Centerspace Acquires 17-Community Minnesota Portfolio

The properties are located throughout Minneapolis and St. Cloud, Minn.
Palisades. Image courtesy of Centerspace

Centerspace has nearly doubled its multifamily presence in the Minneapolis area with its acquisition of a 2,696-unit Minnesota portfolio.

The company acquired the 17 communities from KMS Management Inc. for $323.8 million and will also absorb its team and investors into Centerspace.

The portfolio totals 14 communities in Minneapolis and three communities in St. Cloud, Minn. The largest community, the 300-unit Palisades, is located in the Ramsey suburb of Minneapolis, while the smallest community in the portfolio, the 62-unit West Calhoun, is located directly in the city.

According to Centerspace, the portfolio has an average in-place rent of $1,050. Mark Decker Jr., president & CEO of Centerspace, told Multi-Housing News that the portfolio was more than 96 percent occupied at the time of the transaction and its communities have an average age of 50 years old.

The new ownership is also planning to invest approximately $40 million to reposition the communities over the next 24 to 36 months.

Decker also told MHN that the repositioning strategy will mostly focus on common area maintenance and improving the general condition of the properties.

List of portfolio properties. Image courtesy of Centerspace

OUTCLASSED BY CLASS B

Decker said in prepared remarks that the KMS acquisition has doubled Centerspace’s footprint in Minneapolis. With the new acquisitions, Centerspace now owns 4,901 homes in Minneapolis and 1,524 homes in St. Cloud.

Outside of Minnesota, Centerspace also acquired a 256-unit community in Longmont, Colo., for $76.9 million in January.

Decker told Multi-Housing News that communities like those in the KMS portfolio have performed well from 2011 to the current market cycle, including through the COVID-19 pandemic.

In Centerspace’s investor presentation in August, the report noted that St. Cloud and Minneapolis’ Class B properties consistently outperformed the city’s Class A properties with higher year-over-year rent growth and lower vacancy rates.

“They’re generally very resilient assets in a very resilient city,” Decker told MHN of the KMS communities. “When we looked at this portfolio, it looked a lot like things we already own where we have the experience of providing a good housing experience and getting a good return.”