Q2 2025 Centerspace Earnings Call

Quick question. Please press star followed by one on your telephone keypad I would now like to pass the conference over to our host Josh Plate with center space You May proceed.

Good morning, everyone. Thanks basis Form 10-Q for the quarter ended June 32025 was filed with the SEC yesterday after the market close. Additionally.

Additionally, our earnings release and supplemental disclosure package have been posted to our website <unk> dot com and filed on form 8-K.

It's important to note that today's remarks will include statements about our business outlook and other forward looking statements that are based on management's current views and assumptions.

These statements are subject to risks and uncertainties discussed in our filing under the section titled risk factors and in our other filings with the SEC.

We cannot guarantee that any forward looking statements will materialize and you're cautioned not to place undue reliance on these forward looking statements.

Please refer to our earnings release for reconciliations of any non-GAAP information, which may be discussed on today's call.

I'll now turn it over to center stage, as President and CEO animal them for the company's prepared remarks.

Good morning, everyone and thank you for joining us I'm joined today by our SVP of investments and capital markets Grand Campbell, and our CFO for off the top.

Last night, we reported strong results from our same store portfolio with a two 7% year over year increase in revenues driving two 9% year over year growth in NOI. However, due to our planned strategic transactions, we're lowering the midpoint of our guidance by <unk> <unk> to account for the impact of capital recycling activities.

Barack will provide detail on our financial results and outlook I want to spend a few minutes on the execution of our longer term strategy.

In June we announced a series of transactions focused on accelerating capital recycling efforts with a focus goal of improving portfolio metrics.

Creasing exposure to institutional markets and enhancing the overall growth profile, while leveraging the stability of our strong Midwest portfolio. These strategic moves included acquisitions in both Colorado, and Utah and dispositions that reduce our exposure to Minnesota.

We entered a new market Salt Lake City, and added to our existing base and Boulder Fort Collins, while staying true to our differentiated footprint in the med and mountain west regions.

Operationally the results give us confidence that our platform is well prepared to undertake these repositioning efforts.

Absorption remains at or near record levels in many of our markets, which led to 96, 1% occupancy in the quarter combined with high retention of 62% and exceptional expense control. We are set up well for the remainder of the year.

Josh Klaetsch: Noted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to our host, Josh Klaetsch, with CENTERSPACE. You may proceed.

your growth and anyway,

However, due to our plans and strategic transactions, we're lowering the midpoint of our guidance by $0.04 to account for the impact of capital recycling activities.

Leasing spreads are following a similar seasonal pattern to last year and we saw second quarter same store lease growth of two 4% on a blended basis with new lease growth of two 1% and renewal growth of two 6%.

While Barack will provide detail on the financial results and Outlook, I want to spend a few minutes on the execution of our longer term strategy.

Anne Olson: Good morning, everyone. CENTERSPACE's Form 10-Q for the quarter ended June 30, 2025, was filed with the SEC yesterday after the market closed. Additionally, our earnings release and supplemental disclosure package have been posted to our website at censerspacehomes.com and filed on Form 8-K. It's important to note that today's remarks will include statements about our business outlook and other forward-looking statements that are based on management's current views and assumptions. These statements are subject to risks and uncertainties discussed in our filing under the section titled Risk Factors and in our other filings with the SEC. We cannot guarantee that any forward-looking statements will materialize, and we caution not to place undue reliance on these forward-looking statements. Please refer to our earnings release for reconciliations of any non-GAAP information which may be discussed on today's call.

Excellent results demonstrate the strength of our platform and provide a solid base to continue execution of our longer term market repositioning while still growing earnings.

In June, we announced a series of transactions focused on accelerating Capital recycling, efforts with a focus School of improving portfolio metrics, increasing exposure to institutional markets and enhancing the overall growth profile while leveraging the stability of our strong Midwest portfolio.

Our Midwest focused markets continue to show their stability and consistency in our largest market of Minneapolis strong absorption and decreasing supply led to some of the nation's best market level occupancy gains for.

These strategic moves included Acquisitions in both Colorado and Utah and dispositions that reduce our exposure to Minnesota.

For center space. This dynamic aided Minneapolis blended same store leasing spreads where they increased two 7% in the quarter, which consisted of new leases, increasing two 5% and renewals increasing two 8% in our Denver portfolio, we're still seeing the impact of record recent supply in that market with leasing spreads remaining chi.

We entered a new market. Salt Lake City and added to our existing base in Boulder Fort Collins while staying true to our differentiated Twitter in the mid and Mountain West Region.

Operationally, the results give us confidence that our platform is well prepared to undertake these repositioning efforts.

Absorption remains at or near record levels in many markets, which led to 96.1% occupancy in the quarter.

<unk>, even in the face of favorable absorption.

Anne Olson: I'll now turn it over to CENTERSPACE's President and CEO, Anne Olson, for the company's prepared remarks.

That said the anticipated supply drop off in line with expectations for a pickup in job growth in that market into 2026, and 2027 point to current headwinds becoming tailwind.

Combined, with high retention of 60.2% and exceptional expense control. We are set up well for the remainder of the year.

Anne Olson: Good morning, everyone, and thank you for joining us. I'm joined today by our SVP of Investments and Capital Markets, Grant Campbell, and our CFO, Bhairav Patel. Last night, we reported strong results from our same-store portfolio, with a 2.7% year-over-year increase in revenues, driving 2.9% year-over-year growth in NOI. However, due to our planned strategic transactions, we're lowering the midpoint of our guidance by 4 cents to account for the impact of capital recycling activities. While Bhairav will provide detail on the financial results and outlook, I want to spend a few minutes on the execution of our longer-term strategy. In June, we announced a series of transactions focused on accelerating capital recycling efforts with a focused goal of improving portfolio metrics, increasing exposure to institutional markets, and enhancing the overall growth profile while leveraging the stability of our strong Midwest portfolio.

While our initial expectations of pricing power returning to Denver in the second half of the year may be delayed.

And that took about the market overall.

Resident health remains strong with rent to income ratio of 22, 5% and same store bad debt at roughly 40 basis points for the quarter.

Leasing spreads are following a similar seasonal pattern to last year. And we saw second quarter same store. Lease growth of 2.4% on a blended basis with new lease growth of 2.1% in renewal growth of 2.6%, these excellent results demonstrate the strength of our platform and provide a solid base to continue execution of our longer term Market repositioning while still growing earnings.

Mentioned that our retention rate was 62% and that brings us to 56, 8% for the year. This is a testament to our team members and their commitment to providing an exceptional customer experience. This commitment is also evidenced by continual improvement in our online review scores, which reached its highest point in the Companys history during the second quarter.

Our Midwest focused markets continue to show their stability and consistency, in our largest market of Minneapolis, strong absorption and decreasing Supply led to some of the nation's best Market level occupancy. Gains.

Before I turn it over to grant to share an overview on the recent transactions I want to reiterate our commitment to our strategy, which includes not only capital recycling to enhance our future growth profile and maintaining best in class operations driving shareholder results through continued year over year earnings growth and staying nimble to take advantage of opportunities, while keeping an eye on our balance sheet.

Anne Olson: These strategic moves included acquisitions in both Colorado and Utah and dispositions that reduced our exposure to Minnesota. We entered a new market, Salt Lake City, and added to our existing base in Boulder-Fort Collins while staying true to our differentiated footprint in the Mid and Mountain West regions. Operationally, the results give us confidence that our platform is well prepared to undertake these repositioning efforts. Absorption remains at or near record levels in many of our markets, which led to 96.1% occupancy in the quarter. Combined with high retention of 60.2% and exceptional expense control, we are set up well for the remainder of the year. Leasing spreads are following a similar seasonal pattern to last year, and we saw second quarter same-store lease growth of 2.4% on a blended basis, with new lease growth of 2.1% and renewal growth of 2.6%.

For Center space, this Dynamic aided Minneapolis Blended same store leasing spread where they increase 2.7% in the quarter, which consisted of new, leases increasing 2.5% and renewals increasing 2.8% in our Denver portfolio. We're still seeing the impact of record recent Supply. In that market, with leasing spread through remaining challenge, even in the face of favorable absorption.

While our stock price continues to be subject to macro volatility. We're excited about the path forward for center space Brant I'll turn it over to you for a discussion of the transactions and current transaction market.

that said, the anticipated supply drop off combined with expectations for a pickup and job growth in that market into 2026 and 2027 point to current headwinds becoming Tailwind

While our initial expectations of pricing power returning to Denver in the second half of the Year may be delayed. We're optimistic about the market overall.

Thanks, Dan and good morning, everyone. Our transaction initiatives include two recent acquisitions, both of which we have completed and the disposition of 12 communities in St Cloud in Minneapolis, Minnesota.

We closed on the acquisition of sugar amount of 341 home community in Salt Lake City at the end of May for $149 million.

The property was built in 2021 and is located in Sugar House, one of Salt Lake City is most desirable submarkets.

Salt Lake City is a natural extension of our existing mountain west footprint. Our team has been spending a lot of time in market and we have been actively pursuing opportunities there.

Resident Health remains strong with rent, to income ratio of 22.5% and same store bad debt at roughly 40 basis points. For the quarter, I mentioned that our retention rate was 60.2% and that brings us to 56.8% for the Year. This is a testament to our team members and their commitment to providing an exceptional customer experience. This commitment is also evident by continual improvement in our online review score, which reached its highest point in the company's history during the second quarter.

Anne Olson: These excellent results demonstrate the strength of our platform and provide a solid base to continue execution of our longer-term market repositioning while still growing earnings. Our Midwest-focused markets continue to show their stability and consistency. In our largest market of Minneapolis, strong absorption and decreasing supply led to some of the nation's best market-level occupancy gains. For CENTERSPACE, this dynamic aided Minneapolis blended same-store leasing spreads, where they increased 2.7% in the quarter, which consisted of new leases increasing 2.5% and renewals increasing 2.8%. In our Denver portfolio, we're still seeing the impact of record recent supply in that market, with leasing spreads remaining challenged even in the phase of favorable absorption. That said, the anticipated supply drop-off, combined with expectations for a pickup in job growth in that market into 2026 and 2027, point to current headwinds becoming tailwinds.

That on the ground presence is what led to this off market acquisition.

The Salt Lake City Valley features a diverse and growing economic base with a large presence of jobs in technology Finance education, and healthcare along with four large universities totaling approximately 145000 students.

Before I turn it over to Grant to share an overview on the recent transactions. I want to reiterate our commitment to our strategy, which includes not only Capital recycling, the enhance our future growth profile but maintaining best-in-class operations. Driving shareholder results through continued year-over-year, earnings growth and staying Nimble to take advantage of opportunities, while keeping an eye, on our balance sheet.

While many other institutional markets have recently realized the slowdown in effective rents due to a period of peak lease ups Salt Lake City has the second highest level of momentum in the country across institutional markets when measuring year over year effective rent change from March to June.

While our stock price continues to be subject to macro volatility. We're excited about the path forward for Center space Grant. I'll turn it over to you for a discussion of the transactions and current transaction markets.

Thanks Anne and good morning everyone. Our transaction initiatives include 2, recent acquisitions, both of which we have completed and the disposition of 12 communities in St. Cloud and Minneapolis Minnesota.

These variables coupled with the high cost of housing the state business friendly backdrop.

Robust outdoor amenities and Utah ranking sixth nationally for forecasted growth and young adult population between 2023, and 2033 provide both near and long term tailwind for the market as we execute our strategy.

We closed on the acquisition of sugarmont at 341 home community, in Salt Lake City at the end of May for 149 million.

Anne Olson: While our initial expectations of pricing power returning to Denver in the second half of the year may be delayed, we are optimistic about the market overall. Resident health remains strong, with a rent-to-income ratio of 22.5% and same-store bad debt at roughly 40 basis points for the quarter. I mentioned that our retention rate was 60.2%, and that brings us to 56.8% for the year. This is a testament to our team members and their commitment to providing an exceptional customer experience. This commitment is also evidenced by continual improvement in our online review score, which reached its highest point in the company's history during the second quarter.

The property was built in 2021 and is located in Sugarhouse 1 of Salt Lake City's, most desirable submarkets.

In conjunction with earnings last night, we also announced the acquisition of railway flats, a 420 home community in Loveland, Colorado for total consideration of $132 million.

Salt Lake City is a natural extension of our existing Mountain West footprint. Our team has been spending a lot of time in market and we have been actively pursuing opportunities there.

That on the ground presence is what led to this off-market acquisition?

This acquisition included the assumption of $76 million of long term HUD debt at an average effective interest rate of 326%.

The Salt Lake City Valley features, a diverse and growing economic base with a large presence of jobs and Technology, Finance, education, and Healthcare along with 4, large universities, totaling approximately 145,000 students.

The community is approximate to our 2023 acquisition Lake Vista, and we expect operational synergies between our three communities located in the Boulder Fort Collins market as well as with our broader Colorado portfolio.

Anne Olson: Before I turn it over to Grant to share an overview on the recent transactions, I want to reiterate our commitment to our strategy, which includes not only capital recycling to enhance our future growth profile, but maintaining best-in-class operations, driving shareholder results through continued year-over-year earnings growth, and staying nimble to take advantage of opportunities while keeping an eye on our balance sheet. While our stock price continues to be subject to macro volatility, we're excited about the path forward for CENTERSPACE. Grant, I'll turn it over to you for a discussion of the transactions and current transaction market.

While many other institutional markets have recently realized the slowdown in effective rents due to a period of peak lease up.

For Collins is a market that is displayed relative outperformance and annual rent growth and vacancy when compared to metro Denver fundamentals.

Salt Lake City has the second highest level of momentum in the country across institutional markets. When measuring year-over-year effective rent, change from March to June

Business. Friendly backdrop.

The fund these acquisitions, we are currently marketing for sale 12 communities in Minnesota.

Interest has been strong for individual community offers and portfolio offers.

We're under letter of intent to sell the entirety of our St Cloud portfolio, which includes five communities totaling 832 apartment homes.

Grant Campbell: Thanks, Anne, and good morning, everyone. Our transaction initiatives include two recent acquisitions, both of which we have completed, and the disposition of 12 communities in St. Cloud and Minneapolis, Minnesota. We closed on the acquisition of Sugar Mot, a 341-home community in Salt Lake City, at the end of May for $149 million. The property was built in 2021 and is located in Sugar House, one of Salt Lake City's most desirable submarkets. Salt Lake City is a natural extension of our existing Mountain West footprint. Our team has been spending a lot of time in market, and we have been actively pursuing opportunities there. That on-the-ground presence is what led to this off-market acquisition. The Salt Lake City Valley features a diverse and growing economic base with a large presence of jobs in technology, finance, education, and healthcare, along with four large universities totaling approximately 145,000 students.

Robust outdoor amenities and Utah ranking. Sixth nationally for forecasted growth and young adult population between 2023 and 2033. Provide both near- and long-term tailwinds to the market as we execute our strategy.

<unk> of this sales anticipated in September.

In addition, we are currently in the marketing phase for seven communities in Minneapolis totaling 679 apartment homes.

In conjunction with earning last night. We also announced the acquisition of Railway Flats a 420 home community in Loveland Colorado, for total consideration of 132 million.

First round bids for these Minneapolis communities will be received this week and closing is anticipated in Q4.

This acquisition included the Assumption of 76 million of long-term HUD debt at an average effective interest rate of 3.26%.

Pricing indications to date remains supportive of the $210 million to $230 million total sale price for dispositions. We noted in early June and this pricing results in individual community cap rates well inside of the mid to high 7% implied cap rate that our stock currently trades at.

The community is proximate to our 2023 acquisition Lake Vista and we expect operational synergies between our 3 communities located in the boulder for Collins Market, as well as with our broader Colorado portfolio.

Taken together these acquisitions and planned dispositions improve our diversification, reducing Minneapolis NOI exposure in our portfolio by 300 basis points, while adding exposure to a new institutional market in Salt Lake City.

Fort Collins is a market that has displayed, relative outperformance and annual rent, growth and vacancy when compared to metro Denver fundamentals.

With fund these Acquisitions, we are currently marketing for sale. 12 communities in Minnesota,

Grant Campbell: While many other institutional markets have recently realized a slowdown in effective rents due to a period of peak leases, Salt Lake City has the second-highest level of momentum in the country across institutional markets when measuring year-over-year effective rent change from March to June. These variables, coupled with the high cost of housing, the state's business-friendly backdrop, robust outdoor amenities, and Utah ranking sixth nationally for forecasted growth in the young adult population between 2023 and 2033, provide both near and long-term tailwinds to the market as we execute our strategy. In conjunction with earnings last night, we also announced the acquisition of Railway Flats, a 420-home community in Loveland, Colorado, for total consideration of $132 million. This acquisition included the assumption of $76 million of long-term HUD debt at an average effective interest rate of 3.26%.

buyer, interest has been strong for individual Community offers and portfolio offers

They improve our portfolio quality with pro forma average portfolio rent, increasing $50 versus Q1 2025 levels in.

We are under letter of intent to sell the entirety of our St. Cloud portfolio, which includes 5, communities, totaling 832, Apartment Homes,

And they improve our portfolio margins with year, one NOI margins on acquisitions projected to be between 65, and 70%, while the disposition communities or low 50%.

Closing of this sale is anticipated in September.

In addition, we are currently in the marketing phase for 7 communities in Minneapolis, totaling 679, Apartment Homes,

Taking a step back our transaction events also coincide with our broader thawing in the transaction market.

First, round bids for these Minneapolis communities will be received this week in closing is anticipated in Q4.

<unk> allocators have recently been communicating and displaying more conviction to place capital as we move further into the year.

While we don't expect the market to see transaction volumes like in 2021, and 2022 incrementally more transactions are happening at a cadence analogous to pre COVID-19 levels and these should suggest favorable valuation marks for our portfolio and our stock price with that I'll turn it over to Rob to discuss our financial results and our guide.

Pricing indications today, remain supportive of the 210 to 230 million, total sale price for dispositions. We noted in early June.

And this pricing results in individual Community cap rates. Well, inside of the mid to high 7% and by cap rate that our stock currently trades at

<unk>.

Thanks, Greg and Hello, everyone last night, we reported second quarter core <unk> of $1 28 per diluted share driven by a two 9% year on year increase the same store NOI.

Grant Campbell: The community is proximate to our 2023 acquisition, Lake Vista, and we expect operational synergies between our three communities located in the Boulder-Fort Collins market, as well as with our broader Colorado portfolio. Fort Collins is a market that has displayed relative outperformance in annual rent growth and vacancy when compared to Metro Denver fundamentals. To fund these acquisitions, we are currently marketing for sale 12 communities in Minnesota. Buyer interest has been strong for individual community offers and portfolio offers. We are under letter of intent to sell the entirety of our St. Cloud portfolio, which includes five communities totaling 832 apartment homes. Closing of this sale is anticipated in September. In addition, we are currently in the marketing phase for seven communities in Minneapolis totaling 679 apartment homes. First-round bids for these Minneapolis communities will be received this week, and closing is anticipated in Q4.

Taken together, these Acquisitions and planned dispositions improve our diversification. Reducing Minneapolis noi exposure, in our portfolio by 300 basis points. While adding exposure to a new institutional Market, in Salt Lake City.

This NOI growth was driven by a two 7% increase in same store revenues with revenue growth composed of a 60 basis point increase in occupancy and a two 1% increase in average monthly revenue per occupied home.

They improve our portfolio quality with proforma average portfolio. Rent, increasing $50 versus q1 2025 levels.

And they improve our portfolio margins with Year 1. The margins on acquisitions are projected to be between 65% and 70%. While the disposition communities are low, at 50%.

On the same store expense side Q2 numbers were up two 4% year over year with controllable expenses up three 2% and non controllable up one 2%.

Taking a step back, our transaction events also coincide with a broader song in the transaction market.

Please note that same store results exclude the 12 communities that are currently being marketed for sale.

Capital allocators have recently been communicating and displaying more conviction to place Capital as we move further into the year.

These properties have been carved out of the same store pool and included in the held for sale category on our balance sheet.

Relatedly, we have booked an impairment charge of $14 5 million with a shorter holding period for the property is driving the impairment assessment.

Clarify the impairment charges based on our GAAP carrying value and like depreciation is excluded from our non-GAAP metrics.

While we don't expect the market to see transaction volumes like in 2021 and 2022, incrementally, more transactions are happening at a cadence analogous to pre-COVID levels. These should suggest favorable valuation marks for our portfolio and our stock price with that. I'll turn it over to Bhairav Patel to discuss our financial results and our guidance.

Grant Campbell: Pricing indications to date remain supportive of the $210 to $230 million total sale price for dispositions we noted in early June, and this pricing results in individual community cap rates well inside of the mid to high 7% implied cap rate that our stock currently trades at. Taken together, these acquisitions and planned dispositions improve our diversification, reducing Minneapolis NOI exposure in our portfolio by 300 basis points while adding exposure to a new institutional market in Salt Lake City. They improve our portfolio quality with pro forma average portfolio rent increasing $50 versus Q1 2025 levels, and they improve our portfolio margins with year-one NOI margins on acquisitions projected to be between 65% and 70%, while the disposition communities are low 50%. Taking a step back, our transaction events also coincide with a broader thawing in the transaction market.

Turning to guidance, we now anticipate full year core <unk> per share or $4 88 to $5 per share with expectations for 2025 same store NOI growth to be two 5% to three 5%.

Thanks Grant and hello everyone. Last night we reported second quarter core for 428 cents per diluted share driven by a 2.9% year-on-year. Increase the same store noi

As <unk> results indicate our operating performance remains solid.

We are roughly in line with our initial revenue projections, allowing us to maintain our mid point of revenue growth of two 5% for the year.

This noi growth was driven by a 2.7% increase in same store revenues with Revenue growth. Composed of a 60 basis point increase in occupancy and a 2.1% increase in average monthly Revenue per occupied home.

As Dan alluded to in our remarks, we have maintained our focus and discipline on managing expenses and now expect nominal growth and control of expenses for the year, leading to total same store expense growth of one to two 5% and NOI growth of 3% at the midpoint, an increase of 70 basis points above our previous expectations.

On the same store expense side. Q2 numbers were up 2.4% year-over-year with controllable expenses up 3.2% and non-controllable up 1.2%.

Please note that same store results excluded 12 communities that are currently being marketed for sale.

These properties have been carved out of the same store, pool and included in the health, for sale category on our balance sheet.

Core <unk> guidance is lower at the midpoint by <unk> <unk> per share due to the expected impact of our announced transactions and the projected dispositions that Brent discussed in his remarks too.

Relatedly, we have booked an impairment charge of $14.5 million, with the shorter holding period for the properties driving the impairment assessment.

To reiterate collectively they represent progress on the planned evolution of our portfolio that will improve the quality of our portfolio and enhance our market exposure, thereby lifting margins in the long term growth profile of the company, all while maintaining our differentiator footprint and.

Grant Campbell: Capital allocators have recently been communicating and displaying more conviction to place capital as we move further into the year. While we don't expect the market to see transaction volumes like in 2021 and 2022, incrementally more transactions are happening at a cadence analogous to pre-COVID levels, and these should suggest favorable valuation marks for our portfolio and our stock price. With that, I'll turn it over to Bhairav to discuss our financial results and our guidance.

To clarify the impairment charges based on our Gap, carrying value and like, depreciation is excluded from our non-gaap metrics.

And as we do so we are still growing earnings which at the midpoint of $4 94 per share represents a one 2% increase over the prior year.

Turning to guidance. We now anticipate fully your core as a full per share of $4.88 to $5 per share with expectations for 2025 same store. Noi growth to be 2.5% to 3.5%.

Once again as a reminder, the same store pool excludes the 12 properties that are being marketed for sale.

As our Q2 results indicate, our operating performance remains solid. We are roughly in line with our initial revenue projections, allowing us to maintain our midpoint of revenue growth at 2.5% for the year.

To help facilitate the announced transactions, we added to our balance sheet flexibility in the quarter by expanding our line of credit capacity by $150 million. This flexibility was used to fund the recent purchases and we anticipate paying down the facility as our dispositions closed later this year, we expect our net debt to EBITDA to trend back down.

Bhairav Patel: Thanks, Grant, and hello, everyone. Last night, we reported second quarter core at the flow of $1.28 per diluted share, driven by a 2.9% year-on-year increase to same-store NOI. This NOI growth was driven by a 2.7% increase in same-store revenues, with revenue growth composed of a 60 basis point increase in occupancy and a 2.1% increase in average monthly revenue per occupied home. On the same-store expense side, Q2 numbers were up 2.4% year-over-year, with controllable expenses up 3.2% and non-controllables up 1.2%. Please note that same-store results exclude the 12 communities that are currently being marketed for sale. These properties have been carved out of the same-store pool and included in the health for sale category on our balance sheet. Relatedly, we have booked an impairment charge of $14.5 million, with a shorter holding period for the properties driving the impairment assessment.

to Total same store expense growth of 1 to 2.5% and noi growth of 3% of the midpoint and increase of 70 basis points above our previous expectations,

To the low to mid seven times level by year end as this occurs our.

Transaction activity also helps extend our maturity profile pro forma for the transactions our debt has a weighted average rate of three 6% and a weighted average time to maturity of seven three years.

Core ffo guidance is lower at the midpoint by 4 cents per share. Due to the expected impact of our announced transactions and the projected dispositions that Grant discussed in his remarks.

Q2 was another good quarter for center space with our results benefiting from continued occupancy growth high retention and continued expense controls all of which set us up well into the back half of this year.

To reiterate collectively, the represent progress, on the plan, evolution of our portfolio, they will improve the quality of our portfolio and enhance our Market exposure, thereby lifting margins, and the long-term growth profile of the company. All while maintaining our differentiated footprint,

Operator, please open the line for questions.

And as we do, so we are still growing earnings, which at the, midpoint of $4.94 per share represents a 1.2% increase over the prior year.

Absolutely we will now begin the question and answer session. If you would like to ask a question. Please press star followed by one on your telephone keypad. If you need to remove your question. Please press star followed by Tina again to ask a question. Please press star one as a reminder, if youre using a speakerphone. Please remember to pick up your handset before asking a question.

Bhairav Patel: To clarify, the impairment charge is based on our GAAP carrying value, and like depreciation, is excluded from our non-GAAP metrics. Turning to guidance, we now anticipate full-year core at the flow per share of $4.88 to $5 per share, with expectations for 2025 same-store NOI growth to be 2.5% to 3.5%. As our Q2 results indicate, our operating performance remains solid. We are roughly in line with our initial revenue projections, allowing us to maintain our midpoint of revenue growth at 2.5% for the year. And as Anne alluded to in our remarks, we have maintained our focus and discipline on managing expenses and now expect nominal growth in controllable expenses for the year, leading to total same-store expense growth of 1% to 2.5% and NOI growth of 3% at the midpoint, an increase of 70 basis points above our previous expectation.

Once again, as a reminder, the same store pool, excludes the 12 properties that are being marketed for sale.

The first question comes from Brad Heffern with RBC. Your line is now open.

Yes, thanks, good morning.

On the capital recycling program can you talk about any guardrails you have around how much you would allow dilution to offset organic growth in any given year.

Yeah. Good morning, Brad It's it's good to have you on the call.

I think as we look at the strategic plan to recycle capital and get into more institutional markets.

Help facilitate, the announced transactions, we added to our balance sheet, flexibility in the quarter. By expanding our line of credit capacity by 150 million. This flexibility was used to fund the recent purchases, in the anticipate paying down the facility. As of this positions closed later this year we expect our net debt to either Dodge or turn back by the low to mid 7 times level by year, end as this occurs, our transaction activity also helps extend our maturity profile performer for the transactions are debt has rated average rate of 3.6% and the weighted average time to maturity of 7.3 years.

We're thinking of Guardrails, a couple of ways. One we're really keeping an eye on the balance sheet. So to the extent we have like we did in this quarter temporary upticks in leverage we really want to make sure that we match funded those with dispositions to bring that leverage back down in line and then.

To conclude Q2 is another good quarter for Center space. With our results, benefiting from continued occupancy growth, High retention, and continued expense controls, all of which set us up well, into the back half of this year.

Bhairav Patel: Core at the flow guidance is lower at the midpoint by 4 cents per share due to the expected impact of our announced transactions and the projected dispositions that Grant discussed in his remarks. To reiterate, collectively, they represent progress in the planned evolution of our portfolio. They will improve the quality of our portfolio and enhance our market exposure, thereby lifting margins and the long-term growth profile of the company, all while maintaining our differentiated footprint. And as we do so, we are still growing earnings, which at the midpoint of $4.94 per share represents a 1.2% increase over the prior year. Once again, as a reminder, the same-store pool excludes the 12 properties that are being marketed for sale. To help facilitate the announced transactions, we added to our balance sheet flexibility in the quarter by expanding our line of credit capacity by $150 million.

Operator. Please open the line for questions.

I think we've stated and shown in this guidance, we do want to continue to grow earnings year over year.

So while we may be willing to take some dilution off of the growth.

Really do want to continue to show progress year over year in growing earnings.

Okay got it thanks for that.

Absolutely. We will now begin the question and answer session. If you would like to ask a question, please press star. Followed by 1 on your telephone keypad. If you need to remove your question, please, press star. Followed by 2 again to ask a question. Please press star 1 as a reminder, if you're using a speaker-phone, please remember to pick up your handset before asking your question, the first question comes from Brad Heffron with RBC, your line is now open.

And then do you have any July leasing stats you could quote.

Yeah.

Good morning, Brad with respect to July I think the trends that we saw in June have continued.

Yeah. Thanks morning everybody um on the capitol recycling program. Can you talk about any guard rails? You have around how much you would allow dilution to offset organic growth and in any given year.

With the Denver actually turning the corner a little bit what we saw in late Q2, and Denver was a spike in concessions, which kind of impacted occupancy as well as rent growth. We are seeing that reverse a little bit when all of the woods, yet, but the rest of the portfolio is offsetting that and chugging along through.

Yeah, good morning, Brad. It's it's, uh, good to have you on the call.

Bhairav Patel: This flexibility was used to fund the recent purchases, and we anticipate paying down the facility as our dispositions close later this year. We expect our net debt to EBITDA to trend back down to the low to mid-seven times level by year-end as this occurs. Our transaction activity also helps extend our maturity profile. Pro forma for the transactions, our debt has a weighted average rate of 3.6% and a weighted average time to maturity of 7.3 years. To conclude, Q2 was another good quarter for CENTERSPACE, with our results benefiting from continued occupancy growth, high retention, and continued expense controls, all of which set us up well into the back half of this year. Operator, please open the line for questions.

The rest of the leasing season.

<unk>.

Right now where we sit today, we really only have about 17% of the leases to lock in for the rest of the year. So renewals are being pushed out into kind of October we're still seeing really healthy renewal rents across the portfolio and those renewal rents are.

I think as we look at the Strategic plan to recycle capital and get into more institutional markets. Um, we are thinking of guardrails a couple ways 1. We're really keeping an eye on the balance sheet. So so to the extent we have like we did in this quarter, temporary upticks and leverage, you know, we really want to make sure that we've matched funded those with dispositions to bring that leverage back down in line. And then um, you know, I think we've stated and, and shown in this guidance, we do want to continue to grow earnings

Barely off of market rent, so I think the loss to lease as we get to this ended the year, we feel good about shrinking not being in a really good position to for pricing power as we head into the winter and look forward to 2026.

Year-over-year. So, while we may be willing to take some delusion off of the growth, um, you know, we really do want to continue to show progress year-over-year in growing earnings,

Okay, got it, thanks for that. Um, and then, do you have any July leasing stats? You could quote,

Josh Klaetsch: Absolutely. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If you need to remove your question, please press star followed by two. Again, to ask a question, please press star one. As a reminder, if you're using a speaker phone, please remember to pick up your handset before asking your question. The first question comes from Brad Heffern with RBC. Your line is now open.

Okay, and then just one more little accounting. Thank Rob can you just give the net impact of the acquisition and disposition activity on the guidance.

Sure.

It's about six to eight cents of dilution as a result of the transactions. There is a lot of moving parts there.

The biggest being the timing of the timing of the dispositions. We expect some of the dispositions to close in late Q3, some of them to close in early to mid Q4, so that can change the.

Brad Heffern: Yeah, thanks. Morning, everybody. On the capital recycling program, can you talk about any guardrails you have around how much you would allow dilution to offset organic growth in any given year?

The number eventually based on the actual closing date the two things.

Morning, Brett uh, with respect to July. I think the trends that we saw in in June have continued um you know with the Denver actually turning the corner, a little bit, what we saw in in late Q2 in Denver was a spike in concessions, uh, which kind of impacted occupancy as well as rent growth, we are seeing that reverse a little bit. We're not out of the woods yet, but the rest of the portfolio is offsetting that and chugging along through the rest of the leasing season. Yeah. And Brad, we're, you know, right now where we sit today, you know, we really only have about 17.

We closed the acquisition so that's no longer a factor in terms of the.

Of the leases to lock in.

Anne Olson: Yeah, good morning, Brad. It's good to have you on the call. I think as we look at the strategic plan to recycle capital and get into more institutional markets, we are thinking of guardrails a couple of ways. One, we're really keeping an eye on the balance sheet. So to the extent we have, like we did in this quarter, temporary upticks in leverage, you know, we really want to make sure that we've match-funded those with dispositions to bring that leverage back down in line. And then, you know, I think we've stated and shown in this guidance, we do want to continue to grow earnings year over year. So while we may be willing to take some dilution off of the growth, you know, we really do want to continue to show progress year over year in growing earnings.

The impact on the range, but in addition to the timing of the dispositions. There is some friction with respect to hold back of proceeds to complete the reverse 10 31 that we've set up so all of that combined results in about six to eight cents of of our range from a disposition standpoint.

Okay. Thank you.

You know, renewals are being pushed out into kind of October. We're still seeing really healthy renewal rents across the portfolio and those renewal rents are, you know, just barely off of Market rent. So I think the last lease as we get to this end of the year, we feel good about shrinking that and being in a really good position to for pricing power as we head into the winter and uh look forward to 2026.

Thank you so much for your questions.

Our next question comes from Jamie Feldman with Wells Fargo. Your line is now open.

Yes.

Okay. Um, and then just 1 more little account. I think. Rob. Can you just give the net impact of the acquisition and disposition activity on the guidance?

Great. Thank you for taking the question I guess, just focusing still on rents.

How.

A bunch of your peers have.

Change their outlooks for topline growth.

New lease growth and have your expectations changed at all across any of the markets whether up or down.

Brad Heffern: Okay, got it. Thanks for that. And then do you have any July leasing stats you could quote?

So in the back half of the year.

Yeah.

We look and forecast out into the back half of the year I would say our expectations for Denver have come in a little bit we really believed at the beginning of the year.

Bhairav Patel: Morning, Brad. With respect to July, I think the trends that we saw in June have continued. You know, with Denver actually turning the corner a little bit, what we saw in late Q2 in Denver was a spike in concessions, which kind of impacted occupancy as well as rent growth. We are seeing that reverse a little bit. We're not out of the woods yet, but the rest of the portfolio is offsetting that and chugging along through the rest of the leasing season.

The strong absorption in that market would lead us to turn the corner a little sooner than than were seeing so while we see some positivity.

Brad noted that comes a little bit with a lot of concessions. So I'd say, we pulled in our revenue expectations for Denver, but that's really been offset by the really strong performance in the tertiary markets. If you look.

Earlier mid Q4 so that can change the number eventually based on the actual closing date. Uh, the 2 things, uh, we we've closed the acquisition. So that's no longer a factor in terms of the impact on the Range. But in addition to the timing of the dispositions, there's some friction with respect to hold back of proceeds, uh, to complete the reverse 1031 that we've set up. So, all of that combined, uh, results in about 6, to 8 cents of uh, of a range from a disposition standpoint,

Okay, thank you.

Anne Olson: Yeah, and Brad, we're, you know, right now where we sit today, you know, we really only have about 17% of the leases to lock in for the rest of the year. So, you know, renewals are being pushed out into kind of October. We're still seeing really healthy renewal rents across the portfolio, and those renewal rents are, you know, just barely off of market rent. So I think the loss to lease as we get to this end of the year, we feel good about shrinking that and being in a really good position for pricing power as we head into the winter and look forward to 2026.

Across North Dakota, we're seeing just tremendous growth in these areas with no supply.

Thank you so much for your question.

We're really seeing good rent growth, we're still encountering high cost of housing high mortgage rates and.

The next question comes from, Jamie Feldman with Wells. Fargo, your line is now open.

Very high retention so.

As as it netted out.

Feel confident about where the revenue was we're just getting to the our initial revenue projections in a little bit different way, so softer in Denver better than the rest of the portfolio.

Great. Thank you for taking the question. Um, I guess just focusing still on rent, you know how you know a bunch of your peers have changed their outlooks for Topline growth.

For new lease growth, have your expectations changed at all across any of the markets, whether up or down?

Through the back half of the year.

Okay. That's helpful.

And then the.

Comments about the disposition market heating up can you talk more about the types of buyers that are out there.

Brad Heffern: Okay, and then just one more little accounting thing. Brad, can you just give the net impact of the acquisition and disposition activity on the guidance?

The pipeline of buyers for the assets Youre trying to sell multiple bids are you working with single buyers and then what kind of returns are people looking for and.

Bhairav Patel: Sure. It's about 6 to 8 cents of dilution as a result of the transactions. There's a lot of moving parts there. The biggest being the timing of the dispositions. We expect some of the dispositions to close in late Q3, some of them to close in early and mid-Q4. So that can change the number eventually based on the actual closing date. The two things, we've closed the acquisition, so that's no longer a factor in terms of the impact on the range. But in addition to the timing of the dispositions, there's some friction with respect to holdback of proceeds to complete the reverse 1031 that we've set up. So all of that combined results in about 6 to 8 cents of a range from a disposition standpoint.

And how are they underwriting and financing these projects.

Yes. Good morning, Jamie This is grant from a bedsheet or bid depth perspective.

Yeah, as we as we look and forecasts out into the back half of the year, I'd say our expectations for Denver have come in a little bit. You know, we really believe that the beginning of the year that um the strong absorption in that market would lead us to turn the corner, a little sooner than than we're seeing. So while we see some positivity um, as broad noted that comes a little bit with a lot of concessions. So I'd say we pulled in our Revenue expectations for Denver, but that's really been

Multiple offers are certainly there there's been a whole host of interested parties.

For both of the offerings that we have in the market ranging from local capital that may be interested in one specific community to national platform capital that may be interested in an entire portfolio or a sub portfolio of the offering so it really runs the gamut and there is a.

Lot of depth, there that we're seeing currently from an underwriting and pricing perspective.

Oxide the really strong performance in the tertiary markets. If you, you know, across North Dakota, we're seeing just tremendous growth, you know, these areas with no Supply. Um we're really seeing good rent growth. We're still encountering high cost of housing High mortgage rates and um you know, very high retention. So um, I think as it as it matted out, you know, we we feel confident about where the revenue was. We're just getting to the our initial Revenue projections in a little bit different way. So softer in Denver, better in the rest of the portfolio.

In the case of St Cloud.

Brad Heffern: Okay, thank you.

Folks generally are looking for call it mid six NOI cap rate.

Okay, that's helpful.

Josh Klaetsch: Thank you so much for your questions. The next question comes from Jamie Feldman with Wells Fargo. Your line is now open.

In the case of Minneapolis, as we said in our prepared remarks too early to tell from an offer perspective, we'll have more visibility. This week, but we expect that portfolio broadly speaking to be in the mid fives and then just anecdotally if you look at our other secondary market locations throughout the Midwest.

Jamie Feldman: Great, thank you for taking the question. I guess just focusing still on rent, you know, how, you know, a bunch of your peers have changed their outlooks for top line growth or new lease growth. Have your expectations changed at all across any of the markets, whether up or down through the back half of the year?

And then um, you know, the comments about the disposition Market heating up. Can you talk more about the types of buyers that are out there, the pipeline of buyers for the assets? You're trying to sell. I mean, is it multiple bids? Or are you working with single buyers? And then what kind of returns are people looking for?

And how are they underwriting and financing these projects?

The status of the financing markets at any moment in time is going to drive pricing there as folks are looking for neutral to positive leverage day one.

Anne Olson: Yeah, as we look and forecast out into the back half of the year, I'd say our expectations for Denver have come in a little bit. You know, we really believed at the beginning of the year that the strong absorption in that market would lead us to turn the corner a little sooner than we're seeing. So while we see some positivity, as Bhairav noted, that comes a little bit with a lot of concessions. So I'd say we pulled in our revenue expectations for Denver, but that's really been offset by the really strong performance in the tertiary markets. If you, you know, across North Dakota, we're seeing just tremendous growth. You know, these areas with no supply, we're really seeing good rent growth. We're still encountering high cost of housing, high mortgage rates, and, you know, very high retention.

Okay. Thanks for that and this is on what forward NOI or trailing NOI.

These cap rates that would be on pro forma year one.

Yeah.

Okay.

And then.

I appreciate the comments about getting back to <unk>.

<unk> seven times leverage by year end.

Yeah, morning. Jamie, this is Grant from a bid sheet or bid depth perspective. Um, multiple offers are certainly there; there's been a whole host of interested parties for both of the offerings that we have in the market, ranging from local capital that may be interested in one specific community to national platform capital that may be interested in an entire portfolio or a sub-portfolio of the offering. So it really runs the gamut, and there is a lot of depth there that we're seeing currently from.

Whats the long term plan again in terms of where you'd like leverage to be and how long does it take you to get there.

Underwriting and pricing perspective.

Yeah.

Long term, we'd really like to deleverage to be lower than seven ideally I think over a period of time, we'd like to get down into the five.

There is a few steps there right. So we need to one make our cost of capital work and I think this capital recycling is really an effort by us to show where the value is in the portfolio and start bridging that gap between where from where were trading to what we actually think the portfolio's worth bullet the sales are going to give every.

Anne Olson: So I think as it netted out, you know, we feel confident about where the revenue was. We're just getting to our initial revenue projections in a little bit different way. So softer in Denver, better in the rest of the portfolio.

Jamie Feldman: Okay, that's helpful. And then, you know, the comments about the disposition market heating up, can you talk more about the types of buyers that are out there, the pipeline of buyers for the assets you're trying to sell? I mean, is it multiple bids, or are you working with single buyers? And then what kind of returns are people looking for, and how are they underwriting and financing these projects?

We won some good marks and then of course, the acquisitions are going to be in markets, where there's high visibility into what cap rates are and what valuation and what the market trends are.

Uh, in the case of St. Cloud, um, folks generally are looking for call it mid 6, no cap rate. Um in the case of Minneapolis, you know as we said in our prepared remarks too early to tell from an offer perspective, we'll have more visibility this week but we expect to have portfolio. Broadly speaking to be in the mid 5 and then just anecdotally, if you look at our other secondary Market locations, throughout the Midwest, you know, really the status of the financing markets. At any moment in time is going to drive pricing there. It's folks are looking for, you know, neutral deposit of Leverage day. 1

Okay, thanks for that. And this is on what forward NOI or trailing NOI?

Once we can do that I think the deleveraging is going to come from a couple of ways. One we can use excess sale proceeds as we move through recycling and two as we get larger we'll be able to bring that leverage down more naturally, but we're we're very focused on it.

Please, that would be on proforma year 1.

Okay.

Grant Campbell: Yeah, morning, Jamie. This is Grant. From a bid sheet or bid depth perspective, multiple offers are certainly there. There's been a whole host of interested parties for both of the offerings that we have in the market, ranging from local capital that may be interested in one specific community to national platform capital that may be interested in an entire portfolio or a sub-portfolio of the offering. So it really runs the gamut, and there is a lot of depth there that we're seeing currently. From an underwriting and pricing perspective, in the case of St. Cloud, folks generally are looking for, call it, mid-six NOI cap rate. In the case of Minneapolis, you know, as we said in our prepared remarks, too early to tell from an offer perspective. We'll have more visibility this week, but we expect that portfolio, broadly speaking, to be in the mid-fives.

Last year.

Is the chance we had to raise equity in the market last summer that's about $110 million of our preferred which lowered our overall leverage so we're thinking about ways to take opportunities to lower that leverage while still repositioning repositioning the market exposure of the company, but I think it's going to take a little time, it's going to take a little bit bigger scale.

And then I, you know, I appreciate the comments about getting back to low 7 times leveraged by year-end. Just, you know, what's the long-term plan again in terms of where you'd like leverage to be? And how long does it take you to get there?

Yeah, I mean, long term, we'd really like to leverage to be lower than 7, you know. Ideally, I think over a period of time we'd like to get down into the 5.

Okay, alright, thanks for your thoughts.

And thank you so much for your questions. The next question comes from Kannan Mitchell with Piper Sandler Your line is now open.

Hey, good morning, Thanks for taking my questions.

First off maybe I missed it but could you just remind us what the cap rates were on the recent acquisitions for the Colorado asset Salt Lake City and then.

What.

What's the timeline or what's the inflection point that youre expecting for these acquisitions, especially maybe the Denver and Colorado.

Grant Campbell: And then just anecdotally, if you look at our other secondary market locations throughout the Midwest, you know, really the status of the financing markets at any moment in time is going to drive pricing there as folks are looking for, you know, neutral to positive leverage day one.

Markets to turn accretive I know you mentioned that.

Some of the rent pricing is a little softer than expected in the back half of the year.

And I think Andy you had a few comments on maybe the job growth for the market.

Jamie Feldman: Okay, thanks for that. And this is on what, forward NOI or trailing NOI, these cap rates?

Anything we can think about for maybe the timeline for when when these lower cap rate acquisitions will turn more accretive for the overall portfolio.

Bhairav Patel: That would be on pro forma year one.

Jamie Feldman: Okay. And then, you know, I appreciate the comments about getting back to low seven times leverage by year-end. Just, you know, what's the long-term plan again in terms of where you'd like leverage to be and how long does it take you to get there?

Leveraging is going to come from a couple ways 1. We can use excess sale proceeds as we move through Recycling and 2, as we get larger, we'll be able to bring that leverage down, you know more naturally but we're we're very focused on it. Um, last year, you know, we used the chance we had to raise equity in the market last summer, you know, that took about 110 million dollars of our preferred which lowered our overall leverage. So you know, we're thinking about ways to take opportunities to lower that leverage while still repositioning, we positioning the market exposure of the company. But I I think it's going to take a little time. It's going to take a little bit bigger scale.

Okay.

Okay. All right. Thanks for your thoughts.

Hey, good morning, Conor. This is grant to your first question from a cap rate perspective on the recent acquisitions high floors in the case of.

And thank you so much for your questions. The next question comes from Conor Mitchell with pyper Sandler, your line is now open.

Railway it was an unlevered four eight.

Anne Olson: Yeah, I mean, long-term, we'd really like leverage to be lower than seven. You know, ideally, I think over a period of time, we'd like to get down into the five. There's a few steps there, right? So we need to, one, make our cost of capital work. And I think this capital recycling is really an effort by us to show where the value is in the portfolio and start bridging that gap between where from where we're trading, you know, to what we actually think the portfolio is worth. Both the sales are going to give everyone some good marks, and then, of course, the acquisitions are going to be in markets where there's high visibility into what cap rates are and what valuation and what the market trends are. Once we can do that, I think the de-leveraging is going to come from a couple of ways.

In the case of Sugar Mountain in Salt Lake City 46 547.

As we alluded to in our remarks related to railway there was debt that we assumed there at a three 6% effective interest rates so profile of accretion there if you will.

Hey, good morning. Thanks for taking my questions. Um, first off I maybe I missed it, um, but could you just remind us what the cap rates were on the recent acquisitions for, uh, the Colorado, assets, Salt Lake City and then um, what

Looks obviously.

Much better much different than something that we are buying unencumbered or something that we would have to place new debt on today in the case of Salt Lake you also alluded to jobs and when you look at the job growth profile of Salt Lake. It has been a clear outperformer for a very long period of time.

What's the timeline or what's the Reflection Point? Um, that you're expecting for these Acquisitions, especially maybe the Denver and Colorado, uh, markets to turn a creative. I know you mentioned that, uh, some of the rent pricing is a little softer that expected of the back half of the year. Um, and I think and you have a few comments on the top rows for the market, um, anything we can think about for maybe the timeline for

Also this assets located in Submarket that is highly highly desirable. So when we put those variables alongside the physical quality of the asset. We do think the growth potential is there and as you move into years, two and three of the pro forma start to think that we'll see some some healthy growth on cash flows.

Anne Olson: One, we can use excess sale proceeds as we move through recycling. And two, as we get larger, we'll be able to bring that leverage down, you know, more naturally. But we're very focused on it. Last year, you know, we used the chance we had to raise equity in the market last summer. You know, that took out $110 million of our preferred, which lowered our overall leverage. So, you know, we're thinking about ways to take opportunities to lower that leverage while still repositioning the market exposure of the company. But I think it's going to take a little time. It's going to take a little bit bigger scale.

When when these lower cap rate Acquisitions, will turn more a creative for the overall portfolio.

Okay. Yes, that's helpful. So I guess it was how much can we split it between maybe supply tempering and.

Good morning. Conor, this is Grant. Uh, to your first question, from a cap rate perspective on the recent acquisitions, high floors, in the case of Railway, it was an unlevered 48.

Some some healthy job gains for the markets and then also just bring the assets onto your platform to.

Boost.

Most of the accretion as well.

Maybe a year or two out.

Jamie Feldman: Okay. All right, thanks for your thought.

Yeah.

Yes.

Josh Klaetsch: And thank you so much for your questions. The next question comes from Connor Mitchell with Piper Sandler. Your line is now open.

I'll try that one so I think in Salt Lake City.

We're not expecting any boost from bringing it onto our platform in fact during this first year, it's going to continue to be managed while we built some additional scale it'll be continued demand by our cottonwood residential on their platform.

Brad Heffern: Hey, good morning. Thanks for taking my questions. First off, maybe I missed it, but can you just remind us what the cap rates were on the recent acquisitions for the Colorado assets, Salt Lake City? And then what's the timeline or what's the inflection point that you're expecting for these acquisitions, especially maybe the Denver and Colorado markets to turn and creep? I know you mentioned that some of the rent pricing is a little softer than expected in the back half of the year. And I think, Anne, you had a few comments on maybe the job growth for the markets. Anything we can think about for maybe the timeline for when these lower cap rate acquisitions will turn more accretive for the overall portfolio?

So not anything immediate from that standpoint, and then I'd say the impact of tapering supply in Salt Lake City is going to be very positive and that's going to be exacerbated by the strong job growth. So.

I think the fundamental change is going to be that supply is diminishing in salt Lake city and they have very very high absorption.

In the case of sugarmont, in Salt Lake City 46547, uh, as we alluded to in our remarks related to railway, there was debt that we assumed there at a 3.26% effective, interest rates. So profile of accretion there. If you will, um, uh, looks obviously much better much different than something that we're buying unencumbered or something that we would have to place new debt on today, in the case of Salt Lake, you know, you also alluded to jobs. And when you look at the job growth profile of Salt Lake, it's been a clear out performer for a very long period of time. Um also this asset is located in the submarket that is highly highly desirable. So when we put those variables, alongside the physical quality of the asset, you know we do think the growth potential is there and as you move into years 2 and 3 of the pro-forma, you know, start to think that we'll see some some healthy growth on cash flows.

Given the strong underlying fundamentals of population and job. So I'd say there is probably 50 50 on which one of those drive.

Drive movement into a territory, where we think that's really a cash flow accretive acquisition.

Okay, yeah, that that's helpful. So um, I guess just how much can we split it between maybe Supply tempering and, uh, some some healthy job gains for the market. And then also, just bringing the assets onto your platform to, you know, boost uh, boost the accretion as well. Um, maybe a year or 2 out

Okay. That's helpful and then maybe switching gears a little bit.

Grant Campbell: Hey, good morning, Connor. This is Grant. To your first question from a cap rate perspective on the recent acquisitions, high floors. In the case of Railway, it was an unlevered 48. In the case of Sugar Mot and Salt Lake City, 465-47. As we alluded to in our remarks related to Railway, there was debt that we assumed there at a 3.26% effective interest rate. So a profile of accretion there, if you will, looks obviously much better, much different than something that we're buying unencumbered or something that we would have to place new debt on today. In the case of Salt Lake, you know, you also alluded to jobs. And when you look at the job growth profile of Salt Lake, it's been a clear outperformer for a very long period of time. Also, this asset's located in a submarket that is highly, highly desirable.

I know you guys mentioned, how how are you.

Yeah, I'll I'll I'll I'll try that 1. So I think um on Salt Lake City

<unk> focused on the plan to move into institutional markets, but just kind of looking at some recent performance.

The secondary or tertiary markets like North Dakota, Omaha, Rochester continue to see strong revenue with rent growth.

I guess, just what what is the plan for the long term for these markets in particular, and then is there any potential to see maybe even increased exposure to some of these markets with some of your points that the low supply and strong economic backdrop.

Yes. This is a great question and one I think that we spend a lot of time on both with our management team and in our boardroom.

Historically over the last three or four years really since 2021 2000 22021, we have been putting up really good numbers out of these tertiary markets, but it's not reflected in our stock price or the way in institutional investors value that cash flow.

Grant Campbell: So when we put those variables alongside the physical quality of the asset, you know, we do think the growth potential is there. And as you move into years two and three of the pro forma, you know, start to think that we'll see some healthy growth on cash flows.

We're not expecting any Boost from bringing it on to our platform. Um, in fact, during this first year, it's going to continue to be managed while we build some additional scale. It'll be continue to be managed by a cottonwood residential on their platform. Um, so not anything immediate from that standpoint and then I'd say, you know, the impact of tapering Supply in Salt Lake City is going to be very positive and that's going to be exacerbated by the strong job growth. So, um, you know, I think the the fundamental change is going to be the supply is diminishing in Salt Lake City and they have very, very high absorption. Um, you know, given the given the strong underlying fundamentals of population and jobs so I'd say there is probably 5050 on, you know what? Which 1 of those drives uh, drives movement into territory, where we think that's really a cash flow of freedom of acquisition.

So the credit I think we're getting is from our exposure to markets like Denver, and somewhat Minneapolis, where there's really good visibility for our investors and potential investors to see what the value of those properties are and what the growth trajectory of those properties are so ideally we would like to grow.

Brad Heffern: Okay, yeah, that's helpful. So I guess just how much can we split it between maybe supply tempering and some healthy job gains for the market, and then also just bring the assets onto your platform to, you know, boost the accretion as well, maybe a year or two out?

So on top of those markets.

Have a cost of capital, where we could expand into into institutional markets, while keeping our exposure to these tertiary markets over time, it would just get smaller but it would provide that Dallas that we're seeing right now of really stable cash flows and the ability to grow counter cyclically.

Anne Olson: Yeah, I'll try that one. So I think on Salt Lake City, we're not expecting any boost from bringing it onto our platform. In fact, during this first year, it's going to continue to be managed while we build some additional scale. It'll continue to be managed by Cottonwood Residential on their platform. So not anything immediate from that standpoint. And then I'd say, you know, the impact of tapering supply in Salt Lake City is going to be very positive, and that's going to be exacerbated by the strong job growth. So, you know, I think the fundamental change is going to be that supply is diminishing in Salt Lake City, and they have very, very high absorption, you know, given the strong underlying fundamentals of population and jobs.

By and strong economic backdrop.

One of the things about these markets is right now and for the past three years few years that had no supply and very good regional economy is but it's also the case that because they are small a small amount of supply or a small interruption in job growth or the economy. There can have a really big impact.

And I would use St cloud that we're selling is an example of that one thing that were over the history. It's provided really good returns for us, but we've been seeing some shifts in the fundamentals there, including declining enrollments at there at the University.

Anne Olson: So I'd say there is probably 50/50 on, you know, which one of those drives movement into territory where we think that's really a cash flow accretive acquisition.

Just overall shrinking of the job and so we feel like those are things that we really need to watch carefully because.

The small things have a big impact on a small company, but overall, we really would like to grow on top of those markets and continue to have them, but until we really feel like we're getting value.

Yeah, this this is a great question and 1, I think that we spend a lot of time on both with our management team and in our boardroom um you know historically over the last 3, 4 years really since 2021 2020 2021 we have been putting up you know really good numbers out of these tertiary markets but it's not reflected in our stock price or the way in institutional investors value that cash flow. Um so the the credit I think we're getting is from you know our exposure to markets like Denver and and somewhat Minneapolis, where there's really good visibility for our investors and potential investors to see what the value of those properties are and what the growth trajectory of those properties are. So ideally, uh Connor. We would like to grow on top of those markets.

Brad Heffern: Okay, that's helpful. And then maybe switching gears a little bit, I know you guys mentioned how you're focused on the plan to move into institutional markets, but just kind of looking at some recent performance, you know, the secondary or tertiary markets like North Dakota, Omaha, Rochester continue to see strong revenue and rent growth. I guess just what is the plan for the long term for these markets in particular? And then is there any potential to see maybe even increased exposure to some of these markets with, to some of your points, the low supply and strong economic backdrop?

<unk> appropriately for that cash flow that we're producing out of those markets.

As reflected in our stock price and total shareholder return, we're going to remain committed to recycling until we hit that balance of when our cost of capital can be used to help us scale the company.

Um, you know, have a cost of capital where we could expand in into institutional markets, while keeping our exposure to these tertiary markets over time. It would just get smaller. But it would provide that balance that we're seeing right now of, you know, really stable, cash flows and the ability to grow counter cyclically.

Okay. No. That's very helpful. Thank you and then maybe just one follow up or one additional question.

Um, 1 of the things about these markets is right now and for the past 3 years, few years they've had no Supply and very good Regional economies. But it's also the case that because they're small, a small amount of Supply or a small interruption in job growth or the economy, there can have a really big impact

Just quickly.

With the interest at the Salt Lake did you guys continue to acquire in Colorado in those markets.

Just how would you prioritize expanding into salt Lake some more some additional assets.

Anne Olson: Yeah, this is a great question and one I think that we spend a lot of time on both with our management team and in our boardroom. You know, historically, over the last three, four years, really since 2020, 2021, we have been putting up, you know, really good numbers out of these tertiary markets. But it's not reflected in our stock price or the way institutional investors value that cash flow. So the credit I think we're getting is from, you know, our exposure to markets like Denver and somewhat Minneapolis, where there's really good visibility for our investors and potential investors to see what the value of those properties are and what the growth trajectory of those properties are.

Continuing to scale.

Denver.

There are four Collins, Colorado, and then any expansion into new markets as well.

Were to prioritize kind of those three or something else that that you may have on the board.

I think our priorities right now are really focused on scaling in Salt Lake City regional scale is really important as an operator.

I mentioned earlier that we are having the seller cottonwood residential will continue to manage it on their platform.

Well, we find our next acquisition and really grow that regional scale. It's important because we manage these on our own platform to have a little bit larger team to be able to get some centralization efficiencies in salt Lake City, and so I think that's our first priority our second priority would be to start really assessing what the next market.

Anne Olson: So ideally, Connor, we would like to grow on top of those markets, you know, have a cost of capital where we could expand into institutional markets while keeping our exposure to these tertiary markets. Over time, it would just get smaller, but it would provide that balance that we're seeing right now of, you know, really stable cash flows and the ability to grow countercyclically. One of the things about these markets is right now and for the past three years, a few years they've had no supply and very good regional economies. But it's also the case that because they're small, a small amount of supply or a small interruption in job growth or the economy there can have a really big impact. And I would use St. Cloud that we're selling as an example of that.

And I would use St. Cloud, that we're selling, as an example of that 1 thing that we're, you know, over the history. It's provided really good returns for us, but we've been seeing some shifts in the fundamentals there including declining enrollment at their, at the University. Um, lot just overall shrinking of the job base and so we feel like those are things that we really need to watch carefully because um, you know, the small things have a big impact on a small company but you know, overall we really would like to grow on top of those markets and continue to have them. But until we really feel like we're getting, you know, valued appropriately for that cash flow that we're producing out of those markets as reflected in our stock price and total shareholder return. You know, we we're going to bring in committed to recycling until we hit that balance of when our cost of capital can be used to help us scale the company.

Will be for us and we're keeping a really close pulse on what the trends are what the fundamental trends are related to population growth job growth household incomes the kinds of jobs and also the business friendliness of other markets and we really do want to remain differentiated so I.

I think we've turned.

Have definitely been over the past couple of years really focused on opportunistic acquisitions in Minneapolis, I think our shifts for Denver is is leaning a little bit that way, where we're looking more at real off market opportunities or opportunities that are a good fit for us that might not be.

Okay. No. That that's very helpful. Thank you. And then maybe just 1, follow-up or 1 additional question. Uh, just quickly um, with the entrance to the Salt Lake and you guys continue to acquire in Colorado and those markets um just how would you prioritize expanding into Salt Lake? Sibur some additional assets um continuing to scale in, you know, Denver uh Boulder Fort Collins Colorado and then any expansion into new markets as well. If you were to prioritize, kind of those 3 or something else that that you may have, uh, on the board.

Anne Olson: One thing that we're, you know, over the history, it's provided really good returns for us. But we've been seeing some shifts in the fundamentals there, including declining enrollment at their at the university, a lot just overall shrinking of the job base. And so we feel like those are things that we really need to watch carefully because, you know, the small things have a big impact on a small company. But, you know, overall, we really would like to grow on top of those markets and continue to have them.

Idly widely.

Widely been on in the Denver market.

With really a pretty laser focused on scaling and salt Lake City.

Alright I appreciate it thank you.

Yes.

Yeah.

Thank you so much for your questions. The next question comes from Rob Stevenson with Janney. Your line is now open.

Anne Olson: But until we really feel like we're getting, you know, valued appropriately for that cash flow that we're producing out of those markets, as reflected in our stock price and total shareholder return, you know, we're going to remain committed to recycling until we hit that balance of when our cost of capital can be used to help us scale the company.

Hey, good morning, guys.

Can you talk about how much of a drag Denver was on the two 6% renewal lease rate growth were there any other markets that had an outsized impact on that number.

I think our priorities right now are really focused on scaling in Salt Lake City Regional scale is really important as an operator. Um, you know, I mentioned earlier that we are having the seller. Cottonwood residential continue to manage it on their platform, um, while we find our next acquisition and really grow that Regional scale, it's important because we manage these on our own platform to have a little bit larger team, to be able to get some centralization efficiencies in Salt Lake City. And so I think that's our first priority. Our second priority would be to start really uh assessing what the next Market will be for us. And we're keeping, you know, a really close call on what the trends are, what the fundamental Trends are related to population. Growth job, growth household incomes, the kinds of jobs and also the business friendliness of

Yeah, I think Denver really is the only market that had an impact on that on that lease rate growth is probably brought it in 20 to 30 basis points overall, given the given the waiting.

Brad Heffern: Okay, no, that's very helpful. Thank you. And then maybe just one follow-up or one additional question just quickly. With the entrance into Salt Lake, did you guys continue to acquire in Colorado and those markets? Just how would you prioritize expanding into Salt Lake to more of some additional assets, continuing to scale in, you know, Denver, Boulder, Fort Collins, Colorado, and then any expansion into new markets as well? If you were to prioritize kind of those three or something else that you may have on the board?

Denver renewal.

On the on the renewal side, we're just above.

Flat, so 6% on renewals.

Relative to the other markets, where we were we were really seeing.

North Dakota, and the five Minneapolis in the high twos.

Other markets and we really do want to remain differentiated so um I think we've turned a we've definitely been over the past couple years really focused on opportunistic Acquisitions in Minneapolis. I think our shifts for Denver is is leaning a little bit that way we're looking more at you know real off Market opportunities or opportunities that are a good fit for us. That might not be you know widely uh widely bid on in the Denver Market. Um you know with really a pretty laser focused on on scaling in Salt Lake City.

Rochester, Nebraska, you know in that same range high too long, so not a huge impact, but but some.

All right, I appreciate it. Thank you.

Okay, and then Bob post sale of these 500 units does that do anything material to the annual per unit maintenance Capex of $11 50 to 200 that you have in the guidance for this year.

Anne Olson: I think our priorities right now are really focused on scaling in Salt Lake City. Regional scale is really important as an operator. You know, I mentioned earlier that we are having the seller, Cottonwood Residential, continue to manage it on their platform while we find our next acquisition and really grow that regional scale. It's important because we manage these on our own platform to have a little bit larger team, to be able to get some centralization efficiencies in Salt Lake City. And so I think that's our first priority. Our second priority would be to start really assessing what the next market will be for us. And we're keeping, you know, a really close pulse on what the trends are, what the fundamental trends are related to population growth, job growth, household incomes, the kinds of jobs, and also the business friendliness of other markets.

Thank you so much for your questions. The next question comes from Rob Stevenson with Jamie. Your line is now open.

Good morning, guys. Um, can you talk about how much of a drag Denver was on the 2.6 percent renewal lease rate growth and were there any other markets that had an outsized impact on that number

Yes, so what we factored in to our guidance, which is about.

$11 75 at the midpoint is some shift in capex dollars from from the assets that we expect to sell to the now smaller same store portfolio. Overall, when you think about capex as we move forward. It is.

Yeah, I think vendor really is the only Market that had an impact on that on that lease rate growth and it it's probably brought it in. You know, 20 to 30 basis points overall, given the given the waiting um, you know, Denver renewals

On a portfolio wide basis, we expect.

It could be a lot more efficient because we are trading if you think about our 12 assets for two assets. So.

A lot less to maintain these assets some increase in turn Capex. Because these are higher quality assets with overall reduction and maintenance cost is going to outweigh.

Anne Olson: And we really do want to remain differentiated. So I think we've turned, we've definitely been over the past couple of years really focused on opportunistic acquisitions in Minneapolis. I think our shift for Denver is leaning a little bit that way, where we're looking more at, you know, real off-market opportunities or opportunities that are a good fit for us that might not be, you know, widely bid on in the Denver market, you know, with really a pretty laser focus on scaling in Salt Lake City.

Those increases so yes, we expect from a capex perspective for the portfolio to be more efficient going forward.

On the, on the renewal side were just above, uh, flat. So, you know, 6% on renewals, um, relative to the other markets where we were, you know, we were really seeing, you know North Dakota in the 5 and the high twos. Um, Rochester Nebraska. You know in that same Range High 2 those so not a huge impact but um but some

Okay, and then a clarification the six to eight cents of dilution that you talked about earlier in terms of the asset recycling program is that just 2025 or is that an annualized number.

Okay. And then brav post sale of these 1500 units. Does that do anything material to the annual per unit, maintenance capex of 1150 to 12200 that you have in the guidance for this year.

That is the impact on 2025 as I said, there is a lot of moving pieces in 2025, including the timing of the dispositions and some proceeds holbeck. So you should.

Yes. So what we factored in to our guidance, which is about

Brad Heffern: All right, appreciate it. Thank you.

Josh Klaetsch: Thank you so much for your questions. The next question comes from Rob Stevenson with Jamie. Your line is now open.

Difficult to annualize that number.

Given all of those components, including some other transaction related costs that we'll incur as a result of the plan so on a full year basis.

Brad Heffern: Good morning, guys. Can you talk about how much of a drag Denver was on the 2.6% renewal lease rate growth, and were there any other markets that had an outsized impact on that number?

You can't just simply annualize that number.

Uh, 1175 of the midpoint, is some shift in capex dollars from, uh, from the assets that we expect to sell to the now smaller. Same store portfolio. Overall. Uh, when you think about capex, as we move forward, it is uh, on on, on a portfolio right basis. We expect, uh, it to be a lot more efficient because we're trading. If you think about our 12 assets for

We expect on a full year basis.

Anne Olson: Yeah, I think Denver really is the only market that had an impact on that lease rate growth. And it's probably brought it in, you know, 20 to 30 basis points overall, given the weighting. You know, Denver renewals, on the renewal side, were just above flat, so, you know, 0.6% on renewal relative to the other markets where we were, you know, we were really seeing, you know, North Dakota in the fives, Minneapolis in the high twos, Rochester, Nebraska, you know, in that same range, high two, low threes. So not a huge impact, but some.

The dilution to be around <unk>.

<unk> <unk> and into <unk>.

<unk> range as you move forward on a full year basis.

Okay.

That guidance basically assumes the St cloud closes sometime in September and then many of the Minneapolis assets for some time in the fourth quarter at this point.

We have two assets. So, you know, we have a lot less to maintain with these assets. These are high-quality assets, and the overall reduction in maintenance costs is going to outweigh, you know, those increases. So yes, we expect from a CapEx perspective for the portfolio to be more efficient going forward.

That's correct, saying cloud is expected to close in September with Minneapolis.

Okay, and then uh, clarification the 6 to 8 cents of dilution that you talked about earlier in terms of the asset recycling program is that just 2025 or is that an annualized number?

In November.

The expectation that would be factored into the guidance.

Alright, Thanks, guys I appreciate the time this morning.

Thank you so much for your question. The next question comes from Ebrahim <unk> with UBS. Your line is now open.

Brad Heffern: Okay. And then, Bhairav, post-sale of these 1,500 units, does that do anything material to the annual per unit maintenance capex of $1,150 to $1,200 that you have in the guidance for this year?

Hi, Thanks.

Previous expectation was that occupancy comps, we're going to be getting a bit more challenging in the second quarter of 2025, and then remain challenging through the remainder of the year, so less upside from occupancy so why in your market changed to allow you to achieve.

Bhairav Patel: Yes, what we factored into our guidance, which is about $1,175 at the midpoint, is some shift in capex dollars from the assets that we expect to sell to the now smaller same-store portfolio. Overall, when you think about capex as we move forward, it is on a portfolio-wide basis, we expect it to be a lot more efficient because we're trading, if you think about it, 12 assets for two assets. So, you know, a lot less to maintain these assets. You know, some increase in turn capex because these are higher quality assets, but overall reduction in maintenance cost is going to outweigh, you know, those increases. So yes, we expect from a capex perspective for the portfolio to be more efficient going forward.

Both sequential and a really strong year over year increase in occupancy in the quarter and then do you expect occupancy to fall off in the back half of the year.

Um, that is the impact in 2025. As I said, there's a lot of moving pieces in 2025, including the timing of the dispositions and some proceeds, hold back. So you should, it's it's difficult to annualize that number, um, you know, given, uh, all of those components, including some other transaction related costs, uh, that will incur as a result of off the plan. So, on, on a full year basis. Uh, you know, uh, you, you can't just simply analyze that number, um, you know, we we expect on the full year basis, uh, the the dilution to be around, uh, you know, 15 cents, uh, and then the 15th cents range as As you move forward on a full year basis,

No.

We expect to sustain the momentum from an occupancy standpoint, if you look at the first half even though some of the blended lease trade outs may have been pressured because of Denver. Our occupancy is ahead of where we expected we expect to kind of sustain the momentum leading into the ore going to the second half of the year.

Okay? And the that guidance, basically assumes that St, Cloud? Closest sometime in September. And then many, the Minneapolis assets are sometime in the fourth quarter at this point.

That's correct sin. Cloud is expected to close in September with Minneapolis in uh, in November. That's, that's the expectation that we factored into the guidance.

We don't expect on an overall portfolio basis for the lease tradeoffs to change materially and we do expect to maintain the higher occupancy and that's really allowed us to maintain the midpoint of our revenue range.

Okay. All right. Thanks, guys. Appreciate the time this morning.

Thank you so much for your question. The next question comes from Abraham with UBS. Your line is now open.

Unchanged.

Because year to date performance has been in line, although the mix has been different some challenges in Denver, but we've offset it pretty well and the rest of the portfolio and continue its in.

Brad Heffern: Okay. And then a clarification, the 6 to 8 cents of dilution that you talked about earlier in terms of the asset recycling program, is that just 2025 or is that an annualized number?

Expect to continue to do so.

In the second half of the year.

Bhairav Patel: That is the impact on 2025. As I said, there's a lot of moving pieces in 2025, including the timing of the dispositions and some proceeds holdback. So you should, it's difficult to annualize that number, you know, given all of those components, including some other transaction-related costs that will incur as a result of the plan. So on a full-year basis, you know, you can't just simply annualize that number. You know, we expect on a full-year basis the dilution to be around, you know, 15 cents in the 15 cents range as you move forward on a full-year basis.

Okay. So I guess I'm just curious if youre seeing this really strong occupancy.

Why isn't there a little bit more pricing power on the rate side as well are you seeing some price sensitivity is this something that other operators are doing in the market, which is taking a little bit more challenging conditions, there or is there something else going on or is this maybe a decision to not push as hard to really boost occupancy.

Hi, thanks. Um, I think your previous expectation. Was that occupancy comps. Were going to be getting a bit more challenging in the second quarter of 2025 and then remain challenging through the remainder of the year. So, um, less upside from occupancy. So what in your markets change to allow you to achieve? Um, both sequential and a really strong year-over-year increase in occupancy in the quarter, and do you expect occupancy to fall off in the back half of the year?

Yes, I think it really lies in the blend of the portfolio. So if you look at where our strongest occupancies are we're also getting our strongest rent growth and those would be in markets like North Dakota Omaha Rochester.

No, we we, you know, we expect to sustain the momentum uh from an occupancy standpoint. If you look at the first half, even though uh some of the Blended geese trade outs, may have been pressured because a rocket Pennsy is ahead of where we expected. We expect to kind of sustain the momentum leading into the or or, you know, going into the second half of the year. Uh, we don't expect on an overall portfolio basis for the least trade-offs to change materially.

Brad Heffern: Okay. And that guidance basically assumes that St. Cloud closes sometime in September and then the Minneapolis assets are sometime in the fourth quarter at this point?

Then.

You know that that when we give you the whole number it's a blended also Denver, which is a large part of our portfolio and we've had a little bit softer occupancy there as a broad noted we've been seeing quite a bit of concessions.

Bhairav Patel: That's correct. St. Cloud is expected to close in September with Minneapolis in November. That's the expectation that we factored into the guidance.

So a lot a lot of competition for residents and that puts a lot of for a lot of pressure on the rates. So I think where we have the strongest occupancy we are getting real pricing power and youre seeing that in the results. You know just looking at the revenue growth across markets like North Dakota in Omaha.

And we do expect to maintain the, the hierarchy. And that's really allowed us to maintain the midpoint of of our Revenue range. Um, you know unchanged, uh, because, uh, year to date, the performance has been in line, although the mix has been different, uh, you know, some challenges in Denver, but we've all set up pretty well in the rest of the portfolio and continue to and expect to continue to do so, uh, in the second half of the year.

Brad Heffern: Okay. All right, thanks, guys. I appreciate the time this morning.

Josh Klaetsch: Thank you so much for your questions. The next question comes from Avery Probent with UBS. Your line is now open.

Some of those tertiary markets has been really strong.

Ami Probandt: Hi, thanks. I think a previous expectation was that occupancy comps were going to be getting a bit more challenging in the second quarter of 2025 and then remain challenging through the remainder of the year, so less upside from occupancy. So what year markets change to allow you to achieve both sequential and a really strong year-over-year increase in occupancy in the quarter? And then do you expect occupancy to fall off in the back half of the year?

You put it all together you do it does get offset somewhat by the softness in Denver.

Got it. Thanks, that's helpful context, and then.

This is something that other operators are doing in the market, which is making conditions a little bit more challenging there. Or is there something else going on? Or is this maybe a decision to not push as hard to really boost occupancy?

I guess my second question is if you.

You mentioned, a focus on scaling and Salt Lake City. So I'm wondering what you're seeing in terms of opportunities there.

Good morning, Amy I would say a couple of thoughts one sugar amount was really a continuation of pipeline for us. This was not the first opportunity that came across our desk and we jumped at it we've been spending a lot of time in market.

Bhairav Patel: No, we expect to sustain the momentum from an occupancy standpoint. If you look at the first half, even though some of the blended lease tradeouts may have been pressured because of Denver, our occupancy is ahead of where we expected. We expect to kind of sustain the momentum leading into the, or, you know, going into the second half of the year. We don't expect on an overall portfolio basis for the lease tradeouts to change materially, and we do expect to maintain the higher occupancy.

<unk> been building good pipeline and seeing opportunities.

A few of the things that we really liked where.

Just a bit outside from from where we needed to be.

From an underwriting and math perspective.

We feel confident that we will continue to build pipeline and continue to see opportunities in that market moving forward.

Great. Thank you.

Bhairav Patel: And that's really allowed us to maintain the midpoint of our revenue range, you know, unchanged because year to date, the performance has been in line, although the mix has been different, you know, some challenges in Denver, but we've offset it pretty well in the rest of the portfolio and continue to, and expect to continue to do so in the second half of the year.

Thank you so much for your questions. The next question comes from Nathan <unk> with Baird. Your line is now open.

Hey, good morning, everyone.

Yeah. Amy, I think it really lies in the blend of the portfolio. So if you look at where our strongest occupancies are, we're also getting our strongest rent growth and those would be in markets, like, North Dakota, you know, Omaha Rochester. Um, and then, but, you know, that that when we give you, the whole number is the blend of also Denver, which is a large part of our portfolio. And we've had a little bit softer occupancy there, as as broad noted, we've been seeing quite a bit of concessions. Um, and so a lot, a lot of competition for residents, and that puts a lot of a lot of pressure on the race. So I think, you know where we have the strongest occupancy, we are getting real pricing power, and you're seeing that in the results, you know, just looking at, you know, the revenue growth across markets, like, North Dakota and Omaha. Um, some of those tertiary markets have been really strong. Uh, when we put it all together, you know, you do it does get offset somewhat by the softness in Denver.

Curious what you are selling and it wasn't all that today for August and September and then maybe what you expect blended rates to be in the second half of the year.

Ami Probandt: Okay. So I guess I'm just curious, if you're seeing this really strong occupancy, why isn't there a little bit more pricing power on the rate side as well? Are you seeing some price sensitivity? Is this something that other operators are doing in the market, which is making a little bit more challenging conditions there, or is there something else going on, or is this maybe a decision to not push as hard to really boost occupancy?

Good morning, Nathan Yes, so renewals continue to be healthy.

Got it. Thanks that's that's helpful context. And then um I guess my second question is, if you mentioned uh focus on scaling and Salt Lake City, so I'm wondering what you're seeing in terms of opportunities there.

With all the renewals that we've sent out today, which takes US all the way to October in the high twos to close to 3% range.

For the second half of the year as I mentioned earlier, we do expect blended rate growth to be in line with what we saw in the first half with renewals leading.

Morning, Amy. I would say a couple of thoughts: 1. Sugar. Matt was really a continuation of our pipeline for us. You know, this was not the first opportunity that came across our desk, and we jumped at it. Uh, we've been spending a lot of time in market. We've been building a good pipeline and seeing opportunities.

Rent growth and as I mentioned, there is some softness in Denver.

Anne Olson: Yeah, Amy, I think it really lies in the blend of the portfolio. So if you look at where our strongest occupancies are, we're also getting our strongest rent growth, and those would be in markets like North Dakota, you know, Omaha, Rochester. And then, but you know that when we give you the whole number, it's a blend of also Denver, which is a large part of our portfolio, and we've had a little bit softer occupancy there. As Bhairav noted, we've been seeing quite a bit of concessions, and so a lot of competition for residents, and that puts a lot of pressure on the rates. So I think, you know, where we have the strongest occupancy, we are getting real pricing power, and you're seeing that in the results.

So we expect renewals to outpace <unk>.

A few of the things that we really liked were, you know, just a bit outside from from where we needed to be, uh, from an underwriting and math perspective.

New lease trade outs, but overall the expectation in the second half versus the first half is not that different.

We feel confident that we'll continue to build Pipeline and continue to see opportunities in that market moving forward.

Great. Thank you.

Thank you and appreciate all the color on the rate growth by market. So far I was just wondering if you could provide some numbers around maybe the new rates in the blended rates and some would be a tertiary market.

Thank you so much for your questions. The next question comes from Mason ghoul with beard. Your line is now open.

Yes, so certainly for.

The <unk>.

For the second quarter.

Hey, good morning, everyone. Um, just curious what you’re seeing in your news about August and September, and then maybe what you expect blended rates to be in the second half of the year.

We had about six 6% to 7% rent growth in Nebraska, and North Dakota.

Anne Olson: You know, just looking at, you know, the revenue growth across markets like North Dakota and Omaha, some of those tertiary markets have been really strong. When you put it all together, you know, you do, it does get offset somewhat by the softness in Denver.

And pretty much all of our markets were positive, including Minneapolis in the 3% range with the exception of Denver, which was which was negative overall as I said blended rent growth also for for those markets was wasn't the <unk>.

Morning Mason. Uh, yes. So renewals continued to be healthy. Uh, you know, with all the renewals that we've sent out today, which takes us all the way to October in the high twos to close to 3% range. Uh, you know, for the second half of the year, as I mentioned earlier, uh, we do expect

Single digits high single digits in certain instances.

Ami Probandt: Got it. Thanks. That's helpful context. And then I guess my second question is, if you mentioned a focus on scaling in Salt Lake City, so I'm wondering what you're seeing in terms of opportunities there.

Again, the challenge has been in Denver, we encountered some concessions, which is built into these new lease trade outs.

Which.

Is we are seeing some some changes there in terms of.

That Blended rate growth to be in line with what we saw in the first half with renewals leading, uh, rent growth and you know, as and mentioned you know, there's some softness in Denver, um, you know, so we expect renewals to to outpace, uh, new lease trade outs, but overall the second half versus the first half is not that different.

Grant Campbell: Morning, Amy. I would say a couple of thoughts. One, Sugar Mot was really a continuation of pipeline for us. You know, this was not the first opportunity that came across our desk, and we jumped at it. We've been spending a lot of time in market. We've been building good pipeline and seeing opportunities. A few of the things that we really liked were, you know, just a bit outside from where we needed to be from an underwriting and math perspective. We feel confident that we'll continue to build pipeline and continue to see opportunities in that market moving forward.

Turning the corner, we're turning the corner with respect to occupancy that should actually help rent growth moving forward. So we saw some challenges in June quickly address that in July and I think the trends are moving in the right direction as we head into August and the rest of the year.

Thank you and appreciate all the color on, raiko by markets so far, I was just wondering if you could provide some numbers around, maybe the new rates and the Blended rates and some of your tertiary Market.

Thank you.

so, uh, certainly for, um, the

for the second quarter.

Thank you so much for your questions.

We have a follow up from Jamie Feldman with Wells Fargo. Your line is now open.

Great. Thanks for taking my follow up so I had some back and forth with some investors in the call. So I figured we'd just ask you the question.

Ami Probandt: Great. Thank you.

Josh Klaetsch: Thank you so much for your questions. The next question comes from Mason Gould with Baird. Your line is now open.

How do you how are you thinking about just timing of capital allocation I mean, clearly you could be buying back your stock today.

Brad Heffern: Hey, good morning, everyone. Just curious what you're sending in about us today for August and September, and then maybe what you expect blended rates to be in the second half of the year.

Much less dilutive outcome than buying a lower cap rate assets, and where youre selling I mean do you.

Feel like Youre kind of racing the clock here to get everything done or why don't I take a more measured pace and kind of take shots at the goal and the goal is open.

Bhairav Patel: Morning, Mason. Yeah, so renewals continue to be healthy, you know, with all the renewals that we've sent out to date, which takes us all the way to October in the high twos, close to 3% range. You know, for the second half of the year, as I mentioned earlier, we do expect blended rate growth to be in line with what we saw in the first half, with renewals leading rent growth. And, you know, as Ben mentioned, you know, there's some softness in Denver. You know, so we expect renewals to outpace new lease tradeouts, but overall, the expectation in the second half versus the first half is not that different.

Rather than creating dilution to earnings.

Yeah I think this is something we're also thinking a lot about genie is just timing and I.

Um, we we had about 6, 6 to 7% rent growth in in Nebraska and North Dakota. Um, and pretty much all our markets were positive, including Minneapolis, uh, in the 3% range, uh, with the exception of then, which was, which was negative overall, as I said, uh, Blended. Rent growth also, for for those markets was, uh, was in the, you know, single digits High single digits in certain instances. Um, you know, again the the the challenge has been in Denver, uh, we we encountered some concessions, which is built into these new lease trade outs, uh, which, uh, you know, is, uh, you know, we are seeing, you know, some, some changes there in terms of, uh, uh, turning the corner. We have returning the corner with respect to occupancy, which should actually help rent growth. We saw some challenges

I don't feel like we do feel like we have a time clock that we're racing I do think that the particularly with Salt Lake City as grant mentioned earlier that really was a big opportunity for us. It was an off market transaction, we have looked at quite a bit there.

In June quickly addressed it uh in July. And I think the trends are moving in the right direction as we head into August and the rest of the year

Thank you.

Thank you so much for your questions.

And.

We have a follow-up from Jamie Feldman with Wells, Fargo, your line is now open.

When we.

When we when we look at same with railway that was that was a property that we have been following for a long time that we had the opportunity to acquire it with with existing debt in place. So I do think we're taking advantage of opportunities I think our history also would show that we really are we really are having a good track record.

Brad Heffern: Thank you. And I appreciate all the color on rate growth by market so far. I was just wondering if you could provide some numbers around maybe the new rates and the blended rates in some of your tertiary markets.

Great. Uh thanks for taking my follow-up. So you know, I had some back and forth with some investors during the call so I figured we just ask you the question. Um, how do you, how are you thinking about just timing of capital allocation? I mean clearly you could be buying back your stock today at

Bhairav Patel: Yeah, so certainly for the second quarter, we had about 6 to 7 percent rent growth in Nebraska and North Dakota, and pretty much all our markets were positive, including Minneapolis, in the 3% range, with the exception of Denver, which was negative overall. As I said, blended rent growth also for those markets was in the single digits, high single digits in certain instances. You know, again, the challenge has been in Denver. We encountered some concessions, which is built into these new lease tradeouts, which, you know, is, you know, we are seeing, you know, some changes there in terms of turning a corner. We are turning the corner with respect to occupancy, which should actually help rent growth moving forward.

I'm, taking advantage of opportunities such as <unk>.

We bought back stock at the end of 'twenty three when it was at 54, we reissued that stock at 75, we've taken down leverage. So we are looking for those pockets of opportunities, but we're also really trying to be mindful of the fact that.

And where you're selling. I mean you feel like you're kind of racing the clock here to get everything done or why not take a more measured pace and kind of take shots at the goal when the goal is open rather than you know creating dilution to earnings.

<unk>.

We're not getting credit for the results that we're putting up out of these tertiary market. So we really do want to make sure. We're articulating our strategy and that we're making progress on our strategy, but really not a not a gun to the head end.

And when we think about the timing of the acquisitions that we made the stock wasn't it wasn't as low as it is today it was closer to 70.

Yeah, I think this is something. We're also thinking a lot about timing, and I don't feel like we do feel like we have a time clock that we're racing. I do think that, particularly with Salt Lake City, as Grant had mentioned earlier, that really was a big opportunity for us. It was an off-market transaction, and we had looked at quite a bit there. Um, and what, you know, when we...

When we ink those deals.

Bhairav Patel: So we saw some challenges in June, quickly addressed it in July, and I think the trends are moving in the right direction as we head into August and the rest of the year.

Okay.

So would you take a look.

A closer look at share buybacks going forward and get more aggressive like how do you I mean, I guess it rates will go lower.

Brad Heffern: Thank you.

I mean, how do we like how should we just think about the moving pieces here. As you are are you guys think about the moving pieces.

Josh Klaetsch: Thank you so much for your questions. We have a follow-up from Jamie Feldman with Wells Fargo. Your line is now open.

Yeah, absolutely and in fact.

Jamie Feldman: Great. Thanks for taking my follow-up. So, you know, I had some back and forth with some investors during the call, so I figured we'd just ask you the question. How do you, how are you thinking about just timing of capital allocation? I mean, clearly, you could be buying back your stock today at a much less dilutive outcome than, you know, buying the lower cap rate assets than where you're selling. I mean, do you feel like you're kind of racing the clock here to get everything done, or why not take a more measured pace and kind of take shots at the goal when the goal is open rather than, you know, creating dilution to earnings?

We are looking constantly at what the levels of the buyback are and how we balance that with just overall float and the and leverage as you as you know we took leverage up in the in the second quarter.

When we, when we look at same with Railway, you know, that was a that was a property that we had been following for a long time. We had the opportunity to acquire it with with the existing debt in place. So, I do think we're taking advantage of opportunities. I think our history also would show that we really are, we really are have a good track record of taking advantage of opportunities. Such as you know, we bought back stock at the end of 23. You know, when it was at 54, we reissued that stock at 75, we've taken down leverage. So we are looking for those pockets of opportunities. But we're also really trying to be mindful of the fact that, um,

But we do want to make sure that we're ready to execute on buybacks, if and when we think that it's there it's the right time.

I would note.

Sure you are aware like where the stock is trading today, we're really thinking hard about it and every dollar that we have to use Jamie we're thinking where does it go does it go to debt pay down does it go to new acquisitions and a lot of our a lot of the strategy of trying to grow and scale. The company a lot of those things really do compete with each other so.

You know, we're not getting credit for the results that we're putting up out of these tertiary markets. So, you know, we really do want to make sure we're articulating our strategy and that we're making progress on our strategy but really not a, not a gun to the head and uh, and when we think about the timing of the Acquisitions that we made, you know, the thought wasn't wasn't as low as it is today, it was, you know, closer to 70

when when we Inked those deals,

Anne Olson: Yeah, I think this is something we're also thinking a lot about, Jamie, is just timing. And I don't feel like we do feel like we have a time clock that we're racing. I do think that particularly with Salt Lake City, as Grant had mentioned earlier, that really was a big opportunity for us. It was an off-market transaction. We had looked at quite a bit there. And, you know, when we, when we look at, same with Railway, you know, that was a property that we had been following for a long time. We had the opportunity to acquire it with the existing debt in place. So I do think we're taking advantage of opportunities.

We want to make sure that we're ready to take advantage of stock buybacks and.

Okay, so would you take a a closer look at your BuyBacks going forward, and get more aggressive? Like, how do you? I mean, I guess rates will go lower.

Obviously with with earnings just released we're coming out of our blackout period now so now would be the time, we could take advantage of it the last 30 days we've.

Um, I mean how do we like how should we just think about the moving pieces here as you or how do you guys think about the moving pieces?

We've not been able to yield.

Yeah. Uh, absolutely. And in fact, um,

Okay, alright, thanks for your thoughts.

Thank you so much for your question there are no additional questions at this time, so I'd like to remind everyone to ask a question to start followed by one we will pause briefly ask questions all registered.

Anne Olson: I think our history also would show that we really are, we really have a good track record of taking advantage of opportunities such as, you know, we bought back stock at the end of '23. You know, when it was at $54, we reissued that stock at $75. We've taken down leverage. So we are looking for those pockets of opportunities, but we're also really trying to be mindful of the fact that, you know, we're not getting credit for the results that we're putting up out of these tertiary markets. So, you know, we really do want to make sure we're articulating our strategy and that we're making progress on our strategy, but really not a gun to the head. And when we think about the timing of the acquisitions that we made, you know, the stock wasn't as low as it is today.

There are no additional questions registered at this time, so I'd like to pass the conference back over to Anne Olson for any closing remarks.

Yeah.

Thanks, everyone for joining us today and for the really great questions and the interest in center space. We're excited about the results we're putting up we're also.

you know, we we are looking constantly at what the levels of the buyback are and how we balance that with just overall float and the Le and leverage, you know, as you as you know, we took leverage up in the in the second quarter, um, but we do want to make sure that we're ready to execute on BuyBacks. If and when we, we think that it's the, it's the right time. Um, I would note, you know, I'm, I'm sure you're aware, like, you know, where the stock is trading today. We're, we're really thinking hard about it and, uh, every dollar that we have to use Jamie, we're thinking, where does it go? Does it go to debt, stay down? Does it go to new acquisitions? And

Being carefully optimistic about execution of our strategic plan and happy with the progress we've made to date.

And I, especially want to thank all of our team for all the hard work that they put in to the recent transactions.

Expected to lead to greater growth for our portfolio. Overall, so thank you very much and have a great day.

A lot of our a lot of the strategy of trying to grow and scale the company, a lot of those things, you know, really do compete with each other. So, um, you know, we want to make sure that we're ready to take advantage of stock BuyBacks. And uh, obviously with with earnings just released, we're coming out of our blackout period. Now, so now would be the time we could take advantage of it. The last 30 days we've we've not been able to

Anne Olson: It was, you know, closer to $70 when we inked those deals.

That will conclude the center space second quarter 2025 earnings call. Thank you. So much for your participation you may now disconnect your line.

Okay. All right. Thanks for your thoughts.

Jamie Feldman: Okay. So would you take a closer look at share buybacks going forward and get more aggressive? Like, how do you, I mean, I guess rates will go lower. I mean, how do we, like, how should we just think about the moving pieces here as you, or how do you guys think about the moving pieces?

Thank you so much for your question. There are no additional questions at this time. So, I would like to remind everyone to ask a question to start, followed by 1. We will pause briefly if questions are registered.

Anne Olson: Yeah, absolutely. And in fact, you know, we are looking constantly at what the levels of the buyback are and how we balance that with just overall float and leverage. You know, as you know, we took leverage up in the second quarter, but we do want to make sure that we're ready to execute on buybacks if and when we think that it's the right time. I would note, you know, I'm sure you're aware, like, you know, where the stock is trading today, we're really thinking hard about it. And every dollar that we have to use, Jamie, we're thinking, where does it go? Does it go to debt paydown? Does it go to new acquisitions? And a lot of our, a lot of the strategy of trying to grow and scale the company, a lot of those things, you know, really do compete with each other.

There are no additional questions registered at this time, so I would like to pass the conference back over to Ann Olsen for any closing remarks.

Thanks everyone for joining us today and for the really great questions and the interests and Center space. You know, we're excited about the results we're putting up. We're also, you know, being uh, carefully optimistic about execution of our strategic plan and happy with the progress we've made to date. Um, and I especially want to thank all our team for all the hard work that they've put in to the recent transactions. Um, expected to lead a greater growth for our portfolio overall. So uh, thank you very much and have a great day.

That will conclude the CenterSpace Q2 2025 earnings call. Thank you so much for your participation; you may disconnect your line.

Anne Olson: So, you know, we want to make sure that we're ready to take advantage of stock buybacks. And obviously, with earnings just released, we're coming out of our blackout period now. So now would be the time we could take advantage of it. The last 30 days, we've not been able to.

Jamie Feldman: Okay. All right, thanks for your thoughts.

Josh Klaetsch: Thank you so much for your question. There are no additional questions at this time, so I would like to remind everyone to ask a question and to start follow-up by one. We will pause briefly if questions are registered. There are no additional questions registered at this time, so I would like to pass the conference back over to Anne Olson for any closing remarks.

Anne Olson: Thanks, everyone, for joining us today and for the really great questions and the interest in Centerspace. You know, we're excited about the results we're putting up. We're also, you know, being carefully optimistic about execution of our strategic plan and happy with the progress we've made to date. And I especially want to thank all our team for all the hard work that they've put into the recent transactions, expected to lead to greater growth for our portfolio overall. So thank you very much and have a great day.

Josh Klaetsch: That will conclude the Centerspace second quarter 2025 earnings call. Thank you so much for your participation. You may now disconnect your line.