D/b/a Centerspace · NYSE:CSR
D/b/a Centerspace — Centerspace — Investor Day (October 2023)
31 slides from D/b/a Centerspace's investor day presentation, Oct 4, 2023
Slide 1: Investor Day, Denver, CO, October 5, 2023
INVESTOR DAY Denver, CO | October 5, 2023 NOKO – Minneapolis, MN
Slide 2: Safe Harbor Statement and Legal Disclosure
2 SAFE HARBOR STATEMENT AND LEGAL DISCLOSURE Certain statements in this presentation are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual re
Slide 3: Our Mission and Vision
3 OUR MISSION To provide a great home— for our residents, our team members, and our investors. OUR VISION To be the premier provider of apartment homes in vibrant communities by focusing on integrity and serving others. 71 France – Edina, MN
Slide 4: Company Overview
4 1. Adjusted for Q3 2023 dispositions 2. See page 9 for total capitalization detail 12,785 Apartments owned and operated(1) $2.1 Billion Total capitalization(2) DIFFERENTIATED Multifamily Market Exposure KEY INDICES S&P SmallCap 600 MSCI US REIT Russell 2000 NYSE: CSR MNND SD NE CO MT Lyra – Centen
Slide 5: To Execute This, We Focus On
TO EXECUTE THIS, WE FOCUS ON: CENTERSPACE is guided by the north star of increasing distributable cash flow 5 Exceptional customer experience Diverse talent to enable a culture of engagement Enhancing efficiencies by scaling the business Managing the balance sheet to maximize financial flexibility I
Slide 6: RISE: Results, Innovation, Service, Engagement
6 It is how we monitor and measure our performance in our quest to provide a great home - for our residents, our team members, and our investors. R I RISE is Centerspace’s commitment to Results, Innovation, Service, and Engagement. E S Prosper West – Waite Park, MN
Slide 7: Same-Store Leasing Update
7 SAME-STORE LEASING UPDATE RESULTS – FAVORABLE LEASING TRENDS Note: Data represents 2023 Same Store Pool after Q3 2023 dispositions. Occupancy represents weighted average physical occupancy. Q3 2023 represents data as of October 2, 2023 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Occupancy 94.0% 94.5%
Slide 8: Results – NOI Composition and Rental Rate Growth
8 RESULTS – NOI COMPOSITION AND RENTAL RATE GROWTH 1. Q2 2023 adjusted for Q3 2023 dispositions 2. Year-to-date through September; data as of October 2, 2023 MARKET % OF MULTIFAMILY NOI(1) Minneapolis, MN 35.4% Denver, CO 23.8% North Dakota 11.3% Rochester, MN 9.6% Other Mountain West 8.9% Omaha, NE
Slide 9: Results – Balance Sheet Positioned for Growth
9 LOW MATURITIES THROUGH 2027(2) QUARTERLY NET DEBT / ANNUALIZED TRAILING EBITDA (1) RESULTS – BALANCE SHEET POSITIONED FOR GROWTH 1. Net debt is the total outstanding debt balance less cash and cash equivalents and net tax deferred exchange proceeds (included within restricted cash). Adjusted EBITD
Slide 10: Results – Balance Sheet Execution
10 RESULTS – BALANCE SHEET EXECUTION 2017 2Q 2023 DIFFERENCE (2Q 2023 VS 2017) Net Debt / EBITDA 9.7x 6.5x (3.2x) Weighted Average Years to Maturity 4.8 6.9 2.1 Weighted Average Interest Rate 4.5% 3.5% (1.0%) Civic Lofts – Denver, CO
Slide 11: Results – 2023 Financial Outlook
11 RESULTS – 2023 FINANCIAL OUTLOOK Q2 YTD 2023 2023 CURRENT GUIDANCE RANGE ACTUAL LOW MID-POINT HIGH SAME-STORE GROWTH Revenues 9.5% 6.50% 7.25% 8.00% Expenses 6.6% 4.00% 4.62% 5.25% NOI 11.6% 8.50% 9.25% 10.00% PER SHARE Net Income $2.55 $2.84 $3.24 $3.64 FFO $2.01 $4.14 $4.25 $4.35 Core FFO $2.36
Slide 12: Results – Attractive Valuation Relative to Private Market
12 RESULTS – ATTRACTIVE VALUATION RELATIVE TO PRIVATE MARKET Source: S&P Capital IQ Note: Stock price as of 10/2/2023 1. Based on Q2 2023 balance sheet adjusted for Q3 2023 dispositions Trading at ~25% discount to average analyst NAV per share ~$155,000 implied value per home at current share price(
Slide 13: Innovation – Approach to Investments and Dispositions
13 INNOVATION – APPROACH TO INVESTMENTS AND DISPOSITIONS DEMOGRAPHIC AND ECONOMIC CONSIDERATIONS MULTIFAMILY FUNDAMENTALS CONSIDERATIONS OTHER CONSIDERATIONS Population Trends Population Characteristics Labor Force Health Employment Economic Composition Rents Occupancy Market Size and Liquidity Supp
Slide 14: Innovation – Portfolio Improvement Since 2017
14 % of NOI by Market – Today vs 2017 INNOVATION – PORTFOLIO IMPROVEMENT SINCE 2017 1. Q2 2023 multifamily only, adjusted for Q3 2023 dispositions While a similar portfolio home count as 2017, investment and disposition activity has resulted in a more efficient and higher quality portfolio with impr
Slide 15: Innovation – Recent Capital Recycling (March 2023)
15 INNOVATION – RECENT CAPITAL RECYCLING CONTINUES UPGRADE OF PORTFOLIO QUALITY AND MARKET EXPOSURE MARCH 2023 DISPOSITIONS MINNEAPOLIS, MN; ST. CLOUD, MN; OMAHA, NE; LINCOLN, NE Communities 9 Homes 1,567 Avg. Monthly Rent/Home $1,002 Homes/Community 174 Avg Age (Years) 48 NOI Margin 38.8% SEPTEMBER
Slide 16: Innovation – Recent Capital Recycling (September 2023)
16 INNOVATION – RECENT CAPITAL RECYCLING CONTINUES UPGRADE OF PORTFOLIO QUALITY AND MARKET EXPOSURE SEPTEMBER 2023 DISPOSITIONS MINOT, ND Communities 4 Homes 712+ 50k SF office Avg. Monthly Rent/Home $1,071 Homes/Community 178 Avg Age (Years) 23 NOI Margin 59.0% PENDING ACQUISITION (UNDER CONTRACT)
Slide 17: Innovation – Geographic Differentiation
17 INNOVATION – GEOGRAPHIC DIFFERENTIATION Public Multifamily REIT Market Overview Source: S&P Global GEOGRAPHIC FOCUS (% OF UNITS) 24% 3% 5% 9% 6% 76% 21% 6% 44% 54% 4% 100% 28% 15% 32% 21% 5% 4% 86% 32% 70% 18% 72% 20% 79% 91% 19% 19% 7% 22% 11% 23% 5% 80% 3% 30% 20% 17% 17% 95% Mountain West Midw
Slide 18: Service – Technology Initiatives and Enhancements
18 SERVICE – TECHNOLOGY INITIATIVES AND ENHANCEMENTS OBJECTIVE Enable new opportunities Replace incumbent processes Build strategic solutions Enhance resident and team experience PATH FORWARD Modernize our technology Resident experience • Automation • Self Service on platform of choosing • Transpare
Slide 19: Service – Technology and Operating Platform Initiatives
19 SERVICE – TECHNOLOGY AND OPERATING PLATFORM INITIATIVES * BEGINNING MIDDLE END *Illuminate by Nancy Duarte and Patti Sanchez Beginning the journey Training in new methods and developing Standard Operating Procedures Starting to see initial results Accelerating knowledge Approaching steady state a
Slide 20: Service – Technology Implementation Case Studies
20 SERVICE – TECHNOLOGY IMPLEMENTATION CASE STUDIES Smart home solutions and connectivity platform that includes integrated smart locks, connected thermostats, leak sensors, and app access from resident smartphones granting in-home control Piloted at ten communities to date with positive results Pha
Slide 21: Engagement – ESG Highlights
21 ENGAGEMENT – ESG HIGHLIGHTS ENVIRONMENTAL SOCIAL GOVERNANCE Participated in the GRESB annual assessment to identify risks and opportunities and benchmark performance amongst real estate peers Implemented an Environmental Management System (EMS) aligned with ISP 14001 to gather, track, and improve
Slide 22: Key Takeaways
22 KEY TAKEAWAYS Differentiation Proven Execution Value
Slide 23: Historical Value Add Spend and Return on Investment
23 0 20 40 60 80 100 120 140 $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 2018 2019 2020 2021 2022 2023 Thru August 2018-2023 Value Add Spend Actual Spend 2023 Reforecast Achieved Premium U/W Cumulative Premium 1. Includes unit renovations, common area renova
Slide 24: Value Add Strategy
24 24% 39% FUTURE IDENTIFIED PIPELINE EXAMPLES PROPERTY PROJECT TYPE Martin Blu Common Area Palisades Common and Units River Pointe Common and Units Aqua Mizer Pilot ESG Smart Irrigation Pilot ESG EV Charging ESG Plymouth Pointe Common Area Dylan Common Area LED & Package Lockers ESG Recently Renova
Slide 25: Value Add Value Creation and Pipeline
25 VALUE ADD VALUE CREATION VALUE ADD PIPELINE (UNITS)(1) UNIT RENOVATIONS COMMON AREAS RENOVATIONS ($ IN MILLIONS) CURRENT IDENTIFIED PIPELINE CURRENT IDENTIFIED PIPELINE REMAINING SMART HOME PIPELINE TOTAL PROJECTS FOR LONGER TERM CONSIDERATION UNITS IMPACTED 4,166 1,531 5,998 25 properties 3,092
Slide 26: Lugano at Cherry Creek
26 LUGANO AT CHERRY CREEK Common Area Profile When We Started
Slide 27: Lugano at Cherry Creek Value Add Results
27 LUGANO AT CHERRY CREEK 1. Through August 31, 2023 2. March 2023-August 2023 198 apartment homes completed through September 2023 This is an occupied unit renovation where we are completing the work within a one-week period while residents are in the space Common area projects completed are commun
Slide 28: Thank You
THANK YOU! F or q u es t i on s p l ea s e c on t a c t : w w w . c e n t e r s p a c e h o m e s . c o m Westend – Denver, CO J o s h K l a e t s c h D i r e c t o r o f I n v e s t o r R e l a t i o ns j k l a e t s c h @c e nt er sp a ce h o me s.c o m
Slide 29: Reconciliation to Non-GAAP Measures
29 RECONCILIATION TO NON-GAAP MEASURES 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 inve
Slide 30: Reconciliation to Non-GAAP Measures
30 RECONCILIATION TO NON-GAAP MEASURES
Slide 31: Reconciliation to Non-GAAP Measures
31 RECONCILIATION TO NON-GAAP MEASURES Reconciliation of Net Income (Loss) Available to Common Shareholders to Adjusted EBITDA Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, gain or loss on sale of real estate and other investments, impairment of real estate investme