MINNEAPOLIS, MN – Centerspace (NYSE: CSR) has entered into contribution agreements with companies managed by KMS Management, Inc. (KMS) to acquire a portfolio of 17 communities for a total purchase price of $ 323.8 million. The portfolio of 19 real estate investments includes 14 parishes in Minneapolis, Minnesota and three parishes in St. Cloud, Minnesota. The takeover will add 2,696 residential buildings to the Centerspace portfolio, further strengthening the company's presence in markets in which the company has historically been very active.
The company will fully fund the transaction by issuing up to $ 197.3 million of Preferred Operating Partnership convertible shares, paying a preferred dividend of 3.875% and an exchange rate of 1.2048 common shares per Preferred Operating Partnership convertible share convertible to common stock, which is a conversion price of $ 83.00 per unit. In lieu of Convertible Preferred Operating Partnership Units, KMS may receive up to $ 16.2 million of the total purchase price in cash upon completion. The Company will acquire the communities subject to approximately $ 126.5 million in mortgage liabilities, some of which the Company intends to refinance upon completion of the transaction. In addition, the company plans to invest approximately $ 40 million in capital in repositioning the communities over the next 24-36 months. The transaction is expected to close in the third quarter of 2021, subject to customary approvals and closing conditions.
"This fully funded acquisition fits in with our investment thesis," said Mark O. Decker Jr., President and CEO. "The addition of the KMS communities, team and investors to our company will double our presence in our core Minneapolis market, expand the scope of our operations and provide numerous opportunities to improve our business. We are the KMS team and investors as well grateful to everyone. " for your work on this transaction and for your trust in Centerspace when you join our platform. "
Centerspace currently owns 2,537 Minneapolis homes in 14 parishes and 1,192 St. Cloud homes in six parishes. With the addition of the KMS portfolio, the company will increase its presence in Minneapolis to 4,901 homes and 1,524 homes in St. Cloud.
Minneapolis has a diverse economy driven by high employment, with 24 Fortune 1000 companies headquartered and the highest median income in the Midwest. The suburbs of Centerspace in Minneapolis saw sales growth of 6.3% and NOI growth of 5.8% from 2018 to 2020, with St. Cloud showing sales growth of 4.7% and NOI growth of 9 over the same period .3% registered.
"Our plan is to integrate this portfolio with our existing platform and leverage our operational initiatives, particularly our focus on customer experience and margin expansion, to improve the overall quality and cash flow of our aggregated portfolios in Minneapolis and St. Cloud. The KMS -Communities have a long and successful operating history, great locations in their respective sub-markets and we see a high demand for products with achievable rental prices, "said Mr. Decker.