QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
(Address of principal executive offices) | (Zip code) |
☑ | No | ☐ |
☑ | No | ☐ |
☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | |||||||||||||
Smaller Reporting Company | Emerging growth company |
Yes | No | ☑ |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Page | |||||
(in thousands, except per share data) | |||||||||||
June 30, 2022 | December 31, 2021 | ||||||||||
ASSETS | |||||||||||
Real estate investments | |||||||||||
Property owned | $ | $ | |||||||||
Less accumulated depreciation | ( | ( | |||||||||
Mortgage loans receivable at fair value | |||||||||||
Total real estate investments | |||||||||||
Cash and cash equivalents | |||||||||||
Restricted cash | |||||||||||
Other assets | |||||||||||
TOTAL ASSETS | $ | $ | |||||||||
LIABILITIES, MEZZANINE EQUITY, AND EQUITY | |||||||||||
LIABILITIES | |||||||||||
Accounts payable and accrued expenses | $ | $ | |||||||||
Revolving lines of credit | |||||||||||
Notes payable, net of unamortized loan costs of $ | |||||||||||
Mortgages payable, net of unamortized loan costs of $ | |||||||||||
TOTAL LIABILITIES | $ | $ | |||||||||
COMMITMENTS AND CONTINGENCIES (NOTE 10) | |||||||||||
SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $ | $ | $ | |||||||||
EQUITY | |||||||||||
Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, $ | |||||||||||
Common Shares of Beneficial Interest (Unlimited authorization, no par value, | |||||||||||
Accumulated distributions in excess of net income | ( | ( | |||||||||
Accumulated other comprehensive income (loss) | ( | ( | |||||||||
Total shareholders’ equity | $ | $ | |||||||||
Noncontrolling interests – Operating Partnership and Series E preferred units | |||||||||||
Noncontrolling interests – consolidated real estate entities | |||||||||||
Total equity | $ | $ | |||||||||
TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY | $ | $ |
(in thousands, except per share data) | |||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
REVENUE | $ | $ | $ | $ | |||||||||||||||||||
EXPENSES | |||||||||||||||||||||||
Property operating expenses, excluding real estate taxes | |||||||||||||||||||||||
Real estate taxes | |||||||||||||||||||||||
Property management expense | |||||||||||||||||||||||
Casualty (gain) loss | ( | ||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
General and administrative expenses | |||||||||||||||||||||||
TOTAL EXPENSES | $ | $ | $ | $ | |||||||||||||||||||
Gain (loss) on sale of real estate and other investments | |||||||||||||||||||||||
Operating income (loss) | ( | ||||||||||||||||||||||
Interest expense | ( | ( | ( | ( | |||||||||||||||||||
Interest and other income (loss) | ( | ||||||||||||||||||||||
NET INCOME (LOSS) | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Dividends to Series D preferred unitholders | ( | ( | ( | ( | |||||||||||||||||||
Net (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units | ( | ( | |||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities | ( | ( | ( | ( | |||||||||||||||||||
Net income (loss) attributable to controlling interests | ( | ( | |||||||||||||||||||||
Dividends to preferred shareholders | ( | ( | ( | ( | |||||||||||||||||||
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | ( | $ | $ | ( | $ | |||||||||||||||||
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC | $ | ( | $ | $ | ( | $ | |||||||||||||||||
NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED | $ | ( | $ | $ | ( | $ |
(in thousands) | |||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net income (loss) | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Other comprehensive income: | |||||||||||||||||||||||
Unrealized gain (loss) from derivative instrument | ( | ||||||||||||||||||||||
(Gain) loss on derivative instrument reclassified into earnings | |||||||||||||||||||||||
Total comprehensive income (loss) | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Net comprehensive (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units | ( | ( | |||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities | ( | ( | ( | ( | |||||||||||||||||||
Comprehensive income (loss) attributable to controlling interests | $ | ( | $ | $ | ( | $ |
(in thousands, except per share data) | ||||||||||||||||||||||||||||||||||||||
Six Months Ended June 30, 2021 | PREFERRED SHARES | NUMBER OF COMMON SHARES | COMMON SHARES | ACCUMULATED DISTRIBUTIONS IN EXCESS OF NET INCOME | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | NONCONTROLLING INTERESTS | TOTAL EQUITY | |||||||||||||||||||||||||||||||
Balance December 31, 2020 | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||
Net income (loss) attributable to controlling interests and noncontrolling interests | ||||||||||||||||||||||||||||||||||||||
Change in fair value of derivatives | ||||||||||||||||||||||||||||||||||||||
Distributions - common shares and units ($ | ( | ( | ( | |||||||||||||||||||||||||||||||||||
Distributions – Series C preferred shares ($ | ( | ( | ||||||||||||||||||||||||||||||||||||
Share-based compensation, net of forfeitures | ||||||||||||||||||||||||||||||||||||||
Sale of common shares, net | ||||||||||||||||||||||||||||||||||||||
Redemption of units for common shares | ( | |||||||||||||||||||||||||||||||||||||
Change in redemption value of Series D preferred units | ( | ( | ||||||||||||||||||||||||||||||||||||
Other | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
Balance June 30, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||
Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||
Balance December 31, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||
Net income (loss) attributable to controlling interests and noncontrolling interests | ( | ( | ( | |||||||||||||||||||||||||||||||||||
Change in fair value of derivatives | ||||||||||||||||||||||||||||||||||||||
Distributions - common shares and units ($ | ( | ( | ( | |||||||||||||||||||||||||||||||||||
Distributions – Series C preferred shares ($ | ( | ( | ||||||||||||||||||||||||||||||||||||
Distributions - Series E preferred units ($ | ( | ( | ||||||||||||||||||||||||||||||||||||
Share-based compensation, net of forfeitures | ||||||||||||||||||||||||||||||||||||||
Sale of common shares, net | ||||||||||||||||||||||||||||||||||||||
Issuance of units | ||||||||||||||||||||||||||||||||||||||
Redemption of units for common shares | ( | |||||||||||||||||||||||||||||||||||||
Redemption of units for cash | ( | ( | ||||||||||||||||||||||||||||||||||||
Change in redemption value of Series D preferred units | ||||||||||||||||||||||||||||||||||||||
Shares withheld for taxes | ( | ( | ||||||||||||||||||||||||||||||||||||
Other | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
Balance June 30, 2022 | $ | $ | $ | ( | $ | ( | $ | $ |
(in thousands, except per share data) | ||||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2021 | PREFERRED SHARES | NUMBER OF COMMON SHARES | COMMON SHARES | ACCUMULATED DISTRIBUTIONS IN EXCESS OF NET INCOME | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | NONCONTROLLING INTERESTS | TOTAL EQUITY | |||||||||||||||||||||||||||||||
Balance March 31, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||
Net income (loss) attributable to controlling interests and noncontrolling interests | ||||||||||||||||||||||||||||||||||||||
Change in fair value of derivatives | ||||||||||||||||||||||||||||||||||||||
Distributions - common shares and units ($ | ( | ( | ( | |||||||||||||||||||||||||||||||||||
Distributions – Series C preferred shares ($ | ( | ( | ||||||||||||||||||||||||||||||||||||
Share-based compensation, net of forfeitures | ||||||||||||||||||||||||||||||||||||||
Sale of common shares, net | ||||||||||||||||||||||||||||||||||||||
Redemption of units for common shares | ( | |||||||||||||||||||||||||||||||||||||
Change in redemption value of Series D preferred units | ( | ( | ||||||||||||||||||||||||||||||||||||
Other | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
Balance June 30, 2021 | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||
Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||
Balance March 31, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||
Net income (loss) attributable to controlling interests and noncontrolling interests | ( | ( | ( | |||||||||||||||||||||||||||||||||||
Change in fair value of derivatives | ||||||||||||||||||||||||||||||||||||||
Distributions - common shares and units ($ | ( | ( | ( | |||||||||||||||||||||||||||||||||||
Distributions – Series C preferred shares ($ | ( | ( | ||||||||||||||||||||||||||||||||||||
Distributions - Series E preferred units ($ | ( | ( | ||||||||||||||||||||||||||||||||||||
Share-based compensation, net of forfeitures | ||||||||||||||||||||||||||||||||||||||
Redemption of units for common shares | ( | |||||||||||||||||||||||||||||||||||||
Redemption of units for cash | ( | ( | ||||||||||||||||||||||||||||||||||||
Change in redemption value of Series D preferred units | ||||||||||||||||||||||||||||||||||||||
Other | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
Balance June 30, 2022 | $ | $ | $ | ( | $ | ( | $ | $ |
(in thousands) | |||||||||||
Six Months Ended June 30, | |||||||||||
2022 | 2021 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
Net income (loss) | $ | ( | $ | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
Depreciation and amortization, including amortization of capitalized loan costs | |||||||||||
(Gain) loss on sale of real estate and other investments | ( | ||||||||||
Share-based compensation expense | |||||||||||
(Gain) loss on interest rate swap termination, amortization, and mark-to-market | ( | ||||||||||
Other, net | |||||||||||
Changes in other assets and liabilities: | |||||||||||
Other assets | ( | ||||||||||
Accounts payable and accrued expenses | ( | ( | |||||||||
Net cash provided by (used by) operating activities | $ | $ | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
Increase in mortgages and notes receivable | ( | ||||||||||
Proceeds from sale of real estate and other investments | |||||||||||
Payments for acquisitions of real estate investments | ( | ( | |||||||||
Payments for improvements of real estate investments | ( | ( | |||||||||
Other investing activities | ( | ( | |||||||||
Net cash provided by (used by) investing activities | $ | ( | $ | ( | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
Principal payments on mortgages payable | ( | ( | |||||||||
Proceeds from revolving lines of credit | |||||||||||
Principal payments on revolving lines of credit | ( | ( | |||||||||
Net proceeds from notes payable | |||||||||||
Payment for termination of interest rate swap | ( | ||||||||||
Net proceeds from issuance of common shares | |||||||||||
Redemption of partnership units | ( | ||||||||||
Distributions paid to common shareholders | ( | ( | |||||||||
Distributions paid to preferred shareholders | ( | ( | |||||||||
Distributions paid to preferred unitholders | ( | ( | |||||||||
Distributions paid to noncontrolling interests – Operating Partnership and Series E preferred units | ( | ( | |||||||||
Other financing activities | ( | ( | |||||||||
Net cash provided by (used by) financing activities | $ | ( | $ | ||||||||
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | ( | ||||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | |||||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | $ |
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | |||||||||||
Accrued capital expenditures | $ | $ | |||||||||
Operating partnership units converted to shares | ( | ||||||||||
Distributions declared but not paid to common shareholders | |||||||||||
Retirement of shares withheld for taxes | |||||||||||
Real estate assets acquired through assumption of debt | |||||||||||
Fair value adjustment to debt | |||||||||||
Note receivable exchanged through real estate acquisition | |||||||||||
Real estate assets acquired through issuance of operating partnership units | |||||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |||||||||||
Cash paid for interest | $ | $ |
(in thousands) | |||||||||||||||||
Balance sheet description | June 30, 2022 | December 31, 2021 | June 30, 2021 | ||||||||||||||
Cash and cash equivalents | $ | $ | $ | ||||||||||||||
Restricted cash | |||||||||||||||||
Total cash, cash equivalents and restricted cash | $ | $ | $ |
(in thousands) | ||||||||
2022 (remainder) | $ | |||||||
2023 | ||||||||
2024 | ||||||||
2025 | ||||||||
2026 | ||||||||
Thereafter | ||||||||
Total scheduled lease income - commercial operating leases | $ |
(in thousands) | |||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
Revenue Stream | Applicable Standard | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||
Fixed lease income - operating leases | Leases | $ | $ | $ | $ | ||||||||||||||||||
Variable lease income - operating leases | Leases | ||||||||||||||||||||||
Other property revenue | Revenue from contracts with customers | ||||||||||||||||||||||
Total revenue | $ | $ | $ | $ |
(in thousands, except per share data) | |||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
NUMERATOR | |||||||||||||||||||||||
Net income (loss) attributable to controlling interests | $ | ( | $ | $ | ( | $ | |||||||||||||||||
Dividends to preferred shareholders | ( | ( | ( | ( | |||||||||||||||||||
Numerator for basic earnings (loss) per share – net income available to common shareholders | ( | ( | |||||||||||||||||||||
Noncontrolling interests – Operating Partnership and Series E preferred units | ( | ( | |||||||||||||||||||||
Dividends to preferred unitholders | |||||||||||||||||||||||
Numerator for diluted earnings (loss) per share | $ | ( | $ | $ | ( | $ | |||||||||||||||||
DENOMINATOR | |||||||||||||||||||||||
Denominator for basic earnings per share weighted average shares | |||||||||||||||||||||||
Effect of redeemable operating partnership units | |||||||||||||||||||||||
Effect of Series D preferred units | |||||||||||||||||||||||
Effect of dilutive restricted stock units and stock options | |||||||||||||||||||||||
Denominator for diluted earnings per share | |||||||||||||||||||||||
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC | $ | ( | $ | $ | ( | $ | |||||||||||||||||
NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED | $ | ( | $ | $ | ( | $ |
(in thousands) | |||||||||||
Three Months Ended June 30, | Number of Units | Net Book Basis | |||||||||
2022 | $ | ( | |||||||||
2021 | $ | ||||||||||
Six Months Ended June 30, | |||||||||||
2022 | $ | ||||||||||
2021 | $ |
(in thousands, except per Unit data) | |||||||||||||||||
Three Months Ended June 30, | Number of Units | Aggregate Cost | Average Price Per Unit | ||||||||||||||
2022 | $ | $ | |||||||||||||||
Six Months Ended June 30, | |||||||||||||||||
2022 | $ | $ | |||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||
Three Months Ended June 30, | Number of Common Shares | Net Consideration(1) | Average Net Price Per Share | ||||||||||||||
2022 | $ | $ | |||||||||||||||
2021 | $ | $ | |||||||||||||||
Six Months Ended June 30, | |||||||||||||||||
2022 | $ | $ | |||||||||||||||
2021 | $ | $ |
(in thousands) | ||||||||||||||
Amount | Maturity Date | Interest Rate | ||||||||||||
Series A | $ | September 13, 2029 | % | |||||||||||
Series B | $ | September 30, 2028 | % | |||||||||||
Series C | $ | June 6, 2030 | % | |||||||||||
Series 2021-A | $ | September 17, 2030 | % | |||||||||||
Series 2021-B | $ | September 17, 2031 | % | |||||||||||
Series 2021-C | $ | September 17, 2032 | % | |||||||||||
Series 2021-D | $ | September 17, 2034 | % |
(in thousands) | |||||||||||
June 30, 2022 | December 31, 2021 | Weighted Average Maturity in Years at June 30, 2022 | |||||||||
Lines of credit | $ | $ | |||||||||
Unsecured senior notes (1) | |||||||||||
Unsecured debt | |||||||||||
Mortgages payable - Fannie Mae credit facility | |||||||||||
Mortgages payable - other | |||||||||||
Total debt | $ | $ | |||||||||
Weighted average interest rate on lines of credit (rate with swap)(2) | % | % | |||||||||
Weighted average interest rate on unsecured senior notes | % | % | |||||||||
Weighted average interest rate on mortgages payable - Fannie Mae credit facility | % | % | |||||||||
Weighted average interest rate on mortgages payable - other | % | % | |||||||||
Weighted average interest rate on total debt | % | % |
(in thousands) | |||||
2022 (remainder) | $ | ||||
2023 | |||||
2024 | |||||
2025 | |||||
2026 | |||||
Thereafter | |||||
Total payments | $ |
(in thousands) | |||||||||||||||||
June 30, 2022 | December 31, 2021 | ||||||||||||||||
Balance Sheet Location | Fair Value | Fair Value | |||||||||||||||
Total derivative instruments designated as hedging instruments - interest rate swaps | Accounts Payable and Accrued Expenses | $ | $ | ||||||||||||||
Total derivative instruments not designated as hedging instruments - interest rate swaps | Accounts Payable and Accrued Expenses | $ | $ |
(in thousands) | |||||||||||||||||||||||||||||
Gain (Loss) Recognized in OCI | Location of Gain (Loss) Reclassified from Accumulated OCI into Income | Gain (Loss) Reclassified from Accumulated OCI into Income | |||||||||||||||||||||||||||
Three months ended June 30, | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
Total derivatives in cash flow hedging relationships - Interest rate contracts | $ | $ | ( | Interest expense | $ | ( | $ | ( | |||||||||||||||||||||
Six months ended June 30, | |||||||||||||||||||||||||||||
Total derivatives in cash flow hedging relationships - Interest rate contracts | $ | $ | Interest expense | $ | ( | $ | ( |
(in thousands) | |||||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
June 30, 2022 | |||||||||||||||||||||||
Assets | |||||||||||||||||||||||
Notes receivable | $ | $ | |||||||||||||||||||||
December 31, 2021 | |||||||||||||||||||||||
Assets | |||||||||||||||||||||||
Mortgages and notes receivable | $ | $ | |||||||||||||||||||||
Liabilities | |||||||||||||||||||||||
Derivative instruments - interest rate swaps | $ | $ | $ |
(in thousands) | |||||||||||||||||||||||
Fair Value Measurement at June 30, | Other Gains (Losses) | Interest Income | Total Changes in Fair Value Included in Current-Period Earnings | ||||||||||||||||||||
Six months ended June 30, 2022 | |||||||||||||||||||||||
Notes receivable | $ | $ | $ | $ | |||||||||||||||||||
Six months ended June 30, 2021 | |||||||||||||||||||||||
Mortgage loans and notes receivable | $ | $ | $ | $ |
(in thousands) | |||||||||||||||||||||||
June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||||
FINANCIAL ASSETS | |||||||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
Restricted cash | $ | $ | $ | $ | |||||||||||||||||||
FINANCIAL LIABILITIES | |||||||||||||||||||||||
Revolving lines of credit(1) | $ | $ | $ | $ | |||||||||||||||||||
Unsecured senior notes | $ | $ | $ | $ | |||||||||||||||||||
Mortgages payable - Fannie Mae | $ | $ | $ | $ | |||||||||||||||||||
Mortgages payable - other | $ | $ | $ | $ |
Date Acquired | (in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Acquisition Cost | Form of Consideration | Investment Allocation | |||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Cash | Units(1) | Other(2) | Land | Building | Intangible Assets | Other(3) | ||||||||||||||||||||||||||||||||||||||||||||||
January 4, 2022 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||
January 4, 2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
January 4, 2022 | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
January 26, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Acquisitions | $ | $ | $ | $ | $ | $ | $ | $ | ( |
Date Acquired | (in thousands) | ||||||||||||||||||||||||||||||||||||||||
Total Acquisition Cost | Form of Consideration | Investment Allocation | |||||||||||||||||||||||||||||||||||||||
Acquisitions | Cash | Land | Building | Intangible Assets | |||||||||||||||||||||||||||||||||||||
January 6, 2021 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Dispositions | Date Disposed | Sale Price | Book Value and Sales Cost | Gain/(Loss) | |||||||||||||||||||
Multifamily | |||||||||||||||||||||||
May 25, 2021 | $ | $ | $ | ||||||||||||||||||||
May 25, 2021 | |||||||||||||||||||||||
May 25, 2021 | |||||||||||||||||||||||
May 25, 2021 | |||||||||||||||||||||||
May 25, 2021 | |||||||||||||||||||||||
Total Dispositions | $ | $ | $ |
(in thousands) | |||||||||||||||||
Three Months Ended June 30, 2022 | Multifamily | All Other | Total | ||||||||||||||
Revenue | $ | $ | $ | ||||||||||||||
Property operating expenses, including real estate taxes | |||||||||||||||||
Net operating income | $ | $ | $ | ||||||||||||||
Property management | ( | ||||||||||||||||
Casualty gain (loss) | ( | ||||||||||||||||
Depreciation and amortization | ( | ||||||||||||||||
General and administrative expenses | ( | ||||||||||||||||
Gain (loss) on sale of real estate and other investments | |||||||||||||||||
Interest expense | ( | ||||||||||||||||
Interest and other income | ( | ||||||||||||||||
Net income (loss) | $ | ( |
(in thousands) | |||||||||||||||||
Three Months Ended June 30, 2021 | Multifamily | All Other | Total | ||||||||||||||
Revenue | $ | $ | $ | ||||||||||||||
Property operating expenses, including real estate taxes | |||||||||||||||||
Net operating income | $ | $ | $ | ||||||||||||||
Property management | ( | ||||||||||||||||
Casualty gain (loss) | |||||||||||||||||
Depreciation and amortization | ( | ||||||||||||||||
General and administrative expenses | ( | ||||||||||||||||
Gain (loss) on sale of real estate and other investments | |||||||||||||||||
Interest expense | ( | ||||||||||||||||
Interest and other income | |||||||||||||||||
Net income (loss) | $ |
(in thousands) | |||||||||||||||||
Six Months Ended June 30, 2022 | Multifamily | All Other | Total | ||||||||||||||
Revenue | $ | $ | $ | ||||||||||||||
Property operating expenses, including real estate taxes | |||||||||||||||||
Net operating income | $ | $ | $ | ||||||||||||||
Property management expenses | ( | ||||||||||||||||
Casualty gain (loss) | ( | ||||||||||||||||
Depreciation and amortization | ( | ||||||||||||||||
General and administrative expenses | ( | ||||||||||||||||
Gain (loss) on sale of real estate and other investments | |||||||||||||||||
Interest expense | ( | ||||||||||||||||
Interest and other income | |||||||||||||||||
Net income (loss) | $ | ( |
(in thousands) | |||||||||||||||||
Six Months Ended June 30, 2021 | Multifamily | All Other | Total | ||||||||||||||
Revenue | $ | $ | $ | ||||||||||||||
Property operating expenses, including real estate taxes | |||||||||||||||||
Net operating income | $ | $ | $ | ||||||||||||||
Property management expenses | ( | ||||||||||||||||
Casualty gain (loss) | ( | ||||||||||||||||
Depreciation and amortization | ( | ||||||||||||||||
General and administrative expenses | ( | ||||||||||||||||
Gain (loss) on sale of real estate and other investments | |||||||||||||||||
Interest expense | ( | ||||||||||||||||
Interest and other income | |||||||||||||||||
Net income (loss) | $ |
(in thousands) | |||||||||||||||||
As of June 30, 2022 | Multifamily | All Other | Total | ||||||||||||||
Segment assets | |||||||||||||||||
Property owned | $ | $ | $ | ||||||||||||||
Less accumulated depreciation | ( | ( | ( | ||||||||||||||
Total property owned | $ | $ | $ | ||||||||||||||
Cash and cash equivalents | |||||||||||||||||
Restricted cash | |||||||||||||||||
Other assets | |||||||||||||||||
Total Assets | $ |
(in thousands) | |||||||||||||||||
As of December 31, 2021 | Multifamily | All Other | Total | ||||||||||||||
Segment assets | |||||||||||||||||
Property owned | $ | $ | $ | ||||||||||||||
Less accumulated depreciation | ( | ( | ( | ||||||||||||||
Total property owned | $ | $ | $ | ||||||||||||||
Mortgage loans receivable | |||||||||||||||||
Cash and cash equivalents | |||||||||||||||||
Restricted cash | |||||||||||||||||
Other assets | |||||||||||||||||
Total Assets | $ |
2022 | |||||
Exercise price | $ | ||||
Risk-free rate | % | ||||
Expected term | |||||
Expected volatility | % | ||||
Dividend yield | % |
(in thousands, except percentages) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | 2022 | 2021 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
Operating income (loss) | $ | 3,835 | $ | 29,573 | $ | (25,738) | (87.0) | % | $ | (76) | $ | 31,214 | $ | (31,290) | (100.2) | % | ||||||||||||||||||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Property management expenses | 2,721 | 2,085 | 636 | 30.5 | % | 4,974 | 3,852 | 1,122 | 29.1 | % | ||||||||||||||||||||||||||||||||||||||||
Casualty (gain) loss | 382 | (27) | 409 | * | 980 | 74 | 906 | * | ||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 24,768 | 19,308 | 5,460 | 28.3 | % | 55,769 | 39,300 | 16,469 | 41.9 | % | ||||||||||||||||||||||||||||||||||||||||
General and administrative expenses | 5,221 | 3,797 | 1,424 | 37.5 | % | 9,721 | 7,703 | 2,018 | 26.2 | % | ||||||||||||||||||||||||||||||||||||||||
Gain (loss) on sale of real estate and other investments | (27) | (26,840) | 26,813 | (99.9) | % | (27) | (26,840) | 26,813 | (99.9) | % | ||||||||||||||||||||||||||||||||||||||||
Net operating income | $ | 36,900 | $ | 27,896 | $ | 9,004 | 32.3 | % | $ | 71,341 | $ | 55,303 | $ | 16,038 | 29.0 | % |
(in thousands, except percentages) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | $ Change | % Change | 2022 | 2021 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
Same-store | $ | 48,867 | $ | 43,762 | $ | 5,105 | 11.7 | % | $ | 95,758 | $ | 86,956 | $ | 8,802 | 10.1 | % | ||||||||||||||||||||||||||||||||||
Non-same-store | 13,334 | 1,195 | 12,139 | 1,015.8 | % | 25,841 | 2,242 | 23,599 | 1,052.6 | % | ||||||||||||||||||||||||||||||||||||||||
Other | 915 | 664 | 251 | 37.8 | % | 1,831 | 1,332 | 499 | 37.5 | % | ||||||||||||||||||||||||||||||||||||||||
Dispositions | — | 1,035 | (1,035) | (100.0) | % | — | 2,774 | (2,774) | (100.0) | % | ||||||||||||||||||||||||||||||||||||||||
Total | 63,116 | 46,656 | 16,460 | 35.3 | % | 123,430 | 93,304 | 30,126 | 32.3 | % | ||||||||||||||||||||||||||||||||||||||||
Property operating expenses, including real estate taxes | ||||||||||||||||||||||||||||||||||||||||||||||||||
Same-store | 19,700 | 17,610 | 2,090 | 11.9 | % | 38,915 | 35,140 | 3,775 | 10.7 | % | ||||||||||||||||||||||||||||||||||||||||
Non-same-store | 6,286 | 357 | 5,929 | 1,660.8 | % | 12,614 | 701 | 11,913 | 1,699.4 | % | ||||||||||||||||||||||||||||||||||||||||
Other | 230 | 258 | (28) | (10.9) | % | 560 | 521 | 39 | 7.5 | % | ||||||||||||||||||||||||||||||||||||||||
Dispositions | — | 535 | (535) | (100.0) | % | — | 1,639 | (1,639) | (100.0) | % | ||||||||||||||||||||||||||||||||||||||||
Total | 26,216 | 18,760 | 7,456 | 39.7 | % | 52,089 | 38,001 | 14,088 | 37.1 | % | ||||||||||||||||||||||||||||||||||||||||
Net operating income | ||||||||||||||||||||||||||||||||||||||||||||||||||
Same-store | 29,167 | 26,152 | 3,015 | 11.5 | % | 56,843 | 51,816 | 5,027 | 9.7 | % | ||||||||||||||||||||||||||||||||||||||||
Non-same-store | 7,048 | 838 | 6,210 | 741.1 | % | 13,227 | 1,541 | 11,686 | 758.3 | % | ||||||||||||||||||||||||||||||||||||||||
Other | 685 | 406 | 279 | 68.7 | % | 1,271 | 811 | 460 | 56.7 | % | ||||||||||||||||||||||||||||||||||||||||
Dispositions | — | 500 | (500) | (100.0) | % | — | 1,135 | (1,135) | (100.0) | % | ||||||||||||||||||||||||||||||||||||||||
Total | $ | 36,900 | $ | 27,896 | $ | 9,004 | 32.3 | % | $ | 71,341 | $ | 55,303 | $ | 16,038 | 29.0 | % | ||||||||||||||||||||||||||||||||||
Property management expenses | (2,721) | (2,085) | 636 | 30.5 | % | (4,974) | (3,852) | 1,122 | 29.1 | % | ||||||||||||||||||||||||||||||||||||||||
Casualty gain (loss) | (382) | 27 | 409 | * | (980) | (74) | 906 | * | ||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | (24,768) | (19,308) | 5,460 | 28.3 | % | (55,769) | (39,300) | 16,469 | 41.9 | % | ||||||||||||||||||||||||||||||||||||||||
General and administrative expenses | (5,221) | (3,797) | 1,424 | 37.5 | % | (9,721) | (7,703) | 2,018 | 26.2 | % | ||||||||||||||||||||||||||||||||||||||||
Gain (loss) on sale of real estate and other investments | 27 | 26,840 | 26,813 | 99.9 | % | 27 | 26,840 | 26,813 | 99.9 | % | ||||||||||||||||||||||||||||||||||||||||
Interest expense | (7,561) | (7,089) | 472 | 6.7 | % | (15,276) | (14,320) | 956 | 6.7 | % | ||||||||||||||||||||||||||||||||||||||||
Interest and other income (loss) | (17) | 619 | (636) | (102.7) | % | 1,046 | 1,050 | (4) | (0.4) | % | ||||||||||||||||||||||||||||||||||||||||
NET INCOME (LOSS) | $ | (3,743) | $ | 23,103 | $ | (26,846) | (116.2) | % | $ | (14,306) | $ | 17,944 | $ | (32,250) | (179.7) | % | ||||||||||||||||||||||||||||||||||
Dividends to Series D preferred unitholders | (160) | (160) | — | — | (320) | (320) | — | — | ||||||||||||||||||||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units | 950 | (1,386) | 2,336 | (168.5) | % | 3,107 | (917) | 4,024 | (438.8) | % | ||||||||||||||||||||||||||||||||||||||||
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities | (38) | (19) | (19) | 100.0 | % | (61) | (36) | (25) | 69.4 | % | ||||||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to controlling interests | (2,991) | 21,538 | (24,529) | (113.9) | % | (11,580) | 16,671 | (28,251) | (169.5) | % | ||||||||||||||||||||||||||||||||||||||||
Dividends to preferred shareholders | (1,607) | (1,607) | — | — | (3,214) | (3,214) | — | — | ||||||||||||||||||||||||||||||||||||||||||
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | (4,598) | $ | 19,931 | $ | (24,529) | (123.1) | % | $ | (14,794) | $ | 13,457 | $ | (28,251) | (209.9) | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
Weighted Average Occupancy(1) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Same-store | 94.8 | % | 94.9 | % | 94.3 | % | 94.8 | % | |||||||||||||||
Non-same-store | 95.0 | % | 93.1 | % | 94.8 | % | 91.8 | % | |||||||||||||||
Total | 94.8 | % | 94.8 | % | 94.4 | % | 94.7 | % |
Number of Apartment Homes | June 30, 2022 | June 30, 2021 | |||||||||
Same-store | 11,319 | 11,319 | |||||||||
Non-same-store | 3,519 | 256 | |||||||||
Total | 14,838 | 11,575 |
(in thousands, except per share and unit amounts) | ||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
Net income (loss) available to common shareholders | $ | (4,598) | $ | 19,931 | $ | (14,794) | $ | 13,457 | ||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||
Noncontrolling interests – Operating Partnership and Series E preferred units | (950) | 1,386 | (3,107) | 917 | ||||||||||||||||||||||
Depreciation and amortization | 24,768 | 19,308 | 55,769 | 39,300 | ||||||||||||||||||||||
Less depreciation – non real estate | (101) | (87) | (202) | (185) | ||||||||||||||||||||||
Less depreciation – partially owned entities | (7) | (24) | (28) | (48) | ||||||||||||||||||||||
(Gain) loss on sale of real estate and other investments | (27) | (26,840) | (27) | (26,840) | ||||||||||||||||||||||
FFO applicable to common shares and Units | $ | 19,085 | $ | 13,674 | $ | 37,611 | $ | 26,601 | ||||||||||||||||||
Adjustments to Core FFO: | ||||||||||||||||||||||||||
Non-cash casualty (gain) loss | 163 | — | 188 | — | ||||||||||||||||||||||
Loss on extinguishment of debt | 5 | — | 5 | — | ||||||||||||||||||||||
Technology implementation costs(1) | 447 | 447 | 550 | 860 | ||||||||||||||||||||||
Interest rate swap termination, amortization, and mark-to-market | 205 | — | (408) | — | ||||||||||||||||||||||
Amortization of assumed debt | (116) | — | (231) | — | ||||||||||||||||||||||
Pursuit costs | 1,127 | — | 1,127 | — | ||||||||||||||||||||||
Other miscellaneous items | 100 | 3 | 96 | 3 | ||||||||||||||||||||||
Core FFO applicable to common shares and units | $ | 21,016 | $ | 14,124 | $ | 38,938 | $ | 27,464 | ||||||||||||||||||
FFO applicable to common shares and Units | $ | 19,085 | $ | 13,674 | $ | 37,611 | $ | 26,601 | ||||||||||||||||||
Dividends to preferred unitholders | 160 | 160 | 320 | 320 | ||||||||||||||||||||||
FFO applicable to common shares and Units - diluted | $ | 19,245 | $ | 13,834 | $ | 37,931 | $ | 26,921 | ||||||||||||||||||
Core FFO applicable to common shares and units | $ | 21,016 | $ | 14,124 | $ | 38,938 | $ | 27,464 | ||||||||||||||||||
Dividends to preferred unitholders | 160 | 160 | 320 | 320 | ||||||||||||||||||||||
Core FFO applicable to common shares and Units - diluted | $ | 21,176 | $ | 14,284 | $ | 39,258 | $ | 27,784 | ||||||||||||||||||
Per Share Data | ||||||||||||||||||||||||||
Earnings (loss) per common share - diluted | $ | (0.30) | $ | 1.48 | $ | (0.97) | $ | 1.02 | ||||||||||||||||||
FFO per share and Unit - diluted | $ | 1.02 | $ | 0.95 | $ | 2.03 | $ | 1.87 | ||||||||||||||||||
Core FFO per share and Unit - diluted | $ | 1.12 | $ | 0.98 | $ | 2.10 | $ | 1.93 | ||||||||||||||||||
Weighted average shares - basic | 15,369 | 13,353 | 15,233 | 13,216 | ||||||||||||||||||||||
Effect of redeemable operating partnership units | 995 | 916 | 978 | 939 | ||||||||||||||||||||||
Effect of Series D preferred units | 228 | 228 | 228 | 228 | ||||||||||||||||||||||
Effect of Series E preferred units | 2,186 | — | 2,186 | — | ||||||||||||||||||||||
Effect of dilutive restricted stock units and stock options | 48 | 17 | 57 | 18 | ||||||||||||||||||||||
Weighted average shares and Units - diluted | 18,826 | 14,514 | 18,682 | 14,401 |
(in thousands) | ||||||||||||||
Amount | Maturity Date | Interest Rate | ||||||||||||
Series A | $ | 75,000 | September 13, 2029 | 3.84 | % | |||||||||
Series B | $ | 50,000 | September 30, 2028 | 3.69 | % | |||||||||
Series C | $ | 50,000 | June 6, 2030 | 2.70 | % | |||||||||
Series 2021-A | $ | 35,000 | September 17, 2030 | 2.50 | % | |||||||||
Series 2021-B | $ | 50,000 | September 17, 2031 | 2.62 | % | |||||||||
Series 2021-C | $ | 25,000 | September 17, 2032 | 2.68 | % | |||||||||
Series 2021-D | $ | 15,000 | September 17, 2034 | 2.78 | % |
Maximum Dollar | |||||||||||||||||
Total Number of Shares | Amount of Shares That | ||||||||||||||||
Total Number of | Average Price | Purchased as Part of | May Yet Be Purchased | ||||||||||||||
Shares and Units | Paid per | Publicly Announced | Under the Plans or | ||||||||||||||
Period | Purchased | Share and Unit(1) | Plans or Programs | Programs | |||||||||||||
April 1 - 30, 2022 | 2,899 | 93.67 | — | — | |||||||||||||
May 1 - 31, 2022 | 353 | 85.85 | — | — | |||||||||||||
June 1 - 30, 2022 | 300 | 83.45 | — | 50,000,000 | |||||||||||||
Total | 3,552 | 92.03 | — |
Exhibit No. | Description | ||||
3.1 | |||||
3.2 | |||||
3.3 | |||||
31.1* | |||||
31.2* | |||||
32.1* | |||||
32.2* | |||||
101 INS** | INSTANCE DOCUMENT | ||||
101 SCH** | SCHEMA DOCUMENT | ||||
101 CAL** | CALCULATION LINKBASE DOCUMENT | ||||
101 LAB** | LABELS LINKBASE DOCUMENT | ||||
101 PRE** | PRESENTATION LINKBASE DOCUMENT | ||||
101 DEF** | DEFINITION LINKBASE DOCUMENT | ||||
104** | COVER PAGE INTERACTIVE DATA FILE - THE COVER PAGE XBRL TAGS ARE EMBEDDED WITHIN THE INLINE XBRL DOCUMENT |
/s/ Mark O. Decker, Jr. | |||||
Mark O. Decker, Jr. | |||||
President and Chief Executive Officer | |||||
/s/ Bhairav Patel | |||||
Bhairav Patel | |||||
Executive Vice President and Chief Financial Officer | |||||
Date: August 1, 2022 |
1 | I have reviewed this quarterly report on Form 10-Q of Centerspace; |
2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4 | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5 | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Mark O. Decker, Jr. | |||||||
Mark O. Decker, Jr., President and Chief Executive Officer |
1 | I have reviewed this quarterly report on Form 10-Q of Centerspace; |
2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4 | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5 | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Bhairav Patel | |||||||
Bhairav Patel, Executive Vice President and Chief Financial Officer | ||||||||
/s/ Mark O. Decker, Jr. | |||||
Mark O. Decker, Jr. | |||||
President and Chief Executive Officer | |||||
August 1, 2022 |
/s/ Bhairav Patel | |||||
Bhairav Patel | |||||
Executive Vice President and Chief Financial Officer | |||||
August 1, 2022 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
EQUITY | ||
Preferred units, par value (in dollars per share) | $ 100 | $ 100 |
Preferred units, shares issued (in shares) | 166 | 166 |
Preferred units, shares outstanding (in shares) | 166 | 166 |
Preferred units, liquidation preference | $ 16,560 | $ 16,560 |
Preferred shares, liquidation preference (in dollars per share) | $ 25 | $ 25 |
Preferred shares of beneficial interest, shares issued (in shares) | 3,881 | 3,881 |
Preferred shares of beneficial interest, shares outstanding (in shares) | 3,881 | 3,881 |
Preferred shares of beneficial interest, liquidation preference | $ 97,036 | $ 97,036 |
Common shares of beneficial interest, shares issued (in shares) | 15,373 | 15,016 |
Common shares of beneficial interest, shares outstanding (in shares) | 15,373 | 15,016 |
Term Loans | ||
LIABILITIES | ||
Unamortized loan costs | $ 626 | $ 656 |
Mortgages | ||
LIABILITIES | ||
Unamortized loan costs | $ 3,632 | $ 3,187 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ (3,743) | $ 23,103 | $ (14,306) | $ 17,944 |
Other comprehensive income: | ||||
Unrealized gain (loss) from derivative instrument | 0 | (386) | 1,581 | 1,625 |
(Gain) loss on derivative instrument reclassified into earnings | 188 | 1,120 | 492 | 2,216 |
Total comprehensive income (loss) | (3,555) | 23,837 | (12,233) | 21,785 |
Net comprehensive (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units | 984 | (1,430) | 3,463 | (1,169) |
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities | (38) | (19) | (61) | (36) |
Comprehensive income (loss) attributable to controlling interests | $ (2,609) | $ 22,388 | $ (8,831) | $ 20,580 |
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - $ / shares |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2022 |
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Distributions - common shares and units (in dollars per share) | $ 0.73 | $ 0.70 | $ 1.45 | $ 1.40 |
Series C Preferred Stock | ||||
Distributions - preferred shares and units (in dollars per share) | 0.4140625 | $ 0.4140625 | 0.828125 | $ 0.828125 |
Series E Preferred Units | ||||
Distributions - preferred shares and units (in dollars per share) | $ 0.96875 | $ 1.93750 |
ORGANIZATION |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION | ORGANIZATION Centerspace, collectively with its consolidated subsidiaries (“Centerspace,” “the Company,” “we,” “us,” or “our”), is a North Dakota real estate investment trust (“REIT”) focused on the ownership, management, acquisition, redevelopment, and development of apartment communities. As of June 30, 2022, Centerspace owned interests in 83 apartment communities consisting of 14,838 apartment homes. |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION Centerspace conducts a majority of its business activities through a consolidated operating partnership, Centerspace, LP (f/k/a IRET Properties), a North Dakota limited partnership (the “Operating Partnership”), as well as through a number of other consolidated subsidiary entities. The accompanying Condensed Consolidated Financial Statements include the Company’s accounts and the accounts of all its subsidiaries in which it maintains a controlling interest, including the Operating Partnership. All intercompany balances and transactions are eliminated in consolidation. The Condensed Consolidated Financial Statements also reflect the Operating Partnership’s ownership of a joint venture entity in which the Operating Partnership has a general partner or controlling interest. This entity is consolidated into the Company’s operations, with noncontrolling interests reflecting the noncontrolling partners’ share of ownership, income, and expenses. UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Centerspace’s interim Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with GAAP are omitted. The year-end balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments necessary for the fair presentation of financial position, results of operations, and cash flows for the interim periods, have been included. The current period’s results of operations are not necessarily indicative of results which ultimately may be achieved for the year. The interim Condensed Consolidated Financial Statements and accompanying notes thereto should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 28, 2022. USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH, CASH EQUIVALENTS, AND RESTRICTED CASH As of June 30, 2022 and December 31, 2021, restricted cash consisted primarily of real estate deposits and escrows held by lenders for real estate taxes, insurance, and capital additions. LEASES As a lessor, Centerspace primarily leases multifamily apartment homes which qualify as operating leases with terms that are generally one year or less. Rental revenues are recognized in accordance with ASC 842, Leases, using a method that represents a straight-line basis over the term of the lease. Rental income represents approximately 97.9% of total revenues and includes gross market rent less adjustments for gain or loss to lease, concessions, vacancy loss, and bad debt. Other property revenues represent the remaining 2.1% of total revenues and are primarily driven by other fee income, which is typically recognized when earned, at a point in time. Some of the Company’s apartment communities have commercial spaces available for lease. Lease terms for these spaces typically range from to fifteen years. The leases for commercial spaces generally include options to extend the lease for additional terms. Many of the leases contain non-lease components for utility reimbursement from residents and common area maintenance from commercial tenants. Centerspace has elected the practical expedient to combine lease and non-lease components for all asset classes. The combined components are included in lease income and are accounted for under ASC 842. The aggregate amount of future scheduled lease income on commercial operating leases, excluding any variable lease income and non-lease components, as of June 30, 2022, was as follows:
REVENUES AND GAINS ON SALE OF REAL ESTATE Revenue is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration to which the Company expects to be entitled for those goods and services. Revenue streams that are included in revenues from contracts with customers include other property revenue such as application fees and other miscellaneous items. Centerspace recognizes revenue for these rental related items not included as a component of a lease as earned. The following table presents the disaggregation of revenue streams for the three and six months ended June 30, 2022 and 2021:
In addition to lease income and other property revenue, the Company recognizes gains or losses on the sale of real estate when the criteria for derecognition of an asset are met, including when (1) a contract exists and (2) the buyer obtained control of the nonfinancial asset that was sold. IMPAIRMENT OF LONG-LIVED ASSETS The Company evaluates long-lived assets, including investments in real estate, for impairment indicators at least quarterly. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each property, and legal and environmental concerns. If indicators exist, the Company compares the expected future undiscounted cash flows for the property against the carrying amount of that property. If the sum of the estimated undiscounted cash flows is less than the carrying amount, an impairment loss is recorded for the difference between the estimated fair value and the carrying amount. If the anticipated holding period for properties, the estimated fair value of properties, or other factors change based on market conditions or otherwise, the evaluation of impairment charges may be different and such differences could be material to the consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates, and capital requirements that could differ materially from actual results. Reducing planned property holding periods may increase the likelihood of recording impairment losses. During the three and six months ended June 30, 2022 and 2021, the Company recorded no impairment charges. MORTGAGE LOANS RECEIVABLE AND NOTES RECEIVABLE The Company has a tax increment financing note receivable (“TIF”) with a principal balance of $6.3 million and $6.4 million at June 30, 2022 and December 31, 2021, respectively, which appears within other assets in the Condensed Consolidated Balance Sheets. The note bears an interest rate of 4.5% with payments due in February and August of each year. Centerspace originated a $29.9 million construction loan and a $15.3 million mezzanine loan for the development of a multifamily community located in Minneapolis, Minnesota. The construction and mezzanine loans bore and accrued interest at 4.5% and 11.5%, respectively. The Company exercised its option to purchase the apartment community in exchange for the loans and cash, during the six months ended June 30, 2022. As of June 30, 2022, the loans had no remaining balance. As of December 31, 2021, the Company had fully funded the $29.9 million construction loan and $13.4 million of the mezzanine loan, both of which appear within mortgage loans receivable in the Condensed Consolidated Balance Sheets. VARIABLE INTEREST ENTITIES Centerspace has determined that its Operating Partnership and each of its less-than-wholly owned real estate partnerships are variable interest entities (each, a “VIE”), as the limited partners or the functional equivalent of limited partners lack substantive kick-out rights and substantive participating rights. The Company is the primary beneficiary of the VIEs, and the VIEs are required to be consolidated on the balance sheet because the Company has a controlling financial interest in the VIEs and has both the power to direct the activities of the VIEs that most significantly impact the economic performance of the VIEs as well as the obligation to absorb losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs. Because the Operating Partnership is a VIE, all of the Company’s assets and liabilities are held through a VIE.
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EARNINGS PER SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER SHARE | EARNINGS PER SHARE Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares of beneficial interest (“common shares”) outstanding during the period. Centerspace has issued restricted stock units (“RSUs”) and incentive stock options (“ISOs”) under the 2015 Incentive Plan, Series D Convertible Preferred Units (“Series D preferred units”), and Series E Convertible Preferred Units (“Series E preferred units”), which could have a dilutive effect on the earnings per share upon exercise of the RSUs or ISOs or upon conversion of the Series D or Series E preferred units (refer to Note 4 for further discussion of the Series D and the Series E preferred units). Other than the issuance of RSUs, ISOs, Series D preferred units, and Series E preferred units, there are no outstanding options, warrants, convertible stock or other contractual obligations requiring issuance of additional shares that would result in dilution of earnings. Under the terms of the Operating Partnership’s Agreement of Limited Partnership, limited partners have the right to require the Operating Partnership to redeem their limited partnership units (“Units”) any time following the first anniversary of the date they acquired such Units (“Exchange Right”). Upon the exercise of Exchange Rights, and in Centerspace’s sole discretion, it may issue common shares in exchange for Units on a one-for-one basis. For the three months ended June 30, 2022, operating partnership units of 995,000, Series D preferred units of 228,000, Series E preferred units of 2.2 million, time-based RSUs of 9,000, weighted average stock options of 39,000, and performance-based RSUs of 30,000, were excluded from the calculation of diluted earnings per share because they were anti-dilutive. For the three months ended June 30, 2021, weighted average stock options of 44,000 and performance-based RSUs of 31,000, were excluded from the calculation of diluted earnings per share because they were anti-dilutive. For the six months ended June 30, 2022, operating partnership units of 978,000, Series D preferred units of 228,000, Series E preferred units of 2.2 million, time-based RSUs of 11,000, weighted average stock options of 46,000, and performance-based RSUs of 30,000, were excluded from the calculation of diluted earnings per share because they were anti-dilutive. For the six months ended June 30, 2021, weighted average stock options of 44,000 and performance-based RSUs of 28,000, were excluded from the calculation of diluted earnings per share because they were anti-dilutive. The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the Condensed Consolidated Financial Statements for the three and six months ended June 30, 2022 and 2021.
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EQUITY AND MEZZANINE EQUITY |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY AND MEZZANINE EQUITY | EQUITY AND MEZZANINE EQUITY Operating Partnership Units. The Operating Partnership had 995,000 and 832,000 outstanding Units at June 30, 2022 and December 31, 2021, respectively. During the six months ended June 30, 2022, we issued 209,000 Units as partial consideration for the acquisition of three apartment communities. Exchange Rights. Centerspace redeemed Units in exchange for common shares in connection with Unitholders exercising their exchange rights during the three and six months ended June 30, 2022 and 2021 as detailed in the table below.
Pursuant to the exercise of exchange rights, the Company redeemed Units for cash during the three and six months ended June 30, 2022 and 2021 as detailed in the table below.
Series E Preferred Units (Noncontrolling Interests). On September 1, 2021, Centerspace issued 1.8 million Series E preferred units with a par value of $100 per Series E preferred unit as partial consideration for the acquisition of 17 apartment communities. The Series E preferred unit holders receive a preferred distribution at the rate of 3.875% per year. Each Series E preferred unit is convertible, at the holder’s option, into 1.2048 Units. The Series E preferred units have an aggregate liquidation preference of $181.4 million. The holders of the Series E preferred units do not have voting rights and are required to hold the units for one year before they may elect to convert. Common Shares and Equity Awards. Common shares outstanding on June 30, 2022 and December 31, 2021, totaled 15.4 million and 15.0 million, respectively. There were 5,538 and 24,297 shares issued upon the vesting of equity awards under the 2015 Incentive Plan during the three and six months ended June 30, 2022, respectively, with a total grant-date fair value of $397,000 and $619,000, respectively. There were 23,385 and 26,186 shares issued upon the vesting of equity awards under the 2015 Incentive Plan during the three and six months ended June 30, 2021, respectively, with a total grant-date fair value of $750,000 and $914,000, respectively. These shares vested based on performance and service criteria. Equity Distribution Agreement. Centerspace had an equity distribution agreement in connection with an at-the-market offering (“2019 ATM Program”) through which it could offer and sell common shares having an aggregate sales price of up to $150.0 million. In September 2021, the Company replaced the 2019 ATM Program with a new at-the-market offering (“2021 ATM Program”) through which it may offer and sell common shares having an aggregate sales price of up to $250.0 million, in amounts and at times determined by management. Under the 2021 ATM Program, the Company may enter into separate forward sale agreements. The proceeds from the sale of common shares under the 2021 ATM Program may be used for general corporate purposes, including the funding of acquisitions, construction or mezzanine loans, community renovations, and the repayment of indebtedness. The table below provides details on the sale of common shares during the three and six months ended June 30, 2022 and 2021 under both the 2019 and 2021 ATM Programs. As of June 30, 2022, common shares having an aggregate offering price of up to $126.6 million remained available under the 2021 ATM Program.
(1)Total consideration is net of $338 in commissions and issuance costs during the six months ended June 30, 2022 and $528 and $709 for the three and six months ended June 30, 2021, respectively. Share Repurchase Program. On June 13, 2022, the Board of Trustees approved a new share repurchase program (the “Share Repurchase Program”), providing for the repurchase of up to an aggregate of $50.0 million of the Company's outstanding common shares. Under the Share Repurchase Program, the Company is authorized to repurchase common shares through open market purchases, privately-negotiated transactions, block trades or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Securities and Exchange Act of 1934, as amended. The repurchases have no time limit and may be suspended or discontinued completely at any time. The specific timing and amount of repurchases will vary based on available capital resources or other financial and operational performance, market conditions, securities law limitations, and other factors. During the six months ended June 30, 2022, the Company had no share repurchases under this program. As of June 30, 2022, the Company had $50.0 million remaining authorized for purchase under this program. Series C Preferred Shares. Series C preferred shares outstanding were 3.9 million shares at June 30, 2022 and December 31, 2021. The Series C preferred shares are nonvoting and redeemable for cash at $25.00 per share at Centerspace’s option after October 2, 2022. Holders of these shares are entitled to cumulative distributions, payable quarterly (as and if declared by the Board of Trustees). Distributions accrue at an annual rate of $1.65625 per share, which is equal to 6.625% of the $25.00 per share liquidation preference ($97.0 million liquidation preference in the aggregate). Series D Preferred Units (Mezzanine Equity). Series D preferred units outstanding were 165,600 preferred units at June 30, 2022 and December 31, 2021. The Series D preferred units have a par value price of $100 per preferred unit. The Series D preferred unit holders receive a preferred distribution at the rate of 3.862% per year. The Series D preferred units have a put option which allows the holder to redeem any or all of the Series D preferred units for cash equal to the issuance price. Each Series D preferred unit is convertible, at the holder’s option, into 1.37931 Units. The Series D preferred units have an aggregate liquidation preference of $16.6 million. Changes in the redemption value are charged to common shares on the Condensed Consolidated Balance Sheets from period to period. The holders of the Series D preferred units do not have voting rights. Distributions to Series D unitholders are presented in the Condensed Consolidated Statements of Equity within net income (loss) attributable to controlling interests and noncontrolling interests.
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT | DEBTAs of June 30, 2022, 52 apartment communities were not encumbered by mortgages and were available to provide credit support for the unsecured borrowings. The Company’s primary unsecured credit facility (“unsecured credit facility”) is a revolving, multi-bank line of credit, with the Bank of Montreal serving as administrative agent. The line of credit has total commitments and borrowing capacity of $250.0 million, based on the value of unencumbered properties. As of June 30, 2022, the additional borrowing availability was $177.0 million beyond the $73.0 million drawn. This unsecured credit facility was amended on September 30, 2021 to extend the maturity date to September 2025 and to provide for an accordion option to increase borrowing capacity up to $400.0 million. The interest rates on the line of credit is based, at the Company’s option, on either the lender’s base rate plus a margin, ranging from 25-80 basis points, or the London Interbank Offered Rate (“LIBOR”), plus a margin that ranges from 125-180 basis points based on the consolidated leverage ratio, as defined under the Third Amended and Restated Credit Agreement. The unsecured credit facility and unsecured senior notes are subject to customary financial covenants and limitations. The Company believes that it was in compliance with all such financial covenants and limitations as of June 30, 2022. In January 2021, Centerspace amended and expanded its private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc. (collectively, “PGIM”) to increase the aggregate amount available for issuance of unsecured senior promissory notes (“unsecured senior notes”) to $225.0 million. In September 2021, the Company entered into a note purchase agreement for the issuance of $125.0 million senior unsecured promissory notes, of which $25.0 million was issued under the private shelf agreement with PGIM. Under the private shelf agreement with PGIM, the Company has issued $200.0 million unsecured senior notes with $25.0 million remaining available as of June 30, 2022. The following table shows the notes issued under both private shelf agreements.
In September 2021, Centerspace entered into a $198.9 million Fannie Mae Credit Facility Agreement (the “FMCF”) for the acquisition of 16 apartment communities. The FMCF is currently secured by mortgages on those apartment communities. The notes are interest-only, with varying maturity dates of 7, 10, and 12 years, and a blended, weighted average interest rate of 2.78%. As of June 30, 2022, the FMCF had a balance of $198.9 million. The FMCF is included within mortgages payable on the Condensed Consolidated Balance Sheets. As of June 30, 2022, Centerspace owned 15 apartment communities that served as collateral for mortgage loans, in addition to the apartment communities secured by the FMCF. All of these mortgage loans were non-recourse to the Company other than for standard carve-out obligations. As of June 30, 2022, the Company believes that there were no material defaults or instances of noncompliance in regards to any of these mortgages payable. Centerspace also has a $6.0 million operating line of credit. This operating line of credit is designed to enhance treasury management activities and more effectively manage cash balances. This operating line matures on November 29, 2022, with pricing based on a market spread plus the one-month LIBOR index rate. The following table summarizes indebtedness.
(1)Included within notes payable on the Condensed Consolidated Balance Sheets. (2)The interest rate swap was terminated in February 2022. Refer to Note 6 - Derivative Instruments for additional information. The aggregate amount of required future principal payments as of June 30, 2022, was as follows:
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DERIVATIVE INSTRUMENTS |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS Centerspace used interest rate derivatives to stabilize interest expense and to manage its exposure to interest rate fluctuations. To accomplish this objective, the Company primarily used interest rate swap contracts to fix variable interest rate debt. Changes in the fair value of derivatives designated and that qualified as cash flow hedges were recorded in accumulated other comprehensive income (“OCI”). Amounts recorded in accumulated other comprehensive income will be reclassified to interest expense in the periods in which interest payments are incurred on variable rate debt. During the next twelve months, the Company estimates an additional $604,000 will be reclassified as an increase to interest expense. Derivatives not designated as hedges were not speculative and were used to manage the Company’s exposure to interest rate movements and other identified risks but did not meet the strict hedge accounting requirements. Changes in fair value of derivatives not designated in hedging relationships were recorded directly to earnings within other income (loss) in the Condensed Consolidated Statement of Operations. During the six months ended June 30, 2022, the Company recorded a gain of $582,000 related to the interest rate swap not designated in a hedging relationship, prior to its termination. In February 2022, the Company paid $3.2 million to terminate its $75.0 million interest rate swap and its $70.0 million forward swap. As of June 30, 2022 the Company had no remaining interest rate swaps. As of December 31, 2021, Centerspace had one interest rate swap contract designated as a cash flow hedge of interest rate risk with a notional amount of $75.0 million to fix the interest rate on the line of credit. The Company also had one additional interest rate swap with an effective date of January 31, 2023 and a notional amount of $70.0 million which was not designated as a hedge in a qualifying hedging relationship. The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021.
The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations as of June 30, 2022 and 2021.
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FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Cash and cash equivalents, restricted cash, accounts payable, accrued expenses, and other liabilities are carried at amounts that reasonably approximate their fair value due to their short-term nature. For variable rate line of credit debt that re-prices frequently, fair values are based on carrying values. In determining the fair value of other financial instruments, Centerspace applies FASB ASC 820, “Fair Value Measurement and Disclosures.” Fair value hierarchy under ASC 820 distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (Levels 1 and 2) and the reporting entity’s own assumptions about market participant assumptions (Level 3). Fair value estimates may differ from the amounts that may ultimately be realized upon sale or disposition of the assets and liabilities. Fair Value Measurements on a Recurring Basis
The fair value of the interest rate swaps was determined using the market standard methodology of netting discounted expected variable cash payments and receipts. The variable cash payments and receipts were based on an expectation of future interest rates (a forward curve) derived from observable market interest rate curves. The Company also considered both its own nonperformance risk and the counterparty’s nonperformance risk in the fair value measurement (Level 3). Centerspace utilizes an income approach with Level 3 inputs based on expected future cash flows to value mortgages and notes receivable. The inputs include market transactions for similar instruments, management estimates of comparable interest rates (range of 3.75% to 10.75%), and instrument specific credit risk (range of 0.5% to 1.0%). Changes in the fair value of these receivables from period to period are reported in interest and other income on the Condensed Consolidated Statements of Operations.
As of June 30, 2022 and December 31, 2021, Centerspace had an investment of $966,000 and $903,000, respectively, in a real estate technology venture consisting of privately held entities that develop technology related to the real estate industry. This investment is measured at net asset value (“NAV”) as a practical expedient under ASC 820. As of June 30, 2022, the Company had unfunded commitments of $1.0 million. Fair Value Measurements on a Nonrecurring Basis There were no non-financial assets or liabilities measured at fair value on a nonrecurring basis at June 30, 2022 and December 31, 2021. Financial Assets and Liabilities Not Measured at Fair Value The fair value of unsecured senior notes and mortgages payable are estimated based on the discounted cash flows of the loans using market research and management estimates of comparable interest rates, excluding any prepayment penalties (Level 3). The estimated fair values of the Company’s financial instruments as of June 30, 2022 and December 31, 2021, respectively, are as follows:
(1)Excluding the effect of interest rate swap agreements. Refer to Note 6 for discussion on the fair value of the interest rate swap agreements.
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ACQUISITIONS AND DISPOSITIONS |
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Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS AND DISPOSITIONS | ACQUISITIONS AND DISPOSITIONS ACQUISITIONS Centerspace had no acquisitions during the three months ended June 30, 2022 and 2021. The acquisitions during the six months ended June 30, 2022 and 2021 are detailed below. Six Months Ended June 30, 2022
(1)Fair value of operating partnership units issued on acquisition. (2)Assumption of seller's debt upon closing for Martin Blu, Zest, and Elements. Mezzanine and construction loans, financed by Centerspace, exchanged as partial consideration for the acquisition of Noko Apartments. (3)Debt discount on assumed mortgage. Six Months Ended June 30, 2021
DISPOSITIONS During the three and six months ended June 30, 2022, Centerspace disposed of no real estate compared to $60.0 million in the three and six months ended June 30, 2021. The dispositions during the six months ended June 30, 2021 are detailed below. Six Months Ended June 30, 2021
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SEGMENT REPORTING |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT REPORTING | SEGMENT REPORTING Centerspace operates in a single reportable segment which includes the ownership, management, development, redevelopment, and acquisition of apartment communities. Each of the operating properties is considered a separate operating segment because each property earns revenues, incurs expenses, and has discrete financial information. The chief operating decision-makers evaluate each property’s operating results to make decisions about resources to be allocated and to assess performance and do not group the properties based on geography, size, or type for this purpose. The apartment communities have similar long-term economic characteristics and provide similar products and services to residents. No apartment community comprises more than 10% of consolidated revenues, profits, or assets. Accordingly, the apartment communities are aggregated into a single reportable segment. “All other” includes non-multifamily components of mixed-use properties and apartment communities the Company has sold. The members of the executive management team are the chief operating decision-makers. This team measures the performance of the reportable segment based on net operating income (“NOI”), a non-GAAP 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 expense. 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. The following tables present NOI for the three and six months ended June 30, 2022 and 2021, respectively, along with reconciliations to net income in the Condensed Consolidated Financial Statements. Segment assets are also reconciled to total assets as reported in the Condensed Consolidated Financial Statements.
Segment Assets and Accumulated Depreciation Segment assets are summarized as follows as of June 30, 2022, and December 31, 2021, respectively, along with reconciliations to the Condensed Consolidated Financial Statements:
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COMMITMENTS AND CONTINGENCIES |
6 Months Ended |
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Jun. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Litigation. In the ordinary course of operations, Centerspace becomes involved in litigation. At this time, the Company knows of no material pending or threatened legal proceedings, or other proceedings contemplated by governmental authorities, that would have a material impact on it. Environmental Matters. Under various federal, state, and local laws, ordinances, and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal of, or remediation of, certain hazardous or toxic substances in, on, around, or under the property. While the Company currently has no knowledge of any material violation of environmental laws, ordinances, or regulations at any of the properties, there can be no assurance that areas of contamination will not be identified at any of its properties or that changes in environmental laws, regulations, or cleanup requirements would not result in material costs. Restrictions on Taxable Dispositions. Thirty-seven properties, consisting of 6,754 apartment homes, are subject to restrictions on taxable dispositions under agreements entered into with certain of the sellers or contributors of the properties and are effective for varying periods. Centerspace does not believe that the agreements materially affect the conduct of its business or its decisions whether to dispose of restricted properties during the restriction period because it generally holds these and other properties for investment purposes rather than for sale. In addition, where the Company deems it to be in the shareholders’ best interests to dispose of such properties, it generally seeks to structure sales of such properties as tax-deferred transactions under Section 1031 of the Internal Revenue Code. Otherwise, the Company may be required to provide tax indemnification payments to the parties to these agreements.
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SHARE-BASED COMPENSATION |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION Share-based awards are provided to officers, non-officer employees, and trustees under the 2015 Incentive Plan approved by shareholders on September 15, 2015, as amended and restated on May 18, 2021 (the “2015 Incentive Plan”) which allows for awards in the form of cash, unrestricted and restricted common shares, stock options, stock appreciation rights, and RSUs up to an aggregate of 775,000 shares over the ten-year period in which the plan is in effect. Under the 2015 Incentive Plan, officers and non-officer employees may earn share awards under a long-term incentive plan, which is a forward-looking program that measures long-term performance over the stated performance period. These awards are payable to the extent deemed earned in shares. The terms of the long-term incentive awards granted under the revised program may vary from year to year. 2022 LTIP Awards Awards granted to employees on January 1, 2022, consisted of an aggregate of 5,849 time-based RSU awards, 13,407 performance RSUs based on total shareholder return (“TSR”), and 30,002 stock options. The time-based awards vest as to one-third of the shares on each of January 1, 2023, January 1, 2024, and January 1, 2025. The stock options vest as to 25% on each of January 1, 2023, January 1, 2024, January 1, 2025, and January 1, 2026. The fair value of stock options was $17.094 per share and was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
The TSR performance RSUs are earned based on the Company’s TSR as compared to the FTSE Nareit Apartment Index over a forward looking three-year period. The maximum number of RSUs eligible to be earned is 26,814 RSUs, which is 200% of the RSUs granted. Earned awards (if any) will fully vest as of the last day of the measurement period. These awards have market conditions in addition to service conditions that must be met for the awards to vest. Compensation expense is recognized ratably based on the grant date fair value, as determined using the Monte Carlo valuation model, regardless of whether the market conditions are achieved and the awards ultimately vest. Therefore, previously recorded compensation expense is not adjusted in the event that the market conditions are not achieved. The Company based the expected volatility on a weighted average of the historical volatility of the Company’s daily closing share price and a select peer average volatility, the risk-free interest rate on the interest rates on U.S. treasury bonds with a maturity equal to the remaining performance period of the award, and the expected term on the performance period of the award. The assumptions used to value the TSR performance RSUs were an expected volatility of 22.40%, a risk-free interest rate of 0.97%, and an expected life of 3 years. The share price at the grant date, January 1, 2022, was $110.90 per share. Awards granted to employees on February 1, 2022, consist of an aggregate of 1,295 time-based RSU awards which vest as to one-third of the RSUs on each of January 1, 2023, January 1, 2024, and January 1, 2025. Awards granted to trustees on May 17, 2022 consist of 6,563 time-based RSUs, which vest on May 17, 2023. These awards are classified as equity awards. Share-Based Compensation Expense Share-based compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was $1.2 million and $1.5 million for the six months ended June 30, 2022 and 2021, respectively.
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION Centerspace conducts a majority of its business activities through a consolidated operating partnership, Centerspace, LP (f/k/a IRET Properties), a North Dakota limited partnership (the “Operating Partnership”), as well as through a number of other consolidated subsidiary entities. The accompanying Condensed Consolidated Financial Statements include the Company’s accounts and the accounts of all its subsidiaries in which it maintains a controlling interest, including the Operating Partnership. All intercompany balances and transactions are eliminated in consolidation. The Condensed Consolidated Financial Statements also reflect the Operating Partnership’s ownership of a joint venture entity in which the Operating Partnership has a general partner or controlling interest. This entity is consolidated into the Company’s operations, with noncontrolling interests reflecting the noncontrolling partners’ share of ownership, income, and expenses.
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UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Centerspace’s interim Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with GAAP are omitted. The year-end balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments necessary for the fair presentation of financial position, results of operations, and cash flows for the interim periods, have been included. The current period’s results of operations are not necessarily indicative of results which ultimately may be achieved for the year. The interim Condensed Consolidated Financial Statements and accompanying notes thereto should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 28, 2022.
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USE OF ESTIMATES | USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH As of June 30, 2022 and December 31, 2021, restricted cash consisted primarily of real estate deposits and escrows held by lenders for real estate taxes, insurance, and capital additions.
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LEASES | LEASES As a lessor, Centerspace primarily leases multifamily apartment homes which qualify as operating leases with terms that are generally one year or less. Rental revenues are recognized in accordance with ASC 842, Leases, using a method that represents a straight-line basis over the term of the lease. Rental income represents approximately 97.9% of total revenues and includes gross market rent less adjustments for gain or loss to lease, concessions, vacancy loss, and bad debt. Other property revenues represent the remaining 2.1% of total revenues and are primarily driven by other fee income, which is typically recognized when earned, at a point in time. Some of the Company’s apartment communities have commercial spaces available for lease. Lease terms for these spaces typically range from to fifteen years. The leases for commercial spaces generally include options to extend the lease for additional terms. Many of the leases contain non-lease components for utility reimbursement from residents and common area maintenance from commercial tenants. Centerspace has elected the practical expedient to combine lease and non-lease components for all asset classes. The combined components are included in lease income and are accounted for under ASC 842.
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REVENUES AND GAINS ON SALE OF REAL ESTATE | REVENUES AND GAINS ON SALE OF REAL ESTATE Revenue is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration to which the Company expects to be entitled for those goods and services. Revenue streams that are included in revenues from contracts with customers include other property revenue such as application fees and other miscellaneous items. Centerspace recognizes revenue for these rental related items not included as a component of a lease as earned. In addition to lease income and other property revenue, the Company recognizes gains or losses on the sale of real estate when the criteria for derecognition of an asset are met, including when (1) a contract exists and (2) the buyer obtained control of the nonfinancial asset that was sold.
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IMPAIRMENT OF LONG-LIVED ASSETS | IMPAIRMENT OF LONG-LIVED ASSETS The Company evaluates long-lived assets, including investments in real estate, for impairment indicators at least quarterly. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each property, and legal and environmental concerns. If indicators exist, the Company compares the expected future undiscounted cash flows for the property against the carrying amount of that property. If the sum of the estimated undiscounted cash flows is less than the carrying amount, an impairment loss is recorded for the difference between the estimated fair value and the carrying amount. If the anticipated holding period for properties, the estimated fair value of properties, or other factors change based on market conditions or otherwise, the evaluation of impairment charges may be different and such differences could be material to the consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates, and capital requirements that could differ materially from actual results. Reducing planned property holding periods may increase the likelihood of recording impairment losses.
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VARIABLE INTEREST ENTITIES | VARIABLE INTEREST ENTITIES Centerspace has determined that its Operating Partnership and each of its less-than-wholly owned real estate partnerships are variable interest entities (each, a “VIE”), as the limited partners or the functional equivalent of limited partners lack substantive kick-out rights and substantive participating rights. The Company is the primary beneficiary of the VIEs, and the VIEs are required to be consolidated on the balance sheet because the Company has a controlling financial interest in the VIEs and has both the power to direct the activities of the VIEs that most significantly impact the economic performance of the VIEs as well as the obligation to absorb losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs. Because the Operating Partnership is a VIE, all of the Company’s assets and liabilities are held through a VIE.
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future Scheduled Lease Income for Operating Leases | The aggregate amount of future scheduled lease income on commercial operating leases, excluding any variable lease income and non-lease components, as of June 30, 2022, was as follows:
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Schedule of Disaggregation of Revenue | The following table presents the disaggregation of revenue streams for the three and six months ended June 30, 2022 and 2021:
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EARNINGS PER SHARE (Tables) |
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Numerator and Denominator Used To Calculate Basic and Diluted EPS | The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the Condensed Consolidated Financial Statements for the three and six months ended June 30, 2022 and 2021.
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EQUITY AND MEZZANINE EQUITY (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Conversions of Stock | Centerspace redeemed Units in exchange for common shares in connection with Unitholders exercising their exchange rights during the three and six months ended June 30, 2022 and 2021 as detailed in the table below.
Pursuant to the exercise of exchange rights, the Company redeemed Units for cash during the three and six months ended June 30, 2022 and 2021 as detailed in the table below.
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Schedule of Sale of Common Shares | The table below provides details on the sale of common shares during the three and six months ended June 30, 2022 and 2021 under both the 2019 and 2021 ATM Programs. As of June 30, 2022, common shares having an aggregate offering price of up to $126.6 million remained available under the 2021 ATM Program.
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DEBT (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt | The following table shows the notes issued under both private shelf agreements.
The following table summarizes indebtedness.
(1)Included within notes payable on the Condensed Consolidated Balance Sheets. (2)The interest rate swap was terminated in February 2022. Refer to Note 6 - Derivative Instruments for additional information.
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Aggregate Amount of Required Future Principal Payments on Mortgages Payable | The aggregate amount of required future principal payments as of June 30, 2022, was as follows:
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DERIVATIVE INSTRUMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Derivative Instruments | The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021.
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Schedule of Derivative Instruments | The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations as of June 30, 2022 and 2021.
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FAIR VALUE MEASUREMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Fair Values of Financial Instruments | Fair Value Measurements on a Recurring Basis
The estimated fair values of the Company’s financial instruments as of June 30, 2022 and December 31, 2021, respectively, are as follows:
(1)Excluding the effect of interest rate swap agreements. Refer to Note 6 for discussion on the fair value of the interest rate swap agreements.
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Changes in Fair Value Receivables | Changes in the fair value of these receivables from period to period are reported in interest and other income on the Condensed Consolidated Statements of Operations.
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ACQUISITIONS AND DISPOSITIONS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Acquisitions | The acquisitions during the six months ended June 30, 2022 and 2021 are detailed below. Six Months Ended June 30, 2022
(1)Fair value of operating partnership units issued on acquisition. (2)Assumption of seller's debt upon closing for Martin Blu, Zest, and Elements. Mezzanine and construction loans, financed by Centerspace, exchanged as partial consideration for the acquisition of Noko Apartments. (3)Debt discount on assumed mortgage. Six Months Ended June 30, 2021
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Schedule of Dispositions | The dispositions during the six months ended June 30, 2021 are detailed below. Six Months Ended June 30, 2021
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SEGMENT REPORTING (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues and Net Operating Income for Reportable Segments | The following tables present NOI for the three and six months ended June 30, 2022 and 2021, respectively, along with reconciliations to net income in the Condensed Consolidated Financial Statements. Segment assets are also reconciled to total assets as reported in the Condensed Consolidated Financial Statements.
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Segment Assets and Accumulated Depreciation | Segment assets are summarized as follows as of June 30, 2022, and December 31, 2021, respectively, along with reconciliations to the Condensed Consolidated Financial Statements:
|
SHARE-BASED COMPENSATION (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Stock Options | The fair value of stock options was $17.094 per share and was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
|
ORGANIZATION (Details) - Residential Real Estate |
Jun. 30, 2022
apartmentHome
apartmentCommunity
|
---|---|
Real Estate Properties [Line Items] | |
Number of real estate properties | apartmentCommunity | 83 |
Number of apartment units | apartmentHome | 14,838 |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Leases (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2022
USD ($)
| |
Lessor, Operating Lease, Payments, Fiscal Year Maturity [Abstract] | |
2022 (remainder) | $ 1,112 |
2023 | 2,599 |
2024 | 2,534 |
2025 | 2,469 |
2026 | 1,876 |
Thereafter | 1,528 |
Total scheduled lease income - commercial operating leases | $ 12,118 |
Minimum | |
Lessor, Lease, Description [Line Items] | |
Lease terms | 3 years |
Maximum | |
Lessor, Lease, Description [Line Items] | |
Lease terms | 15 years |
Rental Income | Revenue | Product Concentration Risk | |
Lessor, Lease, Description [Line Items] | |
Concentration risk | 97.90% |
Fee Income | Revenue | Product Concentration Risk | |
Lessor, Lease, Description [Line Items] | |
Concentration risk | 2.10% |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Accounting Policies [Abstract] | ||||
Fixed lease income - operating leases | $ 59,387 | $ 43,659 | $ 116,061 | $ 87,499 |
Variable lease income - operating leases | 2,300 | 2,103 | 4,822 | 4,072 |
Revenue from contracts with customers | 1,429 | 894 | 2,547 | 1,733 |
Total revenue | $ 63,116 | $ 46,656 | $ 123,430 | $ 93,304 |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Impairment of Long-Lived Assets (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Accounting Policies [Abstract] | ||||
Impairment of real estate investments | $ 0 | $ 0 | $ 0 | $ 0 |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Mortgage Receivable and Notes Receivable (Details) - USD ($) $ in Thousands |
1 Months Ended | 6 Months Ended | |
---|---|---|---|
Sep. 30, 2021 |
Jun. 30, 2022 |
Dec. 31, 2021 |
|
MORTGAGE RECEIVABLE AND NOTES RECEIVABLE | |||
Mortgage loans receivable at fair value | $ 0 | $ 43,276 | |
Multi Family Same-Store | Ironwood Apartments - New Hope, MN | Tax Increment Financing | |||
MORTGAGE RECEIVABLE AND NOTES RECEIVABLE | |||
Loan commitment | $ 6,300 | 6,400 | |
Multi-Family Residential | Ironwood Apartments - New Hope, MN | Tax Increment Financing | |||
MORTGAGE RECEIVABLE AND NOTES RECEIVABLE | |||
Interest rate | 4.50% | ||
Multi-Family Residential | Minneapolis, Minnesota | Construction Loans | |||
MORTGAGE RECEIVABLE AND NOTES RECEIVABLE | |||
Interest rate | 4.50% | ||
Mortgage loans receivable at fair value | $ 29,900 | 29,900 | |
Multi-Family Residential | Minneapolis, Minnesota | Mezzanine Loan | |||
MORTGAGE RECEIVABLE AND NOTES RECEIVABLE | |||
Interest rate | 11.50% | ||
Mortgage loans receivable at fair value | $ 15,300 | $ 13,400 |
EQUITY AND MEZZANINE EQUITY - Schedule of Conversions of Common Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Conversion of Stock [Line Items] | ||||
Net Book Basis | $ 0 | $ 0 | $ 0 | $ 0 |
Exercise of Exchange Rights | ||||
Conversion of Stock [Line Items] | ||||
Number of units redeemed (in shares) | 1 | 69 | 11 | 95 |
Net Book Basis | $ (13) | $ 639 | $ 375 | $ 418 |
Redemption Of Units For Cash | ||||
Conversion of Stock [Line Items] | ||||
Number of units converted (in shares) | 4 | 35 | ||
Aggregate Cost | $ 327 | $ 3,230 | ||
Average Price Per Unit (in dollars per share) | $ 92.03 | $ 93.03 |
EQUITY AND MEZZANINE EQUITY - Sale of Common Shares (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Commission and issuance costs | $ 528 | $ 338 | $ 709 | |
At-The-Market Offering | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of common shares (in shares) | 0 | 731 | 321 | 896 |
Net Consideration | $ 0 | $ 54,636 | $ 31,732 | $ 66,495 |
Average Net Price Per Share (in dollars per share) | $ 0 | $ 74.64 | $ 98.89 | $ 74.19 |
DEBT - September Note Purchase Agreement, Schedule of Debt (Details) - Unsecured Debt |
Jun. 30, 2022
USD ($)
|
---|---|
Series A | |
Line of Credit Facility [Line Items] | |
Amount | $ 75,000,000 |
Interest Rate | 3.84% |
Series B | |
Line of Credit Facility [Line Items] | |
Amount | $ 50,000,000 |
Interest Rate | 3.69% |
Series C | |
Line of Credit Facility [Line Items] | |
Amount | $ 50,000,000 |
Interest Rate | 2.70% |
Series 2021-A | |
Line of Credit Facility [Line Items] | |
Amount | $ 35,000,000 |
Interest Rate | 2.50% |
Series 2021-B | |
Line of Credit Facility [Line Items] | |
Amount | $ 50,000,000 |
Interest Rate | 2.62% |
Series 2021-C | |
Line of Credit Facility [Line Items] | |
Amount | $ 25,000,000 |
Interest Rate | 2.68% |
Series 2021-D | |
Line of Credit Facility [Line Items] | |
Amount | $ 15,000,000 |
Interest Rate | 2.78% |
DEBT - Schedule of future payments (Details) $ in Thousands |
Jun. 30, 2022
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2022 (remainder) | $ 2,808 |
2023 | 45,988 |
2024 | 5,012 |
2025 | 106,850 |
2026 | 50,088 |
Thereafter | 663,464 |
Total payments | $ 874,210 |
DERIVATIVE INSTRUMENTS - Fair Value of Derivative Financial Instruments (Details) - Interest Rate Swap - Accounts Payable and Accrued Expenses - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Designated as Hedging Instrument | ||
Derivative [Line Items] | ||
Total derivative instruments | $ 0 | $ 4,610 |
Not Designated as Hedging Instrument | ||
Derivative [Line Items] | ||
Total derivative instruments | $ 0 | $ 1,097 |
DERIVATIVE INSTRUMENTS - Derivative Instruments on Statement of Operations (Details) - Interest Rate Contract - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
Derivative [Line Items] | ||||
Gain (Loss) Recognized in OCI | $ 0 | $ (386) | $ 1,581 | $ 1,625 |
Interest Expense | ||||
Derivative [Line Items] | ||||
Gain (Loss) Reclassified from Accumulated OCI into Income | $ (188) | $ (1,120) | $ (492) | $ (2,216) |
FAIR VALUE MEASUREMENTS - Changes in Fair Value of Receivables (Details) - Fair Value, Recurring - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Dec. 31, 2021 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Mortgage loans and notes receivable | $ 6,072 | $ 43,796 | $ 49,484 |
Change in fair value of receivables | 149 | 997 | |
Other Gains (Losses) | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Change in fair value of receivables | 7 | 7 | |
Interest Income | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Change in fair value of receivables | $ 142 | $ 990 |
SEGMENT REPORTING - Segment Assets and Accumulated Depreciation (Details) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
Jun. 30, 2021 |
---|---|---|---|
Segment Reporting Information [Line Items] | |||
Property owned | $ 2,401,427 | $ 2,271,170 | |
Less accumulated depreciation | (487,834) | (443,592) | |
Total property owned | 1,913,593 | 1,827,578 | |
Mortgage loans receivable | 0 | 43,276 | |
Cash and cash equivalents | 13,156 | 31,267 | $ 5,194 |
Restricted cash | 1,914 | 7,358 | $ 8,444 |
Other assets | 18,950 | 30,582 | |
Total Assets | 1,947,613 | 1,940,061 | |
Multifamily | |||
Segment Reporting Information [Line Items] | |||
Property owned | 2,374,726 | 2,244,250 | |
Less accumulated depreciation | (480,113) | (436,004) | |
Total property owned | 1,894,613 | 1,808,246 | |
All Other | |||
Segment Reporting Information [Line Items] | |||
Property owned | 26,701 | 26,920 | |
Less accumulated depreciation | (7,721) | (7,588) | |
Total property owned | $ 18,980 | $ 19,332 |
COMMITMENTS AND CONTINGENCIES (Details) - Subject to Restrictions on Taxable Dispositions |
Jun. 30, 2022
apartmentProperty
apartmentHome
|
---|---|
Real Estate Properties [Line Items] | |
Number of properties | apartmentProperty | 37 |
Number of apartment units | apartmentHome | 6,754 |
SHARE-BASED COMPENSATION - Schedule of Assumptions Used in Black-Scholes Pricing Model (Details) - Stock Options - 2022 LTIP Awards |
6 Months Ended |
---|---|
Jun. 30, 2022
$ / shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Exercise price (in dollars per share) | $ 110.90 |
Risk-free rate | 1.44% |
Expected term | 6 years 3 months |
Expected volatility | 21.20% |
Dividend yield | 2.597% |
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