Centerspace Reports Third Quarter 2021 Financial Results and Increases Financial Outlook

Rhea-AI Summary

Centerspace (NYSE: CSR) reported financial results for Q3 and YTD 2021, highlighting a net loss of $(0.81) per diluted share, down from a profit of $1.38 in Q3 2020. Core FFO rose to $0.98, a 4.3% increase year-over-year. Same-store revenues increased by 6.2%, while expenses grew by 4.4%. The company completed a $359.9 million acquisition, adding 2,696 apartment homes. It also improved its balance sheet with $125 million in unsecured notes and a revised earnings outlook of $(0.36) to $(0.24) for the year.

Positive

• Core FFO increased 4.3% to $0.98 per diluted share year-over-year.
• Same-store revenues grew by 6.2% compared to Q3 2020.
• The company completed a strategic acquisition of 2,696 apartment homes for $359.9 million.

Negative

• Net loss of $(0.81) per diluted share in Q3 2021 compared to profit of $1.38 in Q3 2020.
• Revised earnings per share outlook for 2021 lowered to between $(0.36) and $(0.24).

MINNEAPOLIS, Nov. 1, 2021 /PRNewswire/ -- Centerspace (NYSE: CSR) announced today its financial and operating results for the three and nine months ended September 30, 2021. The tables below show Net Income, Funds from Operations ("FFO")¹, and Core FFO¹, all on a per share basis, for the three and nine months ended September 30, 2021; 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 September 30, 2021, June 30, 2021, and September 30, 2020.

		Three Months Ended September 30,								Nine Months Ended September 30,
Per Share		2021				2020				2021				2020
Net Income - diluted		$	(0.81)			$	1.38			$	0.12			$	0.33
FFO - diluted		$	0.60			$	0.90			$	2.44			$	2.49
Core FFO - diluted		$	0.98			$	0.94			$	2.91			$	2.76

		Year-Over-Year Comparison			Sequential Comparison			YTD Comparison
Same-Store Results		Q3 2021 vs. Q3 2020			Q3 2021 vs. Q2 2021			2021 vs. 2020
Revenues		6.2	%		3.7	%		3.3	%
Expenses		4.4	%		3.6	%		2.9	%
NOI		7.5	%		3.8	%		3.6	%

		Three months ended
Same-Store Results		September 30, 2021			June 30, 2021			September 30, 2020
Weighted Average Occupancy		94.3	%		94.9	%		94.3	%

(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 $(0.81) per diluted share for the third quarter of 2021, compared to Net Income of $1.38 per diluted share for the same period of 2020;
• Core FFO increased 4.3% to $0.98 per diluted share for the three months ended September 30, 2021, compared to $0.94 for the three months ended September 30, 2020 and 5.4% to $2.91 per diluted share for the nine months ended September 30, 2021, compared to $2.76 for the nine months ended September 30, 2020;
• Same-store revenues increased by 6.2% for the third quarter of 2021 compared to the third quarter of 2020;
• Same-store new lease over lease rates were 10.8% for the third quarter of 2021, compared to 0.0% in the same period of the prior year. Same-store renewal lease over lease rates were 7.2% for the third quarter of 2021, compared to 0.6% for the same period the prior year. Same-store blended lease over lease rates were 9.0% for the third quarter of 2021, compared to 0.4% for the same period the prior year;
• Full year earnings per share mid-point outlook of $(0.30) resulting in a 3% increase in Core FFO from our prior outlook;
• Continued to grow the portfolio through the strategic portfolio acquisition comprised of 14 communities in Minneapolis, Minnesota and three communities in St. Cloud, Minnesota totaling 2,696 apartment homes for an aggregate acquisition cost of $359.9 million;
• Issued $125.0 million of unsecured notes with a weighted average interest rate of 2.6% and weighted average maturity of 10.5 years with tranches of $35.0 million in 2030, $50.0 million in 2031, $25.0 million in 2032 and $15.0 million in 2034;
• Improved and extended $250.0 million revolving credit facility with an accordion feature for up to $400.0 million which matures in September 2025; and
• Continued to strengthen the balance sheet by issuing 199,000 common shares under the ATM program for net proceeds of $19.6 million.

Acquisitions and Dispositions

On September 1, 2021, Centerspace closed on its strategic portfolio acquisition in Minneapolis and St. Cloud, Minnesota for an aggregate acquisition cost of $359.9 million. The  portfolio is comprised of 14 communities in Minneapolis, Minnesota and three communities in St. Cloud, Minnesota. The acquisition added 2,696 apartments homes to the portfolio. Centerspace fully funded the acquisition with the issuance of $181.4 million of Convertible Preferred Operating Partnership Units at $100.0 dollar par value that pay a 3.875% dividend rate and are convertible into common units at an exchange rate of 1.2048 common units per Convertible Preferred Operating Partnership Units representing a conversion price of $83.00 per unit. The acquired assets were subject to $126.5 million in mortgage liabilities of which $20.0 million was assumed at a rate of 4.31% with the remaining $106.5 million refinanced through a $198.9 million Fannie Mae Credit Facility. The Fannie Mae Credit facility includes tranches in 7, 10 and 12-year increments with a weighted average interest rate of 2.78%. The additional proceeds from the refinancing were used to reduce the outstanding balance under our bank credit facility.  

Subsequent to the end of the quarter, Centerspace sold its sole remaining commercial property Minot IPS located in Minot, North Dakota on October 18th for an aggregate sale price of $2.3 million. 

Balance Sheet

At the end of the third quarter, Centerspace had $219.8 million of total liquidity on its balance sheet, consisting of $199.0 million available under the line of credit and cash and cash equivalents of $20.8 million.

In the three months ended September 30, 2021, Centerspace issued $125.0 million of unsecured notes with a weighted average interest rate of 2.6% and weighted average maturity of 10.5 years.

During the quarter, Centerspace amended and extended our existing $250.0 million revolving credit facility. The new facility includes an accordion feature for up to $400.0 million and matures in September 2025 with two optional six-month extensions.

Revised 2021 Financial Outlook

Centerspace revised its 2021 financial outlook, which includes the acquisition of KMS on September 1, 2021. For additional information, see S-16 of the Supplemental Financial and Operating Data for the quarter ended September 30, 2021 included at the end of this release. These ranges should be considered in their entirety. The revised outlook is:

	Previous Outlook for 2021						Updated Outlook for 2021
	Low			High			Low			High
Earnings per Share – diluted	$	0.58		$	0.76		$	(0.36)		$	(0.24)
Same-Store Revenue	2.0		%	3.5		%	3.5		%	4.0		%
Same-Store Expenses	4.0		%	6.0		%	4.5		%	5.0		%
Same-Store NOI	0.5		%	2.0		%	3.0		%	3.5		%
FFO per Share – diluted	$	3.64		$	3.83		$	3.40		$	3.52
Core FFO per Share – diluted	$	3.78		$	3.94		$	3.92		$	4.02

COVID-19 Developments

The COVID-19 pandemic, including the associated economic disruptions, has continued to impact business and operations since March 2020. The company continues to prioritize the health and well-being of its residents, team members, and the communities it serves.

A discussion of the ongoing and potential effects of the COVID-19 pandemic on financial condition, results of operations, and cash flows can be found in "Management's Discussion and Analysis of Financial Conditions and Results of Operations" presented in the company's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 22, 2021. For a more detailed description of the risks and uncertainties affecting business, see the risk factors presented in Item 1A in the company's Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 22, 2021.

Upcoming Events

Centerspace is scheduled to participate in the upcoming National Association of Real Estate Investment Trusts ("Nareit") REITworld 2021 Annual Conference, which will be held virtually November 9-11.

Earnings Call

Live webcast and replay:  https://ir.centerspacehomes.com
Live Conference Call			Conference Call Replay
Tuesday, November 2, 2021, at 10:00 AM ET			Replay available until November 16, 2021
USA Toll Free Number	1-877-509-9785		USA Toll Free Number	1-877-344-7529
International Toll Free Number	1-412-902-4132		International Toll Free Number	1-412-317-0088
Canada Toll Free Number	1-855-669-9657		Canada Toll Free Number	1-855-669-9658
			Conference Number	10160003

Supplemental Information

Supplemental Operating and Financial Data for the quarter ended September 30, 2021 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 September 30, 2021, Centerspace owned 79 apartment communities consisting of 14,275 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, 2020, 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
Emily Miller
Phone: 701-837-7104
IR@centerspacehomes.com

Marketing & Media
Kelly Weber
Phone: 701-837-7104
kweber@centerspacehomes.com

Supplemental Financial and Operating Data
Table of Contents
September 30, 2021
	Page
Common Share Data	S-1
Key Financial Data
Condensed Consolidated Statements of Operations	S-2
Condensed Consolidated Balance Sheets	S-3
Non-GAAP Financial Measures and Reconciliations
Net Operating Income	S-4
Same-Store Controllable Expenses	S-5
Funds From Operations and Core Funds From Operations	S-6
Adjusted EBITDA	S-9
Debt and Capital Analysis
Debt Analysis	S-10
Capital Analysis	S-11
Portfolio Analysis
Same-Store Comparison	S-12
Portfolio Summary	S-15
Capital Expenditures	S-16
2021 Financial Outlook	S-17

 

Common Share Data (NYSE: CSR)
		3rd Quarter				2nd Quarter				1st Quarter				4th Quarter				3rd Quarter
		2021				2021				2021				2020				2020
High closing price		$	105.42			$	79.71			$	73.42			$	74.55			$	73.53
Low closing price		$	78.42			$	67.28			$	68.00			$	65.79			$	61.87
Average closing price		$	94.10			$	71.99			$	71.37			$	70.30			$	70.15
Closing price at end of quarter		$	94.50			$	78.90			$	68.00			$	70.64			$	65.17
Common share distributions – annualized		$	2.88			$	2.80			$	2.80			$	2.80			$	2.80
Closing dividend yield – annualized		3.1		%		3.6		%		4.1		%		4.0		%		4.3		%
Closing common shares outstanding (thousands)		14,281				14,045				13,220				13,027				12,976
Closing limited partnership units outstanding (thousands)		845				881				950				977				1,018
Closing Series E preferred units outstanding, as converted (thousands)		2,186				—				—				—				—
Closing market value of outstanding common shares, plus imputed closing market value of outstanding limited partnership units (thousands)		$	1,635,984			$	1,177,661			$	963,560			$	989,243			$	911,989

 

CENTERSPACE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands)
		Three Months Ended																					Nine Months Ended
		9/30/2021				6/30/2021				3/31/2021				12/31/2020				9/30/2020					9/30/2021				9/30/2020
REVENUE		$	50,413			$	46,656			$	46,648			$	45,540			$	44,138				$	143,717			$	132,454
EXPENSES
Property operating expenses, excluding real estate taxes		14,434				13,018				13,449				12,668				13,129					40,901				38,957
Real estate taxes		5,916				5,742				5,792				5,256				5,402					17,450				16,277
Property management expense		2,203				2,085				1,767				1,460				1,442					6,055				4,341
Casualty (gain) loss		(10)				(27)				101				331				91					64				1,331
Depreciation/amortization		22,447				19,308				19,992				20,282				18,995					61,747				55,311
General and administrative expenses		4,279				3,797				3,906				3,733				3,077					11,982				9,707
TOTAL EXPENSES		$	49,269			$	43,923			$	45,007			$	43,730			$	42,136				$	138,199			$	125,924
Operating income		1,144				2,733				1,641				1,810				2,002					5,518				6,530
Interest expense		(7,302)				(7,089)				(7,231)				(6,903)				(6,771)					(21,622)				(20,622)
Interest and other income (loss)		(5,082)				619				431				404				277					(4,032)				(1,979)
Income (loss) before gain (loss) on sale of real estate and other investments		(11,240)				(3,737)				(5,159)				(4,689)				(4,492)					(20,136)				(16,071)
Gain (loss) on sale of real estate and other investments		—				26,840				—				17				25,676					26,840				25,486
Net income (loss)		$	(11,240)			$	23,103			$	(5,159)			$	(4,672)			$	21,184				$	6,704			$	9,415
Dividends to Series D preferred unitholders		(160)				(160)				(160)				(160)				(160)					(480)				(480)
Net (income) loss attributable to noncontrolling interest – Operating Partnership and Series E preferred units		1,930				(1,386)				469				460				(1,387)					1,013				(248)
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities		(22)				(19)				(17)				(6)				(8)					(58)				132
Net income (loss) attributable to controlling interests		(9,492)				21,538				(4,867)				(4,378)				19,629					7,179				8,819
Dividends to preferred shareholders		(1,607)				(1,607)				(1,607)				(1,607)				(1,607)					(4,821)				(4,921)
Discount (premium) on redemption of preferred shares		—				—				—				—				(1)					—				297
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS		$	(11,099)			$	19,931			$	(6,474)			$	(5,985)			$	18,021				$	2,358			$	4,195
Per Share Data - Basic
Net earnings (loss) per common share – basic		$	(0.79)			$	1.49			$	(0.49)			$	(0.46)			$	1.40				$	0.17			$	0.33
Per Share Data - Diluted
Net earnings (loss) per common share – diluted		$	(0.81)			$	1.48			$	(0.49)			$	(0.46)			$	1.38				$	0.12			$	0.33

 

CENTERSPACE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
		9/30/2021				6/30/2021				3/31/2021				12/31/2020				9/30/2020
ASSETS
Real estate investments
Property owned		$	2,203,606			$	1,838,837			$	1,883,407			$	1,812,557			$	1,805,390
Less accumulated depreciation		(426,926)				(407,400)				(408,014)				(399,249)				(380,392)
		1,776,680				1,431,437				1,475,393				1,413,308				1,424,998
Mortgage loans receivable		42,160				37,457				30,107				24,661				17,986
Total real estate investments		1,818,840				1,468,894				1,505,500				1,437,969				1,442,984
Cash and cash equivalents		20,816				5,194				10,816				392				16,804
Restricted cash		2,376				8,444				1,610				6,918				2,199
Other assets		34,919				17,218				18,427				18,904				16,947
TOTAL ASSETS		$	1,876,951			$	1,499,750			$	1,536,353			$	1,464,183			$	1,478,934
LIABILITIES, MEZZANINE EQUITY, AND EQUITY
LIABILITIES
Accounts payable and accrued expenses		$	58,092			$	52,413			$	53,852			$	55,609			$	58,596
Revolving line of credit		57,000				87,000				181,544				152,871				135,000
Notes payable, net of loan costs		299,454				319,286				319,236				269,246				269,202
Mortgages payable, net of loan costs		489,140				287,143				293,709				297,074				313,065
TOTAL LIABILITIES		$	903,686			$	745,842			$	848,341			$	774,800			$	775,863
SERIES D PREFERRED UNITS		$	21,585			$	18,022			$	16,560			$	16,560			$	16,560
EQUITY
Series C Preferred Shares of Beneficial Interest		93,530				93,530				93,530				93,530				93,530
Common Shares of Beneficial Interest		1,092,130				1,033,940				980,453				968,263				968,436
Accumulated distributions in excess of net income		(454,691)				(433,310)				(443,409)				(427,681)				(412,577)
Accumulated other comprehensive income (loss)		(5,784)				(12,064)				(12,798)				(15,905)				(17,256)
Total shareholders' equity		$	725,185			$	682,096			$	617,776			$	618,207			$	632,133
Noncontrolling interests – Operating Partnership and Series E preferred units		225,850				53,133				53,007				53,930				53,669
Noncontrolling interests – consolidated real estate entities		645				657				669				686				709
Total equity		$	951,680			$	735,886			$	671,452			$	672,823			$	686,511
TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY		$	1,876,951			$	1,499,750			$	1,536,353			$	1,464,183			$	1,478,934

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 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 us to evaluate full period-over-period operating comparisons for existing apartment communities and their contribution to net 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, renewing the leases on existing residents, controlling operating costs, and making prudent capital improvements.

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.

	(in thousands, except percentages)
	Three Months Ended													Sequential							Year-Over-Year
	9/30/2021				6/30/2021				9/30/2020					$ Change				% Change			$ Change				% Change
Operating income	$	1,144			$	2,733			$	2,002				$	(1,589)			(58.1)	%		$	(858)			(42.9)	%
Adjustments:
Property management expenses	2,203				2,085				1,442					118				5.7	%		761				52.8	%
Casualty (gain) loss	(10)				(27)				91					17				(63.0)	%		(101)				(111.0)	%
Depreciation and amortization	22,447				19,308				18,995					3,139				16.3	%		3,452				18.2	%
General and administrative expenses	4,279				3,797				3,077					482				12.7	%		1,202				39.1	%
Net operating income	$	30,063			$	27,896			$	25,607				$	2,167			7.8	%		$	4,456			17.4	%
Revenue
Same-store	$	42,034			$	40,521			$	39,571				$	1,513			3.7	%		$	2,463			6.2	%
Non-same-store	7,214				4,436				1,117					2,778				62.6	%		6,097				545.8	%
Other properties	1,120				646				833					474				73.4	%		287				34.5	%
Dispositions	45				1,053				2,617					(1,008)				(95.7)	%		(2,572)				(98.3)	%
Total	50,413				46,656				44,138					3,757				8.1	%		6,275				14.2	%
Property operating expenses, including real estate taxes
Same-store	17,126				16,528				16,409					598				3.6	%		717				4.4	%
Non-same-store	2,940				1,439				491					1,501				104.3	%		2,449				498.8	%
Other properties	317				268				229					49				18.3	%		88				38.4	%
Dispositions	(33)				525				1,402					(558)				(106.3)	%		(1,435)				(102.4)	%
Total	20,350				18,760				18,531					1,590				8.5	%		1,819				9.8	%
Net operating income
Same-store	24,908				23,993				23,162					915				3.8	%		1,746				7.5	%
Non-same-store	4,274				2,997				626					1,277				42.6	%		3,648				582.7	%
Other properties	803				378				604					425				112.4	%		199				32.9	%
Dispositions	78				528				1,215					(450)				(100.0)	%		(1,137)				(93.6)	%
Total	$	30,063			$	27,896			$	25,607				$	2,167			7.8	%		$	4,456			17.4	%

	(in thousands, except percentages)
	Nine Months Ended September 30,
	2021				2020				$ Change				% Change
Operating income	$	5,518			$	6,530			$	(1,012)			(15.5)	%
Adjustments:
Property management expenses	6,055				4,341				1,714				39.5	%
Casualty (gain) loss	64				1,331				(1,267)				(95.2)	%
Depreciation and amortization	61,747				55,311				6,436				11.6	%
General and administrative expenses	11,982				9,707				2,275				23.4	%
Net operating income	$	85,366			$	77,220			$	8,146			10.5	%
Revenue
Same-store	$	122,555			$	118,627			$	3,928			3.3	%
Non-same-store	15,892				2,319				13,573				585.3	%
Other properties	2,415				2,208				207				9.4	%
Dispositions	2,855				9,300				(6,445)				(69.3)	%
Total	143,717				132,454				11,263				8.5	%
Property operating expenses, including real estate taxes
Same-store	50,032				48,631				1,401				2.9	%
Non-same-store	5,875				995				4,880				490.5	%
Other properties	873				759				114				15.0	%
Dispositions	1,571				4,849				(3,278)				(67.6)	%
Total	58,351				55,234				3,117				5.6	%
Net operating income
Same-store	72,523				69,996				2,527				3.6	%
Non-same-store	10,017				1,324				8,693				656.6	%
Other properties	1,542				1,449				93				6.4	%
Dispositions	1,284				4,451				(3,167)				(71.2)	%
Total	$	85,366			$	77,220			$	8,146			10.5	%

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 September 30,																Nine Months Ended September 30,
	2021				2020				$ Change				% Change				2021				2020				$ Change				% Change
Controllable expenses
On-site compensation(1)	$	4,488			$	4,362			$	126			2.9	%			$	13,182			$	12,908			$	274			2.1	%
Repairs and maintenance	2,562				2,804				(242)				(8.6)	%			7,060				7,469				(409)				(5.5)	%
Utilities	2,941				2,609				332				12.7	%			8,239				7,689				550				7.2	%
Administrative and marketing	956				853				103				12.1	%			2,701				2,595				106				4.1	%
Total	$	10,947			$	10,628			$	319			3.0	%			$	31,182			$	30,661			$	521			1.7	%
Non-controllable expenses
Real estate taxes	$	4,812			$	4,795			$	17			0.4	%			$	14,665			$	14,513			$	152			1.0	%
Insurance	1,367				986				381				38.6	%			4,185				3,457				728				21.1	%
Total	$	6,179			$	5,781			$	398			6.9	%			$	18,850			$	17,970			$	880			4.9	%
Property operating expenses, including real estate taxes - non-same-store	$	2,940			$	491			$	2,449			498.8	%			$	5,875			$	995			$	4,880			490.5	%
Property operating expenses, including real estate taxes - other properties	317				229				88				38.4	%			873				759				114				15.0	%
Property operating expenses, including real estate taxes - dispositions	(33)				1,402				(1,435)				(102.4)	%			1,571				4,849				(3,278)				(67.6)	%
Total property operating expenses, including real estate taxes	$	20,350			$	18,531			$	1,819			9.8	%			$	58,351			$	55,234			$	3,117			5.6	%

_________________
(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																					Nine Months Ended
		9/30/2021				6/30/2021				3/31/2021				12/31/2020				9/30/2020					9/30/2021				9/30/2020
Funds From Operations
Net income (loss) available to common shareholders		$	(11,099)			$	19,931			$	(6,474)			$	(5,985)			$	18,021				$	2,358			$	4,195
Adjustments:
Noncontrolling interests – Operating Partnership		(1,930)				1,386				(469)				(460)				1,387					(1,013)				248
Depreciation and amortization		22,447				19,308				19,992				20,282				18,995					61,747				55,311
Less depreciation – non real estate		(80)				(87)				(98)				(87)				(85)					(265)				(266)
Less depreciation – partially owned entities		(24)				(24)				(24)				(33)				(31)					(72)				(346)
(Gain) loss on sale of real estate		—				(26,840)				—				(17)				(25,676)					(26,840)				(25,486)
FFO applicable to common shares and Units		$	9,314			$	13,674			$	12,927			$	13,700			$	12,611				$	35,915			$	33,656
Adjustments to Core FFO:
Casualty (gain) loss		—				—				—				204				545					—				545
Loss on extinguishment of debt		530				3				—				2				4					533				21
Rebranding costs		—				—				—				402				—					—				—
Technology implementation costs		625				447				413				—				—					1,485				—
(Gain) loss on marketable securities		—				—				—				—				—					—				3,378
(Discount) premium on redemption of preferred shares		—				—				—				—				1					—				(297)
Commercial lease termination proceeds		(450)				—				—				—				—					(450)				—
Acquisition related costs		140				—				—				—				—					140				—
Interest rate swap termination and amortization		5,353				—				—				—				—					5,353				—
Amortization of assumed debt		(27)				—				—				—				—					(27)				—
Other miscellaneous items		(3)				—				—				—				—					(3)				—
Core FFO applicable to common shares and Units		$	15,482			$	14,124			$	13,340			$	14,308			$	13,161				$	42,946			$	37,303
Funds from operations applicable to common shares and Units		$	9,314			$	13,674			$	12,927			$	13,700			$	12,611				$	35,915			$	33,656
Dividends to preferred unitholders		160				160				160				160				160					480				480
Funds from operations applicable to common shares and Units - diluted		$	9,474			$	13,834			$	13,087			$	13,860			$	12,771				$	36,395			$	34,136
Core funds from operations applicable to common shares and Units		$	15,482			$	14,124			$	13,340			$	14,308			$	13,161				$	42,946			$	37,303
Dividends to preferred unitholders		160				160				160				160				160					480				480
Core funds from operations applicable to common shares and Units - diluted		$	15,642			$	14,284			$	13,500			$	14,468			$	13,321				$	43,426			$	37,783
Per Share Data
Earnings (loss) per share and Unit - diluted		$	(0.81)			$	1.48			$	(0.49)			$	(0.46)			$	1.38				$	0.12			$	0.33
FFO per share and Unit - diluted		$	0.60			$	0.95			$	0.92			$	0.97			$	0.90				$	2.44			$	2.49
Core FFO per share and Unit - diluted		$	0.98			$	0.98			$	0.95			$	1.02			$	0.94				$	2.91			$	2.76
Weighted average shares and Units - diluted		15,922				14,514				14,282				14,222				14,143					14,917				13,704

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																					Nine Months Ended
		9/30/2021				6/30/2021				3/31/2021				12/31/2020				9/30/2020					9/30/2021				9/30/2020
Adjusted EBITDA
Net income (loss) available to common shareholders		$	(9,492)			$	21,538			$	(4,867)			$	(4,378)			$	19,629				$	7,179			$	8,819
Adjustments:
Dividends to preferred unitholders		160				160				160				160				160					480				480
Noncontrolling interests – Operating Partnership		(1,930)				1,386				(469)				(460)				1,387					(1,013)				248
Income (loss) before noncontrolling interests – Operating Partnership		$	(11,262)			$	23,084			$	(5,176)			$	(4,678)			$	21,176				$	6,646			$	9,547
Adjustments:
Interest expense		7,287				7,075				7,216				6,888				6,756					21,578				20,446
Loss on extinguishment of debt		530				3				—				2				4					533				21
Depreciation/amortization related to real estate investments		22,423				19,284				19,969				20,250				18,964					61,676				54,965
Casualty (gain) loss		—				—				—				204				545					—				545
Interest income		(769)				(583)				(407)				(328)				(256)					(1,759)				(1,184)
(Gain) loss on sale of real estate and other investments		—				(26,840)				—				(17)				(25,676)					(26,840)				(25,486)
Technology implementation costs		625				447				413				—				—					1,486				—
(Gain) loss on marketable securities		—				—				—				—				—					—				3,378
Commercial lease termination proceeds		(450)				—				—				—				—					(450)				—
Acquisition related costs		140				—				—				—				—					140				—
Interest rate swap termination		5,361				—				—				—				—					5,361				—
Other miscellaneous items		(3)				—				—				—				—					(3)				—
Adjusted EBITDA		$	23,882			$	22,470			$	22,015			$	22,321			$	21,513				$	68,368			$	62,232

 

CENTERSPACE
DEBT ANALYSIS
(in thousands)
Debt Maturity Schedule
Annual Expirations
			Future Maturities of Debt
			Secured Fixed Debt				Unsecured Fixed Debt(1)				Total Debt				% of Total Debt			Weighted Average Interest Rate(2)
	2021 (remainder)		$	—			$	—			$	—			—			—
	2022		29,822				—				29,822				3.5	%		4.07	%
	2023		42,875				—				42,875				5.1	%		4.02	%
	2024		—				—				—				—			—
	2025		32,316				57,000				89,316				10.5	%		2.83	%
	Thereafter		387,384				300,000				687,384				80.9	%		3.20	%
Total debt			$	492,397			$	357,000			$	849,397			100.0	%		3.23	%

__________________
(1)	The line of credit is fixed with an interest rate swap.
(2)	Weighted average interest rate of debt that matures during the year, including the effect of interest rate swaps on the term loans and line of credit.

		9/30/2021				6/30/2021				3/31/2021				12/31/2020				9/30/2020
Debt Balances Outstanding
Secured fixed rate - other mortgages		$	293,547			$	288,363			$	295,001			$	298,445			$	314,511
Secured fixed rate - Fannie Mae credit facility		198,850				—				—				—				—
Unsecured fixed rate line of credit(1)		57,000				50,000				50,000				50,000				50,000
Unsecured variable rate line of credit		—				37,000				131,544				102,871				85,000
Unsecured term loans		—				145,000				145,000				145,000				145,000
Unsecured senior notes		300,000				175,000				175,000				125,000				125,000
Debt total		$	849,397			$	695,363			$	796,545			$	721,316			$	719,511
Other mortgages rate		3.83		%		3.90		%		3.92		%		3.93		%		3.99		%
Fannie Mae Credit Facility rate		2.78		%		—				—				—				—
Lines of credit rate (rate with swap)		2.79		%		2.24		%		2.18		%		2.35		%		3.35		%
Term loan rate (rate with swap)		—				4.19		%		4.11		%		4.18		%		4.18		%
Senior notes rate		3.12		%		3.47		%		3.47		%		3.78		%		3.78		%
Total debt		3.23		%		3.70		%		3.37		%		3.62		%		3.68		%

__________________
(1)	A portion of the primary line of credit is fixed through an interest rate swap.

 

CENTERSPACE
CAPITAL ANALYSIS
(in thousands, except per share and unit amounts)
		Three Months Ended
		9/30/2021				6/30/2021				3/31/2021				12/31/2020				9/30/2020
Equity Capitalization
Common shares outstanding		14,281				14,045				13,220				13,027				12,976
Operating partnership units outstanding		845				881				950				977				1,018
Series E preferred units (as converted)		2,186				—				—				—				—
Total common shares and units outstanding		17,312				14,926				14,170				14,004				13,994
Market price per common share (closing price at end of period)		$	94.50			$	78.90			$	68.00			$	70.64			$	65.17
Equity capitalization-common shares and units		$	1,635,984			$	1,177,661			$	963,560			$	989,243			$	911,989
Recorded book value of preferred shares		$	93,530			$	93,530			$	93,530			$	93,530			$	93,530
Total equity capitalization		$	1,729,514			$	1,271,191			$	1,057,090			$	1,082,773			$	1,005,519
Series D Preferred Units		$	21,585			$	18,022			$	16,560			$	16,560			$	16,560
Debt Capitalization
Total debt		$	849,397			$	695,363			$	796,545			$	721,317			$	719,511
Total capitalization		$	2,600,496			$	1,984,576			$	1,870,195			$	1,820,650			$	1,741,590
Total debt to total capitalization(1)		33.1		%		35.0		%		43.1		%		39.6		%		41.3		%

________________________
(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 and operating partnership units, and book value of Series C preferred shares and Series D preferred units outstanding at the end of the period.

		Three Months Ended																					Nine Months Ended
		9/30/2021				6/30/2021				3/31/2021				12/31/2020				9/30/2020					9/30/2021				9/30/2020
Debt service coverage ratio(1)		2.75		x		2.62		x		2.53		x		2.73		x		2.65		x			2.63		x		2.52		x
Adjusted EBITDA/Interest expense plus preferred distributions and principal amortization		2.32		x		2.21		x		2.14		x		2.28		x		2.21		x			2.22		x		2.08		x
Net debt/Adjusted EBITDA(2)		8.67		x		7.68		x		8.92		x		8.07		x		8.17		x			9.09		x		8.47		x
Net debt and preferred equity/Adjusted EBITDA(2)		9.88		x		8.92		x		10.17		x		9.31		x		9.45		x			10.35		x		9.80		x
Distribution Data
Common shares and Units outstanding at record date		15,126				14,926				14,171				14,004				13,994					15,126				13,994
Total common distribution declared		$	10,890			$	10,448			$	9,919			$	9,803			$	9,796				$	31,257			$	28,735
Common distribution per share and Unit		$	0.72			$	0.70			$	0.70			$	0.70			$	0.70				$	2.12			$	2.10
Payout ratio (Core FFO per diluted share and unit basis)(3)		73.5		%		71.4		%		73.7		%		68.6		%		74.5		%			72.9		%		76.1		%

_________________________________
(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 THIRD QUARTER COMPARISONS
(in thousands, except property data amounts and percentages)
		Apartment Homes Included			Revenues											Expenses											NOI
Regions					Q3 2021				Q3 2020				% Change			Q3 2021				Q3 2020				% Change			Q3 2021				Q3 2020				% Change
Denver, CO		992			$	5,565			$	5,372			3.6	%		$	1,899			$	1,916			(0.9)	%		$	3,666			$	3,456			6.1	%
Minneapolis, MN		2,355			11,361				10,547				7.7	%		4,548				4,462				1.9	%		6,813				6,085				12.0	%
North Dakota		2,422			8,183				7,852				4.2	%		3,378				3,146				7.4	%		4,805				4,706				2.1	%
Omaha, NE		1,370			4,166				3,884				7.3	%		1,933				1,790				8.0	%		2,233				2,094				6.6	%
Rochester, MN		1,122			4,874				4,577				6.5	%		1,924				2,064				(6.8)	%		2,950				2,513				17.4	%
St. Cloud, MN		1,192			3,683				3,548				3.8	%		1,750				1,603				9.2	%		1,933				1,945				(0.6)	%
Other Mountain West		1,223			4,202				3,791				10.8	%		1,694				1,428				18.6	%		2,508				2,363				6.1	%
Same-Store Total		10,676			$	42,034			$	39,571			6.2	%		$	17,126			$	16,409			4.4	%		$	24,908			$	23,162			7.5	%

		% of NOI Contribution			Weighted Average Occupancy (1)									Average Monthly Rental Rate (2)											Average Monthly Revenue per Occupied Home (3)
Regions					Q3 2021			Q3 2020			Growth			Q3 2021				Q3 2020				% Change			Q3 2021				Q3 2020				% Change
Denver, CO		14.7	%		94.5	%		93.4	%		1.1	%		$	1,779			$	1,750			1.7	%		$	1,978			$	1,932			2.5	%
Minneapolis, MN		27.3	%		94.6	%		93.1	%		1.5	%		1,558				1,504				3.6	%		1,699				1,603				6.2	%
North Dakota		19.3	%		94.2	%		95.5	%		(1.3)	%		1,107				1,054				5.0	%		1,195				1,131				5.5	%
Omaha, NE		9.0	%		94.6	%		93.8	%		0.8	%		962				913				5.4	%		1,072				1,008				6.5	%
Rochester, MN		11.8	%		93.2	%		93.8	%		(0.6)	%		1,462				1,385				5.6	%		1,554				1,450				7.1	%
St. Cloud, MN		7.8	%		91.5	%		94.4	%		(2.9)	%		1,063				963				10.4	%		1,125				1,051				6.7	%
Other Mountain West		10.1	%		96.6	%		97.1	%		(0.5)	%		1,080				970				11.3	%		1,185				1,064				11.3	%
Same-Store Total		100.0	%		94.3	%		94.3	%		—			$	1,279			$	1,215			5.3	%		$	1,392			$	1,311			6.2	%

______________________
(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 Homes Included			Revenues											Expenses											NOI
Regions					Q3 2021				Q2 2021				% Change			Q3 2021				Q2 2021				% Change			Q3 2021				Q2 2021				% Change
Denver, CO		992			$	5,565			$	5,486			1.4	%		$	1,899			$	1,837			3.4	%		$	3,666			$	3,649			0.4	%
Minneapolis, MN		2,355			11,361				10,538				7.8	%		4,548				4,649				(2.2)	%		6,813				5,889				15.7	%
North Dakota		2,422			8,183				8,078				1.3	%		3,378				3,199				5.6	%		4,805				4,879				(1.5)	%
Omaha, NE		1,370			4,166				4,037				3.2	%		1,933				1,885				2.5	%		2,233				2,152				3.8	%
Rochester, MN		1,122			4,874				4,709				3.5	%		1,924				1,937				(0.7)	%		2,950				2,772				6.4	%
St. Cloud, MN		1,192			3,683				3,634				1.3	%		1,750				1,582				10.6	%		1,933				2,052				(5.8)	%
Other Mountain West		1,223			4,202				4,039				4.0	%		1,694				1,439				17.7	%		2,508				2,600				(3.5)	%
Same-Store Total		10,676			$	42,034			$	40,521			3.7	%		$	17,126			$	16,528			3.6	%		$	24,908			$	23,993			3.8	%

		% of NOI Contribution			Weighted Average Occupancy									Average Monthly Rental Rate											Average Monthly Revenue per Occupied Home
Regions					Q3 2021			Q2 2021			Growth			Q3 2021				Q2 2021				% Change			Q3 2021				Q2 2021				% Change
Denver, CO		14.7	%		94.5	%		94.2	%		0.3	%		$	1,779			$	1,727			3.0	%		$	1,978			$	1,957			1.1	%
Minneapolis, MN		27.3	%		94.6	%		94.2	%		0.4	%		1,558				1,510				3.2	%		1,699				1,584				7.4	%
North Dakota		19.3	%		94.2	%		95.9	%		(1.7)	%		1,107				1,078				2.7	%		1,195				1,159				3.0	%
Omaha, NE		9.0	%		94.6	%		95.5	%		(0.9)	%		962				927				3.8	%		1,072				1,029				4.1	%
Rochester, MN		11.8	%		93.2	%		94.5	%		(1.3)	%		1,462				1,403				4.2	%		1,554				1,480				4.8	%
St. Cloud, MN		7.8	%		91.5	%		92.7	%		(1.2)	%		1,063				1,005				5.8	%		1,125				1,097				2.5	%
Other Mountain West		10.1	%		96.6	%		98.1	%		(1.5)	%		1,080				1,014				6.5	%		1,185				1,122				5.5	%
Same-Store Total		100.0	%		94.3	%		94.9	%		(0.6)	%		$	1,279			$	1,233			3.7	%		$	1,392			$	1,333			4.4	%

 

CENTERSPACE
SAME-STORE YEAR-TO-DATE COMPARISONS
(in thousands, except property data amounts and percentages)
		Apartment Homes Included			Revenues											Expenses											NOI
Regions					2021				2020				% Change			2021				2020				% Change			2021				2020				% Change
Denver, CO		992			$	16,459			$	16,170			1.8	%		$	5,604			$	5,332			5.1	%		$	10,855			$	10,838			0.2	%
Minneapolis, MN		2,355			32,365				32,024				1.1	%		13,627				13,125				3.8	%		18,738				18,899				(0.9)	%
North Dakota		2,422			24,209				23,331				3.8	%		9,848				9,791				0.6	%		14,361				13,540				6.1	%
Omaha, NE		1,370			12,229				11,536				6.0	%		5,580				5,199				7.3	%		6,649				6,337				4.9	%
Rochester, MN		1,122			14,227				13,910				2.3	%		5,847				5,922				(1.3)	%		8,380				7,988				4.9	%
St. Cloud, MN		1,192			10,972				10,705				2.5	%		4,967				4,883				1.7	%		6,005				5,822				3.1	%
Other Mountain West		1,223			12,094				10,951				10.4	%		4,559				4,379				4.1	%		7,535				6,572				14.7	%
Same-Store Total		10,676			$	122,555			$	118,627			3.3	%		$	50,032			$	48,631			2.9	%		$	72,523			$	69,996			3.6	%

		% of NOI Contribution			Weighted Average Occupancy									Average Monthly Rental Rate											Average Monthly Revenue per Occupied Home
Regions					2021			2020			Growth			2021				2020				% Change			2021				2020				% Change
Denver, CO		15.0	%		94.4	%		93.6	%		0.8	%		$	1,741			$	1,772			(1.7)	%		$	1,953			$	1,935			1.0	%
Minneapolis, MN		25.7	%		93.9	%		93.8	%		0.1	%		1,521				1,495				1.7	%		1,626				1,611				1.0	%
North Dakota		19.8	%		95.4	%		95.9	%		(0.5)	%		1,082				1,045				3.5	%		1,164				1,116				4.3	%
Omaha, NE		9.2	%		95.0	%		94.3	%		0.7	%		934				903				3.4	%		1,044				992				5.3	%
Rochester, MN		11.6	%		94.4	%		95.5	%		(1.1)	%		1,413				1,383				2.2	%		1,493				1,443				3.4	%
St. Cloud, MN		8.3	%		92.9	%		94.3	%		(1.4)	%		1,013				953				6.3	%		1,101				1,058				3.9	%
Other Mountain West		10.4	%		97.5	%		95.9	%		1.6	%		1,026				954				7.5	%		1,127				1,037				8.8	%
Same-Store Total		100.0	%		94.7	%		94.7	%		—			$	1,242			$	1,208			2.8	%		$	1,347			$	1,304			3.3	%

 

CENTERSPACE
PORTFOLIO SUMMARY(1)
		Three Months Ended
		9/30/2021				6/30/2021				3/31/2021				12/31/2020				9/30/2020
Number of Apartment Homes at Period End
Same-Store		10,676				10,676				11,265				10,567				10,567
Non-Same-Store		3,599				903				903				1,343				1,343
All Communities		14,275				11,579				12,168				11,910				11,910
Average Monthly Rental Rate(2)
Same-Store		$	1,279			$	1,233			$	1,200			$	1,177			$	1,178
Non-Same-Store		1,506				1,617				1,584				1,599				1,597
All Communities		$	1,293			$	1,263			$	1,229			$	1,225			$	1,210
Average Monthly Revenue per Occupied Apartment Home(3)
Same-Store		$	1,392			$	1,333			$	1,302			$	1,282			$	1,271
Non-Same-Store		1,606				1,739				1,705				1,708				1,729
All Communities		$	1,397			$	1,365			$	1,332			$	1,330			$	1,307
Weighted Average Occupancy(4)
Same-Store		94.3		%		94.9		%		94.9		%		95.0		%		94.4		%
Non-Same-Store		95.1		%		94.2		%		91.8		%		92.3		%		93.9		%
All Communities		94.4		%		94.8		%		94.6		%		94.6		%		94.3		%
Operating Expenses as a % of Scheduled Rent
Same-Store		41.8		%		41.9		%		42.9		%		41.2		%		43.4		%
Non-Same-Store		39.9		%		32.9		%		34.9		%		35.3		%		39.7		%
All Communities		41.6		%		41.0		%		42.1		%		40.3		%		43.0		%
Capital Expenditures
Total Capital Expenditures per Apartment Home – Same-Store		$	255			$	159			$	131			$	326			$	293

___________________
(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									Nine Months Ended
		9/30/2021				9/30/2020					9/30/2021				9/30/2020
Total Same-Store Apartment Homes		10,676				10,676					10,676				10,676
Building - Exterior		$	1,236			$	707				$	2,013			$	2,796
Building - Interior		128				154					431				370
Mechanical, Electrical, & Plumbing		145				—					476				—
Furniture & Equipment		13				19					76				237
Landscaping & Grounds		211				727
Turnover		989				1,071					2,371				2,553
Capital Expenditures - Same-Store		$	2,722			$	2,678				$	5,737			$	7,136
Capital Expenditures per Apartment Home - Same-Store		$	255			$	251				$	537			$	668
Value Add		$	7,209			$	4,118				$	14,384			$	10,267
Total Capital Spend - Same-Store		$	9,931			$	6,796				$	20,121			$	17,403
Total Capital Spend per Apartment Home - Same-Store		$	930			$	637				$	1,885			$	1,630
All Properties - Weighted Average Apartment Homes		12,475				11,600					12,140				11,456
Capital Expenditures		$	2,827			$	2,761				$	5,939			$	7,755
Capital Expenditures per Apartment Home		$	227			$	238				$	489			$	677
Value Add		7,209				4,118					14,396				10,267
Acquisition Capital		336				730					1,297				1,265
Total Capital Spend		10,372				7,609					21,632				19,287
Total Capital Spend per Apartment Home		$	831			$	656				$	1,782			$	1,684
Value Add Capital Expenditures
Interior - Units
Same-Store		$	4,823			$	2,228				$	9,622			$	4,581
Non-Same-Store		—				—					8				—
Total Interior Units		$	4,823			$	2,228				$	9,630			$	4,581
Expected Year 1 Annual ROI		16.0		%		17.3		%			16.3		%		17.0		%
Common Areas and Exteriors
Same-Store		$	2,386			$	1,890				$	4,762			$	5,686
Non-Same-Store		—				—					4				—
Total Common Areas and Exteriors		$	2,386			$	1,890				$	4,766			$	5,686
Expected Year 1 Annual ROI		8.6		%		11.7		%			8.4		%		11.8		%
Total Value-Add Capital Expenditures
Same-Store		$	7,209			$	4,118				$	14,384			$	10,267
Non-Same-Store		—				—					12				—
Total Portfolio Value-Add		$	7,209			$	4,118				$	14,396			$	10,267
Expected Year 1 Annual ROI		13.6		%		14.7		%			13.7		%		14.1		%

 

CENTERSPACE
2021 Financial Outlook
(in thousands, except per share and per home amounts)
Centerspace revised its outlook for 2021 in the table below.
	Nine Months Ended				2021 Previous Outlook Range								2021 Revised Outlook Range
	September 30, 2021				Low				High				Low				High
	YTD Actual				Amount				Amount				Amount				Amount
Same-store growth
Revenue	$	122,555			2.0		%		3.5		%		3.5		%		4.0		%
Controllable expenses	$	31,182			3.0		%		5.0		%		3.8		%		4.3		%
Non-controllable expenses	$	18,850			5.5		%		7.5		%		6.3		%		6.8		%
Total Expenses	$	50,032			4.0		%		6.0		%		4.5		%		5.0		%
Same-store NOI	$	72,523			0.5		%		2.0		%		3.0		%		3.5		%
Components of NOI
Same-store NOI	$	72,523			$	95,100			$	96,300			$	97,300			$	97,800
Non-same-store NOI	$	10,017			$	11,800			$	12,000			$	17,200			$	17,800
Other Commercial NOI	$	1,542			$	1,800			$	1,900			$	2,100			$	2,200
Other Sold NOI	$	1,284			$	1,200			$	1,200			$	1,200			$	1,200
Total NOI	$	85,366			$	109,900			$	111,400			$	117,800			$	119,000
Accretion (dilution) from investments and capital market activity, excluding impact from change in share count	$	—			4,350				4,500				30				40
Interest expense	$	(21,622)			(28,700)				(28,500)				(29,100)				(28,900)
Preferred dividends	$	(4,821)			(6,430)				(6,430)				(6,430)				(6,430)
Recurring income and expenses
Interest and other income	$	(4,104)			2,580				2,580				(3,330)				(3,330)
General and administrative and property management	$	(18,037)			(23,500)				(23,000)				(25,100)				(24,800)
Casualty losses	$	(64)			(1,245)				(755)				(600)				(400)
Non-real estate depreciation and amortization	$	(265)			(280)				(280)				(320)				(330)
Non-controlling interest	$	(58)			(70)				(65)				(70)				(65)
Total recurring income and expenses	$	(22,528)			(22,515)				$	(21,520)			(29,420)				$	(28,925)
FFO	$	36,395			$	56,605			$	59,450			$	52,880			$	54,785
Non-core income and expenses
Casualty loss	$	—			$	280			$	120			$	280			$	120
Technology implementation costs	1,485				1,800				1,600				2,000				1,900
Interest rate swap termination and amortization	5,353				—				—				5,400				5,400
Other miscellaneous items	193				—				—				400				400
Total non-core income and expenses	$	7,031			$	2,080			$	1,720			$	8,080			$	7,820
Core FFO	$	43,426			$	58,685			$	61,170			$	60,960			$	62,605
EPS - Diluted	$	0.12			$	0.58			$	0.76			$	(0.36)			$	(0.24)
FFO per diluted share	$	2.44			$	3.64			$	3.83			$	3.40			$	3.52
Core FFO per diluted share	$	2.91			$	3.78			$	3.94			$	3.92			$	4.02
Weighted average shares outstanding - diluted	14,917				15,541				15,541				15,562				15,570
Additional Assumptions
Same-store capital expenditures (per home)	$	537			$	875			$	925			$	885			915
Value-add expenditures	$	14,396			$	15,000			$	20,000			$	22,000			$	23,000
Investments	$	400,000			$	400,000			$	400,000			$	401,000			$	401,000
Dispositions	$	60,000			$	60,000			$	60,000			$	62,300			$	62,300
Equity issuance proceeds	$	86,127			$	66,500			$	66,500			$	101,100			$	111,100

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
	Nine Months Ended				12 Months Ended								12 Months Ended
	September 30, 2021				December 31, 2021								December 31, 2021
	Actual				Low				High				Low				High
Net income (loss) available to common shareholders	$	2,358			$	10,479			$	13,324			$	(4,180)			$	(2,270)
Noncontrolling interests - Operating Partnership and Series E preferred units	(1,013)				(1,456)				(1,456)				(6,518)				(6,518)
Depreciation and amortization	61,747				74,157				74,157				90,452				90,452
Less depreciation - non real estate	(265)				(280)				(280)				(320)				(330)
Less depreciation - partially owned entities	(72)				(95)				(95)				(70)				(65)
(Gain) loss on sale of real estate	(26,840)				(26,840)				(26,840)				(27,124)				(27,124)
Dividends to preferred unitholders	480				640				640				640				640
FFO applicable to common shares and Units	$	36,395			$	56,605			$	59,450			$	52,880			$	54,785
Adjustments to Core FFO:
Casualty loss write off	—				280				120				280				120
Technology implementation costs	1,485				1,800				1,600				2,000				1,900
Interest rate swap termination and amortization	5,353				—				—				5,400				5,400
Other miscellaneous items	193				—				—				400				400
Core FFO applicable to common shares and Units	$	43,426			$	58,685			$	61,170			$	60,960			$	62,605
Earnings per share - diluted	$	0.12			$	0.58			$	0.76			$	(0.36)			$	(0.24)
FFO per share - diluted	$	2.44			$	3.64			$	3.83			$	3.40			$	3.52
Core FFO per share - diluted	$	2.91			$	3.78			$	3.94			$	3.92			$	4.02

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
	Nine Months Ended				12 Months Ended								12 Months Ended
	September 30, 2021				December 31, 2021								December 31, 2021
	Actual				Low				High				Low				High
Operating income	$	5,518			$	10,998			$	13,488			$	1,648			$	3,348
Adjustments:
General and administrative and property management expenses	18,037				23,500				23,000				25,100				24,800
Casualty loss	64				1,245				755				600				400
Depreciation and amortization	61,747				74,157				74,157				90,452				90,452
Net operating income	$	85,366			$	109,900			$	111,400			$	117,800			$	119,000

 

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/centerspace-reports-third-quarter-2021-financial-results-and-increases-financial-outlook-301413324.html

SOURCE Centerspace

FAQ

What were Centerspace's earnings results for Q3 2021?

Centerspace reported a net loss of $(0.81) per diluted share for Q3 2021, down from a profit of $1.38 per diluted share in Q3 2020.

How did Core FFO perform in Q3 2021 for Centerspace?

Core FFO increased by 4.3% to $0.98 per diluted share in Q3 2021, compared to $0.94 in Q3 2020.

What is the updated earnings outlook for Centerspace in 2021?

The revised earnings outlook for 2021 is between $(0.36) and $(0.24) per diluted share.

What acquisition did Centerspace complete recently?

Centerspace completed a strategic acquisition of 14 communities, adding 2,696 apartment homes at an aggregate cost of $359.9 million.

How much did Centerspace's same-store revenues increase in Q3 2021?

Same-store revenues increased by 6.2% in Q3 2021 compared to Q3 2020.