Apartment owner and operator Centerspace is taking steps to strengthen its balance sheet and portfolio as well as preserve shareholder value.
After a comprehensive evaluation of strategic alternatives by its board of trustees, the company plans to dispose of 12 communities at approximately $240 million to $245 million. This includes one community in Denver as well as full exits from the Bismarck, North Dakota, and Rapid City, South Dakota, markets. Each of the dispositions is under contract with anticipated closings in the second half of the year.
As of March 31, Centerspace owned 61 apartment communities comprising over 12,000 homes in Colorado, Minnesota, Montana, Nebraska, North Dakota, South Dakota, and Utah.
Centerspace plans to prioritize higher-quality, more liquid markets for its portfolio. According to the company, these sales once completed will position it for long-term success as multifamily fundamentals continue to recover after the pandemic supply boom.
The company expects:
- Total debt to decrease by $175 million to $190 million, including the repayment of its line of credit balance, improving the cost and duration of debt;
- Improvement in pro forma annualized net debt to EBITDA, dropping from 8.2x in the first quarter to an anticipated sub-7x level in the fourth quarter; and
- Potential special distributions of $45 million to $65 million.
“This capital allocation initiative we are announcing today is an outcome of our review process,” said CEO Anne Olson. “We expect these actions to enhance shareholder value by capturing the discount between public and private market valuations, while materially strengthening our balance sheet and positively evolving our market exposures.”