Centerspace Q2 2026 Earnings Report

Centerspace EPS Results

• Actual EPS: -$0.07
• Consensus EPS: -$0.13
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: N/A

Centerspace Revenue Results

• Actual Revenue: $65.78 million
• Expected Revenue: $66.29 million
• Beat/Miss: Missed by -$511.00 thousand
• YoY Revenue Growth: N/A

Centerspace Announcement Details

• Quarter: Q2 2026
• Date: 8/3/2026
• Time: After Market Closes
• Conference Call Date: Tuesday, August 4, 2026
• Conference Call Time: 10:00AM ET

Centerspace (NYSE:CSR) is an owner and operator of apartment communities committed to providing great homes by focusing on integrity and serving others. Founded in 1970, as of September 30, 2023, Centerspace owned interests in 71 apartment communities consisting of 12,785 apartment homes located in Colorado, Minnesota, Montana, Nebraska, North Dakota, and South Dakota. Centerspace was named a Top Workplace for the fourth consecutive year in 2023 by the Minneapolis Star Tribune.

Centerspace Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Centerspace advanced its portfolio repositioning, selling or contracting to sell 20 communities for approximately $530 million over 14 months. The transactions reduce exposure to tertiary markets, improve portfolio quality and are expected to lower total debt below $850 million.
• Positive Sentiment: Operating trends were stable, with same-store NOI up 30 basis points year over year, expenses down 10 basis points and blended lease growth of 1.8%. Resident retention was strong at 61.3%, while Minneapolis, Minnesota, Nebraska and North Dakota delivered particularly healthy rent growth.
• Negative Sentiment: Management lowered full-year same-store NOI guidance to flat to down 1% and reduced the Core FFO midpoint to $4.63 per share, largely because recently sold communities had been stronger performers and will not contribute meaningfully in the second half.
• Neutral Sentiment: Denver remains pressured by elevated supply and concessions, with second-quarter blended lease spreads down 2.6%, although this improved from the first quarter and July spreads turned positive. Management expects better comparisons in the second half and believes the market could recover in 2027 as deliveries decline.
• Positive Sentiment: The company repurchased $2.5 million of shares at an average price of $55.54 and expects approximately $450 million of total liquidity after the transactions. Net debt to EBITDA is projected to settle in the mid-six-times range, which management described as the strongest balance-sheet position in its history.

Presentation

[Operator]

Hello, everyone. Thank you for joining us, and welcome to the Centerspace Q2 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. The presentation will now begin.

[Anne Olson, President and CEO at Centerspace]

Thank you. Good morning. Centerspace's Form 10-Q for the quarter ended June 30th, 2026, was filed with the SEC yesterday after market close. Our earnings release and supplemental disclosure package are available on centerspacehomes.com and were filed on Form 8-K. Today's remarks include forward-looking statements based on management's current views and assumptions. These statements are subject to risks and uncertainties discussed in our risk factors and other SEC filings.

[Anne Olson, President and CEO at Centerspace]

We cannot guarantee these statements will materialize, and you should not place undue reliance on them. Please refer to our earnings release for reconciliations of any non-GAAP measures discussed on today's call. Joining me today are Bhairav Patel, our Chief Financial Officer, and Grant Campbell, Senior Vice President of Investments in Capital Markets. During our remarks, we will give a brief update related to our portfolio repositioning and operating trends. After which, Grant will elaborate on the status of our dispositions and investment activities.

[Anne Olson, President and CEO at Centerspace]

We'll close out with Bhairav providing context for the guidance updates we outlined in our release last evening. In the last 14 months, we have sold or are under contract to sell 20 communities for approximately $530 million. These transactions have significantly improved the profile of our portfolio and balance sheet, increasing exposure to institutional markets, eliminating exposure to tertiary markets like St. Cloud, Rapid City, and Bismarck, and reducing leverage. Executing this strategy is intentional.

[Anne Olson, President and CEO at Centerspace]

Our goal is a higher quality portfolio with stronger growth potential, lower Net Debt to EBITDA, and greater financial flexibility. Operationally, the quarter was in line with our expectations. We have updated our same-store reporting to reflect disposition activity. Now our same-store results are more weighted to Denver and Minneapolis. This impacted our overall revenue, which was flat year-over-year, primarily due to concessions in the Denver market.

[Anne Olson, President and CEO at Centerspace]

However, disciplined expense management led to NOI growth of 30 basis points in the second quarter when compared to the second quarter of 2025. Expenses declined 10 basis points year-over-year as our teams controlled costs across categories. Most of the savings came from lower R&M costs, including turn expenses. Within the same store, we had an excellent quarter for retention. Of residents with lease expirations, 61.3% of our residents renewed at a renewal rate growth of 3.4%.

[Anne Olson, President and CEO at Centerspace]

New lease rate growth was -60 basis points, which was an improvement of 190 basis points over the first quarter and resulted in blended lease growth of 1.8%. The blended lease increases have held steady through July. While Denver remains softer as new supply continues to be absorbed, it is notable that our blended spreads for July were positive. Overall, the softness in Denver is offset by strong results out of North Dakota, Nebraska, and Minnesota.

[Anne Olson, President and CEO at Centerspace]

In particular, Minneapolis delivered blended rent growth of 3.4%, with retention at 65%, evidence that the market has absorbed the elevated supply that had challenged many markets across the country. We are capturing rent increases in markets where supply has been absorbed and new supply is muted. Outside of the Mountain West, all of our markets had blended lease growth in June in excess of 3%. While we believe we have stability in operations and an opportunity as deliveries diminish in the Mountain West into 2027.

[Anne Olson, President and CEO at Centerspace]

We also have a strong opportunity to capture value through our portfolio repositioning. Grant, can you discuss more specifics on our disposition and capital markets activities?

[Grant Campbell, SVP of Investments in Capital Markets at Centerspace]

Thanks, Anne, good morning, everyone. We continue making progress on our portfolio optimization and de-leveraging plan announced in early June. On June 29th, we sold Civic Lofts in Denver, Colorado, for $30 million. This was a smaller community relative to our other Denver assets and no longer core to our long-term strategy in that market. The transaction represented a mid 3% cap rate on T12 financials, including non-stabilized vacancy and concessions this particular urban Denver sub-market is experiencing today.

[Grant Campbell, SVP of Investments in Capital Markets at Centerspace]

From a stabilized operations perspective, the transaction represents a low 5% cap rate. More broadly in Denver, first half of the year transaction volume is down 46% from the same time period in 2025 and 72% compared to 2024. Despite lower transaction volumes, high conviction investors have recently been active on individual community acquisitions. We have seen recent acquisitions at significant discounts to replacement costs in urban submarkets with going-in cap rates at mid 4% and below, along with select newer vintage suburban communities pricing at high 4% to low 5% in place cap rates.

[Grant Campbell, SVP of Investments in Capital Markets at Centerspace]

These investment decisions are informed by first half of 2026 absorption figures being the highest on record in Denver, market's continued high cost of homeownership, and deceleration of the new construction pipeline. Moving to other portfolio markets, on July 9th, we closed the sale of five communities in Rapid City, South Dakota, for $66 million. This sale exited us from the Rapid City market. In Bismarck, North Dakota, we remain in process on executing the sale of six communities for approximately $150 million with closing expected in August.

[Grant Campbell, SVP of Investments in Capital Markets at Centerspace]

This transaction will exit us from the Bismarck market. Pricing on the Rapid City and Bismarck sales is a mid 6% cap rate, highlighting the capital interest in secondary markets driven by healthy regional economies and measured new supply pipelines. In total, our disposition activity in Denver, Rapid City, and Bismarck includes 12 communities, two market exits, and total sale price of approximately $245 million, all consistent with pro forma outcomes described in our early June portfolio optimization plan.

[Grant Campbell, SVP of Investments in Capital Markets at Centerspace]

In addition to these initiatives, we also made the decision to sell two communities in Minneapolis. This was driven by strong asset pricing received given the strength of Minneapolis fundamentals, management of our portfolio concentrations, and further advancement of balance sheet strategy. On July 14th, we closed the sale of Red 20 and Ironwood to newer vintage communities totaling 312 homes, which sold for $73.8 million. In aggregate, all 2026 disposition activity includes 14 communities, 1,810 apartment homes, and total sale price of approximately $320 million.

[Grant Campbell, SVP of Investments in Capital Markets at Centerspace]

These sales improve our overall portfolio quality and operating efficiency, including average rent per community increasing 1.4% and average homes per community increasing from 201 to 222. Our 2026 dispositions have allowed us to move forward with certainty and speed in executing de-leveraging outcomes associated with our strategic review and manage related tax implications. All of our sales priced inside of the implied mid to high 7% portfolio cap rate, our stock currently trades at.

[Grant Campbell, SVP of Investments in Capital Markets at Centerspace]

Given this valuation disconnect, we bought back shares in the quarter, repurchasing $2.5 million at an average price of $55.54 per share. While active with buybacks, we are also focused on our leverage profile, seeking to strike an appropriate balance between the two, this quarter's initiatives achieve this. I'll now turn it over to Bhairav to discuss our financial results, balance sheet, and revised guidance.

[Bhairav Patel, CFO at Centerspace]

Thanks, Grant, hello, everyone. Last night we reported second quarter Core FFO of $1.27 per diluted share, driven by a 30 basis point year-over-year increase in same-store NOI as revenues and expenses remained relatively flat. Our same-store results exclude NOI from the 14 communities sold or held for sale as of quarter end. As a result, they are not comparable to first quarter same-store results or prior same-store guidance, both of which included those assets. Turning to full-year 2026 expectations.

[Bhairav Patel, CFO at Centerspace]

The reconstitution of our same-store pool to exclude the 14 communities now results in expected same-store NOI growth ranging from flat to down 1% year-over-year. At the midpoint, we expect revenue growth of 50 basis points and expense growth of 2%. Most of the change in same-store guidance reflects the updated same-store pool, as Bismarck and Minneapolis had strong first halves and were expected to continue performing well. These communities will not meaningfully contribute to earnings in the second half of the year.

[Bhairav Patel, CFO at Centerspace]

As a result, we are lowering our Core FFO midpoint to $4.63 per share. We will use the proceeds to fully repay our line of credit and expect to have approximately $100 million of cash on hand, including $50 million-$60 million earmarked for a special distribution that may be required to maintain our REIT status. We continue to refine our taxable income projections, and any required special distribution would likely occur in the fourth quarter. Lastly, we expect full-year net G&A and property management expenses of $28.3 million at the midpoint, excluding non-routine severance and strategic review items.

[Bhairav Patel, CFO at Centerspace]

The reductions we implemented in connection with the dispositions reflect our ongoing effort to align our overhead structure with the evolution of our portfolio. The reduction in overhead this year does not fully capture the total impact because several actions were implemented mid-year. We expect our annualized run rate, which better captures the overall impact, to be lower by approximately $2 million because of the realignment. Moving to the balance sheet, we ended the quarter with more than $240 million of liquidity.

[Bhairav Patel, CFO at Centerspace]

Annualized Net Debt to EBITDA was 7.3x, down sharply from 8.2x in Q1. We had approximately $1 billion of debt outstanding, with a weighted average rate of 3.6% and a weighted average maturity of 6.7 years. Disposition activity after quarter end will further strengthen our position. Following the sales, we expect total debt to be below $850 million. Assuming $50 million-$60 million in special distributions later this year, Net Debt to EBITDA should settle in the mid-6x range.

[Bhairav Patel, CFO at Centerspace]

Together with approximately $450 million in total liquidity, this would put us in the strongest balance sheet position in our history. To conclude, I want to commend our team for maintaining operating discipline while making significant progress against our strategic plan in a challenging market. With a stronger balance sheet and a more focused portfolio, we are well positioned to deliver solid operating results in the second half of the year. With that, operator, please open the line for questions.

[Operator]

We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from Brad Heffern of RBC Capital Markets. Your line is now open. Please go ahead.

[Brad Heffern, Analyst at RBC Capital Markets]

Thanks. Morning, everybody. You added the roughly $75 million to the disposition plan with the Minneapolis properties. First can you just sort of talk through that decision, and then can you also talk about the use of those proceeds? Will that also be for de-leveraging, or might you allocate some of that to repurchases or something else?

[Anne Olson, President and CEO at Centerspace]

Good morning, Brad. Thanks for the question. I'm going to have Grant take that and talk a little bit about our decision to sell those additional two assets.

[Grant Campbell, SVP of Investments in Capital Markets at Centerspace]

Good morning, Brad. That decision really resulted from a couple different things. One, strong pricing received as we worked through our process. Two, as we sell out of some of these non-institutional secondary markets, we are mindful of portfolio concentrations and managing that, this was an ability to not only achieve strong pricing, but also manage our portfolio concentrations as we think about the company moving forward. Then I'll pass it over to Bhairav to talk about proceeds.

[Bhairav Patel, CFO at Centerspace]

Sure. Morning, Brad. With respect to proceeds, part of those proceeds may be used to pay down debt. Part of those will be earmarked for a special distribution that we expect to happen in the fourth quarter of this year. Then there's going to be a small amount of cash on hand, which we may hold, and use to kind of retire secured mortgages early next year.

[Brad Heffern, Analyst at RBC Capital Markets]

Okay. Got it. Thank you for that. Bhairav, maybe sticking with you. Obviously, tons of moving pieces between the sales, timing, deleveraging, etc. Not really looking for 2027 guidance, but I'm wondering if there's any color you can give us on just what the FFO run rate of the business looks like approximately after all of these transactions are completed.

[Bhairav Patel, CFO at Centerspace]

Sure. I'll start with the impact on the second half. Let's go through some of the big components. About $300 million in sales. Grant mentioned a cap rate of [inaudible], let's add 50 basis points from an NOI standpoint. That approximates about $11.5 million for the second half, which is roughly in line with the reduction in NOI compared to our prior guidance. That's offset with the use of proceeds as we talked about, which for the second half are about $6.5 million. The net impact is $5 million.

[Bhairav Patel, CFO at Centerspace]

That's roughly $0.25. That's for the second half. For the full year, you have to annualize that, but we also have organic growth coming from the rest of the portfolio. Going forward, that's how I would kind of think about the run rate guidance. Obviously, as we annualize what's going to happen in the second half, there's growth coming from the rest of the portfolio in 2027 as well to offset that.

[Brad Heffern, Analyst at RBC Capital Markets]

Okay. Thank you.

[Operator]

The next question is from James Feldman of Wells Fargo. Your line is now open. Please go ahead.

[Analyst at Wells Fargo]

Hi, thank you. This is Conor on with Jamie. Blended lease spreads improved to 1.8% in 2Q, and retention also increased to 61 from 60 last year. Can you walk through what you're seeing in July, and whether that improvement is being driven more by new lease pricing, renewals, or reduced concessions?

[Anne Olson, President and CEO at Centerspace]

Good morning, Conor. I'll start and then Bhairav can add a little bit more color about where we're at, particularly as we send out renewals. Into July, we saw that blended rate hold firm at 1.8%. We're seeing some strengthening in renewal pricing or in new lease pricing, particularly as Denver continues to work through. Really that strength on the renewal side, which we're expecting to come in in the mid threes again. Bhairav, do you have any more color that you want to give on leasing?

[Bhairav Patel, CFO at Centerspace]

No, I would just add that renewals remain strong. New lease trade outs may fluctuate a little bit just because we typically hit our peak in June and July. Overall, as Anne mentioned, from a blended standpoint, we are seeing solid blended rate growth. I'll also add that for the second half, Denver has a better comp that may have an impact on new lease trade outs, because the concessions that we started offering started in the second half of last year. We have a favorable comp going into the second half, which may affect new lease trade outs.

[Analyst at Wells Fargo]

Thank you. That's helpful. On Minneapolis, it generated 2.5% NOI growth this quarter. Remains the largest NOI contributor within the portfolio. I think last quarter you described Minneapolis as moving beyond the supply inflection point here. Has anything changed in your outlook, and is this market performing better than you expected entering the year?

[Anne Olson, President and CEO at Centerspace]

Yeah, I would say it's performing right in line with our expectations, maybe slightly better, as Denver's been slightly down from where we maybe expected, and those are offsetting each other. Definitely have seen really good growth in Minneapolis. We're seeing good new lease rents. We're seeing great retention. I'd say we're probably now a year into past the inflection point where we really saw a pickup last summer around this time. Feeling really great about Minneapolis. The supply picture here remains really muted as to new deliveries.

[Anne Olson, President and CEO at Centerspace]

We think that demand will hold up and we'll continue to see good results out of Minneapolis.

[Analyst at Wells Fargo]

Great. Thank you.

[Operator]

The next question is from Rich Anderson of Cantor Fitzgerald. Your line is now open. Please go ahead.

[Rich Anderson, Analyst at Cantor Fitzgerald]

Okay, thanks. Good morning. I think you just kind of went through an annualized full year headwind of $0.50. I think I got that right. You said offset TBD on organic growth for the rest of the portfolio. All makes sense. I was trying to do this math before my question came up, so I didn't get fully completed on it. If there's $120 million of same store NOI, I think that it's, again, about right. That's got to grow by a certain percentage to offset. The genesis of the question is, in what world could there be FFO growth next year? Is basically the question.

[Bhairav Patel, CFO at Centerspace]

Grant, you want to check Rich's math here?

[Grant Campbell, SVP of Investments in Capital Markets at Centerspace]

Yeah, please.

[Bhairav Patel, CFO at Centerspace]

I think a component to consider there is, we mentioned G&A savings. On an annualized basis, that's about $2 million or $0.10 a share. Depending on where NOI goes next year, again, we expect Denver to recover in 2027. All of the other markets are doing really well and have passed the supply pressures. Once Denver recovers, depending on organic rent growth, we can at least expect some offset coming from NOI and at least hold FFO steady going forward, when you combine the organic growth along with some of the savings on the G&A side.

[Rich Anderson, Analyst at Cantor Fitzgerald]

Okay. Fair enough. Thanks for that. You also mentioned the reason to sell Minneapolis was, I think what you were implying when you were going through the strategic review, that kind of came out in the wash that there would be some strong pricing in certain assets. Is there anything else that came out of that broader process that you're working on as a potential change in the future, like you had it with the mini sales, or is that it in terms of what you think might be different from where you're viewing dispositions today?

[Grant Campbell, SVP of Investments in Capital Markets at Centerspace]

Good morning, Rich. I think, correct. As we worked through the process, it was evident that these assets in Minneapolis, we had strong interest. I think a couple other notes that came out of the process. One, we had strong pricing in the secondary markets. That was consistent all the way through the process. In terms of additional sales in Minneapolis at this time, we're not thinking about any additional sales in 2026. If that answers your question.

[Rich Anderson, Analyst at Cantor Fitzgerald]

Okay. Yep. Thank you. Last for me. A nice transaction in Salt Lake City. I'm wondering what your thoughts are in that market on a go-forward basis in terms of building scale. Thanks.

[Anne Olson, President and CEO at Centerspace]

Thanks, Rich. When we acquired the project in Salt Lake City, our goal was really to scale that market. We are keeping tabs on it. I'll ask Grant to just give a little bit of an overview here in a second of how that market is trending. The cost of capital has really changed since we undertook that transaction and the overall market relative to our cost of capital. The things that are out of our control that are driving our investment decisions keep us a little bit stymied from a new investment perspective.

[Anne Olson, President and CEO at Centerspace]

As we look to scale that market, we'd be looking for really discreet transactions where we could have sales that match fund that until a time when our cost of capital comes back in line to make that accretive. Grant, maybe you can just give a couple sentences on how that market is trending and why we still like it.

[Grant Campbell, SVP of Investments in Capital Markets at Centerspace]

Yeah. We continue to be highly constructive on the Salt Lake market. We would like to grow our presence there. As Anne mentioned, we are evaluating the best use of a dollar. What is the best capital allocation decision? Right now, given our cost of capital, it is not new acquisitions in Salt Lake. Our investment that we made there, it's hitting its marks from a pro forma and underwriting perspective. We're very encouraged by that. There has been a little bit of an uptick in marketed offerings here.

[Grant Campbell, SVP of Investments in Capital Markets at Centerspace]

In particular, the past three to six months, we've seen a few more broadly marketed opportunities. We continue to talk to all of our market relationships. We continue to do all the work there. We're staying close to the market, and if and when we're in a position where that is our best capital allocation decision, we feel confident that we can continue our evolution there.

[Rich Anderson, Analyst at Cantor Fitzgerald]

Okay. Thanks very much.

[Operator]

The next question is from Ami Probandt of UBS. Your line is now open. Please go ahead.

[Ami Probandt, Analyst at UBS]

Morning. Thank you. I am just wondering, how much of an impact did the asset sales have on same-store revenue? Would you likely have maintained the same-store rev guide if you had not sold some of your stronger performing assets?

[Bhairav Patel, CFO at Centerspace]

Yeah. Morning, Ami. Yeah. From a same-store perspective, the recomposition of the pool has a significant impact on our guidance. That would be the main contributor to it. For reference, while NOI for the same-store pool is down to 1.3% year-over-year, the 14 communities that are now excluded, they were collectively up 7.5%. On the revenue side, the performance is similar as well, with Bismarck topping the portfolio and same-store revenue growth. The Minneapolis communities that were included in the dispositions were also solid contributors.

[Bhairav Patel, CFO at Centerspace]

Yeah, a majority of the change in the same-store guidance would be because of the dispositions.

[Ami Probandt, Analyst at UBS]

Okay. Got it. That is helpful. Then I was hoping that you could dig in a little bit more on Denver. How is your portfolio performing versus the MSA as a whole? Do you have pricing power in any of the sub-markets? Is the decline in same-store revenue in Denver that you have been seeing still mostly a supply issue, or is there anything to note on the demand side?

[Anne Olson, President and CEO at Centerspace]

Ami, I'll start there, Bhairav can give a little bit of detail. We continue to really like our Denver portfolio from a position standpoint. We're pretty equally weighted urban and suburban, and we're really along the I-25 corridor. While we have had a lot of supply impacts for our properties, maybe not as much, we're not in the really heavy supply impacted areas, and that has helped us trend really well in Denver. When we look at the underlying fundamentals in the market, we're not yet seeing anything beyond supply that we think is driving it.

[Anne Olson, President and CEO at Centerspace]

We're seeing really good retention. We're seeing great wage growth in our applicant pool. We're not seeing any trends relative to doubling up. The cost of homes is still very high in Denver. Job growth has slowed in Denver. We've all watched that kind of as we watch all the markets across the U.S. The first half absorption of 2026 was the strongest on record for Denver. We really do think it's a supply and demand story. Bhairav, maybe you can just give a little bit of detail about how we're performing relative to the market on our Denver specific stats.

[Bhairav Patel, CFO at Centerspace]

Sure. I'll just add a couple of stats there. Blends for the second quarter in Denver were down 2.6%, but that was an improvement over the first quarter, where the blends were down 4.8%. Concessions did tick up a little bit at about four weeks. That's in line with the market. The increase kind of makes sense given the increase in expirations in the peak leasing season. We should have a much better comp for the second half. In fact, we're already seeing it in our July blends for Denver, which are actually positive at about 1%.

[Bhairav Patel, CFO at Centerspace]

It's led by renewals where we'd see the first impact of concessions rolling off. Despite the supply pressure, we feel good about our positioning in the market. If you kind of think about the overall market vacancy, that's about 10%. Our portfolio average is half of that. Overall, we feel like we're very well positioned in the market, and in a great place to take advantage of a potential recovery in 2027.

[Ami Probandt, Analyst at UBS]

Great. Thank you.

[Operator]

There are no further questions at this time. I will now turn the call back to Anne Olson, President and CEO, for closing remarks.

[Anne Olson, President and CEO at Centerspace]

Thank you all for joining us today, and a special thanks to our team who has done a tremendous job throughout the quarter, specifically as we've undertaken a lot of transactional activity, and we're looking forward to a great second half of the year. Have a good day.

[Operator]

This concludes today's call. Thank you for attending. You may now disconnect

Participants

Executives

• Anne Olson, President and CEO
• Grant Campbell, SVP of Investments in Capital Markets
• Bhairav Patel, CFO

Analysts

• Brad Heffern, Analyst at RBC Capital Markets
• Analyst at Wells Fargo
• Rich Anderson, Analyst at Cantor Fitzgerald
• Ami Probandt, Analyst at UBS