Good day, and welcome to the Centerspace Fourth Quarter Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mark Decker, Chief Executive Officer. Please go ahead, sir.

Thank you, operator, and good morning, everyone. As you may know, we are now doing business as Centerspace and trading on the New York Stock Exchange as CSR. The Form 10-K for the full year 2020 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 we’ll 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-K 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. 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 Mark Decker, Centerspace’s CEO, and with me this morning is Anne Olson, our Chief Operating Officer; and John Kirchmann, our Chief Financial Officer. I'll start with a quick explanation about the name change. Lots of people have asked and the rationale was simple. We changed our business. We were a business that for 50 years was called Investors Real Estate Trust or I-R-E-T or IRET or IREIT, and we built a heritage that we're proud of. However, in addition to having a name, you could agree on that business was one of a diversified landlord that owned apartments among many other things. Today, we are Centerspace and we are taking the 50 years of proud heritage with us, but we are now a customer and team centric housing company. In fact, we've been Centerspace for a few years. And so the name change was a good opportunity to close the chapter on our transition and rally around our mission with a name we felt passionate about. And as I've joked to anyone who'll listen, no one needs any coaching on how to say or spell Centerspace. Simplicity is powerful and on balance where confidence just helps us attract talent, which is so important. We have this name approved and ready in May, but held back in light of COVID social unrest and all the other pain and difficulty of 2020. As the year came to a close, however, it felt great to end with a real positive. I know it resonated with our team and they more than earned something fun after a banner year. We kept our customers and team safe, went above and beyond to be flexible and proactive and delivered stellar financial results. I couldn't be more honored to be a part of this team. I'm especially excited that there are nearly 100 team members that are new owners of our business following last week's Inaugural Leadership Conference. And I'm sure if you were on this call, congrats to those fellow owners and partners. I know that people are eager to talk about the future as I am, but I'd like to take a minute to recall some of last year's highlights because 2020 was a year where our company demonstrated real resilience and continued improvement. In 2020, Centerspace was added to the S&P Small-Cap 600. We grew our same-store NOI 1.8%, which is among the best of the public apartment companies. And we grew our year-over-year core FFO per share by 1.6%. We exited some of our oldest and most inefficient assets at excellent prices and added high quality assets in Minneapolis and Denver, growing our expected exposure to these focused markets for 2021 to over 40% of our net operating income. We also completed $14 million of value-add, exceeding our 2020 budget while hitting our underwriting targets. And lastly, while it closed in early January, the work was done in 2020 to allow us to add another asset, Union Pointe in Longmont, Colorado, bringing us to five assets in Denver. We believe Denver remains well positioned to benefit from shifts in how we all live and work now and in the future. In connection with Union Pointe, we priced 9.5 year money at 2.7%, a spread of 170 basis points over the 10-year and among the best executions for a direct private placement across the real estate spectrum, which is a strong endorsement of the progress we continue to make as a corporate credit. All of this occurred against the backdrop of COVID, with a lean team that made sacrifices all year long to make great homes for our residents and investors’ capital, which takes us to the present. In 2021, we forecast lower revenue growth as the pandemic chills our pricing power through the fall and we returned to normal expense levels. In this time of transition for the economy from lockdown to a return to some normalcy, we are going to invest and position our company for the future. Most importantly, we're embarking this year on work that will enable us to revamp our operating systems as we build on our capabilities to codify, build accountability and consistently deliver a great customer experience as efficiently as possible. We believe the investments we make now will bear fruit as we continue to grow and as fundamentals improve which we expect to occur this fall and beyond. We may prove conservative in our view of revenues. I hope that's the case, but it's out of our control. And of course the upside scenario is always the easiest one to figure out. The downside case is the one we need to prepare for. We are setting the table for the years ahead, and we're confident that our operations, balance sheet and capital allocation discipline will position us well and the investments will be worth it. We've talked a lot over the years about our North Star being the growth of distributable cash flow. And while the guidance that John's going to speak to in a moment, produces lower year-over-year core FFO, it amounts to roughly flat distributable cash flow per share, and positions us for growth in 2022 and beyond, which we believe is the most important thing. Lastly, I'd like to offer some brief thoughts on the opportunities and our outlook for the investment market. As you see, we expect modest acquisitions, funded with capital recycled from dispositions in our ATM. We certainly like to be more active as possible. And as always, our motivations are improving our portfolio’s quality as measured by geography, margins and growth profile. The rest of the story is that we need to make investments that are accretive to cash flow per share, and neutral or better to our balance sheet metrics. Pricing continues to favor sellers as capital seeks increasing exposure to sheds and beds. We always have a robust pipeline of opportunities and we find it today Nashville is the most aggressively priced, with Minneapolis and Denver just behind and in relative parody to one another. This pricing is driven by a combination of factors, most notably market size and liquidity, growth assumptions, and in all cases, less product for sale and larger coastal markets, which puts more marginal dollars in our markets. The cost of debt capital also continues to accommodate long-term investors’ bullishness and apartments nationally remain at historic wides to the tenure. I'm happy to discuss more of that in Q&A, but for now, I'd like to turn things over to our Chief Operating Officer, Anne Olson.

Thank you, Mark, and good morning. Like most people, our team was happy to put 2020 behind us and is cautiously looking forward to the opportunities 2021 will bring. 2020 was a year that was disrupted by working from home, quarantines, regulations, closures, cautious reopenings, cleaning and more cleaning, and a myriad of operational changes from virtual leasing to facilitating rental assistance for our residents financially impacted by the pandemic. In spite of that, we were able to perform well by focusing on the basics of the business, holding occupancy steady to optimize our revenue, closely monitoring our expenses and focusing on collections. In the fourth quarter, our weighted average occupancy increased 60 basis points over the third quarter of 2020, and 1% over fourth quarter of 2019. Our weighted average occupancy in 2020 of 98% was a driver of our 2.1% revenue increase for 2020 over 2019, and together with particularly strong revenue performance in our billings in Rapid City markets, as well as in Omaha and across North Dakota. As we saw developing over the course of the year, the headline of our portfolio performance was our smaller markets. We saw significant year-over-year NOI gains in these markets while our larger markets like Minneapolis and Denver, which faced more regulations, longer eviction moratoriums, and were impacted by higher unemployment rates. We're able to maintain strong occupancy, but saw rental rates decline. In the fourth quarter, we realized a blended decrease of 70 basis points on new and renewal leases. Just 16% of our leases expired in the fourth quarter, which highlights the large opportunity we have for the 2021 leasing season. In 2020, we increased our disclosure as we closely monitored collections and bad debt. For the fourth quarter, we realized strong collections with 98.6% of expected residential revenue collected. January collections maintain that trend with 98.7% expected rental revenue collected. Our fourth quarter, bad debt was 1.4% of revenue compared to 30 basis points in the same period in 2019. In 2020, we deferred a total of $301,000 of rental revenue and currently $56,000 of that deferred amount remains outstanding, less than 4% of our portfolio saw resistance through our rent deferment program in 2020, and as eviction moratoriums burn off across our portfolio, we expect to see our bad debt returning to historical norms by the end of 2020. Despite the negative impact the pandemic had on our revenues, we were able to hold our same-store NOI margin to a decline of just 20 basis points in 2020, compared to 2019. While our NOI margin was significantly impacted by our non-controllable expenses, particularly taxes and insurance, our gross margin increased year-over-year by 1.4% to 73.9%. As we look ahead to 2021, we're expecting wage pressure, higher healthcare and increasing insurance costs to negatively affect our expenses. Coupled with continued uncertainty about revenue growth, our outlook reflects the challenges we face. But there are bright spots, momentum in our value-add, strong occupancy, increasing traffic levels year-over-year and the balance we have in our portfolio across small and large markets and across product types. We will do what we can to continue our rise by five efforts and that have been characterized by revenue optimization, expense control, and strategic disposition and acquisition activity. In the fourth quarter, one of our initiatives drove a one-time increase in our revenue of $450,000 as we shortened our RUBs billing cycle in connection with a conversion to a new RUBs provider. Our value-add common area and unit renovations programs also had a strong fourth quarter, with 81 units renovated and significant progress on common area renovations, we are seeing the increased revenue contribute to our positive results in Minneapolis and Omaha. Particularly, in Minneapolis, the renovation projects at two of our suburban assets were able to offset the declining rates we saw in our urban portfolio. Looking ahead to 2021, we are expecting to renovate approximately 725 units across our portfolio. We're going to leverage what we learned in 2020, as we seek to maintain and expand the efficiencies that we found. We're going to live our mantra of better every day by striving for constant improvement. And through the little things we do each day that enhance the lives of our residents and fellow team members. Our new normal is going to be better every day. And while our economic forecast contains a lot of uncertainty, we have demonstrated that we will control what we can for the best possible outcome given the circumstances we face. I'm continually inspired by and grateful for our teams across our regions and in our support offices. And now I'll ask John to discuss our overall financial results.

Thank you, Anne. Last night, we reported core FFO for the 12-month period ending December 31, 2020 of $3.78 per diluted share, an increase of $0.06 or 1.6% from the prior year. For the quarter ended, December 31, 2020, core FFO was $1.02 per diluted share, an increase of $0.06 or 6.3% from the prior year. The increase in full year core FFO is primarily due to lower interest, G&A and property management expenses, partially offset by lower NOI due to dispositions as well as the impact of COVID-19 financial recession, reducing same-store NOI growth. Looking at general and administrative expenses, total G&A was $13.4 million for the year, a 7% decrease from the prior year. The decrease is primarily from the $720,000 of lower compensation costs driven by open positions left unfilled, $280,000 from legal costs related to our successful pursuit of a construction defect claim in the prior year and a $620,000 reduction in travel, consulting and other costs due to the COVID-19 pandemic. Offsetting these decreases was an increase of $400,000 from non-recurring costs related to our December 2020 rebranding net Centerspace. Property management expense was $5.8 million for the full year, a decrease of 6.2%, primarily driven by lower compensation costs due to unfilled positions and the reduction in travel and advertising. Moving to capital expenditures as presented on Page S15 of our supplemental. Full-year same-store CapEx was $10.7 million, an increase of $2.2 million from the year ended December 31, 2019. Full-year same-store CapEx was $1,008 per unit. The increase in CapEx was primarily due to $750,000 for replacement of a roof damaged by hail and the acceleration of capital costs related to assets undergoing value-add renovation. Looking at value-add capital, which has also presented on Page S-15 of the supplemental. We increased value-add capital spend $8.9 million to $13.9 million for 2020, reflecting our continued expansion of the value-add program since its 2018 reboot. Turning to our balance sheet. As of December 31, 2020, we had $97.5 million of total liquidity, including $97.1 million available on our line of credit. During 2020, we disposed of four apartment communities in Grand Forks, North Dakota, one commercial property, and one parcel of unimproved land for total sales price of $44 million. Proceeds from these sales were used to fund the acquisition of Parkhouse Apartment. During the 12-month period ended December 31, 2020, we repurchased and retired approximately 237,000 Series C preferred shares for an aggregate cost of $5.6 million. The yield to call on these shares was 10%. We also issued 829,000 common shares under the ATM Program in 2020 at a net average price of $71.39 per share for total proceeds of approximately $59 million. In January 2021, we amended and expanded our Note Purchase Private Shelf Agreement with Prudential to increase the aggregate amount available from $150 million to $225 million and issued $50 million in unsecured senior notes due June 6, 2030 at a rate of 2.7%. Under the amended shelf agreement, we have $50 million of capacity remaining. We believe the expansion of this shelf facility and pricing of January note further demonstrates our ability to access all forms of capital, including investment grade pricing on new financings. Looking toward 2021 financial outlook as detailed an S-16 of our supplemental, we expect same-store NOI to decrease by 0.5% to 3.5% in 2021. The decrease in NOI reflects expected 2021 same-store revenue to come in between a 0.5% decrease and a 3.0% increase with same-store operating expenses increasing between 4% and 7.5%. We expect revenue increases to come from rent growth and other income initiatives offset by lower occupancy, impacting same-store expense growth is an estimated increase in non-controllable expenses from increased real estate taxes and continued pressure on insurance costs with 2021 premiums increasing 15% over 2020. We continue to see pressure on insurance premiums as carriers exit the market though we expect the market to stabilize somewhat in time for our 2022 policy renewals. On the controllable side of operating expenses, we are projecting that expenses will return to pre-pandemic levels. This forecast is impacted by the belief we will not see widespread lockdowns, including the shutdown of common area facilities in our markets during 2021. As a result, we're expecting a $1 million increase in common area repair and maintenance costs. In addition, though we have institutionalized some of the lessons and cost savings from the pandemic, we see pressures on compensation, including healthcare and other benefits and PPE costs for operating our community safely. On compensation costs, we see increasing wage pressure in our markets, despite the recession, and we expect that to continue with 2021 same-store compensation costs increasing nearly 4% as we respond to wage inflation and experience higher healthcare costs as utilization levels return to pre-pandemic levels. Now, looking towards general and administrative and property management expenses, we are expecting the combined cost to increase 14% to 23% for 2021, which includes an estimated $1.1 million for non-recurring technology implementation costs. Compensation costs are expected to increase $1.2 million as a result of filling open positions to support our 2021 tech initiatives, as well as $850,000 in higher long-term incentive plan costs. Offsetting these increases is a decrease of $400,000 for non-recurring rebranding costs that were incurred in 2020. The non-recurring tech implementation costs are added back for purposes of core FFO. looking at same-store capital expenditures for 2021, costs are expected to range from $912 to $1,012 per home, which includes $1.2 million for roof replacements for assets damaged by wind and hailstorm in 2020. value-add expenditures are expected to be $15 million to $20 million as we continue to develop our value-add pipeline. on the investment front, we assume investment between $145 million to $170 million, which includes the January acquisition of Union Pointe. anticipated disposition activity ranges from $55 million to $75 million with the proceeds used to fund the Union Pointe acquisition. We plan to continue being active with our equity issuances under our ATM with an estimated $50 million to $70 million of net proceeds expected in 2021. 2020 was a challenging year, but we could not be more pleased with the efforts our team made overcome all the obstacles and deliver top-performing results. 2021 is another challenge, but as a team, we are focused on delivering strong operating results, improving the balance sheet, expanding into our target markets all while investing to create a best-in-class operating platform. I would like to thank our team members who dared to wane over the last year and who worked to make better every days for our residents. with that, operator, I’d turn it back over to you for questions.

Thank you. [Operator Instructions] And our first question today will come from Guarav Mehta with National Securities. Please go ahead.

Thanks. Good morning. First question on the expenses. I was hoping if you could provide some more color on the technology investments we plan to make this year?

Good morning, Guarav. I’ll let Anne take that please.

Yes. Good morning. So, the technology investments really range from infrastructure investments into our core operating platforms, like our accounting system to moving our platforms onto what we call modern digital workplace with MS 365 and use of teams. So, it’s a phased approach and the investments will happen over three years. We do expect to gain some good efficiencies and better reporting, and data that we can use to make more data-driven decisions. And so we are expecting a good return on that investment over time. And this year is just the first stepping stone. we have started the implementation and our first implementation, which is our modern digital workplace and we’re moving into our second implementation, which is the deployment of the Yardi’s stack of products.

Okay. Second question on the investment guidance for 2021, I think, in your prepared remarks, you talked about aggressive pricing in Nashville and Denver and Minneapolis as well. So maybe, talk about, what kind of acquisition opportunities you’re seeing in the market. And I guess in terms of market, are you expecting to deploy more capital in Denver given that Nashville remains aggressive?

Yes. Great question. I mean, the real honest answer is we’re not sure. We’ll have to see what comes our way. But what we’re seeing is that generally speaking older assets with lots of capitals are being priced pretty close to newer assets that have less capital needs. So, our – that tilts us towards wanting to buy newer assets with more modern systems and just less capital right in front of us. So in general, we’re looking at newer products, wherever we can find it. The Union Pointe is a great example that asset was delivered about now, probably 15 months or 16 months ago, and essentially stabilized during COVID. So, in our mind and opportunity to do better when things get better just in the overall economy. But listen, if everything is equal, we’ll be putting capital in Nashville; if things aren’t equal if ever – if the Nashville is off the table and everything’s equal between the Twin Cities and Denver, we’re probably putting capital in Denver, but we’re looking in the Twin Cities as well. So, I wouldn’t say that we’re way wide of market. We’re just – when you, it’s easy to get behind how these help our portfolio overall. it’s harder to figure how they add value in the very near-term. So, when someone wins one of these assets, we don’t think they’re crazy; they just don’t have to report quarterly numbers. And so I think we’re – they’re making a good bet. We think the bed still makes sense on the actual market. And hopefully, we’ll find a way to connect on some things that make sense for us kind of on both fronts. Good for the portfolio. Good for the shareholders in the measurable medium term.

Okay. Thank you. That’s all I had.

Thanks, Guarav.

And our next question will come from John Kim with BMO Capital Markets. Please go ahead.

Thank you. So, it looks like you lost some momentum on the blended lease rates in the last couple of months of the quarter. Can you just share what the new and renewal rates were on that 70 basis points decline in the quarter and also what the blended lease growth rate was in January?

Yes. Good morning, John. Anne, please go ahead.

Yes. Hi, John. So, our new leases in the fourth quarter were down 3.6%. Our renewals have held strong. They were up 2.3%. So that is the blended 70 basis point decline. And again, that was about 16% of our leases expire in the fourth quarter. So, a fairly small sample set, even smaller sample is our January leasing, which is only about 3% of our portfolio. We had really strong renewals at 3.6%. Our new leasing remained about steady at negative 3.5% blended for a negative 1.5% in January.

Yes. So just to tack onto that, John, I mean, I think when we look at this year, I hope this was evident in our prepared remarks, but we’re not forecasting a lot of momentum in this. And what is the spring leasing season, where we do a lot of our work. So, we’re hoping we’re conservative about that. And if that – if the trends we just went through held, which year-over-year felt pretty good, both in the fourth quarter and January, we might be in better shape and more planning, but that’s the big question.

On that new lease rate, how much of that is concessions versus the phase rate change?

Yes, not much at all. So, we really tried to avoid concessions and look at the effective rents in our systems. Those concessions can kind of skew how you look at comps. And so there’s very little concessions in those numbers.

Okay. Mark, you just mentioned on that answer that you’re not projecting a lot of momentum and in your prepared remarks; you also discussed being prepared for the downside scenario in revenue. Can you just elaborate on why you’re being cautious? Is this supply risk or the eviction moratorium, some of your markets, or are there other factors?

Yes. Anne, do you want to start?

Yes. so, we use data from CoStar and Axiometrics, and other advisors to kind of help us watch what the trends are and project into the future. And most of those resources, particularly through the fall and even into the winter months, when we were doing our budgeting and forecasting for next year, we’re projecting flat or declining revenue until the third quarter. So, we follow those trends, not exactly. We took it and extrapolated onto our experience with our portfolio and how we’ve outperformed those projections in the past. But that really led us to our conclusion that we were going to be conservative on revenue and start ramping up that revenue once we hit the third quarter. As we’ve discussed by the time we get to the third quarter are the majority of our leasing season, our leases have ruled. So, that’s really, what’s impacting it is our exposure to those, the second quarter and the beginning of third quarter is really pretty strong from an expiration profile standpoint. So, if we don’t get a pickup in the market, early in the season, then we’re going to be lacking in those leases for a year at fairly flat revenues.

Yes. that’s what she said.

And Anne, what are you expecting as far as occupancy at 94.8%last year? Do you expect occupancy to check up or are you just trying to maintain?

Yes. I think, we’re really focused on maintaining the occupancy, really in a tight range this year. We think that we might see it go down 70 basis points or so. during that time that it goes down, we would expect that that’s our opportunity to be pushing rents up. But we’d really like to manage, given our conservative view of where revenue might be. We’re looking to manage our occupancy in a pretty tight bandwidth this year.

Okay. And my final question is on the insurance premiums increasing 15%. I think that's pretty consistent with what your peers have been saying. You're not in a lot of locations which have a lot of natural disaster risks or so it seems, can you just elaborate on that the big increase you’re expecting and also you expect it to moderate in 2022?

Yes. So John, I think there's a couple of things going on. Number one is that the insurance market just generally speaking is not excited about habitational insurance right now because people live there 24 hours, and they smoke cigarettes and have parties and leak water and do all sorts of things that they don't do in office building. So we have seen a step away from that. We've also seen it, generally tough several years of real cat losses, across the world. And I mean, it's like a balloon, there's only so much money in the world for insurance. And then our particular issue, you're right. We don't really have a lot of hurricanes or things like that. We have hail. Hail is probably our biggest natural thing. And hail went from being an all other peril, meaning it was included in our sort of general policy to having its own rider, which was a pretty big hit. But we do expect it to moderate in 2022 based on what we're hearing from that market.

Great, thank you.

Thanks, John.

And our next question will come from Amanda Sweitzer with Baird. Please go ahead.

Thanks. Good morning. Calling up on your fundamentals, you had a nice uptick in sequential occupancy in Denver this quarter. Have you seen pricing power improve at all in the urban areas of that market?

Yes, go ahead, Anne.

Yes, we haven't – we've – I think we're kind of holding at the bottom. There are some price points. Our renewals are starting to get some pricing power there, but the new leasing is still pretty effective, particularly in the urban area. We do have some non-same-store assets in the suburbs that are looking stronger, but those urban assets are still feeling pressure of supply and social unrest.

Yes, so that's RiNo in Weston, Amanda, or Dylan RiNo, excuse me, in Weston.

That's helpful. And then kind of higher level on capital allocation, as you think about portfolio construction, where are you comfortable expanding your exposure to Minneapolis and then Denver, you don't find those attractive opportunities in Nashville. And is there a point where you expand your target market list?

The answer is we're reasonably comfortable with a lot of exposure to these markets, a lot is defined by, I mean, I don't know. I could imagine we could go higher from here in each of these markets and if we find good opportunities, we will, that might push us to expand the list sooner or push us into Nashville, I’d say with greater energy. But I think on the one hand, as we've talked about having three markets was a big lift for us in terms of opportunity set. Because we went from two to three but at this time, we're holding there. I mean, I think we're always watchful for opportunities that are in other markets that are somewhat transformational, but we're not – those are hard to connect on and we – and they'd have to be in markets we really liked. So we've done a lot of market work. We have a top 10 market list. But for now, we're really focused in Nashville. And if we continue to miss, then we'll reevaluate, but it's only been less than a year.

Fair enough. Thanks for the time.

Thanks, Amanda.

And our next question will come from Rob Stevenson with Janney. Please go ahead.

Good morning, guys. John, did you say how much you were expecting property taxes to be up?

Excuse me. I don't think I gave that on there. But they are going to be up nearly 4%.

Okay.

Less than what they went up for 2020 but still a big increase.

Okay. And is that certain markets or is that across the board for you guys?

Yes, it’s really across the board. I mean, it definitely hits, for example, we got a couple of properties going from non-same-store to same-store in Denver that shift from timing wise are just now getting hit with the adjustment or the purchase price we paid for them. So, we do have some of those kinds of Denver will be hit hard this year, but really it's getting to where we underwrote it. So it'll just look, but generally speaking outside of that no, it's pretty much across all markets.

And you'll recall last year, we had a really big hit in Rochester and this year is much more kind of uneven.

Okay. And John, you were just addressing my next question. I mean, how substantial is the additions to the same-store portfolio as you roll forward here? And is that primarily concentrated in Denver?

Yes. We have two assets coming on from Denver and one in Minneapolis. So a total of three assets and they are larger assets, so they'll make a bigger impact, but really you'll see it in Denver.

And is that one of the reasons – is that one of the drivers of the low end of the same-store revenue range as the addition of those assets into the same-store portfolio?

The driver of the low end revenue range, I guess…

So you're at negative 50 basis points for same-store revenue growth in 2021. If those three assets were still excluded from the same-store portfolio, would the low end of the same-store revenue growth range be flat or plus 50 basis points instead of negative 50 basis points without those? I would assume that those under more pressure than your upper Midwest assets.

To say it in another way, are those new assets bringing down our revenue growth? Is that what you're asking?

Yes.

Yes, I don't think so.

I don't have that in front of me, but I don't think so. In Denver, it's a suburban market. And then we also have a suburban, we actually have two assets coming in from Minneapolis. One is a smaller urban asset, which to your point might bring it down, but one is a suburban asset that should lift it up. So I think all, it's going to be – and the other thing, we have 2020, the baseline of those assets. So to the extent they were urban asset we met at the same-store in 2021, I mean, their comp for 2020 is not going to be a hard comp to compete against from a revenue growth perspective.

Yes. And actually just to clarify, it’s two assets from Minne, not one.

Yes, yes.

So the three assets that are coming in are FreightYard, which is a small asset that is in the urban core of Minneapolis; SouthFork, which is a good suburban-be that we've been undergoing some value add-on; and Lugano, which is a suburban in Denver.

Okay. And then, other than the same-store revenue growth, John, I mean, when you did the – put together the guidance, what's the major places where you were – you had the least amount of confidence in whether or not stuff was going to come in at the low end or the high end of your expectations here?

Yes, I think revenue's always especially coming out of a year like 2020, so I think revenue is an area that we were getting a lot of data as Anne mentioned, same – there would be a recovery in 2021, but it would be in the later part of the year. If that happened sooner, I think that will be very positive for our portfolio for us to get after it. I think on the expense side, so there are some uncertainties there because we had a lot of lockdowns and our ops team really responded well there. They – as there weren't things for them to do it to property, they were stepping in to do the work that contractors would normally do. So trying to thread the needle on how do we bounce back in 2021, assuming properties are open the entire year, which of those savings will we be able to capture and make permanent and which will be returning to the norm.

Yes. I mean, Rob, as you know, it was a humbling year in the prediction business. And as we've talked about, we're conservative on revenues and we're forecasting our guiding expense. I mean, we feel comfortable with our expense guidance and we're nervously watching on the revenue side. Now, again, our portfolio performed very well in 2020. But to John's point, everything's open again and so we're going to have it staffed and we're going to pay for those things. Things that didn't get done last year, your dryer vents, or whatever, are going to get done this year, we can do them twice, but we're going to do them and we didn't do them last year. And then on the human capital side, I mean, we have forecasts some reasonable inflation and lots of utilization of healthcare, where again, a lot of people didn't go to the doctor for six months and they might this year. And again, they're not going to go twice, but they're going to go. So we sort of have all those things underwritten to happen and we'll see.

Okay. And then last one for me. Anne, on the sequential same-store sheet, the average monthly rental rate for the fourth quarter was down 10 basis points from the third quarter levels, but revenue per occupied home was up 90 basis points. I assume the GAAP like many of your peers is mostly fees, but is there anything else in there, driving the diversion? And can you also talk about what you're seeing fee wise here to cause a sequential jump in that number of that magnitude?

Yes. I think in the fourth quarter we had a unique, the one-time revenue jump of $450,000 related to pulling forward and shortening the billing cycle on our RUBs as we converted to a new provider. So that's really the driver of that revenue in the fourth quarter.

Okay.

So it was one time. I do think – we are constantly assessing all the fees, this RUBs initiative as part of our rise by five, we think will allow us to collect more of the RUBs and increased revenue over time, but that $450,000 is a one-time driver in the fourth quarter.

And what percentage of the portfolio is on RUBs rather than individual billing for utilities?

I mean, almost all of it.

Even in the door stuff?

Yes. Yes.

Okay. Thanks, guys.

[Operator Instructions] And our next question will come from Buck Horne with Raymond James. Please go ahead.

Thank you, good morning. I'm just going to ask one of Amanda's questions just for a slightly different market. But if you've seen any difference in pricing or performance recently in Minneapolis/St. Paul, in terms of urban core performance relative to the suburban? Or just any characterization on how the different property locations are performing in the Minneapolis area.

Yes. Good morning, Buck. Thanks for that. There's no question that urban core is a much tougher sledding from a pricing power and operational perspective. So we really have three assets that are affected kind of head on one is called Oxbow, which is right in the urban core in St. Paul. It's a bought from the Xcel Center, which normally is a very vibrant place. I mean, it's – we're getting close to the state hockey finals normally that place would be booked solid for 2.5 weeks and all the bars and restaurants would be going. And Ecolab is right there, there's 8,500 hospital jobs right there. I mean, there's just a whole bunch of things that are, make that submarket really awesome. And most of them are not operational right now. So if you're the executive from Ecolab who lives in our apartment and has been – and weekends at your cabin, which we have several of those they don't need an apartment this year and they didn't need it. They didn't need it when their rental came up. The two bars that are in our space there one is closed. One is doing their best, but really struggling, because when it's not hockey weekend, it's the wild or it's music or whatever. So a similar dynamic in Minneapolis, we have two assets Red 20 and FreightYard, which are both also in the urban core and just benefit from what is great about cities, which is food, music, people, sports, et cetera, adjacencies to the office. All those things are just kind of on hold right now. So we're seeing, I think last quarter we talked about this and I don't have the specific and may be able to add, but we were seeing lease-on-lease down 15% there. We are holding occupancy. And I would say, if you look at where we are in those three assets versus the submarkets, we’re more occupied, kind of three to five or six points, more occupied than market, but look until it's fun to be back in the city again, I think those assets are going to continue to suffer. In the suburbs, it is really a totally different story. Our product there, that's more that I would call, a product is, somewhat supply tested. But again, we're staying full. We’re seeing flat to modest, positive, or modest negative rents. And then in a suburban B, we're really seeing some pricing power and we've continued to execute on value-add. So I guess hopefully that answers the question, if not, please keep at it.

Yes. No, thank you. That's great transparency. Thank you for all that color. Thank you very much. Let's switch over to the – just the thoughts on the ATM issuance, the equity issuance throughout the year. Just, how are you thinking about potential timing of that? Do you anticipate a more ratable kind of just issuance over the course of the year? Is it going to be structured to coincide with transactions as they come up? How should we process or you're thinking about the ATM part of the capital raise this year?

Yes. I mean, listen, we're price sensitive. So that – I guess we'd lead with that. But we're going to be fundamentally kind of thinking about it on a ratable basis. I mean we have – we enjoy right now access to that private placement market and that's something we really want to keep. So we have to watch. Our leverage ratio is there and with the union point, you might see us either raise ATM equity or dispose about that to kind of put ourselves back in line there and from a leverage perspective. But listen, we have lots of opportunities. We usually have a lot more opportunities than capital. And so that's the other governor. So it's price, it's opportunity, and it's kind of managing our overall balance sheet exposure. If I were – if you're asking a modeling question, John jump in, and if you think I've got this wrong, I would just model it ratably over four quarters. They don't let me answer on spot question. So John, do you want to confirm that?

I will confirm that.

Great. Thanks, guys. That's great.

And our next question will come from Daniel Santos with Piper Sandler. Please go ahead.

Good morning. Thanks for taking my questions. My first question was on, I was wondering if you could maybe talk a little bit about cash flow and dividend payout, just given the lower than expected guidance. It seems like the payout might be a little tighter than we would have anticipated?

Yes. I suppose everyone, we don't report an AFFO number and as we've noticed the Street looks at it differently. We – based on how we count AAFO, which I think is reasonably conservative, we covered the dividend in 2020 and we’d expect to cover it in 2021 in both cases healthily, when you look at it on a 12-month basis. So, I don’t think we’re at risk of raising the dividend and I – as one trustee, I wouldn’t be in favor of cutting it.

Got it. That’s helpful. And then just I was wondering if you could give us some color on naming some of those smaller markets that have performed really well, like the North Dakota to South Dakota is like, what’s your sort of outlook on those markets given their strength in 2020?

Yes. I guess, I’ll start by saying, a lot of what we’ve done on the pruning assets. There are – what we call pruning assets has helped where we’ve left ourselves with a portfolio that is generally speaking younger, generally speaking higher rent and more efficient from kind of a human capital basis. So, it’s kind of started there, but then, Anne maybe, you could talk specifically about the operations.

Yes. I think on the – in the smaller markets, we have the advantage of not having the supply that we have – that we see in some of our larger markets and some of those smaller markets, particularly, Rapid City and Billings have benefited from in-migration. So, accelerated population growth that wasn’t expected in 2020 and that may continue into 2021. We have been somewhat conservative in forecasting out what we think will happen across North Dakota and in Billings and Rapid City given the historical slower growth of those markets. So, I think we did see a good increase this last year that we saw more people moving around. We’re able to push lease rents in those markets and those have been kind of bright spots in the portfolio, even in the fourth quarter and in January. But I don’t know that we think they’re going to outperform, the suburban market – particularly, the suburban markets as Minneapolis and Denver we think are going to perform just as strong and stronger than those smaller markets.

Yes. And it’s interesting. I mean, there’s a very strong broker we work with who’s based out of Bismarck, and she would say, hey, listen, we’re open. I mean, which setting judgment aside, I mean, it’s just easier to live and do business in a place, where you can do things. And I think that has been a powerful catalyst as well.

Got it. That all makes sense. I appreciate the detail and congrats on a strong quarter.

Thank you.

Thank you.

And our next question will come from John Kim with BMO Capital Markets. Please go ahead.

Hey, thanks. Just to follow up questions on your guidance. You guys mentioned that you expect bad debt to improve during the year. Is that contemplating your same-store revenue guidance for the year?

Yes. I think for the year, our year-over-year, it’s almost flat, because if you remember, we didn’t – we had our normal around a bad debt in Q1, and I think Anne’s comments are talking about where we’re going to be by the end of the year. but yes, it’s that improvement is contemplated, but on a year-over-year basis, it really works out to be flat.

Okay. And your disposition guidance of $65 million at the midpoint, how realistic is this figure? Just given potential repositioning efforts.

I’d say it’s pretty realistic. I mean, I think this is our first year giving acquisition and disposition guidance. So yes, I mean, we’re serious about it. I mean, as was just pointed out kind of at the beginning of the last question, I mean, we do like the portfolios that we have in the Dakota’s now, a lot better than what we had before, because they’re more efficient, because they’re generally speaking higher rent and sometimes younger and so have less capitals. And so applying that lens is something that we think really does make a difference. We were very pleased to get off the sales that we got last fall, the $44 million in Grand Forks. And when we were out on the road and we talked to the teams and we said – when you talk to the teams before that happens, they’re all nervous and upset, because you’re going to sell the thing that they work at and they don’t like that. Then you do it. And we have the ability often to keep a lot of our – or all of our best people. And they’re like, ah, this is great. We were spending; it’s the 80/20 rule. We were spending all this time on these little things that have more problems. So, I mean, we believe in that, it’s certainly we have a track record for trying to make the portfolio more efficient and we’re going to continue to do that. So, really long-winded way to say we mean it.

So, your other markets are 10% of your same-store NOI, if you sell $65 million, where does that other market exposure go to?

Well, we’re not going to comment on which market we’re selling from. We have opportunities to improve the portfolio probably in every market, John. and I’m not trying to be flipped with you, but that doesn’t necessarily mean it’s coming out of that other market.

Okay. And then you had rebranding cost of $400,000. Is that all you’re going to have, or is there more in 2021 and is all of our – all those costs going to be out of the back to core FFO?

Yes. That’s it for the expenses. I mean, now it’s just – we’ll sort of slowly be uniforms will be uniform, so everything else is just kind of in the budget.

Yes. there won’t be future add backs, that was the total.

Were some of those costs in G&A or in the NOI, in the fourth quarter?

They were all in G&A.

Okay, great. Thank you.

Thanks, John.

And this will conclude our question-and-answer session. I’d like to turn the conference back over to the management for any closing remarks.

Thanks very much. And everybody, we appreciate your time and interest in Centerspace. And we’ll talk to you in a couple of months. Thanks very much.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines at this time.