Centerspace Q2 Earnings Call Highlights

Key Points

• Centerspace is accelerating portfolio repositioning and deleveraging: The apartment REIT has sold or agreed to sell 20 communities worth approximately $530 million, exiting Rapid City and planning to exit Bismarck while increasing exposure to institutional markets.
• Second-quarter results were broadly in line, but guidance was lowered: Core FFO was $1.27 per share, while revised same-store NOI guidance is now flat to down 1% and the Core FFO midpoint fell to $4.63 per share after strong-performing assets were removed from the reporting pool.
• Balance-sheet flexibility is expected to improve materially: Net debt to EBITDA declined to 7.3 times, and post-sale debt is expected to fall below $850 million, with leverage projected in the mid-6-times range and liquidity near $450 million.

Centerspace NYSE: CSR said its second-quarter operating results were in line with expectations as the apartment real estate investment trust continued a portfolio repositioning and deleveraging program that has included sales or pending sales of 20 communities over the past 14 months.

President and CEO Anne Olson said the transactions, totaling approximately $530 million, are intended to increase the company’s exposure to institutional markets, eliminate tertiary-market exposure and reduce leverage. Centerspace has exited Rapid City, South Dakota, and expects to exit Bismarck, North Dakota, through a pending transaction expected to close in August.

“Our goal is a higher quality portfolio with stronger growth potential, lower Net Debt to EBITDA, and greater financial flexibility,” Olson said.

Second-Quarter Operating Trends

Centerspace reported second-quarter Core FFO of $1.27 per diluted share. Same-store net operating income increased 30 basis points from the second quarter of 2025, as relatively flat revenue and expense performance was supported by cost controls.

The company updated its same-store reporting pool to exclude 14 communities sold or held for sale as of quarter-end. Olson said the revised pool is more heavily weighted toward Denver and Minneapolis, and is therefore not comparable with first-quarter same-store results or prior guidance.

Same-store revenue was flat year over year, primarily because of concessions in Denver, while expenses declined 10 basis points. Olson said lower repair-and-maintenance costs, including turn expenses, accounted for most of the savings.

• Resident retention was 61.3% during the quarter.
• Renewal rent growth was 3.4%.
• New-lease rent growth was negative 60 basis points, an improvement of 190 basis points from the first quarter.
• Blended lease growth was 1.8%, a level that held through July.

Olson said Denver remains softer as new supply is absorbed, though the company’s July blended lease spreads in the market turned positive. Outside the Mountain West, all of Centerspace’s markets posted blended lease growth above 3% in June.

Minneapolis posted blended rent growth of 3.4% and retention of 65%. Olson said the market has absorbed elevated supply and now faces a muted delivery outlook. She characterized Minneapolis performance as in line with, or slightly better than, company expectations.

Dispositions Advance Deleveraging Plan

Senior Vice President of Investments in Capital Markets Grant Campbell detailed a series of asset sales completed during and after the quarter. On June 29, Centerspace sold Civic Lofts, a smaller Denver community, for $30 million. Campbell said the sale represented a mid-3% capitalization rate on trailing 12-month financials, including unstabilized vacancy and concessions, and a low-5% rate based on stabilized operations.

On July 9, the company closed the sale of five Rapid City communities for $66 million, completing its exit from that market. Centerspace also remains under contract to sell six Bismarck communities for approximately $150 million, with closing expected in August. The Rapid City and Bismarck transactions were priced at mid-6% capitalization rates, Campbell said.

The company additionally sold two newer Minneapolis communities, Red 20 and Ironwood, for $73.8 million on July 14. The 312-home sale was driven by strong pricing, portfolio-concentration management and the company’s balance-sheet strategy, according to Campbell.

In total, 2026 disposition activity includes 14 communities, 1,810 apartment homes and approximately $320 million of sale proceeds. Campbell said the sales increase average rent per community by 1.4% and raise average homes per community from 201 to 222.

Centerspace also repurchased $2.5 million of its shares during the quarter at an average price of $55.54 per share. Campbell said all company sales were priced inside the implied mid- to high-7% capitalization rate at which the stock was trading.

Guidance Revised as Assets Leave Same-Store Pool

Chief Financial Officer Bhairav Patel said Centerspace now expects full-year same-store NOI growth ranging from flat to down 1% year over year. At the midpoint, the company expects revenue growth of 50 basis points and expense growth of 2%.

Patel said the primary reason for the revised outlook was the removal of strong-performing Bismarck and Minneapolis properties from the same-store pool. The 14 communities excluded from the revised pool collectively delivered 7.5% year-over-year NOI growth, while the revised same-store pool was down 1.3% year over year.

Centerspace lowered its Core FFO midpoint guidance to $4.63 per share. Patel estimated that approximately $300 million of sales would reduce second-half NOI by about $11.5 million, partly offset by roughly $6.5 million from the use of proceeds, for a net second-half impact of about $5 million, or approximately $0.25 per share.

The company expects to use sale proceeds to fully repay its line of credit and to retain about $100 million of cash, including $50 million to $60 million potentially earmarked for a special distribution needed to maintain REIT status. Patel said any such distribution would likely occur in the fourth quarter, subject to ongoing taxable-income projections.

Balance Sheet and Denver Outlook

Centerspace ended the quarter with more than $240 million of liquidity and annualized net debt to EBITDA of 7.3 times, down from 8.2 times in the first quarter. The company had about $1 billion of debt outstanding, with a weighted average interest rate of 3.6% and a weighted average maturity of 6.7 years.

Following post-quarter asset sales, Centerspace expects total debt to fall below $850 million. Assuming the potential special distributions, Patel said net debt to EBITDA should settle in the mid-6-times range and total liquidity should reach approximately $450 million.

In Denver, second-quarter blended lease growth was negative 2.6%, improving from negative 4.8% in the first quarter. July blends were positive at about 1%, led by renewals, Patel said. While concessions increased to roughly four weeks, the company said its Denver portfolio vacancy rate is about half of the broader market’s approximately 10% level.

Olson said Centerspace believes Denver’s weakness remains principally a supply-and-demand issue rather than a broader deterioration in renter demand. She pointed to strong retention, wage growth among applicants, high homeownership costs and record first-half absorption in the Denver market.

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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