D/B/A Centerspace

Hello, everyone, and welcome to the CenterSpace Fourth Quarter 2022 Earnings Call. My name is Daisy, and I'll be coordinating your call today. If you would like to register a question, please press star followed by one on your telephone keypad. I would now like to hand the call over to your host, Joe McComish, VP of Finance, to begin. Joe, please go ahead.

CenterSpace's form 10-K for the year ended December 31, 2022, was filed with the SEC yesterday after the market closed. Additionally, our earnings release and supplemental disclosure package have been posted to our website at centerspacehomes.com and filed on Form 8-K. It's important to note that today's remarks will include statements about our business outlook and other forward-looking statements that are based on management's current views and assumptions. These statements are subject to risks and uncertainties discussed in our filing under the section titled Risk Factors and in our other filings with the SEC. We cannot guarantee that any forward-looking statements will materialize, and you are cautioned not to place undue reliance on these forward-looking statements. Please refer to our earnings release for reconciliations of any non-GAAP information, which may be discussed on today's call. I'll now turn it over to Mark Decker for the company's prepared remarks. Thanks, Joe.

Good morning, everyone, and thank you for joining us. With me this morning is Ann Olson, our Chief Operating Officer, and Bharat Patel, our Chief Financial Officer. 2022 was an ambitious year for CenterSpace. We had several large forces at work, multiple large integrations of communities, people, and systems from late in 21, meaningful labor pressures given that all of our communities are in highly employed markets, inflation, and the reset of the cost of capital. And yet we did continue to grow the quality of our portfolio, and we were able to grow a core FFO per share by 11%. I'm confident we're on the right track as I listen to the many earnings calls and speak to private peers. We're in good company as it relates to strong fundamentals and expense challenges, though we are different in terms of our Midwest and Mountain West market exposure that's provided us with leading consistency in revenues and NOI growth since 2018. I get more excited when I consider that we've been able to find accretive ways to grow, and our internal growth opportunity remains, since we really are just a five-year-old owner-operator. I'm sure Anne will have some depth to the operating commentary, so I'll stop there. But before I move on, I want to say thank you to our teams in operations and support who continue to show incredible dedication to our residents and each other. Moving to capital allocation and balance sheet, we had a quiet first half as we pursued a large strategic portfolio that would have been funded with stock and units that didn't break our way. We got a little more active in the second half of the year, and we deployed capital to continue to improve our portfolio. purchasing a newly built property in Denver, Lira, for $95 million. And we also took advantage of the dislocation in public markets to buy back some of our own shares at a significant discount to intrinsic value. In all, we deployed about $125 million. Our plan was to fund those investments with the equity from sales of some of our least efficient and most capital-intensive communities, as well as long-term fixed-rate debt. And that is what we expect will happen in the coming months, as we have 1,500 homes under contract today, and we've rate locked a $90 million mortgage for 12 years at just over 5%. We delayed our financing plan to let the market settle, and in so doing, took more variable rate exposure. This proved to be the right long-term thing to do, but did cost us in the short term, and that's reflected in our results for Q4, and to some extent, our 2023 guidance, where you can see that interest expense is eating at strong operating results. Asset sales may also hamper core FFO for share growth. However, in our analysis, our cash flow and quality of earnings is improved, and that's a trade-off we like and will continue to seek. I'm pleased to say that we expect in the next 60 days to have long-term financing in place and have our line nearly back to zero. So when it's all said and done, we'll have a robust and scalable operational system with numerous chances to improve resident and team experience while gaining efficiencies. a portfolio of communities with better long-term pricing power and ability to grow and distribute cash flow, and abundant liquidity with an untapped line, low blended rates, long maturities, and a formidable unsecured asset base. Looking forward and considering our overall outlook, we believe that our portfolio provides a strong value proposition to our residents, that our residents are economically strong, and our portfolio of communities are among some of the least exposed to new supply in the public markets. We're excited about the opportunities to continue to improve the company in 2023 and beyond. And with that, Ann, would you please provide a quick operations update?