,695 | 27,800 | 27,100 | 28,900 | 28,600 | ||||
Casualty loss | 980 | 2,000 | 1,700 | 1,800 | 1,700 | ||||
Depreciation and amortization | 55,769 | 86,923 | 86,923 | 86,923 | 86,923 | ||||
(Gain) loss on sale of real estate and other investments | (27) | — | — | — | — | ||||
Net operating income | $ 71,341 | $ 147,700 | $ 150,800 | $ 149,600 | $ 151,800 | ||||
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SOURCE Centerspace
FAQ
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