Centerspace Announces Financial and Operating Results for the Year Ended December 31, 2021 and Provides 2022 Financial Outlook; Dividend Increase

MINNEAPOLIS, Feb. 28, 2022 /PRNewswire/ -- Centerspace (NYSE: CSR) announced today its financial and operating results for the year ended December 31, 2021. The tables below show Net Income (Loss), Funds from Operations ("FFO")1, and Core FFO1, all on a per share basis, for the year ended December 31, 2021; Same-Store Revenues, Expenses, and Net Operating Income ("NOI")1 over comparable periods; and Same-Store Weighted Average Occupancy for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020 and the twelve months ended December 31, 2021 and 2020.

Highlights for the Year Ended December 31, 2021

• Net Loss was $(0.47) per diluted share for the year ended December 31, 2021, compared to Net Income of $(0.15) per diluted share for the year ended December 31, 2020;
• Core FFO increased to $3.99 or 5.8% per diluted share compared to $3.78 for the year ended December 31, 2020;
• Same-store revenue increased 4.8% driven by 5.1% growth in rental revenue and offset by a decrease of 0.3% in occupancy;
• Same-store operating expenses increased 4.8% year-over-year with a increase of 3.7% in same-store controllable expenses, and a increase of 6.7% in same-store non-controllable expenses;
• Same-store NOI growth of 4.8% for the year ended December 31, 2021;
• Same-store NOI growth of 6.4% from the third quarter of 2021;
• Continued to grow the portfolio through a strategic acquisition of 14 communities in Minneapolis, Minnesota and three communities in St. Cloud, Minnesota totaling 2,696 apartment homes for an aggregate purchase price of $359.9 million. Acquired two new apartment communities in Denver, Colorado consisting of 432 homes for an aggregate purchase price of $139.9 million;
• Sold five apartment communities consisting of 589 apartment homes in Rochester, Minnesota for an aggregate sale price of $60.0 million;
• Amended and expanded the Note Purchase Private Shelf Agreement to increase the aggregate amount under the agreement from $150.0 million to $225.0 million and issued $50.0 million of 2.7% unsecured Series C Notes due June 6, 2030;
• Issued $125.0 million of unsecured notes with a weighted average interest rate of 2.6% and weighted average maturity of 10.5 years;
• 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 1.8 million common shares at an average price of $86.13 per share for total consideration, net of commissions and issuance costs, of approximately $156.4 million in the year ended December 31, 2021.

Subsequent Events

Subsequent to December 31, 2021, Centerspace acquired a portfolio of three communities in the Minneapolis, Minnesota region totaling 267 apartment homes for an aggregate purchase price of $68.1 million. The company also acquired Noko Apartments in Minneapolis for an aggregate purchase price of $46.4 million. The company previously financed the construction and mezzanine loan.

On February 23, 2022 the company paid $3.3 million to terminate a $75.0 million interest rate swap and a $70.0 million forward swap.

Dividend Distributions

Centerspace's Board of Trustees announced a regular quarterly distribution of $0.73 per share/unit, payable on April 11, 2022, to common shareholders and unitholders of record at the close of business on March 31, 2022, which represents a $0.01 increase over the prior distribution.

The Board of Trustees also declared a distribution of $0.4140625 per share on the 6.625% Series C Cumulative Redeemable Preferred Shares (NYSE: CSR PRC), payable on March 31, 2022, to holders of record at the close of business on March 15, 2022. Series C preferred share distributions are cumulative and payable quarterly in arrears at an annual rate of $1.65625 per share.

Balance Sheet

At December 31, 2021, Centerspace had $204.8 million of total liquidity on its balance sheet, including $173.5 million available on its lines of credit.

2022 Financial Overview

Centerspace is providing the following guidance for its 2022 performance.

Additional assumptions:

• Same-store capital expenditures of $925 per home to $975 per home
• Value-add expenditures of $21.0 million to $24.0 million
• Investments of $114.5 million due to the January 2021 acquisitions of four communities in Minneapolis, Minnesota

FFO and Core FFO are non-GAAP financial measures. For more information on their usage and presentation, and a reconciliation to the most directly comparable GAAP measures, please refer to "2021 Financial Outlook" in the Supplemental Financial and Operating Data below.

Earnings Call

Supplemental Information

Supplemental Operating and Financial Data for the year ended December 31, 2021, is available in the Investors section on Centerspace's website at https://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 December 31, 2021, Centerspace owned 79 apartment communities consisting of 14,441 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 are based on the company's current expectations and assumptions, and are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Forward-looking statements are typically identified by the use of terms such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "will," "assumes," "may," "projects," "outlook," "future," and variations of such words and similar expressions. Forward-looking statements include the impact of a public health crisis, including the COVID-19 pandemic, and the governmental and third-party response to such a crisis, which may affect our key personnel, our tenants, and the costs of operating our assets; the impact of social distancing, shelter-in-place, travel restrictions, remote work requirements, and similar governmental and private measures taken to combat the spread of a public health crisis on our operations and our tenants. 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. Any statements contained herein that are not statements of historical fact should be deemed forward-looking statements. As a result, reliance should not be placed on these forward-looking statements, as these statements are subject to known and unknown risks, uncertainties, and other factors beyond the company's control and could differ materially from actual results and performance. Such risks and uncertainties are detailed from time to time in filings with the SEC, including the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" contained in the company's Annual Report on Form 10-K, in quarterly reports on Form 10-Q, and in other reports the company files with the SEC from time to time. 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
E-mail: IR@centerspacehomes.com

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

CENTERSPACE
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (unaudited)

This release contains certain non-GAAP financial measures. The non-GAAP financial measures should not be considered a substitute for operating results determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The definitions and calculations of these non-GAAP financial measures, as calculated by the company may not be comparable to non-GAAP 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 development properties, have achieved a target level of physical occupancy of 90%. On the first day of each calendar year, Centerspace determines the composition of the same-store pool for that year and adjusts the previous year, to evaluate full period-over-period operating comparisons for existing apartment communities and their contribution to net operating income. Measuring performance on a same-store basis allows investors to evaluate how a fixed pool of communities are performing year-over-year. Centerspace uses this measure to assess success in increasing NOI, renewing leases on existing residents, controlling operating costs, and making prudent capital improvements.

Reconciliation of Operating Income (Loss) to Net Operating Income

Net operating income, or NOI, is a non-GAAP financial measure which the company defines as total real estate revenues less property operating expenses, including real estate taxes. Centerspace believes that NOI is an important supplemental measure of operating performance for real estate because it provides a measure of operations that is unaffected by depreciation and amortization, financing costs, property management expenses, casualty losses, and general and administrative expenses. NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income, net income available for common shareholders, or cash flow from operating activities as a measure of financial performance.

Reconciliation of Same-Store Controllable Expenses to 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 and real estate taxes.

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 measurement used as a supplemental measure for equity real estate investment trusts, is helpful to investors in understanding 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 impairment write-downs and gains and losses from the sale of real estate assets 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 the definition. The company believes that all such interpretations not specifically provided for in the Nareit definition are consistent with the 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 the 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 needs, including the ability to service indebtedness or make distributions to shareholders.

Core Funds from Operations ("Core FFO"), a non-GAAP measure, is FFO 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 as 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 all cash needs, including the 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 that should not be considered a substitute for operating results determined in accordance with GAAP.

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 investments, gain or loss on extinguishment of debt, gain on litigation settlement, and gain/loss from involuntary conversion. Adjusted EBITDA is a non-GAAP financial measure and should not be considered a substitute for operating results determined in accordance with GAAP. The company considers Adjusted EBITDA to be an appropriate supplemental performance measure because it permits investors to view income from operations without the effect of depreciation, financing costs, or non-operating gains and losses.