D/B/A Centerspace

and welcome to CenterSpace's first quarter 2021 earnings conference call. Today, all participants will be in a listen-only mode. Should you need assistance during today's call, please signal for a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that today's event is being recorded. I would now like to turn the conference over to Mr. Mark Decker, President and Chief Executive Officer. Please go ahead, sir.

Thank you, Chris, and good morning, everyone. Center Space's Form 10-Q for the quarter ended March 31, 2021, was filed with the SEC yesterday after the market closed. Additionally, our earnings release and supplemental disclosure package have been posted on our website at centerspacehomes.com and filed yesterday on Form 8-K. Before we begin our remarks this morning, I need to remind you that during the call we will discuss our business outlook and will be making certain forward-looking statements about future events based on current expectations and assumptions. These statements are subject to risks and uncertainties discussed in our release and Form 10-Q and in other recent filings with the SEC. With respect to non-GAAP measures we used on this call, including pro forma measures, please refer to our earnings supplement for a reconciliation of GAAP, the reasons management uses these non-GAAP measures, and the assumptions used with respect to any pro forma measures and their inherent limitations. Any forward-looking statements made on today's call represent management's current opinions and the company assumes no obligation to update or supplement these statements that become untrue due to subsequent events. With me this morning is our Chief Operating Officer, Ann Olson, and our Chief Financial Officer, John Kirchman. We'll each provide some commentary and then open the call for Q&A. I'm excited to share our first quarter results for 2021, which reflect our business's strength and resilience, enabled by outstanding teamwork and discipline on the part of the CenterSpace team. I continue to marvel at and appreciate my colleagues, who are focused on taking care of our customers and each other. To all those from CenterSpace who are listening, many of whom are fellow owners of the business, thank you. It's also noteworthy to point out that on April 12th, CenterSpace paid its 200th consecutive quarterly dividend, 50 years of focusing on distributable cash flow. Here's to our investors and another 50 years of dividends. May they be paid quarterly and grow. As we discussed in our last call, it's been a humbling 18 months in the prediction and estimation business. And as most listeners here know, we raised our guidance significantly a few weeks ago by over 4% at the midpoint and notably taking the bottom end of our guidance above the previous midpoint. We did this to adjust for the recovery that's happily here sooner than we expected. We had based our guidance on two key assumptions. First, we wouldn't experience pricing power until the second half of the year after most of our leases were signed. And second, caution around our ability to maintain efficiencies that we gained in 2020 through our proactive innovations during COVID. Our goal with guidance is to be pragmatic and thoughtful, to transparently articulate our best estimate of a range of outcomes, but this period has been one of extreme uncertainty. Now back to the business. As John and Ann will discuss further, we had an outstanding first quarter, and that strength is carrying into Q2 as we see high traffic and demand buttressed by a white-hot housing market moving rents upwards. Our results are a testament to the capital allocation decisions we've made over the last few years and payoff on investments we've made and keep making in our people and technology. As we often say, it's about positioning the business with the best opportunity set and then capturing that opportunity with a great operating platform that sits atop a flexible balance sheet. In Q1, we demonstrated good progress. As disclosed in our press release, we are under contract and expect to close this month on the sale of six communities in Rochester for $60 million. Those proceeds, which will be all cash, will be applied to pay down our line of credit, closing out the funding of our January purchase of Union Point on a leverage neutral basis. This series of transactions exemplify what we love about our transformation. Sale of older, lower margin, lower growth assets, purchase new, higher margin, higher growth assets, finance with long-term unsecured debt. We've been doing this for four years. What's different and exciting is to see it get to the bottom line on a per share basis. This is the best quarter per share result we've produced as a team. We will maintain a significant presence in Rochester, and this sale does not reflect a lack of confidence in the market. Like other asset management decisions that result in dispositions, these sales allow us to optimize our portfolio in that market and overall. This has big positives for our team in terms of operating efficiently, and it helps us grow distributable cash flow. We look forward to reporting results in Rochester in the quarters to come, but we know this strategy has been effective in Bismarck, Grand Forks, and Minot, and you can see it in our same store results today, where we are growing NOI and operating margin well. Staying on the theme of transactions and the transaction market, we are reviewing opportunities primarily in the Twin Cities, Denver, and Nashville. We announced last June that Nashville was a focused market, and we don't own anything there yet. And now that market has gotten a lot of positive attention. Cap rates are low, and competition is high. Thematically, this is nothing new. These same comments could have been made about Denver before we got into that market, but of course, we didn't have the interruption of COVID in our early time there, and that is a factor. The reality is that multifamily is a great product and a great business. It's easily financeable and well supported by the federal government through Fannie and Freddie. For a variety of reasons that have been accelerated by the pandemic, markets like ours have seen an uptick in demand from the consumer side and an attendant uptick in interest from investors as marginal dollars flow from coastal markets. These are not secrets, but we know how to compete. We are focused, creative, and bring strong operating skills and an excellent cost of capital to any competitive situation. And we have been and will remain disciplined, never forgetting who we work for, our mission, and how we measure success. With that, Anne, can you please take us through the first quarter and your outlook on operations?

Thank you, Mark, and good morning. When we last talked in February, the weather was hovering around freezing across the Midwest, and the United States had less than 15% of the population vaccinated against COVID-19. As Mark mentioned, there was much uncertainty. As we sit today, the snow is gone, the sun is out, and we're approaching 50% vaccination rates. The optimism for our economy and for the resolution of the pandemic is palpable. And our confidence in our business has also improved as we have more clarity around leasing rates and expense projections, both of which were favorable for our first quarter of 2021. Occupancy across our portfolio is holding steady, and we realized 40 basis points of increased revenue compared to Q1 2020. Strong leasing trends coupled with a 90 basis point decrease in expenses resulted in a 1.4% increase in NOI for the first quarter compared to the same quarter 2020. Our average monthly revenue per occupied home increased 80 basis points in the first quarter over Q1 2020, and our overall revenue per unit increased from 1,119 in Q1 2020 to 1,133 for Q1 2021. Our renewal retention remains strong, And our first quarter collections were 99.1% of expected residential revenue, which compares to pre-pandemic Q1 2020 of 99.8%. We continue to see strong revenue performance in our secondary markets, where there were less COVID impacts to the economy and there continues to be very little, if any, supply. Revenues in Billings, Rapid City, Omaha, and across our North Dakota markets all increased between 3% and 6.5% over Q1 2020. If we bifurcated our portfolio into secondary markets, coupled with suburban assets in our core markets of Minneapolis and Denver, and compared them to our five urban assets that were harder hit by COVID impacts and where there continues to be supply pressures, we would see positive trends in both. Our five urban assets located in Minneapolis and Denver, which contribute approximately 14% of our overall NOI, showed improvement in lease over lease rates for the quarter. starting January at negative 7.9% and improving to negative 3.6% in March. Those assets also experienced flat renewal rates. In comparison, our secondary markets combined with suburban assets showed the potential of increased rates with an average lease-over-lease increase for Q1 of 2.6%, but marked showed lease-over-lease rate increases of 5.9%. Our non-urban portfolio realized first quarter renewal increases of 4.6%. In the first quarter, we achieved renewal increases of over 5% on average in St. Cloud, Rochester, Grand Forks, Bismarck, and Billings. This demonstrates the strength of our suburban portfolio and the balance that our secondary markets have brought to our results. Our preliminary April results show a continuation of this trend, with our same-store replacement rent changes continuing to increase over March and renewal rates remaining strong. This is great news as we're heading into our heavy leasing season with 32% of our portfolio leases expiring in the second quarter. Last quarter, we discussed our desire to leverage operating efficiencies and changes that were made during 2020 that helped us reduce costs. Our 2021 first quarter controllable expenses decreased 2% compared to first quarter 2020. We are capturing operating efficiencies from resident self-service and other measures put into place during 2020. Our Rise by Five initiatives for 2021 are well underway, as we expect to see continued benefits from the changeover of our RUBS provider and as we gain momentum on our technology implementations. During the first quarter, we deployed several new collaborative tools and enhancements to our service and knowledge centers. The costs associated with our technology implementations were $413,000 in the first quarter, and we expect to invest approximately 1.1 million in 2021 as we change over our base property management software systems to enhance efficiencies and reporting. We are right on track with our value-add renovation program through the first quarter, and we'll see a significant uptick in the number of homes renovated during the second and third quarters. We completed 90 homes at an average premium of 187 per month. We anticipate renovating approximately 725 homes in 2021, And between unit renovations and common area enhancements, anticipate our full-year investment to be between $15 and $20 million. With warming weather and positive financial results across our portfolio, we are looking forward to leveraging our success into the summer and having a little more fun than this time last year. Our business is about people, our residents, our team, and our investors. And I know our teams are looking forward to opportunities to connect as our nation reopens. Now I'll ask John to discuss our overall financial results.