Centerspace (NYSE:CSR) Q2 2025 Earnings Call Transcript

Centerspace (NYSE:CSR) Q2 2025 Earnings Call Transcript August 5, 2025

Operator: Good morning, everyone, and welcome to the Centerspace Second Quarter 2025 Earnings Call. My name is Elisa, and I will be the moderator today. [Operator Instructions] I would now like to pass the conference over to our host, Josh Klaetsch with Centerspace. You may proceed.

Joshua M. Klaetsch: 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 centerspacehomes.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 filings 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 Centerspace’s President and CEO, Anne Olson, for the company’s prepared remarks.

Anne M. 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 $0.04 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.

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 and 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 16.2% 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%.

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 face 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. 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 remained 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 evidenced by continual improvement in our online review score which reached its highest point in the company’s history during the second quarter.

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, with 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.

Grant P. Campbell: 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. We closed on the acquisition of Sugarmont, 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 health care along with 4 large universities totaling approximately 145,000 students.

While many other institutional markets have recently realized a 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. 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 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%. The community is proximate to our 2023 acquisition, Lake Vista, and we expect operational synergies between our 3 communities located in the Boulder and 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 of 12 communities in Minnesota. Buyer interest has been strong for individual community offers and portfolio offers. We are under a letter of intent to sell the entirety of our St. Cloud portfolio, which includes 5 communities totaling 832 apartment homes.

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. First round bids for these Minneapolis communities will be received this week and closing is anticipated in Q4. Pricing indications to date remain 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. 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 1 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 swing in the transaction market. 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.

Bhairav Patel: Thanks, Grant, and hello, everyone. Last night, we reported second quarter core FFO 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 noncontrollables 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 held-for-sale category on our balance sheet.

Relatedly, we have booked an impairment charge of $14.5 million with the shorter holding period for the properties driving the impairment assessment. 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 FFO 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 2Q 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 her 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 expectations.

Core FFO guidance is lower at the midpoint by $0.04 per share due to the expected impact of our announced transactions and the projected disposition that Grant discussed in his remarks. To reiterate collectively, they represent progress on 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.

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 7x 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.

Q&A Session

Operator: [Operator Instructions] The first question comes from Brad Heffern with RBC.

Bradley Barrett Heffern: 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?

Anne M. Olson: Yes, 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 and leverage. We really want to make sure that we match funded those with dispositions to bring that leverage back down in line. And then 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 we really do want to continue to show progress year-over-year in growing earnings.

Bradley Barrett Heffern: Okay. Got it. And then do you have any July leasing stats you could quote?

Bhairav Patel: Brad, with respect to July, I think the trends that we saw in June have continued 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.

Anne M. Olson: Yes. And Brad, we’re — 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 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 being in a really good position to — for pricing power as we head into the winter and look forward to 2026.

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

Bhairav Patel: Sure. It’s about $0.06 to $0.08 of dilution as a result of the transaction. 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 to mid-Q4, so that can change the number eventually based on the actual closing date. The 2 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 $0.06 to $0.08 of a range from a disposition standpoint.

Operator: The next question comes from Jamie Feldman with Wells Fargo.

James Colin Feldman: Great. I guess just focusing still on rents. How — a bunch of your peers have changed their outlook for top line growth or new lease growth. Have your expectations changed at all across any of the markets, whether up or down for the back half of the year?

Anne M. Olson: Yes. 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. 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 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 — across North Dakota, we’re seeing just tremendous growth. These areas with no supply, we’re really seeing good rent growth. We’re still encountering high cost of housing, high mortgage rates and very high retention.

So I think as it netted out, 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.

James Colin Feldman: 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? 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?

Grant P. Campbell: 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-6 NOI cap rate. 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-5s.

And then just anecdotally, if you look at our other secondary market locations throughout the Midwest, really, 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.

James Colin Feldman: Okay. And this is on what forward NOI or trailing NOI, these cap rates?

Grant P. Campbell: That would be on pro forma year 1.

James Colin Feldman: Okay. And then I appreciate the comments about getting back to low 7x leverage by year-end. Just 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?

Anne M. Olson: Yes. I mean long term, we really like leverage to be lower than 7. Ideally, I think over a period of time, we’d like to get down into the 5s. 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 — from where we’re trading 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 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 very focused on it. Last year, we used the chance we had to raise equity in the market last summer. That took out $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 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.

Operator: The next question comes from Connor Mitchell with Piper Sandler.

Connor Mitchell: First off, maybe I missed it, but can you just remind us what the cap rates were on the recent acquisitions for the Colorado asset, Salt Lake City? And then what’s the time line? Or what’s the inflection point that you’re expecting for these acquisitions, especially maybe the Denver and Colorado 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, Anne, you had a few comments on maybe the job growth for the market. Anything we can think about for maybe the time line for when these lower cap rate acquisitions will turn more accretive for the overall portfolio.

Grant P. Campbell: Connor, this is Grant. To your first question, from a cap rate perspective on the recent acquisitions, high force. In the case of Railway, it was an unlevered 4.8%. In the case of Sugarmont and Salt Lake City, 4.65%, 4.7%. 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 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 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 is located in a 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 2 and 3 of the pro forma, start to think that we’ll see some healthy growth on cash flows.

Connor Mitchell: Okay. Yes, 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 bringing the assets on to your platform to boost the accretion as well, maybe a year or 2 out.

Anne M. Olson: Yes. I’ll try that one. So I think on Salt Lake City, we’re not expecting any boost from bringing it on to our platform. In fact, during this first year, it’s going to continue to be managed while we build some additional scale. It will continue to be managed by Cottonwood Residential on their platform. 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 given the strong underlying fundamentals of population and jobs. So I’d say there is probably 50-50 on what — which one of those drives movement into territory where we think that’s really a cash flow accretive acquisition.

Connor Mitchell: 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, 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.

Anne M. Olson: 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 3, 4 years, really since 2021 — 2020, 2021, 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 institutional investors value that cash flow. 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, Connor, we would like to grow on top of those markets, 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 really stable cash flows and the ability to grow countercyclically. One of the things about these markets is right now and for the past 3 years — few years, they 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, one thing that we’re — over the history, it’s provided really good returns for us. But we’ve been seeing some shift in the fundamentals there, including declining enrollments 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 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 valued 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.

Connor Mitchell: Okay. No, that’s very helpful. And then maybe just one follow-up or one additional question just quickly. With the interest of the Salt Lake, did you guys continue to acquire in Colorado in those markets, just how would you prioritize expanding into Salt Lake to more some additional assets, continuing to scale in Denver, Boulder for Collins, Colorado. And then any expansion into new markets as well, if you were to prioritize kind of those 3 or something else that you may have on the board.

Anne M. Olson: 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 continue to manage them 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 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 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 real off-market opportunities or opportunities that are a good fit for us but might not be widely bid on in the Denver market with really a pretty laser focus on scaling in Salt Lake City.

Operator: The next question comes from Rob Stevenson with Janney.

Robert Chapman Stevenson: 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?

Anne M. Olson: Yes. I think Denver really is the only market that had an impact on that lease rate growth, and it probably brought it in 20 to 30 basis points overall given the weighting. Denver renewals on the renewal side, we’re just above flat, so 0.6% on renewals relative to the other markets where we were really seeing North Dakota in the 5s, Minneapolis in the high 2s, Rochester Nebraska in that same range, high 2s, low 3s. So not a huge impact, but some.

Robert Chapman Stevenson: Okay. And then Brad, 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?

Bhairav Patel: Yes. So 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 our 12 assets for 2 assets, so a lot less to maintain these assets, some increase in turn CapEx because these are higher-quality assets, but overall reduction in maintenance costs is going to outweigh those increases. So yes, we expect from a CapEx perspective for the portfolio to be more efficient going forward.

Robert Chapman Stevenson: Okay. And then a clarification. The $0.06 to $0.08 of dilution that you talked about earlier in terms of the asset recycling program, is that just 2025? Or is that an annualized number?

Bhairav Patel: 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 holdback, so you should — it’s difficult to annualize that number, 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 can’t just simply annualize that number. We expect on a full year basis the dilution to be around $0.15 — in the $0.15 range as you move forward on a full year basis.

Robert Chapman Stevenson: Okay. And that guidance basically assumes that St. Cloud closes sometime in September and then the Minneapolis assets or sometime in the fourth quarter at this point?

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.

Operator: The next question comes from [indiscernible] with UBS.

Unidentified Analyst: 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 less upside from occupancy. So what your markets changed 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?

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 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 — or going into the second half of the year. We don’t expect on an overall portfolio basis for the lease trade-outs 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 unchanged. Because year-to-date, the performance has been in line, although the mix has been different, some challenges in Denver, but we’ve offset it pretty well in the rest of the portfolio and continue — and expect to continue to do so in the second half of the year.

Unidentified Analyst: 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?

Anne M. Olson: Yes, 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, 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 rate. So I think where we have the strongest occupancy, we are getting real pricing power, and you’re seeing that in the results just looking at the revenue growth across markets like North Dakota and Omaha, some of those tertiary markets has been really strong. When you put it all together, you do — it does get offset somewhat by the softness in Denver.

Unidentified Analyst: Got it. 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?

Grant P. Campbell: Amy, I would say a couple of thoughts. One, Sugarmont 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. We’ve been building good pipeline and seeing opportunities. A few of the things that we really liked were 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.

Operator: The next question comes from Mason Guell with Baird.

Mason P. Guell: Just curious what you’re sending renewals out today for August and September and then maybe what you expect blended rates to be in the second half of the year?

Bhairav Patel: Mason, yes, so renewals continue to be healthy with all the renewals that we’ve sent out to date, which takes us all the way to October in the high 2s 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 rent growth. And as Anne mentioned, there’s some softness in Denver, so we expect renewals to outpace new lease trade-outs. But overall, the expectation in the second half versus the first half is not that different.

Mason P. Guell: 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?

Bhairav Patel: Yes. So certainly for the second quarter, we had about 6% to 7% 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. 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 changes there in terms of turning the corner. We are turning the corner with respect to occupancy, which should actually help rent growth moving forward. 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.

Operator: We have a follow-up from Jamie Feldman with Wells Fargo.

James Colin Feldman: Great. So 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 much less dilutive outcome than buying the lower cap rate assets than where you’re selling. I mean do you feel like you’re kind of raising 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 creating dilution to earnings.

Anne M. Olson: Yes. 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 raising. I do think that the — 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 when we look at same with Railway, 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. I think our history also would show that we really are — have a good track record of taking advantage of opportunities such as we bought back stock at the end of ’23.

When it was at 54%, we reissued that stack 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 we’re not getting credit for the results that we’re putting up out of these tertiary markets. 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 gun to the head and when we think about the timing of the acquisitions that we made, the stock wasn’t as low as it is today, it was closer to 70% when we inked those deals.

James Colin 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?

Anne M. Olson: Yes, absolutely. And in fact, we are looking constantly at what the levels of the buyback are and how we balance that with just overall float and leverage. 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, I’m sure you’re 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 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.

Operator: There are no additional questions at this time. [Operator Instructions] 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 M. Olson: Thanks, everyone, for joining us today and for the really great questions and the interest in Centerspace. We’re excited about the results we’re putting up. We’re also 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 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.

Operator: That will conclude the Centerspace Second Quarter 2025 Earnings Call. Thank you so much for your participation. You may now disconnect your lines.