Centerspace Plotting $245M Multifamily Selloff

Centerspace’s strategic review is set to result in a sale of 20 percent of the apartment landlord’s portfolio.

The North Dakota-based multifamily real estate investment trust announced plans this week for a “portfolio optimization.” Company executives said it looked at alternatives and determined the disposition process was the best path for strengthening the balance sheet.

Under the plan, Centerspace plans to sell between $240 million and $245 million worth of properties by the end of the calendar year. That will involve a dozen of its properties, representing one-fifth of the company’s assets.

One of the sales will be in Denver, while the others will largely focus on exiting the Bismarck, North Dakota, and Rapid City, South Dakota, markets. All of the targeted sales are already under contract and are expected to close by the end of the year.

“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,” Centerspace chief executive officer Anne Olson said in a statement.

The company hopes to reduce its total debt by between $175 million and $190 million. A regular quarterly distribution of $0.77 per share is still expected to be paid out in the middle of next month.

After opening the week at $66.81 per share, the Centerspace stock cratered on the news of the pending sales, falling to $58.06 on Tuesday morning; it stood at $59.90 as of late Thursday morning. The stock is down more than 10.5 percent year-to-date.

Centerspace’s portfolio spans nearly 13,000 units. It’s in major Midwest cities, such as Denver, Minneapolis and Salt Lake City. There have also been opportunities in places property investors consider less popular, such as Grand Forks, North Dakota; Billings, Montana; and Rapid City, South Dakota.

The plan was announced weeks after a transformational deal in the multifamily sector.

Last month, AvalonBay Communities and Equity Residential agreed to an all-stock “merger of equals,” creating a $69 billion multifamily giant with more than 180,000 apartments and a projected $52 billion equity market capitalization.