Investors Real Estate Trust D/B/A Centerspace

CSR Details

Investors Real Estate Trust D/B/A Centerspace (NYSE: CSR) is a North Dakota-based Real Estate Investment Trust (REIT), which is engaged in developing, managing, and acquiring apartment communities. As of June 04, 2021, CSR has 62 apartment communities consisting of 11,579 apartment homes. CSR earns revenues through rental income earned on apartment homes, and gains and losses from the sale of real estate assets. As of July 12, 2021, the company’s market capitalization stood at USD 1.08 billion.

Strategic Acquisition of Minnesota Portfolio: On June 3, 2021, CSR agreed to buy a portfolio of 17 communities for USD 323.8 million from entities controlled by KMS Management, Inc. (KMS), a developer of residential real estate properties. The portfolio of 19 real estate assets is comprised of 14 communities in Minneapolis and 3 communities in Minnesota. The company's portfolio will grow by 2,696 apartment homes due to this transaction, bolstering its presence in locations where it has a long history of success.

Q1FY21 Results: CSR reported a slight increase of 5.05% in total revenues of USD 46.65 million in Q1FY21 (ended March 31, 2021) as compared to USD 44.40 million in Q1FY20, driven by the increase in average rental revenue from non-same store communities. Operating income increased to USD 1.64 million in Q1FY21 vs USD 2.0 million in Q1FY20. Net loss contracted by USD 2.53 million to USD 5.16 million in Q1FY21 vs USD 7.68 million in Q1FY20. On June 04, 2021, CSR announced a regular quarterly dividend of USD 0.70 per share, payable on July 12, 2021, to common shareholders at the record date of June 30, 2021.

Key Risks: The company's operations are concentrated in the Midwest and some portions of the western regions of the United States. Any significant downturn in economic conditions in these areas, such as supply and demand discrepancies, increase in unemployment rates, zonal and other regulatory restrictions that could impact the borrowers’ liquidity, can result in a decline in the company’s financial state of affairs. Furthermore, CSR carries a certain type of debt in its balance sheet that requires it to adhere to certain financial and non-financial covenants, non-compliance of which would be considered a default on CSR's behalf, with potentially severe consequences.

Outlook: For FY21, CSR expects a 0% to 3% growth in revenue, with an increase in expenses in the range of 3.0% - 5.0%. CSR expects to clock net operating income between USD 109.60 and USD 112.60 million, with EPS ranging from USD 0.10 to USD 0.50.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

CSR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: CSR’s share price has increased by 23.24% in the past three months and has currently breached the higher end of the previous 52-week range of USD 61.49 to USD 82.18 to close at a new 52-week high of 83.99. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 74.12. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 67.05. Considering the significant increase in stock price, we believe the current share price sufficiently reflects the strong business fundamentals and have chosen to remain on the sidelines. Therefore, we recommend an “Expensive” rating on the stock at the closing price of USD 83.99, up 2.20% as of July 12, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.