Centerspace(CSR) - 2024 Q3 - Quarterly Results

Earnings Release Financial & Operating Highlights Centerspace reported a Q3 2024 net loss of $0.40 per diluted share, Core FFO of $1.18, 2.8% same-store NOI growth, and raised its 2024 Core FFO guidance Q3 & YTD 2024 Key Financial Metrics (Per Diluted Share) | Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $(0.40) | $0.41 | $(0.96) | $2.96 | | FFO | $1.01 | $1.15 | $3.40 | $3.15 | | Core FFO | $1.18 | $1.20 | $3.68 | $3.56 | Q3 2024 Same-Store Performance vs. Prior Periods | Same-Store Metric | Q3 2024 vs Q3 2023 | Q3 2024 vs Q2 2024 | YTD 2024 vs YTD 2023 | | :--- | :--- | :--- | :--- | | Revenues | 3.0% | —% | 3.3% | | Expenses | 3.2% | 5.8% | 2.0% | | NOI | 2.8% | (3.7)% | 4.2% | - Weighted average occupancy for the same-store portfolio remained stable at 95.3% in Q3 2024, up from 94.6% in Q3 2023[4] - The company raised the mid-point and narrowed the 2024 financial outlook for net loss and Core FFO per diluted share[5] - During Q3 2024, Centerspace issued approximately 1.5 million common shares for $105.1 million and used the proceeds to redeem all outstanding Series C preferred shares for $97.0 million, which carried a 6.625% distribution rate[5] Balance Sheet & Liquidity Centerspace maintained a solid liquidity position of $235.5 million at Q3 2024, comprising available lines of credit and cash equivalents - Total liquidity at the end of Q3 2024 stood at $235.5 million[7] Components of Liquidity (as of September 30, 2024) | Component | Amount (in millions) | | :--- | :--- | | Available under lines of credit | $221.0 | | Cash and cash equivalents | $14.5 | | Total Liquidity | $235.5 | Updated 2024 Financial Outlook Centerspace updated its 2024 financial outlook, raising the Core FFO per share midpoint to $4.82-$4.90 and narrowing same-store NOI growth to 3.25%-3.75% Updated Full-Year 2024 Guidance | Metric | Previous Outlook | Updated Outlook | | :--- | :--- | :--- | | Net income per Share – diluted | $(1.21) - $(1.01) | $(1.21) - $(1.06) | | Same-Store Revenue Growth | 3.25% - 4.25% | 3.00% - 3.50% | | Same-Store Expense Growth | 3.50% - 4.75% | 2.50% - 3.25% | | Same-Store NOI Growth | 3.00% - 4.00% | 3.25% - 3.75% | | Core FFO per Share – diluted | $4.78 - $4.92 | $4.82 - $4.90 | - Additional assumptions for 2024 include same-store recurring capital expenditures of $1,100 to $1,150 per home and value-add expenditures of $23.0 million to $25.0 million[9] Subsequent Events Centerspace acquired The Lydian in Denver, CO, for $54.0 million on October 1, 2024, financed by assumed debt, operating partnership units, and cash - On October 1, 2024, Centerspace acquired The Lydian in Denver, CO, for $54.0 million[10] - The acquisition was funded by assuming mortgage debt, issuing common operating partnership units, and using cash[10] Supplemental Financial and Operating Data Common Share Data Centerspace's common stock closed Q3 2024 at $70.47 with a 4.3% dividend yield, and total shares outstanding increased to 19.4 million Q3 2024 Common Share Performance (as of Sep 30, 2024) | Metric | Value | | :--- | :--- | | High closing price | $75.50 | | Low closing price | $67.04 | | Closing price at end of quarter | $70.47 | | Closing dividend yield – annualized | 4.3% | | Total closing common shares & units (thousands) | 19,415 | Key Financial Data This section presents unaudited consolidated statements of operations and balance sheets, detailing YTD 2024 revenues, net loss, and total assets Condensed Consolidated Statements of Operations Centerspace reported Q3 2024 revenue of $65.0 million and a net loss of $6.2 million, with YTD 2024 revenue at $194.6 million and a net loss of $14.6 million Statement of Operations Highlights (in thousands) | Line Item | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $65,025 | $64,568 | $194,574 | $197,241 | | Total Expenses | $58,675 | $58,408 | $176,380 | $179,746 | | Gain (loss) on sale of real estate | $0 | $11,235 | $(577) | $71,327 | | Net Income (Loss) Available to Common Shareholders | $(6,166) | $6,167 | $(14,581) | $44,661 | Condensed Consolidated Balance Sheets As of Q3 2024, Centerspace's total assets were $1.89 billion and total liabilities $982.3 million, with Series C Preferred Shares redeemed during the quarter Balance Sheet Highlights (in thousands) | Line Item | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total real estate investments, net | $1,834,080 | $1,889,443 | | Cash and cash equivalents | $14,453 | $8,630 | | Total Assets | $1,887,405 | $1,926,361 | | Total Liabilities | $982,266 | $978,776 | | Series C Preferred Shares | $0 | $93,530 | | Total Equity | $888,579 | $931,025 | Non-GAAP Financial Measures and Reconciliations This section reconciles key non-GAAP metrics like NOI, FFO, Core FFO, and Adjusted EBITDA, used to evaluate core operational performance Net Operating Income (NOI) Q3 2024 total NOI increased 1.4% to $38.4 million, driven by a 2.8% rise in same-store NOI, which grew 4.2% year-to-date Same-Store NOI Performance | Period | Revenue Growth | Expense Growth | NOI Growth | | :--- | :--- | :--- | :--- | | Q3 2024 vs Q3 2023 | 3.0% | 3.2% | 2.8% | | YTD 2024 vs YTD 2023 | 3.3% | 2.0% | 4.2% | Same-Store Controllable Expenses Q3 2024 same-store property operating expenses increased 3.2% year-over-year, primarily due to a 7.6% rise in non-controllable expenses, while controllable expenses grew 0.8% Q3 2024 vs Q3 2023 Same-Store Expense Growth | Expense Category | % Change YoY | | :--- | :--- | | Controllable Expenses | 0.8% | | Non-controllable Expenses | 7.6% | | - Real estate taxes | 1.1% | | - Insurance | 26.5% | | Total Same-Store Expenses | 3.2% | Funds From Operations (FFO) and Core FFO Q3 2024 FFO per diluted share was $1.01 and Core FFO was $1.18, with year-to-date Core FFO increasing 3.4% to $3.68 FFO and Core FFO Reconciliation Highlights (Per Diluted Share) | Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $(0.40) | $0.41 | $(0.96) | $2.96 | | FFO | $1.01 | $1.15 | $3.40 | $3.15 | | Core FFO | $1.18 | $1.20 | $3.68 | $3.56 | Adjusted EBITDA Adjusted EBITDA for Q3 2024 was $31.8 million, a slight increase from Q3 2023, with year-to-date Adjusted EBITDA at $97.2 million Adjusted EBITDA Performance (in thousands) | Period | Adjusted EBITDA | | :--- | :--- | | Q3 2024 | $31,757 | | Q3 2023 | $31,692 | | YTD 2024 | $97,178 | | YTD 2023 | $96,773 | Debt and Capital Analysis This section details Centerspace's debt structure and capital position, showing $921.3 million in total debt at 3.59% weighted average interest and stable credit metrics Debt Analysis As of Q3 2024, Centerspace had $921.3 million in total debt at a 3.59% weighted average interest rate, with a well-structured maturity profile extending beyond 2028 - Total debt outstanding as of Q3 2024 was $921.3 million, with a weighted average interest rate of 3.59%[35][36] - The company has a staggered debt maturity profile, with 63.8% of its debt maturing in 2029 or later[35] Capital Analysis At Q3 2024, Centerspace's total market capitalization was $2.31 billion, with a moderate leverage profile and a Core FFO payout ratio of 63.6% Key Capital & Credit Metrics (as of Sep 30, 2024) | Metric | Value | | :--- | :--- | | Total Market Capitalization | $2.31 billion | | Total Debt to Total Market Capitalization | 40.0% | | Net Debt / Adjusted EBITDA | 7.17x | | Payout Ratio (Core FFO basis) | 63.6% | Portfolio Analysis This section details Centerspace's portfolio performance, highlighting 2.8% Q3 same-store NOI growth, 95.3% occupancy, and $42.6 million in year-to-date capital expenditures Same-Store Comparisons Q3 2024 same-store NOI grew 2.8% year-over-year, led by North Dakota's 10.6% growth, though sequential NOI decreased 3.7% due to higher expenses Q3 2024 vs Q3 2023 Same-Store NOI Growth by Region | Region | % of NOI Contribution | NOI % Change YoY | | :--- | :--- | :--- | | Denver, CO | 23.0% | 0.2% | | Minneapolis, MN | 34.4% | 2.5% | | North Dakota | 12.6% | 10.6% | | Omaha, NE | 5.9% | 6.2% | | Same-Store Total | 100.0% | 2.8% | - Sequentially, same-store NOI decreased by 3.7% from Q2 2024 to Q3 2024, as revenues were flat while expenses increased by 5.8%[45] - For the first nine months of 2024, same-store NOI increased by 4.2% compared to the same period in 2023[48] Portfolio Summary As of Q3 2024, Centerspace's portfolio comprised 12,883 homes with 95.3% weighted average occupancy and an average monthly rental rate of $1,577 Portfolio Metrics (All Communities, as of Sep 30, 2024) | Metric | Value | | :--- | :--- | | Number of Apartment Homes | 12,883 | | Weighted Average Occupancy | 95.3% | | Average Monthly Rental Rate | $1,577 | | Average Monthly Revenue per Occupied Home | $1,750 | Capital Expenditures Year-to-date Q3 2024 capital expenditures totaled $42.6 million, including $10.3 million in recurring and $20.6 million in value-add investments for the same-store portfolio Capital Expenditures - YTD 2024 (in thousands) | Category (Same-Store) | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | | Recurring Capital Expenditures | $10,316 | $8,684 | | Total Value Add | $20,608 | $15,478 | | Total Same-Store Capital Spend | $30,924 | $24,162 | - Year-to-date recurring capital expenditures for the same-store portfolio were $820 per apartment home, up from $690 in the prior year period[52] 2024 Financial Outlook Centerspace updated its 2024 financial outlook, raising Core FFO per diluted share guidance to $4.82-$4.90 and same-store NOI growth to 3.25%-3.75% Updated 2024 Full-Year Guidance Ranges | Metric | Updated Low | Updated High | | :--- | :--- | :--- | | Same-Store Revenue Growth | 3.00% | 3.50% | | Same-Store Total Expense Growth | 2.50% | 3.25% | | Same-Store NOI Growth | 3.25% | 3.75% | | FFO per diluted share | $4.50 | $4.59 | | Core FFO per diluted share | $4.82 | $4.90 | - The updated outlook for Net Loss per share is now $(1.21) to $(1.06)[56] Non-GAAP Financial Measures and Other Terms This section defines key non-GAAP financial measures and operational terms, explaining their calculation and utility for evaluating company performance - Defines key non-GAAP metrics including Adjusted EBITDA, FFO, Core FFO, and NOI, explaining their calculation and utility for investors[60][66][73] - Provides definitions for operational terms such as Average Monthly Rental Rate, Blended Lease Rate Growth, and Weighted Average Occupancy[61][63][84] - Explains the components of capital expenditures, distinguishing between Recurring Capital Expenditures and Value Add investments[78][83]