Centerspace Q1 Earnings Call Highlights

Key Points

• The company’s strategic review is ongoing with a substantive update expected before or with the Q2 earnings release, and the process has driven strategic-review costs and a one-asset impairment after management adjusted holding-period assumptions.
• Leasing momentum improved through Q1 into April—blended leasing spreads rose from -90 bps in January to +140 bps in March with preliminary April spreads of 1.8%—but performance diverged regionally as Midwest markets (notably Minneapolis) strengthened while Denver lagged due to supply and Colorado regulatory headwinds.
• Results were broadly in line: Q1 core FFO was $1.12 and management reiterated full-year 2026 guidance with a midpoint core FFO of $4.93, while liquidity was $267 million and weighted-average debt cost was 3.6%.

Centerspace NYSE: CSR reported first-quarter 2026 results that management said were largely in line with expectations, while reiterating full-year guidance and pointing to improving leasing trends heading into peak season. The company also said its strategic review, initiated in 2025, remains ongoing and that shareholders should expect a more substantive update “before or in connection with” the second-quarter earnings release.

Strategic review remains underway

President and CEO Anne Olson opened the call by addressing the company’s strategic review, saying the board and its advisers “continue to make progress” and have received stakeholder feedback. Olson cautioned that “there can be no assurance as to the timing or outcome” and noted the company did not intend to provide additional details on the process while discussing first-quarter results.

During the Q&A, CFO Bhairav Patel also addressed a real estate impairment recorded in the quarter, explaining that impairments are typically seen when assets are held for sale. Patel said that “with the ongoing strategic review, the considerations change a little bit,” and the company adjusted the potential holding period for certain assets, which drove an impairment “on one asset” due to “property specific factors.”

Leasing trends improved through the quarter and into April

Olson said first-quarter revenue was supported by “stable demand” and continued execution by leasing teams, even as results reflected the impact of Colorado regulatory changes, timing of certain expenses, and costs related to the strategic review.

Centerspace’s blended leasing spreads improved throughout the quarter. Olson said blended spreads were up 40 basis points over prior leases in Q1, but monthly performance strengthened from negative 90 basis points in January to positive 140 basis points in March. Preliminary April blended spreads were 1.8%, according to Olson.

• Q1 blended spread composition: new lease rents down 2.1% and renewals up 3.1%, Olson said.
• April trends: new lease spreads turned positive and renewal spreads increased to 3.3%, Olson added.

Same-store portfolio retention was 54.1%, a two percentage point improvement versus the same quarter last year, while the resident base remained “healthy,” Olson said, citing rent-to-income levels of 21.2% and bad debt “within our historical range.” In response to an analyst question, Olson said retention has been higher across the industry in recent years, and she suggested it may reflect a structural shift as renters stay renters longer. She added that April retention increased “pretty significantly.”

Market performance: Midwest strength, Denver pressured by supply and regulation

Olson said Midwest markets continued to see rent growth outpacing national averages. Minneapolis, the company’s largest market, posted blended spreads of 1.3% in Q1 and accelerated to 3.8% in April, with new lease spreads of 4.3% during the month. Asked whether Minneapolis is “back to normal” after supply pressures, Olson said the company believes it is “past the inflection point,” with steady demand and a tapering supply pipeline, and expects Minneapolis to outperform within the portfolio this year.

SVP of Investments and Capital Markets Grant Campbell provided market-level supply and transaction commentary, noting that Minneapolis had a “record year” for transactions in 2025 with $2.5 billion in volume. Campbell said investor interest has been supported by supply peaking in 2023 and a relatively muted delivery pipeline, with next 12-month deliveries representing 1.6% of existing inventory and the full construction pipeline at 2.1%.

In Denver, Olson said Q1 blended rates were down 5.1% and that reimbursement revenues were showing the impact of Colorado regulatory changes. She added that concessions were prevalent and that Centerspace had its “highest usage of concessions to date” in Q1. Still, management pointed to improving demand indicators: Olson said Q1 absorption was at its highest level since the pandemic rebound in 2021, and retention in Denver communities improved to 51.9% from Q1 2025.

Campbell said Denver transaction volume fell 41% in 2025 compared to 2024 and that the slower pace has continued in 2026 as the market absorbs deliveries from the past 24 months and contends with flat job growth in 2025 and “recent legislative changes affecting property level other income.” He said premium assets still command strong pricing, including “a few recent trades at sub 5% in place cap rates.”

On broader concerns about Colorado’s regulatory climate, Olson said it is “something that we’re thinking about,” noting the company is already seeing the impact of regulatory actions on RUBS and utility reimbursement. She also said the company is watching whether broader regulation could affect job growth, though she emphasized Centerspace is “really happy with the portfolio we have there” and optimistic about Denver’s long-term appeal.

When asked about the apparent mismatch between flat job growth and strong absorption, Campbell said the company continues to see inflows of renter demand and pointed to the high cost of homeownership. He also cited a continued inflow of out-of-state renters, noting that within the company’s same-store portfolio, about a third of applicants were from out of state from 2021 to 2023, compared with 25% in 2024 and 2025.

Olson also discussed smaller Mountain West markets (Rapid City and Billings), describing them as acting “a little bit more like a Denver” after outsized rent growth in 2021-2023 drew supply that has weighed on performance. She said supply is tapering and job conditions have been “a little bit softer,” including a pullback in remote-worker inflows seen immediately post-COVID.

Financial results, expenses, and reiterated 2026 guidance

Patel reported first-quarter core FFO of $1.12 per diluted share, driven by a 1.1% year-over-year decrease in same-store NOI. Same-store revenues were flat versus Q1 2025, as a 1.7% increase in average monthly rental rate was offset by a 40 basis point occupancy decline and lower RUBS revenue in Colorado communities, he said.

On expenses, Patel said same-store expenses rose 1.7% year-over-year, with controllable expenses up 3.5% and non-controllables down 1.1%. G&A expenses increased by $1.3 million from the prior-year quarter, driven mainly by strategic review costs, he added.

Centerspace reiterated full-year 2026 guidance consistent with what it outlined in February. At the midpoint, Patel said the company expects:

• Core FFO of $4.93 per share
• Same-store NOI growth of 75 basis points
• Same-store revenue growth of 88 basis points
• Same-store expense growth of 1.5%

Patel said casualty recoveries in Q1 led the company to increase its “neighborhood FFO expectations” by $0.03 at the midpoint to $4.78 per share. Revenue growth assumptions include blended gross leasing spreads of approximately 2%, occupancy in the mid-95% range, and retention of about 52%. He reiterated that blended spreads are expected to be highest in Midwest communities, while Denver spreads are expected to be down for the year but improve as the year progresses.

Regarding Colorado regulations, Patel said changes are expected to temper revenue growth, with RUBS expected to be down nearly $1 million for the year, which he said was already incorporated into initial guidance.

Patel said first-quarter expenses were “slightly higher than our expectations,” in part due to timing. He cited approximately $400,000 in real estate tax true-ups and said the company expects those to be offset when open appeals are resolved in the second half of the year. He also noted non-reimbursable losses were somewhat higher than anticipated but described that line item as volatile. Controllable expenses were affected by a low open-position count and the timing of R&M projects, with expected offsets later in the year, he said.

Patel also provided timing details for several items, including strategic review costs expected to total $1 million to $1.5 million for the year, primarily in the first half, and amortization of assumed debt expected to be $1.3 million for the year, with $490,000 expected in Q2 and $215,000 per quarter in Q3 and Q4. He noted the company’s guidance does not include acquisitions or dispositions.

Balance sheet and liquidity

On leverage, Patel said Q1 annualized debt to EBITDA was “atypically high” due to higher G&A and taxes in the quarter and is not indicative of a meaningful leverage change. He said management expects the metric to return to the company’s “historical mid 7x range” as expenses normalize.

Patel said the company’s debt profile includes a weighted average interest rate of 3.6% and a weighted average maturity of 6.7 years. Liquidity totaled $267 million of cash and line of credit availability, compared with $98 million of debt maturing through 2027.

In response to a question on capital allocation during the strategic review, Olson said the company remains focused on managing line-of-credit debt and maintaining a “strong and flexible” balance sheet, adding that much of the company’s value-add spend relates to projects started or identified last year.

About Centerspace NYSE: CSR

Centerspace 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.

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