Good day, and welcome to Centerspace Q4 2021 earnings call. My name is Brica, and I'll be today's event specialist. You'll have the opportunity to ask a question. To do so, please press star one on your telephone keypads. If you change your mind at any time, please press star two. I would now like to hand the call over to Mark Decker, Centerspace's President and CEO. Mark, you may begin. Thank you, operator, and good morning, everyone. The Form 10-K for the full year 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 Form 10-K, including those under the section titled Risk Factors and in other recent filings with the SEC. With respect to non-GAAP measures we use on this call, including pro forma measures, please refer to our earnings supplement for a reconciliation to GAAP and 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. I'm grateful to be joined this morning by our Chief Operating Officer, Anne Olson, as well as our Chief Financial Officer, Bhairav Patel. We also have a special guest, John Kirchmann, who as most of you know, is our former CFO and is helping with Bhairav's transition. 2021 was an incredible year in the housing business, and Centerspace had a fantastic year as well. Our mantra is better every day, and we lived up to that, making meaningful progress in every respect. With outstanding operating results, record investment and financing activity, critical investments into our technology platform, as well as our team, as we pursue our mission to be a great place to live, work, and invest. We closed the year with Core FFO growth of 5.6% over 2020 and well above consensus. In 2022, the momentum should accelerate and our outlook is for Core FFO growth per share of 11.5% at the midpoint versus 2021 and 3% over consensus. Centerspace is one of just a few companies in the apartment space that was able to post year-over-year growth in operations and per share FFO in each of 2019, 2020, and 2021, an outcome that reflects the quality of our business. Looking to 2022, we expect to build on our fundamentals, characterized by consistency, growth, and relatively low new supply. We've made over $600 million of portfolio investments since January 2021, improving our growth potential and quality of earnings, and we will continue to seek opportunities. Our KMS investment, which we've owned for 6 months now, is on track and the opportunity to be optimizing the lease roll in those assets is just getting started as we head into our peak leasing season. We purchased KMS to grow faster and it's working. In January and February, we are seeing nearly double the blended lease rate growth compared to our same-store portfolio in Minneapolis and St. Cloud. We're also beginning to consider the opportunities for value-add in that subset of the portfolio. Opportunities we did not underwrite or price into the purchase. The work we're doing there and elsewhere should help us continue to grow revenues at better than market as we did in 2021. Our balance sheet has never been better. We closed the year with average maturities over seven years, a blended rate in the low three's, and 7x debt to forward EBITDA. Our access to the private placement market was expanded in 2021, and our spreads continue to narrow and are well in line with investment-grade issuers. On the equity side, we were able to place shares through our ATM into a handful of active investors who understand our business and help us drive float and liquidity. Two of which are now in our top 10 shareholders overall and top three among active investors. As always, I want to thank our outstanding team of professionals who show up every day for our residents and for each other. Anne, please give us an operating update. Thank you, Mark, and good morning. 2021 was a year of stellar revenue growth for our company as we drove a 4.8% increase in same-store net operating income for 2021 over 2020. With 9.2% revenue growth in the fourth quarter compared to the same period in 2020, we believe we have a great runway for success into 2022. In the fourth quarter, our same-store new lease rates were up 5.8% over the prior leases, and same-store renewals achieved increases of 7.8%. Given the seasonality of our business, it is important to note that in the fourth quarter of 2020, our new lease rates had declined 3.6%, and our renewals were 2.3%. Our fourth quarter spread is 9.4% on new leases and 5.5% on renewals compared to the same period in 2020. On a blended basis, this is fourth quarter rental rate growth of 6.5%. Solid rental rate increases continued in January, with new leases increasing 6.6% over prior leases and renewals increasing 9.6% for a blended rate increase of 7.5%. Our same-store weighted average occupancy was 93.4% on December 31, 2021, a slight increase over the end of the third quarter, but lower than where we finished in 2020. Some of this is attributable to our value-add renovations as well as higher turnover as we've come out of COVID and experienced increasing rental rates. Optimizing revenues is our goal through value-add renovations, revenue management, and enhancing our customer experience while we still closely monitor expenses. We expect that the current inflationary environment will create expense pressures, particularly in labor and materials. At this time last year, we were still monitoring our collections rate and bad debt expense while working through the eviction moratoriums and regulations. 2021 saw significant quarterly volatility in our collections, and we realized 101% of expected residential revenue in the fourth quarter. For the year, we collected 99.2% of expected residential revenue, which is what we are anticipating to be a normalized rate heading into 2022. The fourth quarter was also our first full quarter after the integration of the KMS portfolio. With respect to our acquisition capital expectations, we have begun to deploy capital to help drive the rental rates that Mark mentioned. Through December 31, 2021, we have spent approximately $540,000 on common area cleanings, mechanical, plumbing, and HVAC upgrades, and we've bid and contracted for some of our larger acquisition capital projects across that portfolio. In 2022, we expect to spend approximately $21 million of the $38 million allocated to acquisition capital improvements for the KMS assets. Given the strong results of 2021, we're confident that 2022 brings us many opportunities to continue to execute on our operating platform, including integrating our non-same store portfolio, capturing our loss to lease, and optimizing our property management technologies to enhance our customer experience. We're very proud of our team's demonstrated ability to execute on our vision and mission and are grateful for their contributions to making better every day. I'll turn it over to Bhairav to discuss our financial results. Thank you, Anne. Last night, we reported Core FFO for the year ending December 31, 2021 of $3.99 per diluted share, an increase of $0.21 or 5.6% from the prior year. For the quarter ended December 31, 2021, Core FFO was $1.08 per diluted share, an increase of $0.06 or 5.9% from the prior year. The increase in full year Core FFO is primarily attributable to higher NOI, offset in part by higher G&A and property management expenses as we have grown our portfolio. Total G&A was $16.2 million for the year, an increase of $2.8 million over the prior year, primarily attributable to increases of $1.3 million in incentive-based compensation costs related to company performance and share-based compensation arrangements and $800,000 in non-recurring technology initiative costs. Property management expense, which includes property management overhead and property management fees, increased $8.8 million for the year ended December 31, 2021, compared to $5.8 million for the prior year. The increase is primarily due to $1.2 million in non-recurring technology initiatives as well as $1.2 million in compensation costs from the filling of open positions and additional staffing related to the acquisition of communities during the year. Turning to capital expenditures, which is presented on page S-17 of our supplemental, same-store CapEx was $9.7 million for the year ended December 31, 2021. That translates to $906 per unit, which is in line with our expectations. Looking at our balance sheet as of December 31, 2021, we had $205 million of total liquidity, including $174 million available on our line of credit. The refinancings we completed in the third quarter strengthened our balance sheet and added financial flexibility by increasing the weighted average maturity of our debt while reducing our cost of capital. Additionally, subsequent to year-end, we terminated the two remaining swap positions for a total cost of $3.4 million, further reducing our weighted average interest rate. As a result, we now pay interest on our line of credit at LIBOR plus 150 basis points. For reference, the swap interest rate on the $76 million outstanding on our line of credit as of December 31, 2021 was 4.3% versus 1.6% excluding the swaps. In Q4, we issued 721,000 shares at an average price of $97.51 per share, net of commissions. For the full year, we issued 1.8 million common shares at an average price of $86.13 and total consideration, net of commissions and issuance costs of $156 million under the ATM program. Now, I will discuss our 2022 financial outlook, which is presented on page S-18 of our supplemental. Core FFO for 2022 is projected to be $4.45 per share at the midpoint of the range, which is growth of 11.5% over the prior year and is driven by strength in our core operations. Year-over-year growth is driven by strong projected same-store NOI growth, which is expected to increase by 8%-10% as well as the accretive acquisition of 23 communities since the beginning of 2021. Within our same-store pool, we project revenue to increase by 7% at the midpoint as we look to sustain revenue growth we saw in the fourth quarter of 2021. We do anticipate cost increases as a result of inflationary pressures, particularly on compensation costs driven by a challenging labor market, and expect total same-store expenses to increase by 4.25% at the midpoint. Our financial outlook also assumes same-store capital expenditures of $925-$975 per home, which is slightly above last year as a result of timing differences and inflationary increases, value-add capital expenditures of $21 million-$24 million, and the January 2022 acquisition of four communities in the Minneapolis market. To conclude, we executed on several initiatives in 2021 to add scale as evidenced by the growth of our portfolio since the beginning of 2021 while simultaneously positioning the company for future growth. We continue to deliver strong operating results, improve the balance sheet, and invest in a best-in-class operating platform. For that, I thank all our team members for their unwavering commitment and continued hard work. Thank you. If you would like to ask a question, please press star one on your telephone keypad. Please note we allow one question at a time. If you wish to ask a follow-up question, please get back in the queue. As a reminder, it is star followed by one to ask any questions today. We have our first question on the phone lines from Rob Stevenson from Janney. Rob, please go ahead when you are ready. Good morning, guys. Mark and Anne, Minneapolis is 26.6% in terms of the same-store NOI percentage. What percentage of overall NOI is it given the recent acquisitions? Will we see some selective Minneapolis dispositions in 2022? Are you comfortable growing that market even higher at this point? Can you talk about where the Minneapolis suburban versus urban mix is? Hey, Rob. Good morning. Looking through same store to everything, I think we're around 36% in Minne, or the Twin Cities, I should say. That suburban-urban mix would be roughly 90-10 or 85-15, something like that. We'll do some math on that while we're talking and hopefully get back on the call. It would be highly skewed towards the suburbs and more highly skewed than it was towards B. Pre-KMS, we were about 50-50 by NOI and about 60-40 by homes. 60 B, 40 A in terms of number of homes, but 50-50 in terms of cash flow because of the higher rents on the A side. Today we would be probably more like 2/3 B, 1/3 A. Again, I'm winging it a little, Rob, but directionally, that's accurate. Okay. Uh, and so to- And then- The question is, would we pare that down? One, we're happy to own things in the Twin Cities. We don't want to not do things that we think other people can't do because it's in a market we know really well and have a high degree of concentration. We are sensitive to concentration, and we'll be opportunistic sellers of anything and everything. You know, as Bhairav called out in our outlook, we don't have any sales program this year in our plan. We're always seeking undisciplined buyers, and there's more out there than ever. I would say it's plausible, but not likely we sell something in Minneapolis, and if we do so, it'll be to fund something else, either here or elsewhere. Okay. I guess the only other question I have is that the 18.7 million of shares in the guidance, what did you guys end the year with? The weighted average was like 17.9. Does that assume like a $75 million issuance in 2022? Bhairav, do you wanna? Yeah. I mean, no issuances in 2022 are picked up in the guidance. We ended close to just a little over 18 million shares, which is what's being picked up in the shares in the guidance for 2022. Okay. That's stock-based incentive or whatever the growth in the 700,000 extra shares or so? Yep. Okay. Thanks, guys. Appreciate it. Rob, it's the OP Units. There's 200,000 shares equivalence in there from what we call the Minne 3 acquisition, which is an OP Units deal. Okay. Thanks, guys. Appreciate the time. Thank you. Thank you, Rob. We now have another question on the line from Alexander Goldfarb of Piper Sandler. Alexander, your line is open. Thank you. Hey, good morning out there. Just to clarify, is it one question then get back in the queue, or we're allowed to ask a follow-up? Fire away. We'll cut you off if you get to seven questions. Okay, excellent. My kids usually cut me off after I ask them about how school was. Question. First question for you. You know, as far as looking at 2022, how much free rent are you burning off from last year? Or is the revenue guidance pretty much all, you know, face rent over face rent? To restate the question, are we burning off concessions? Yes. Yes. Yes. We have very little use of concessions, and our lease rates that we're quoting the increases on are effective rents over effective rents. That's a true kind of lease rate over lease rate. We very sparingly use concessions. If you recall, you know, our markets were pretty strong, and we didn't have as much need for concessions through COVID. Okay. When we're looking at, like, the revenue, you know, up 25% in St. Cloud or, you know, I guess that's really the standout one. That's really rents are up 25% in that market. Yeah. Part of that is, you know, we had some volatility in bad debt, so that could also be, you know, collections, late collections or deferred collections in that market. That's total revenue, not just rental rates. Okay. The Minneapolis, the Twin Cities exposure at, you know, over, you know, a quarter of your portfolio, there have been obviously the headlines on the rent control, which I think is more in the city, not the suburbs. But still, just, you know, when you look at other companies that have been overly exposed to just one market, your thoughts on having that much exposure. I know you guys tried to go for Nashville expansion to other markets is a slow process, but still, how do you weigh your Minneapolis exposure versus the rent control headlines versus just overall having that much concentration there? Man, I knew we couldn't get off this call without a Nashville barb. Thank you. No, no. Thank you, a hand clap by hand. Listen. I owe this to Daniel Santos to ask Nashville. 100%. I agree. We are certainly focused on the concentration. I think the most concentrated set of NOI is Essex, which is, I think, north of 40 in the Bay Area. People like the Bay Area better than Minneapolis for reasons I understand. I'd say we're mindful of it, but not afraid of it. You know, in our minds, it's less risky to own more of something you know really well. We do wanna get into other markets. We will continue to focus on Nashville. You know, nothing in our thesis there has broken down. You know, as it relates to rent control, St. Paul is the only municipality that actually has rent control. The rent control there is pretty egregiously bad. It stays with the unit. It doesn't change when you change your resident. The mayor there is on record recently trying to walk that back. It is, in our judgment, and I think, broadly understood to be pretty poorly written and ill-conceived. That's a fact that I think the council and the mayor are starting to understand as people have stopped work on market-rate projects. They've lost several thousand homes in St. Paul. It's our view that that might help inoculate, to some extent, Minneapolis, which just to be clear, for everyone who isn't tracking the legislation here, what was voted in was the ability for the Minnesota, or for the Minneapolis City Council to essentially draft legislation on rent control. Voters didn't say, "We want rent control." They said, "We want you, Minneapolis City Council, to figure out," which you could take as a proxy for maybe they want it. Who knows? Our understanding of the Minneapolis City Council is it's eight against it, five who are for it, and four actually the St. Paul version, which we think is terrible. The mayor has come out against it. I would say when you look at what's happened in St. Paul, if you have a head on your shoulders and you want people to continue building things in Minneapolis, you're not going to do that. We also have other issues in the city around law enforcement and lots of other things. In terms of force ranking the priorities of the city council, it's unclear yet where this one will fit. There are lots of projects. I've been on several calls with council members where capital has pooled development capital because they're scared of what's gonna happen here. You know, they don't have to take the time to get into the why and wherefore of what all the landscape is. They just have lots of other markets to play in, and so they're doing that. That message is being pretty well reinforced across the legislature. You know, that's a really long-winded way of saying we're not concerned about it. You know, to some extent, it actually probably gives us more opportunities. If we're looking at doing another NoCo-style deal, we might have a little bit more pricing power than we did before because there's less institutions focused on this market 'cause they don't understand it. It's a risk. I mean, frankly, I think it's a risk everywhere. You know, I know there's lots of states that would never have rent control, but if you have 30% plus rent bumps in Florida, at some point, someone's gonna say, "Hey, we can't do this." I think broadly speaking, and we've talked about this in the past, you know, there's legislative risk to housing everywhere. I would argue we know exactly what the risk is in Minneapolis, and to some extent, that's less risky. Anyway, sorry for the long answer. No problem. Thank you, Mark. We now have John Kim of BMO Capital Markets. Please go ahead, John. I've opened your line. Thank you. Good morning. Can you just discuss the same store revenue growth that you had sequentially of 4%? It's not really quite evident from the occupancy loss and the 6.5% spreads you had on blended lease rates. Was this driven by resident relief funds or anything else that was sort of one-time in nature? Yeah. Thanks, John. Yeah, we did have, as I mentioned in the prepared remarks, some volatility in those relief funds and the timing of those. That is part of what you're seeing there in those numbers sequentially is we collected 101% of expected revenue in the fourth quarter, some of which was just, you know, timing on receipt of collections. What's contemplated in guidance as far as additional resident relief funds you have or the change in bad debt? Yeah, I mean, from a guidance perspective, we are expecting it to normalize. We expect to collect about 99.2%-99.3% of our revenue. It's in the guidance that's contemplated to go back to our normalized collection rate. Okay. Bhairav, you mentioned the increased share count in your guidance is not inclusive of any additional equity raises. But are you assuming at all as part of that increase additional OP transactions this year? No, we haven't projected any acquisitions, and as a result, none of the additional share count is a result of OP issuances. Okay, great. Thank you. Thanks, John. Thank you. We now have another question on the line from Buck Horne of Raymond James. Sir, your line is open. Hey, thanks. Good morning. I wanted to ask a quick clarification question on the occupancy that you ended the fourth quarter with, just kind of the drop off, maybe. I realize you mentioned that there's some kind of post-COVID turnover associated with that. Maybe just, you know, is that a sign of some sort of pushback on kind of the renewal increases or kind of planned turnover or, you know, any color in terms of how you're optimizing and planning for occupancy going into, you know, fiscal 2022 and kinda how January is shaping up so far in terms of occupancy? Yeah. Thanks, Buck. You know, right now we're sitting at our year-to-date weighted average occupancy of 94.4%, so we've already picked up, you know, some of what we were looking at. I think it's a confluence of a few things in the fourth quarter there. One would be, you know, as the rent relief funds came in and then tapered off, and the eviction moratorium being gone, there was some kind of planned turnover or places where we needed to move residents on. We are getting pushback across the board. I think most people in the industry are on the rental increases. You know, we've seen a slight tick-up in people renting other places as we continue to push those rents. We had, you know, about 40 basis points of value-add in the fourth quarter there that is attributable to vacancy in that. That's where, you know, we want those units offline for that 30 days so we can renovate. We saw just a little, a slight uptick in that in the fourth quarter. Feeling good in January, you know, it's picking up. We feel like we have quite a bit of runway, both with respect to the lease rates and ability to push occupancy as we head into leasing season, where we will also see, you know, quite a bit of turnover. Got it. Very helpful. Okay, that's all I have for now. Thanks, guys. Thanks, Buck. Thank you. We now have another follow-up question from Alexander Goldfarb of Piper Sandler. Please go ahead when you're ready. Oh, yes. Hi. Just a quick follow-up. On the two swaps that you broke, I understand the existing swap, but the forward swap, presumably that was put in place in conjunction with some planned issuance. Just sort of curious, the thoughts around, you know, was that an issuance that was pulled or just a little bit more color? And then on the one that you broke, was there no option to assign that to a different piece of debt? Just curious. No, I'll start, and then Bhairav can close with math if necessary. Those swaps were attached to some bank debt that we had done, I think in 2018. Right, John? 17 and 18. 17 and 18. Before we had the ability to borrow 10-year duration money, the longest we could go on an unsecured basis was five and seven with the bank. We did a five and seven-year term loan. We had, you know, fixed those using these derivatives. Then when we did the refi last August of the five and seven-year, and we redid our line, essentially everything that would have had an that was originally attached at that point was in play. Our judgment at the time was, we had no downside to assign those swaps. You know, obviously rates moved quite a bit. It got. I think it went from $8 or $9 million to break those to $3.3. Three, yep. At this point, you know, we're not in the betting on rates game, but it was an easy bet in August. It was not a good bet in our judgment anymore and not kind of our business. That was the business rationale. If you want to add anything, Bhairav, please do. No, I think that covers it. Yeah, from our perspective, when we terminated the other swaps, there was little or no risk of holding onto these in case rates move upwards. They did. You know, that's what triggered the termination. Okay, cool. Thank you. Yeah, thank you. Thank you. We now have another question on the line from John Kim of BMO Capital Markets. Please go ahead, John. Your line is now open. Hey, I was wondering if you could provide an update on your loss to lease and also what you're expecting as far as market rent growth as part of guidance? Yeah, I can. You know, our loss to lease right now is sitting just over 8%. As we head into the peak leasing season, which we feel good about. In our guidance, our rental rate assumptions are, you know, kind of 2% at the very low end, which would be Oxbow in the rent control, where we're experiencing rent control in St. Paul, to 6% at the high end, which would be Denver. Okay. I know you guys present the new and renewal and effective lease growth rates on calls and in presentations, but I was wondering if that was something that you can provide in the supplements going forward. Yeah, we can consider that. We'll review that for the next supplement. We're gonna take all the mystery out of these calls for you, John. I know. We'll run out of questions. We have to keep you listening for something. Mark, you've said in the past that you were going to prioritize earnings growth over portfolio repositioning and improving the balance sheet. I know you discussed getting to Nashville and some other markets. I was wondering if you were gonna take advantage or further take advantage of the strength of the market to accelerate some of those plans as far as, you know, market positioning and also the improvement of the balance sheet. Yeah. As we noted in our prepared remarks, our forward debt to EBITDA is, I think, 7.1, which is the best the balance sheet's ever been, and our maturity schedule is really good. While we do look at the Magnificent 7, as you've dubbed them, and I've repeated, and their incredible balance sheets with covetous eyes, we're very happy with where the balance sheet is, and we're not gonna do anything. I mean, I think we can de-lever by growing cash flow is probably our best tactic at the moment. We certainly will be opportunistic on asset sales. Ideally, what we'd like to do, as we have done in the past, is pair it with a buy we like, which should mute some of the dilutive impact of just a straight sale. I mean, that's really how we've been thinking about it. That's, you know, lessons learned over the last five years. We did a lot of sort of selling and then finding the use that didn't work as well as you might expect, as finding the use and then either acquiring it and then selling or doing it relatively contemporaneous. That's really how we're thinking about it. Mark, can you comment on cap rates either in your targeted markets or in your non-core markets, how they've moved? Yeah. I would say cap rates are kind of 3.25%-4.25% across our markets, roughly. I mean, there might be a little bit higher than that in a few markets. You know, when you look at our portfolio and you look at our average rents and you look at our margins versus some of the recent sales. Obviously, Blackstone's made a lot of noise out there buying a couple of portfolios that mathematically look a lot like ours. I mean, geographically different, which certainly I think matters as it relates to people's growth rate assumptions and how they do their math. Fannie and Freddie look at a dollar the same way, sort of regardless of its origin. You know, there's a really good bid out there for multifamily assets everywhere. The fundamentals of our markets are very good from a supply perspective and everything else. Pricing is strong. You know, we really look at cap rates, and then we also look at unlevered IRRs. I think in general, market clearing IRRs right now, which are riddled with assumptions, as you know, are kind of in that mid-fives to six range. We don't see many things that we underwrite to north of six, where we can win. We can get into a lot of best of finals that way. You know, 5.6, 5.7, 5.8, you probably can take home the thing you're seeking. That's on our math, relatively conservative assumptions. I mean, maybe someone's got a higher IRR with more growth or less reversion or what have you. That's where we think assets are pricing today in our markets. Great. Thank you. Thanks, John. Thank you. As a reminder, if you would like to ask any further questions, please press star followed by one on your telephone keypads. Sounds like that's a wrap. Any more questions? We have no further questions on the line. Excellent. Well, then, in that case, we'd like to thank everyone. In particular, I wanna welcome Bhairav, who's we're excited to have here and thank John Kirchmann. As anyone who knows John knows, he's always one of the most interesting men in the room, and we all wish him the best of everything. Thank you, John. Thanks, everybody. Thank you. This does conclude today's call. Thank you all for joining. You may now disconnect your lines.