Centerspace Aktie

Hello, everyone. Thank you for joining us, and welcome to the Centerspace Q1 2026 Earnings Call. [Operator Instructions]

I will now hand the call over to Josh Klaetsch, Director of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Centerspace's Form 10-Q for the quarter ended March 31, 2026, 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.

Thank you, Josh, and good morning, everyone. I'm here with our SVP of Investments and Capital Markets, Grant Campbell; and our CFO, Bhairav Patel. I'll start by addressing the strategic review which we initiated in 2025. This process is ongoing, and we appreciate the feedback we have received from our stakeholders.

The Board and its advisers continue to make progress, and we expect to provide shareholders with a more substantive update on the status of the review process before or in connection with our second quarter earnings release. There can be no assurance as to the timing or outcome of our process and no assurance that the review process will result in a transaction or other strategic change or outcome. We do not intend to provide further details in connection with discussion of our first quarter earnings results today. Thank you for your understanding as we keep our comments focused on our results and our outlook.

Our revenues for Q1 were in line with our expectations, supported by stable demand and continued execution by our leasing teams. First quarter results reflect the negative impact of recent changes to Colorado regulations, timing of certain expenses and costs related to our strategic review. These were anticipated, and our expectations for full year core FFO and its drivers remain substantially unchanged. We are reiterating our previously released earnings guidance, and Bhairav will discuss this momentarily.

Operationally, we are starting to see the expected seasonal pickup in leasing. While blended leasing spreads in the quarter were up 40 basis points over prior leases, each month demonstrated improvement, increasing from negative 90 basis points in January to positive 140 basis points in March. We've seen this trend continue into April with preliminary blended spreads of 1.8%. The Q1 blend was composed of a 2.1% decrease in new lease rents, combined with a 3.1% increase on renewals, while in April, new lease spreads broke into positive territory and renewal spreads increased to 3.3%. Retention of 54.1% in our same-store portfolio was a 2 percentage point improvement from the same quarter last year, and our resident base remains healthy, with rent-to-income levels at 21.2% and bad debt within our historical range.

Our Midwest markets continue to see rent growth outpacing national averages, and our largest market of Minneapolis saw blended spreads of 1.3% in Q1. Notably, Minneapolis has shown the best acceleration into April with blended spreads of 3.8% and new lease spreads of 4.3% in the month. In Denver, Q1 blended rates were down 5.1%, and reimbursement revenues are exhibiting the impact of regulatory changes in the market.

Concessions are prevalent in the market, and we experienced our highest usage of concessions to date in Q1. That said, we have reason for optimism. Q1 absorption levels were at their highest level since the pandemic rebound in 2021, and retention in our Denver communities was 51.9%, an improvement over Q1 2025. This data, together with the significant drop-off of new construction starts, sets us up for a better leasing profile as the year progresses, with improvement in both concessions and leasing spreads expected as we enter peak leasing season.

Expenses in the quarter were higher than our historic trend or 2026 projected run rate. Much of this was related to timing, which Bhairav will elaborate on. Our team excels in expense management, as evidenced by our same-store expense growth of only 1.6% over 2024 and 2025, and we expect that discipline to show again in 2026 as the impacts of onetime expenses normalize.

I would be remiss not to recognize our team. Their commitment and execution sets us apart, and we're proud that their efforts have been recognized through several awards, most recently being named a USA Today Top Workplace. I'm very grateful for our amazing team members.

With that, I'll turn it over to Grant.

Thanks, Anne, and good morning, everyone. Nationwide transaction activity continued showing signs of improvement, including a 13% total volume increase in 2025 compared to 2024. At the same time, investors are becoming increasingly selective with their investment decisions. There is a wide variation across individual markets as it pertains to investor conviction and actions. Within our geographic footprint, this dynamic exists.

In Minneapolis, 2025 was a record year for transactions at $2.5 billion in total volume. This is driven by supply peaking in 2023, and at the peak, new deliveries representing only 6% of then existing stock, comparing favorably to the profile of high supply markets. Coupling this with stable and persistent renter demand, investors have been drawn to the market, and we expect this to continue throughout 2026, in part due to next 12-month deliveries representing 1.6% of existing inventory and the full construction pipeline at 2.1% of inventory.

In our other Midwest markets, we continue seeing strong interest from private capital investors. These markets are anchored by health care, education and government and have muted supply profiles, including next 12-month deliveries ranging from 0% in our North Dakota and Rochester, Minnesota markets to 2.4% of existing inventory in Omaha. While the labor market has slowed nationally, we are seeing healthier relative performance in these locations, including in Grand Forks, North Dakota, where the U.S. Space Force is expanding its presence and a new $450 million food processing facility is underway, along with Rochester, Minnesota, which saw strong job growth in 2025, driven by health care and education.

Shifting to Denver. Transaction volume was down 41% in 2025 compared to 2024, and this has carried into 2026 thus far. The market continues working through the influx of deliveries from the past 24 months, flat job growth in 2025 and the recent legislative changes affecting property level other income. This has generally put Denver's transaction market in a wait-and-see environment.

Premium assets and locations are still commanding strong pricing, including a few recent trades at sub 5% in-place cap rates, though the divide between premium profile and the rest of the market has widened. We believe this theme will continue until growth indicators translate into hard data, providing investors more conviction in underwriting strengthening fundamentals. Strong Q1 absorption numbers are one building block.

Taken together, we think this environment reinforces our historical focus on disciplined capital allocation. We expect household formation in our portfolio to outpace national averages by 50 basis points through the end of next year and employment growth to similarly outpace the U.S. We believe this positioning will allow us to navigate the current environment while creating value over time.

I'll now turn it over to Bhairav to discuss our financial results and guidance.

Thanks, Grant, and hello, everyone. Last night, we reported first quarter core FFO of $1.12 per diluted share, driven by a 1.1% year-over-year decrease in Q1 same-store NOI. Revenues from same-store communities were flat compared to the same quarter in 2025, with a 1.7% increase to average monthly rental rate in the portfolio offset by a 40 basis point decrease to occupancy and the impact of lower RUBS revenue in our Colorado communities.

On the same-store expense side, Q1 numbers were up 1.7% year-over-year, with controllable expenses up 3.5% and noncontrollables down 1.1%. Our G&A expenses increased by $1.3 million over the same quarter last year, with strategic review costs as the main driver of that increase.

Turning to full year 2026 expectations. Our guidance is consistent with what we outlined in February with core FFO at $4.93, same-store NOI growth of 75 basis points, same-store revenue growth of 88 basis points and same-store expense growth of 1.5%, each at the midpoint of their guided range. Casualty recoveries in Q1 led us to increase our NAREIT FFO expectations for the year by $0.03 at the midpoint to $4.78 per share.

Revenue growth assumes blended gross leasing spreads of approximately 2%, with occupancy in the mid-95% range and retention of about 52%. We continue to expect blended spreads will again be highest in our Midwest communities. That strength will bolster our Denver portfolio, where we expect spreads to be down for the year, though improving as the year progresses. As we have previously stated, regulatory changes are expected to temper revenue growth in our Colorado portfolio, with RUBS expected to be down nearly $1 million, which was already incorporated into our initial guidance.

As Anne alluded to earlier, expenses in the first quarter were slightly higher than our expectations. However, part of that increase was driven by timing differences, especially on the noncontrollable side. We recorded approximately $400,000 in real estate tax true-ups during the quarter. True-ups are not uncommon during the first quarter, and we expect these to be offset when we resolve open appeals in the second half of this year. Our nonreimbursable losses during the quarter were also slightly higher than anticipated. This line item tends to be volatile, and our first quarter experience has not altered our expectations for the full year.

Controllable expenses were impacted by a low team member open position count and the timing of R&M projects. We expect offsets to both will favorably impact the cost of these for the remainder of the year. Lastly, while G&A during the quarter was higher than the projected run rate for the rest of the year, we now expect full year G&A to be lower than our initial projection. As a result, we still expect to deliver financial performance within the initial guidance ranges we discussed at the beginning of the year.

To further aid in modeling, I wanted to highlight our expectations for certain line items and related timing. Costs related to our strategic review are expected to be $1 million to $1.5 million for the year, with those costs expected to occur primarily in the first half of the year. This expense appears in both our G&A costs and has an add-back from FFO to core FFO. Amortization of assumed debt is expected to be $1.3 million for the year, with $490,000 expected in Q2 before quarterly amortization decreases to $215,000 per quarter in Q3 and Q4. Our guidance does not include any acquisitions or dispositions.

Turning to our balance sheet. Q1 annualized debt-to-EBITDA was impacted by the higher G&A and taxes in the quarter, leading it to be atypically high. This is not indicative of any meaningful change to our leverage profile, and we expect this number to return to our historical mid-7x range as the year progresses and expenses normalize. Our debt schedule features both a compelling rate and a long tenure with a weighted average rate of 3.6% and weighted average maturity of 6.7 years, while our liquidity remains strong with $267 million of cash and line of credit availability compared to $98 million of debt maturing through 2027.

To conclude, this quarter demonstrated the stability and consistency of our portfolio, with our results demonstrating our commitments to both operational excellence and financial discipline and positioning us well for the rest of 2026. Operator, please open the line for questions.

[Operator Instructions] Your first question comes from the line of Brad Heffern of RBC.

On Minneapolis, it sounds like you're seeing a strong inflection in spreads there. Do you view that market as being sort of back to normal at this point after we've passed all the supply? And then do you expect to see it overshoot to the upside to some extent?

Yes. I think you're exactly right, how we feel about it. We are certainly past the inflection point where the demand has stayed steady and the supply has been significantly absorbed and the new supply pipeline, as Grant discussed, is tapering to just over 2%. And so we're seeing really good rent increases there, and we think that, that will continue. We have no indicators that demand is softening here in Minneapolis. And the economy -- the regional economy here is healthy. So we do expect some outperformance from Minneapolis this year, particularly relative to our other markets.

Okay. Got it. And then, Bhairav, on the guidance, 1Q was at the bottom end of the revenue growth guidance range. The expenses in 1Q were close to the top end of the range. Obviously, you didn't change the guidance, but I'm curious if you can just walk through the path to both of those getting to their midpoints? Or do you expect that NOI maybe won't get to the midpoint, just based on where we are so far?

Yes, let's go through the components. So revenue was still in line with our expectations. It was flat for the quarter, but we expected it. The increase in scheduled rent was offset by the loss of RUBS revenue in Colorado, and there was amortization and concessions that started in the second half of last year. But overall, revenue came in, in line with expectations, and April is shaping up also in line with expectations. We do expect that remains on track.

On controllables, R&M was slightly higher in the first quarter. Some of that was timing, which will correct itself. And the remainder, we expect to offset with savings elsewhere. And we are fully staffed now, so we expect to be able to drive efficiencies as we enter leasing season by better managing overtime spend and third-party vendors. So we do expect that we'll kind of remain on track on controllables as well.

With respect to noncontrollables, there were some tax true-ups in the first quarter. It's not unusual for us to see tax true-ups in the first quarter. We do expect some fuel savings to materialize in the second half of the year, so that should offset it. And also, as I said in my prepared remarks, there were some nonreimbursable losses, which again tend to be volatile. So we saw higher losses in the first quarter, which is not really indicative of the run rate going forward. So that should normalize as well.

Lastly, there's G&A. That was also higher than the run rate. It was driven by some payroll tax accruals that are typically higher in the first quarter when we grant the equity awards. That should also normalize as we go through the rest of the year, and we actually did identify some additional savings. So overall, then you kind of combine all of these components, we expect to remain in line with the midpoint of our NOI as well as core FFO.

Your next question comes from Ami Probandt of UBS.

Just to dive in a little bit more on the markets. The other Mountain West markets are a relatively small part of the portfolio, but growth in the quarter was pretty soft. So I was wondering if you could talk through what's going on there?

Yes, sure. So the other Mountain West consists of Rapid City and Billings. And those markets, if you recall, are acting a little bit more like a Denver. So they had enormous rent growth in '21, '22 into '23, but then they did get some supply. And so being smaller markets, they have been impacted a little bit by supply. That is tapering off. And as Grant noted, we see very little supply coming there. But that market really has had some equalization going on there as they work through that supply.

And then also a little bit softer job picture there. Immediately post COVID, they had a pretty big influx of people working remotely, particularly in places like Rapid City. And so we've seen that pull back a little bit. The market is still strong, but we're not seeing the growth that we had been there. We've had a little bit of a pullback in those markets.

Got it. That makes sense. And then just on retention, this has been really strong, remains ahead of historical. I was just wondering if you think that retention might come down at all and to what extent it might come down as you change over to pushing a little bit more on rate as we move into the peak leasing season?

Yes, this is a great question. I think the market has changed the last couple of years across the industry, we've really seen higher retention. So you're hearing that from all the multifamily peers. You're hearing that on the private side.

Whether or not that there's some fundamental shift there, I think people are starting to lean into that, right? The renters are staying renters longer. The average age of a renter is increasing. And so I think there's a higher percentage of renters in the market, which is helping retention.

Now as we look into this year, the one thing that we're really looking at is with a lot of absorption coming and a lot of absorption happening, there's actually going to be fewer choices for people to move to. And one of the things we noted is while retention was really strong in Q1, it actually jumped up pretty significantly in April. So I guess I'm -- my early leaning is that this is a little bit of a fundamental shift in the industry away from that 50% general retention rate into something a little bit higher.

[Operator Instructions] Your next question comes from the line of Jeffrey Carr of Cantor Fitzgerald.

Just wanted to ask about with the review ongoing and no acquisitions or dispositions in guidance, how are you thinking about capital allocation priorities for the rest of the year? And specifically maybe around the revolver balance and value-add spend? And how much does the review kind of influence those decisions, if at all?

Yes, this is a great question. I think capital allocation is job #1 of an executive team, and particularly when you have hard assets. And we -- while we maintained our guidance on value-add for the year and we do think that, that's an important part of our program here and our operating platform, really, most of the value-add that we're spending is are things that were started or identified last year. So as we think about capital allocation priorities going forward, we're very focused on managing the line of credit debt and keeping our balance sheet strong and flexible.

Your next question comes from the line of Mason Guell of Baird.

Has there been any change to the outlook for any of your markets this year? And are any doing better or maybe worse than expected?

Well, as Bhairav said, we really expect revenue is coming in line with expectations, and that's unchanged for the year. I think maybe the components are moving a little bit. We'd like to see Denver picking up a little bit faster, but -- and they had awesome absorption in Q1, as we discussed in the prepared remarks. And if that continues, we're going to be right in line there.

Minneapolis is a little bit better than we expected, but these are all very slight offsets. And overall, I think revenue is coming in right where we thought, and we expect that to continue for the year.

Great. And then could you provide some color on the real estate investment impairment line item on your income statement?

Yes, we can go through the impairment. So overall, from a GAAP standpoint, you typically book impairment when your -- on real assets when your cash flows are going to be less than your book value. Now from real assets, you don't typically tend to see it because they have long holding periods. So you usually see impairments when we have assets that are held for sale.

But with the ongoing strategic review, the considerations change a little bit, and we have to kind of tweak the holding period for certain assets, which resulted in the impairment that we booked in the first quarter. It was truly driven by a change in the potential holding period in light of all the other activity that's being reviewed at the strategic level. So that's really what drove the impairment. It was on one asset and was driven by property-specific factors.

Your next question comes from the line of Michael Gorman of BTIG.

Maybe just a quick one for me on a more strategic level as you're thinking about the portfolio and you're thinking about the business. Obviously, Denver, I think, has been a challenge, and that's not unique to you at all. There was an article in The Wall Street Journal over the weekend talking about the regulatory environment for business in general in the state of Colorado and some increasing concerns about the regulatory burden among the tech ecosystem.

And I'm just wondering, have you started to see any of those concerns? Have you started to think about those concerns and what that means for the job market in those kind of core metro areas in Colorado? Or is this just a little bit too far out on the horizon?

Michael, this isn't too far out on the horizon, and it is something that we're thinking about. As we consider -- you may recall when we -- before we bought in Salt Lake City, one of the things that we really look at with respect to markets is the business climate, right, the friendliness, the tax regime, the regulatory environment.

In Colorado, you can even see -- and we discussed in our prepared remarks -- you can start seeing the results of some of the regulatory actions that they have taken with respect to real estate, the RUBS, the collection, our ability to get reimbursement for RUBS and utility costs. So we're already starting to see that there. And I do think that some of the other regulatory actions that they're considering or considering taking are impacting their job growth. As Grant noted, it's been flat there after a few years of really, really strong growth.

So is this part of the natural kind of maturing of Denver, which went from 1 million people to close to 4 million people in a relatively short span of time? A lot of jobs came there. Did the infrastructure not keep up? Do they feel pressure to put these regulations in place? Will that abate over time? I think that remains to be seen. We're really happy with the portfolio we have there. We're very happy with the basis we have in it, having started to acquire that portfolio back in 2017.

And we're optimistic because it's still a place that has a lot of cultural gravitas. People are still wanting to live there for access to the outdoor amenities and things that other cities can't offer. And on a relative basis to places like California, it is still very affordable. So -- but definitely something that we're watching, something we're already starting to feel the impacts of and really keeping a close eye on.

That's really helpful color. And maybe just a follow-up. I just wanted to make sure I had it clear. It sounds like, to your point, job growth is a little bit slower in Denver, but it sounds like absorption is running at pretty high levels. So I'm just wondering, kind of what could be driving that mismatch and how durable that can -- that absorption level do you think can be with the current level of job growth?

Yes. Mike, correct. Q1 absorption numbers were very strong, peak data, looking back to the pandemic period. So we continue to see strong inflows of resident and renter demand in the market. I think a big driver there is the high cost of homeownership in that market.

And although job growth has been flat in 2025, as we talked about, we do continue to still see folks from out of state relocating to the market, maybe not at the same clip that they were from '21 to '23. We actually looked within our portfolio, '21 to '23, about 1/3 of our applicants within our same-store portfolio were from out of state. And in '24 and '25, that was 25%. So a reduction, but still a meaningful inflow of folks coming from out of state, and it is very expensive to own a home in that market.

Your next question comes from the line of Ami Probandt of UBS.

Maybe a follow-up to Mike's question that was just asked. There's maybe some bias for some coastal -- at least coastal people about what your Midwest markets might look like. And so I'm just kind of curious, what's the hiring outlook for recent college grads across your market? Do college grads, are they attractive to these markets? Or do they tend to go to some of the bigger Sunbelt markets or coastal markets and then move into the Midwest as they get a little bit older and want to start a family?

Yes. Ami, this is a good question. And there -- as you probably know, there has been some recent publication highlighting where the hot markets for new college grads are. Very few of them are in the Midwest, but we still do see really strong companies in our markets and across the Midwest.

And so Minneapolis, we have Target, 3M, huge health care in UnitedHealthcare and all the subsidiaries, Cargill, which is one of the largest private companies in the world. And then on the North Dakota side, Grant mentioned, we're starting to see some growth there. And Grant, maybe you can just comment a little bit on what we're seeing in some of those markets with respect to job growth that would attract some of those new college grads?

Yes. I think to Anne's comments on Minneapolis, 17 Fortune 500 companies, Cargill, largest private company that there is. We see a lot of folks that -- maybe Chicago used to be the place, if they were Midwest-centric, it was Chicago, or we're going coastal. We see more and more of those folks coming to the Twin Cities. A strong underlying higher education system in the Twin Cities also serves as a feeder for a lot of those organizations and companies in our backyard.

In the case of our other Midwest markets that you alluded to, Rochester, the Mayo Clinic is undertaking a very significant expansion phase that is drawing a lot of folks. So that market driven by health care and education, we're seeing it play out on the ground. In our prepared remarks, we alluded to North Dakota, where we're seeing some pretty significant investment, both from folks in state as well as other folks, in this case, a European company desiring to put their first U.S. plant in that market. So I think these things, although maybe they don't register at the same level as some of the coastal updates that we hear about, the wheel is turning in these markets.

And Ami, just one more thought on that is when I look at recent data and recent news articles about it, it does -- there is a big highlight there, which is the new college grads aren't just looking for coastal markets and jobs. They're also balancing that with overall affordability, and that's where the Midwest can be a real draw. And over the past few years, we've seen markets like -- not just Minneapolis, but Milwaukee, Columbus, Kansas City really get an outsized share of those grads given the affordability of living there.

There are are no further questions at this time.

Great. Well, thank you all for joining us today. We look forward to meeting with many of you at the upcoming BMO and NAREIT conferences, and we wish you all a great day.

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

Hello, everyone, and thank you for joining the Centerspace Q4 2025 Earnings Call. My name is Gabriel, and I will be coordinating your call today. [Operator Instructions].

I will now hand over to your host, Josh Klaetsch. Please go ahead.

Thank you, and good morning, everyone. Centerspace's Form 10-K for the year ended December 31, 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.

Thank you, Josh, and good morning, everyone. I'm here with our SVP of Investments and Capital Markets, Grant Campbell; and our CFO, Bhairav Patel. We're coming today live from our annual leadership conference, where our operating team is together to celebrate our 2025 wins and prepare to meet our 2026 goals.

I'll start by addressing our strategic review. In November, we shared that our Board of Trustees is overseeing a formal evaluation of strategic alternatives to maximize shareholder value. This process was initiated from a position of strength, having transformed Centerspace into a pure-play multifamily REIT while improving profitability, operating scale and our balance sheet.

Our strategic review underscores our commitment to acting in the best interest of our shareholders, and this evaluation remains ongoing. As we said when we announced this evaluation, there can be no assurance that this process will result in Centerspace pursuing a transaction or any other strategic outcome, and we do not intend to provide further details on the process in connection with the discussion of our fourth quarter earnings results today.

We sincerely appreciate the thoughtful conversations we've had with shareholders thus far, and thank you for your understanding today as we keep our comments focused on our results and outlook. Centerspace's fourth quarter capped a year of progress for the company and demonstrated the health and resilience of our markets.

Importantly, our results for the year showed that our portfolio and approach yields results with our same-store NOI growth of 3.5% outpacing peers on the back of steady occupancy and expense discipline. Rent growth was strong, reflecting the durability of our resident base and our exceptional focus on resident experience and optimization of revenue.

Operationally, our portfolio benefits from Midwest exposure. Blended leasing spreads in the quarter were up 10 basis points. While new lease spreads were down 4.8%, renewal spreads show their highest growth of the year at 3.9% and retention of 55.2% moved the blended rate into positive territory. Retention for the full year was 58.2%, demonstrating relative affordability for our residents.

Favorable absorption in Minneapolis, our largest market, led to positive blended increases of 1.1%, while in our other markets, North Dakota once again led the portfolio with blended increases of 4.5% in the quarter.

In Denver, supply continues to put downward pressure on rents with Q4 blended rent trade-outs down 4.3%. Absorption in the market has continued at rates above historical norms with 2025 the second highest year of absorption in the post-pandemic era.

Additionally, new construction starts in the market have plummeted, tapering deliveries, and we expect Denver fundamentals to normalize as we progress through 2026 and into 2027.

Before I turn it over to Grant to comment on the state of the transaction market and review our 2025 transactions, I'd like to offer a special thanks to many of you for your well wishes for Minneapolis and our communities there and also to thank our Minneapolis team and all of our teams for their dedicated service to their communities and community members. Grant?

Thanks, Anne, and good morning, everyone. In 2025, Centerspace executed a strategic transaction program that continued reshaping our portfolio while maintaining balance sheet strength. We executed $493 million of transaction activity, which included entering the Salt Lake City market, expanding our presence in Fort Collins, exiting the St. Cloud, Minnesota market and pruning our holdings in the city of Minneapolis.

Over time, we have undertaken initiatives to improve our portfolio, and these 2025 transactions continue that, resulting in further diversification of our cash flow and improvements to our portfolio's average monthly rent per home, homes per community, age and operating margin.

Alongside these property transactions, Centerspace demonstrated disciplined balance sheet and shareholder capital management. The company expanded its unsecured credit facility by $150 million, and we assumed $76 million of attractively priced long-term debt in conjunction with our Fort Collins acquisition, enhancing our liquidity and improving our debt profile.

At the same time, we repurchased 3.5 million of common shares, reinforcing our belief in the value of our stock and willingness to explore multiple avenues to unlock value.

Looking ahead to 2026, we expect momentum in many of our markets, driven by measured supply profiles, resident financial strength and strong local economies.

In Minneapolis, on-the-ground fundamentals are positioned well, compared favorably to most markets in the country, and we anticipate this year to be a year of stability and growth.

In Denver, solid absorption is outweighed by the volume of new deliveries from late 2024 through 2025. These supply dynamics, coupled with slow job growth and recent regulatory changes, has generally put Denver's transaction market in a wait-and-see environment.

Premium assets and locations are still commanding strong pricing, including recent trades at sub-5% in-place cap rates, though the divide between premium profile and the rest of the market has widened. We believe this theme will continue until growth indicators translate into hard data, providing investors more conviction in underwriting strengthening fundamentals.

I'll now turn it over to Bhairav to discuss our financial results and guidance.

Thanks, Grant, and hello, everyone. Last night, we reported fourth quarter core FFO of $1.25 per diluted share, driven by a 4.8% year-over-year increase in Q4 same-store NOI.

Revenues from same-store communities increased by 1% compared to the same quarter in 2024, driven by a 1.5% increase in average monthly revenue per occupied home, which offset a 40 basis point decline in occupancy.

On the same-store expense side, Q4 numbers were down 5.1% year-over-year with favorability in both controllable and noncontrollable expenses. On the controllable side, decreases in repairs and maintenance as well as administrative and marketing costs were both drivers of the improvement. For noncontrollable expenses, favorable tax assessments drove much of the improvement.

Turning to 2026. We introduced our expectations for the year in last night's press release. We expect core FFO per diluted share to remain stable year-over-year with an expectation of full year core FFO per share of $4.93 at the midpoint. Guidance assumes that at their midpoint, same-store NOI increases by 75 basis points, same-store revenues increased 88 basis points and same-store expenses increased 150 basis points.

Revenue growth assumes blended leasing spreads of approximately 2% with occupancy in the mid-95% range and retention of about 52%. We expect blended spreads will again be highest in our North Dakota communities, followed by Minneapolis and Omaha. That strength will bolster our Denver portfolio, where we expect spreads to be down for the year, though improving as the year progresses.

Regulatory changes are expected to temper revenue growth in our Colorado portfolio with expense recoveries expected to be down nearly $1 million. Within expenses, controllables are expected to increase by 1%, while noncontrollables increased by 2%, both at their midpoints.

I also want to highlight our expectation for the amortization of assumed debt, which we expect to be $1.5 million for the year. This amount will be higher in the first half of the year and then trail off in the second half upon the maturity of one of our mortgages in June.

On CapEx, we expect value-add expenditures of $2.5 million to $12.5 million with recurring CapEx per home of $1,300 at the midpoint. Our guidance does not include any acquisitions or dispositions.

Turning to our balance sheet. Following the Minneapolis disposition we completed in November, our leverage profile improved in the quarter to 7.5x net debt to EBITDA. We have a well-laddered debt maturity schedule with a weighted average rate of 3.6% and weighted average maturity of 6.9 years. Our liquidity remains strong with nearly $268 million of cash and line of credit availability compared to $99.2 million of debt maturing over the next 2 years.

To conclude, this was a successful year for Centerspace with our results demonstrating our commitments to both operational excellence and financial discipline and positioning us well for 2026.

Operator, please open the line for questions.

[Operator Instructions]. Our first question is from Jamie Feldman from Wells Fargo.

This is Connor on with Jamie. Can you talk us through some of your assumptions within the 2026 revenue guide? It'd be helpful to understand your blended lease rate growth outlook and how that breaks out between new and renewals and any contribution from other income.

Sure. Yes. So let's start with the building blocks for 2026. We had an earn-in of about 80 basis points at the end of the year. So that will be the first piece that goes into revenue. We expect blended rent growth to be in the mid-1% range, resulting in about half of that showing up in revenue for 2026. And that will be offset by about a 40 basis points year-over-year decline in RUBS or about $1 million due to the change in regulations in Colorado.

And then our base case occupancy is a little bit lower than it was in 2025. So that contributes about 30 basis points. So that gives you about 90 basis points of year-over-year revenue growth.

From a market perspective, we expect our Midwest markets to deliver growth that is in line with what we saw in 2025 with Denver obviously remaining pressured as the absorption of units delivered in 2024 and 2025 continues. We expect renewals to once again lead the way with renewal trade-outs in the high 2% range.

And we do expect new lease trade-outs to come better than 2025 in most of the Midwest markets, markets like North Dakota, Omaha and other Mountain West are not really expected to be any supply and the demand there remains robust. Even in markets like Rochester that saw some pressure in the second half of the year, we seem to be coming out on the other side, and we expect a strong showing in 2026 from that market.

Minneapolis has shown like pretty solid absorption in 2025 and is expected to improve in 2026, given that the deliveries will go down significantly. So that's really what's underpinning our revenue guidance.

And maybe if we could talk a little bit more about what you're seeing in Denver. How do you see that market playing out in 2026? And any thoughts on when we could see an inflection, particularly in new lease rate growth?

Yes. So I'll start off and maybe Anne can chime in. But with respect to our base case, we expect some concessionary pressure to continue. In the first half of 2026, we are seeing on average about 2 to 4 weeks of concessions on a per move-in basis, which we do expect will continue at least for the first half of the year, and that's really going to pressure year-over-year revenue growth.

Another note on concessions is any concessions we gave out in the second half also get amortized over the lease term. So we'll see some of that pressure in 2026 as well. But overall, we do expect things to improve as we go through the year and work through some of the supply there. The deliveries are supposed to be the lowest since we've -- in the last few years, but I'll hand it off to Grant to comment a little bit on that in detail.

Yes. Thanks, Bhairav. Regarding supply dynamics, about 16,000 units were delivered in 2025, an additional 9,000 units will be coming online or delivered in '26. So some continued lease-up activity that, that market will need to work through.

When you look at forecasted supply pipeline, new construction starts, 2027 data really falling off in terms of new deliveries. So we do think that will provide tailwinds to the market.

When you look at foot traffic in downtown Denver based on a couple of different measurements, we are seeing increases at year-end 2025 foot traffic levels that are comparable to 2019 data. So that gives us some positivity that things are turning. There's also been some significant investments in bond funding without a property tax increase that has been passed for a whole host of projects across the city, parks, bike lanes, expansions to libraries, et cetera. So we do feel like the wheel is incrementally turning and looking to '27 for true tailwinds.

Our next question is from Brad Heffern from RBC Capital Markets.

No we're not supposed to ask about the strategic review. This is kind of strategic review adjacent. I'm wondering, is the underlying plan for the company sort of continuing in the background? Obviously, the past few years, you've sold out of tertiary markets to build Denver and Salt Lake. Is that continuing on in the background while you're looking at the broader strategic plan? Or is kind of the strategy of the company just on hold until this is completed?

Yes. We feel great about what we executed on strategically in 2025. We highlighted some of those in our prepared remarks. So we feel great about that. The part of the strategic review really is reviewing what we want to do with every dollar of capital. And so a little early in the year to tell and it's still ongoing with that. So no further comments on what that might mean for us as we move through 2026.

Okay. And then do you have any like January or quarter-to-date leasing stats that you can give?

Yes. I can give you some details. Overall, blends were flat to slightly negative. This is not uncommon for this time of the year. Renewals remained pretty strong in the mid-3% range. So that's a positive. And we clawed back some occupancy. So there's weakness on the new lease trade-out side, which we expect, led by Denver.

Really small sample size in January. We have very few leases expiring this month.

Yes. Okay. Okay. Got it. And then just one clarification. I feel like in the prepared remarks, you said that blends for '26 were 2%. But then, Bhairav, I think you said 1.5% later on. Maybe I heard it wrong, but just want to clarify what that number is?

Yes, I would say mid-1% range in our base case. In certain markets, it can be in the 2s. But overall, for the portfolio, we expect it to be in the mid-1% range.

Our next question is from Alexander Goldfarb from Piper Sandler.

Anne, always good to hear North Dakota leading. We like that. Two questions here. First, I guess, going to the strategic review. Are you allowed or can you buy back stock while that process is going on? You highlighted the stock buybacks that you had performed. But are you able to go into the market or you have to complete the process before you can resume buying back stock?

Yes. At this point, we need to complete the process, just given the rules about what kind of information that the company has available. We do have a current authorization for buyback. At where we're trading today, I think that isn't the most attractive use of our capital. Our 2025 buybacks were executed more in the $54 range.

Okay. And second question is rent control regulations, legal costs, it's been a big growing topic. You outlined Denver, the situation of the contrast between St. Paul and Mini has been well documented. As you're assessing other markets, how has the experience in those 2 markets affected?

Are you seeing other markets slowly roll out, whether it's overt rent control or utility restrictions or other restrictions that mean markets that formally were on your radar or existing markets where you were looking to expand, you want to dial back given the local politics or those 2 markets that I cited are really the standouts and the other markets that you either are currently in or thinking about expanding to really don't have that political risk?

Yes, this is a great question, certainly a hot topic. I would say across the nation, we're seeing either municipalities or states really start looking at everything, fee income, regulatory requirements, not just straight rent control.

So while we're happy with the markets that we're in, we have great operations and good operating scale in both Denver and Minneapolis so that we can really absorb and do a great job of handling those regulatory changes. I would say when we're looking at new markets, business friendliness is one of our key categories that we're looking forward at. And that includes things like do they have a heavy regulatory environment? What's the taxation, both property taxes and income taxes. How are they attracting new businesses, subsidies, things like that.

So when we're thinking about new markets, it's definitely, I'd say, one of the key categories that we're considering, but we're happy with the status in our current markets. We haven't seen any movement in markets like -- or in states like Nebraska, North Dakota, South Dakota, Montana to enhance any of their regulatory requirements. And we have seen some pullback on the federal level, particularly around environmental regulation.

Our next question is from Ami Probandt from UBS.

So far, tax refunds are trending much higher this year. So understanding that the post-COVID period is different from what we're currently having, I'm wondering if there are any parallels that you can draw to 2026 in terms of tax refunds compared to 2021 and 2022 when refunds were also elevated. Do you think that this could lead to an increase in demand or pricing power? Or is it sort of a onetime boost that doesn't really have a big impact?

The taxation is more about the valuation cycle coming into 2021 -- and there's a lag between when taxes go up. Sorry.

I was going to say in terms of individual tax refunds, not the property...

Yes. This is -- that's an interesting question. I don't know that we're -- we think that it's going to impact demand. It's going to be more of a onetime item. And our bad debt looks great, and we feel good about the resident health.

So we hope when we see those tax refunds that maybe we'll see a little bit more consumer demand or better consumer credit overall. I think we're going to see that disposable income on the consumer spending side, not necessarily creating any demand on the multifamily side.

Got it. And my second question...

Usually, we're talking about property tax....

Yes. So second question, it's been a while since growth in monthly revenue per unit has been below growth in monthly rent per unit. So in the fourth quarter, rent growth was ahead of revenue growth. Did the changes in Colorado rebilling impact that? What other dynamics could be driving that shift?

Yes. In the fourth quarter, we saw some occupancy pressures. That's contributing to it a little bit, Ami. The Colorado regulations really kicked off in Jan. So we expect the impact from that to be in 2026, not really in 2025. But we did see some occupancy pressure in a couple of our markets. I mentioned Rochester as one, but I think we've turned the corner there, and we are -- we've kind of regained some of the occupancy back in Jan. So that's really what was driving the difference there.

[Operator Instructions]. Our next question is from Mason Guell from Baird.

It looks like your retention rate was down both sequentially and year-over-year, and you're forecasting it to be lower in 2026. Is this due to focusing more on rates instead of occupancy? Or what is driving the lower retention rate?

Yes. We've seen it come down a little bit. Overall, from a base case perspective for 2026, we're just being measured in what we expect from a retention standpoint. We expected the same level for 2025. We outperformed a little bit. We saw a little bit of a downtick in Q4. So we're just kind of building in a little bit of, I would say, we're just being measured about retention being a little conservative to start of the year because we want to see what happens in the first couple of quarters before we adjust our assumptions there.

Great. And then your outlook for value add, it seems like it's a wider range than you previously had in your outlook and the midpoint is expected to be lower than 2025. I guess why the wider range and what's driving the lower expected value add?

Sure, yes. So from a value-add perspective, we're kind of holding back projects for a couple of reasons. I mean, one, just being extremely selective in the projects we greenlight due to the higher cost of capital and execution risk. We want to see some improvement in the marketplace before we do that.

And secondly, we're holding back approvals due to the ongoing process of evaluating strategic alternatives. We would hate to begin a project that we cannot complete as a result of any decision that comes out of that review. So that's really driving the range there.

On the low end, we have about $2.5 million, which is really completion of projects we've started in prior years. So at the very least, we will be starting to put capital out later this year than we typically do. That would drive the range lower. That's what you're seeing in that range.

[Operator Instructions]. We have a follow-up question from Ami Probandt from UBS.

So a quick one on the consumer. You mentioned no changes in bad debt. But for some of the markets where you've had consistent CPI plus renewal growth. Is there any concern about affordability?

We're seeing great affordability. I think our rent to income has held steady, if not lowered slightly over the course of the year. Really, that's been driven by incomes increasing faster than we're seeing rent increases. So even in those markets like North Dakota, where we're getting really great renewal spreads and seeing positive new leasing, the incomes there are growing faster than the rent amount. So we've seen really strong income growth, wage growth across our markets.

Our next question is a follow-up question from Alexander Goldfarb from Piper Sandler.

Just quickly, a number of your markets, you guys always talk about the lack of labor, tight markets, heavy -- tough getting people to work on site. And yet I saw that your on-site comp was basically flat for the year. In fact, it was a little down in the fourth quarter. But I'm just curious what's going on there, just given, again, you guys have spoken about the tight labor markets in a number of the places that you operate.

I think just like we've seen, Alex, in our company, most of our vendors have also experienced less turnover. And so across our markets, there -- it is very strong employment -- very low unemployment. There's opposite of that. And -- but what we've seen is a lot less turnover, more steadiness in that employment.

And so in the past, when we've had vendors and they lose someone, it's very hard for them to replace it, but people are staying in the jobs longer. We saw that in our company as well. Tenure is up and turnover is lower. So I think that really helped us in 2025, and we saw that trend throughout the year.

Yes. And specifically in Q4, Alex, there was a health reserve adjustment that came through in the last quarter when we kind of adjust our health reserves based on the projections for actual expenses. So that also contributed to that comparison on a year-over-year basis.

Okay. And you expect that the low turnover and to continue in '26?

We are expecting low turnover for us, and I think that we've seen that extrapolated out with our vendors, just more consistency in who's coming on site and their ability to service our needs from a vendor perspective.

Our next question is a follow-up question from Brad Heffern from RBC Capital Markets.

On Minneapolis, you mentioned in the comments, of course, been the headlines, a lot of turmoil unrest over the past few months. Did leasing activity look any different as a result? I know it's not a heavy leasing time of year, but I'm curious if you saw an impact? And then do you -- are you expecting like any sort of longer-term impact? Or did your forecast for Minneapolis for this year change versus maybe what it would have been a few months ago?

Yes. We -- not that we've seen any real change. I think in late 2025, we kind of assessed the state of the immigration enforcement actions. What we saw in January was -- had started a few months before. So we have seen very little activity at our communities. We do monitor. We have a system where that's reported. And it's really limited to just a couple of communities where we've seen some interruption and that interruption would be from leasing all the way to resident skips. But so far, it's been really a minimal impact.

And I think the key thing, as you noted, is that there's very low turnover lease expirations in January and not a lot of people looking in January anyway. So hard to tell if there's any real impact. We would see that more once we have leasing season underway.

One of the things that you may have seen about Minnesota is that for the first time, we turned the corner where we actually had good migration into the state. I think we finally cracked that U-Haul list #14 of people moving here. And so that really did offset this year. Our population growth was offset by kind of the net of lack of immigrant migration in.

So we think demand is going to hold up in Minneapolis. And as Grant and Bhairav have noted, very little supply there and good projected growth across the board. So not much impact that we can see right now. And we're monitoring closely things like whether or not there'll be any moratoriums or on evictions or things like that. I think it's settled down, and it's a little bit of a wait and see on that front.

We currently have no further questions. So I will hand back to Anne for closing remarks.

Thank you. Well, thanks, everyone, for joining us today, and thank you again to our team for our tireless pursuit of better every day. We're going to have a great time at our leadership conference here in Vegas, and we look forward to talking with you all very soon. Have a great day.

This concludes today's Centerspace Q4 2025 Earnings Call. Thank you for joining. You may now disconnect your lines.

Hello, everyone, and welcome to the Centerspace Q3 2025 Earnings Call. My name is Ezra, and I will be your coordinator today. [Operator Instructions]

I will now hand over the call to Jose Klaetsch from Centerspace to begin.

Good morning, everyone. Centerspace Form 10-Q for the quarter ended September 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 are 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.

Thank you for joining us today. I'm here with our SVP of Investments and Capital Markets, Grant Campbell, who will provide some comments on the transaction market and our CFO, Bhairav Patel, who will discuss our guidance and balance sheet.

Centerspace's third quarter and year-to-date results are a testament to the health of our smaller regional markets, our operating platform, which helped us drive exceptional expense control and the strength of our team, which has remained focused, even in light of the significant sale and acquisition activity that we have undertaken.

For the third quarter, we reported 4.5% year-over-year growth in NOI within our same-store portfolio. This is being driven by solid increases in revenue, coupled with excellent execution on expenses. That said, due to timing adjustments related to our planned strategic transactions and associated G&A costs, we are lowering the midpoint of our core FFO guidance by $0.02 to $4.92.

Rob will further discuss the impact of our capital recycling activities when he speaks to our outlook. In June, we announced strategic initiatives that included acquisitions in both Colorado and Utah, and dispositions that reduced our portfolio concentration in Minnesota. We expect to close on the sale of 7 communities in the Minneapolis area yet this month, at which time we will have recycled approximately $212 million of capital and increase the quality and efficiency of our portfolio.

While our current cost of capital has impeded our ability to execute on external growth opportunities, we are committed to enhancing our market position and value for our shareholders. We have many levers we can use to do that, and we will remain disciplined and flexible.

Operationally, our portfolio continues to benefit from the stability of our Midwest markets. Like in 2024, these rates peaked in mid Q2 and remained positive for us, up 1.3% on a blended basis in the quarter and 1.6% year-to-date. Retention has exceeded our initial expectations hitting 60% in both of our peak leasing quarters.

In our largest market of Minneapolis, results benefited from the dual tailwinds of improved occupancy and increasing rental rates where we saw improvement in both new and renewal leases in the quarter, leading to blended increases of 2.1%.

In our other markets, North Dakota continues to be a standout with portfolio-leading blended increases of 5.2% in the quarter. Our Denver portfolio has been challenged by supply pressures and Q3 blended lease rates were down 3.5%. Digging more into Denver, we believe our experience there is truly the result of supply based on absorption data, 2025 has been Denver's second best year ever.

In our portfolio, we are seeing higher quoting of leads with our Q3 lead the lease of 275 basis points year-over-year and higher tenant incomes, which are up 7% versus last year as well as a 70 basis point improvement in our occupancy over Q2.

Some of that occupancy was driven by our decision to offer concessions in this market. We anticipate Denver will return to a more normal environment as we move through 2026, and we remain optimistic.

I'll ask Grant to comment on the state of the transaction market.

Thanks, Anne, and good morning, everyone. On a macro level, while we do not expect transaction volumes to return to 2021 and 2022 levels in the near term, this year has produced more transaction activity compared to the last 2 years.

We are seeing investors display conviction in placing capital, and this dynamic should drive value for our shareholders. Our recent transaction initiatives position the portfolio well for continued long-term growth. In May, we closed the acquisition of Sugar mount in Salt Lake City. And in July, we expanded our Fort Collins presence with the acquisition of Railway Flats in Loveland, Colorado, both of which were discussed in detail on last quarter's call.

In the case of Railway Flash, Fort Collins has been a target geography for us as evidenced by 2 of our recent investments occurring there. This market has displayed outperformance in annual rent growth, absorption and vacancy when compared to Metro Denver.

Within our portfolio, for Collins retention is 800 basis points ahead of Denver in the quarter and Fort Collins occupancy is our strongest year-over-year increase across our portfolio markets. To fund these acquisitions, we completed the sale of our St. Cloud, Minnesota portfolio in September for $124 million, exiting us from that market. Investor reception was strong with buyer interest ranging from individual community offers to portfolio offers.

This portfolio transaction of lower growth prospect communities priced at a mid-6% cap rate well inside of the mid-7% implied portfolio cap rate our stock trades at today. In addition, this week, we anticipate closing the sale of 7 communities in Minneapolis for $88.1 million. These 7 assets are smaller communities, totaling 679 homes. This transaction will price at a high 5% cap rate, again, well inside the implied portfolio cap rate we trade at today.

Upon completion of this sale, our remaining Minneapolis portfolio will be higher quality, increasingly suburban with 87% of NOI located in suburban submarkets and operationally more efficient with NOI margin for the Minneapolis portfolio increasing approximately 90 basis points as a result of the impending 7 community sale.

Recent comparable trades support low 5% to 5.75% cap rates for our remaining Minneapolis portfolio. Lastly, on the capital allocation front, we repurchased 63,000 shares in the quarter at an average price of $54.86 per share, driven by the current disconnect between public and private market valuation.

I'll now turn it over to Bhairav to discuss our financial results and guidance.

Thanks, Grant, and hello, everyone. Last night, we reported third quarter core FFO of $1.19 per diluted share driven by a 4.5% year-over-year increase in same-store NOI. This NOI growth was driven by a 2.4% increase in same-store revenues with revenue growth composed of a 20 basis point increase in occupancy and a 2.2% increase in average monthly revenue per occupied home.

On the same-store expense side, Q3 numbers were down 80 basis points year-over-year with controllable expenses up 3.4% and noncontrollables down 7.6% due to favorability in both property taxes and insurance.

Specifically on property taxes, we trued up our accrual based on recently received assessments of value for Colorado which were much lower than initially anticipated.

Turning to guidance. We now anticipate full year core FFO per diluted share of $4.88 to $4.96 per share with expectations for 2025 same-store NOI growth of 3% to 3.5%.

Within NOI, we expect same-store revenues to grow by 2% to 2.5% for the year. This reduction is driven mainly by the impact of concessionary activity in Denver. As a reminder, concessions are amortized over the lease term, and as such, a portion of the noncash amortization will be realized in the fourth quarter and in 2026.

Positive results and expenses are more than offsetting this with same-store expenses not expected to only increase by 75 basis points. Core FFO guidance is lower at the midpoint by $0.02 per share due to higher expectations for G&A and interest expense, offset by higher NOI with the timing of our dispositions putting a significant role in those differences.

On our balance sheet, our recent acquisition of Railway flats, which included the assumption of $76 million of long-dated low-rate debt at 3.26%, as well as the completed same cloud and planned Minneapolis dispositions has improved our debt profile. As these transactions conclude, we expect our net debt to EBITDA to move into a low 7x level by year-end with a pro forma debt profile with an average rate of 3.6% and average time to maturity of 7.2 years.

To conclude, this was a good quarter for Centerspace with our results demonstrating our commitments to both operational excellence and financial discipline and setting us up for the fourth quarter and into 2026.

The Operator, please open the line for questions.

[Operator Instructions]

Our first question comes from Brad Heffern with RBC Capital Markets.

On the repurchase, obviously, a very attractive use of capital right now, just given where the stock is trading, but it does compete against your goals of reducing leverage and increasing the float. So I'm just wondering how you think about the balance.

Yes. And thanks for the question. That's something we think about every day when we have the opportunity to buy back. And I think as you'll see in this quarter, it was a very small use of proceeds, just a few million dollars. Really, we outperformed on the St. Cloud sales from where we thought that, that would trade having gross purchase price of $124 million.

And so when we look at the allocation of capital there, we took some of those excess proceeds. We agree that this is a good use of capital and really sends another signal about where we think the value of the company is. And and our conviction about what we think it's worth.

Okay. Got it. And then for Minneapolis, you gave some numbers in the prepared comments seems like the market is showing some pretty strong signs of recovery. Can you just talk about your expectations going forward? Is that sort of a return to normalcy over the next couple of years? Or would you expect to see a period of above-average performance as sort of a catch-up?

I think we're seeing right now a return to normalcy in Minneapolis. And as we look towards next year, we are expecting that it's going to outperform its historical -- it hit its peak deliveries. We've had excellent absorption. And if we look at third-party data, CoStar, RealPage, Other, Minneapolis is really to be in that kind of top 5 of U.S. markets for rent growth headed into 2026.

So we are expecting a little bit of outperformance there next year. We're optimistic that we're going to be able to capture that strong rent growth and pulled our expenses in line to drive good NOI out of Minneapolis..

Our next question comes from John Kim with BMO Capital Markets.

This is Robin Haneland sitting in for John. It sounds like FEMSA revenue was mostly cap driven by Denver weakness. Could you maybe update us on what you're expecting for the earn-in for '26?

Yes, sure. From an earn-in perspective, we're sitting just a share above at the moment. And as you said, Robin, it captures some of the weakness in Denver, where we're seeing some heavy concessions. So at the moment, about 1%, maybe slightly above.

Got it. And then specifically on Denver, could you just elaborate on the concession levels and how long you expect them to persist?

Yes, certainly. So I'd say concession levels in Denver within our portfolio range from no concessions at a couple of our properties, where we have still seen strong occupancy and good absorption demand there. To 6 weeks free, maybe some waiving of application fees. On the market as a whole, it varies pretty widely. We're seeing up to 2 months free, 8 weeks free, 10 in some pretty isolated instances. But I'd say with respect to our portfolio's concession relative to the market, we're either at or a little bit under what market concessions are.

So the portfolio is taking a little bit of doing quite a little bit of recycling for callings Loveland seems to be targeted markets today. Can you just maybe give us how new leads performed in those 2 markets and how they differ from Denver fundamentals?

Yes. So we are looking at 4 columns, as you said, that is a target market for us. And what we're thinking about there is really just trying to get a little bit of scale in that market. We now have 2 assets in the Fort Collins area. And I'd say when we look at outperformance there relative to the Denver submarket, great commented a little on that, and I'm going to have him just take that and give you some stats on what the difference is there between Fort Collins and Denver.

Yes. I think that outperformance is a result of the supply dynamic deliveries peaked there in 2024 really concentrated in the second and third quarter. In terms of the total number of units delivered at the peak, it was measured at about 7% to 8% of total inventory.

So a more overall more muted supply profile. And then when you look at really any time period kind of over the last 3 years, you'll see rent growth that has outpaced Denver to the tune of about 450 basis points. And then also absorption or demand as a percent of inventory has been pretty robust as well, outperforming to the tune of 600 to 700 basis points compared to Denver over that same time period.

And lastly for me, how are you thinking about recycling the $88 million of sales expected across repurchases, acquisitions and debt.

Yes. Sorry, Robin, was that question about recycling with respect to the sales that are pending here in Minneapolis.

Yes.

Yes. So that we have already acquired that has already -- those proceeds have already been spoken for. And so that is part of the acquisitions that we did in Salt Lake City and Fort Collins. So these proceeds will be used solely to pay down the debt that we incurred to -- when we undertook those transactions.

Our next question comes from Jamie Feldman with Wells Fargo.

Great. So can you talk about your blended lease growth expectations for the fourth quarter? Where are you sending out new and renewal leases and then also just as we think about we're in the slowest time of the year, what do you think January, February could look like before we get back to spring leasing season?

Yes. So for the fourth quarter, renewals are out for the rest of the year. October renewals still in the high 2% to low 3% range. So that's pretty strong. But the new lease trade-outs remain negative. So there's no real material change in trend relative to Q3 that we've seen so far. But from an occupancy standpoint, it remains stable and the exposure is trending in the right direction.

Overall, for the portfolio, we're showing exposure in the low 5% range because it's a good place to be. As we think about Jan and Feb, it's hard to say. We still need to make it through the next couple of months from a concession standpoint in Denver. And if we see some reversal in concessions and stabilization in occupancy, which we are seeing, that will give us a better indication of where next year may start.

Okay. And then can you talk on the expense side, can you talk about the drivers of the higher G&A expense for the year and then also, just as we think about modeling '26, any specific line items that you think could be materially savings year-over-year or growth year-over-year? I know you mentioned the Colorado taxes? Just any onetime items we should be thinking about that could help or hurt?

Yes. So I'll take the G&A question first. There were some additional fees and legal expenses that we incurred in the quarter plus some true-ups, which had an impact on the Q3 numbers. More importantly, none of these are run rate items. So from a run rate perspective, our run rate remains in the $28 million range, in line with what we have previously disclosed.

With respect to Q3, there was a true-up in taxes, specifically in Colorado, which drove the reduction in expense there. We still expect some true-ups in Q4 in other jurisdictions. But overall, that should just bring taxes in about range growth year-over-year, which is pretty normalized. When we think about 2026, there aren't really particularly onetime items that come to mind. One of the expense items that in recent years has driven some volatility in insurance, we should be renewing it in the next couple of weeks.

And at this point, we don't really anticipate a big increase, which is a good outcome just given the 12% reduction we experienced last year. That has typically driven some volatility in year-over-year expense growth over the past couple of years, but that is expected to be a nonfactor when it comes to 2026. So there's no real particular items that come to mind with these updates to taxes. It just seems like taxes would be in a normalized year-over-year pattern.

Okay. And since you mentioned insurance, are you able to ballpark or just give us a range on how they may look across the industry next year? I know you probably don't want to talk about your specifically at?

Yes. No, I mean I think a lot of it depends on when your renewal cycle falls. I mean we are in the process of having those discussions. And -- over the past couple of months, we've had several discussions with the hope that it remains in the low single digits, and that's where it's trending. It might be a little bit favorable, but too early to tell even though it's just a couple of weeks away. But I think overall, it's a huge factor. The renewal cycle with us being at the fag end of the at the year, there might be some activity that drives losses, which we haven't really seen this year.

So we're expecting a favorable outcome this year, which, as I said, is a good follow-up to last year's 12% reduction.

Our next question comes from Connor Mitchell with Piper Sandler.

And you mentioned -- you had some okay commentary on Denver and the supply drag and then grant on some of your kind of focus on the Boulder and Fort Collins and how that's kind of comparing in better rent growth to Denver. I guess just kind of drilling down on both of those.

Can you guys maybe just give us an idea of when you really see Denver, like turning the corner for supply, whether it's earlier in the year or later in the year, it seems like there's kind of more of a drag than we had expected earlier this year into '26. And then the demand around that as well, it sounds like the the income is still growing for Denver and the Colorado market, but maybe any other influences or factors that are really giving you guys some good conviction on Denver and then also the comparison to how you guys want to keep scaling up in Boulder and how you kind of compare those 2 markets within the same state.

Yes. Connor, on the supply front in Denver, obviously, it experienced its peak delivery levels later in the cycle relative to many institutional markets. We look ahead, we really think demand will start to outpace supply in the back half of 2026, and that will certainly carry forward into 2027.

So late '26 into is when we expect demand to start to exceed supply. From a scaling perspective, obviously, Boulder Fort Collins, that is a smaller geographic market relative to the size of Denver. We really like our position in that market with 3 assets now totaling about 980 homes. We do think there could be additional opportunity there, but we're going to be selective and we're going to be targeted in our approach. As it relates to that market. We do have desires to scale other regions within the portfolio, including Salt Lake City, which is a new market for us.

So for Collins, certainly happy with the performance. We'll continue to look at opportunities there, but we'll be targeted in that approach. And then supply in Fort Collins, as I touched on earlier, certainly a more muted supply profile, peak in second and third quarter of 2024. That continued demand and absorption that I alluded to earlier is really creating a strong backdrop for fundamentals right now.

Okay. And then maybe just following that line of thinking as well. You guys entered Salt Lake and you're scaling up in Fort Collins, Boulder and Loveland. And then I know that you guys have mentioned just sinking of other markets for new entries as well. Maybe if you could just stack rank that as those 3 options for the capital recycling program and then thinking of expanding presence in the current market, what's that you're expanding it for College Boulder and then or even entering a new market that's been discussed.

Our priority in that ranking, if you will, would be Salt Lake City. We do desire to scale that market. That is important to us, and we're highly focused on that. So that would be at the top of the list with the caveat that it has to be the right opportunity. We're not going to buy a product there just to fill out the pie chart, if you will, it has to make sense, be the right opportunity, and we're going to continue to seek those.

In terms of new markets, we're always thinking about markets internally. We're always having those discussions we'll continue to do that and more to come from our perspective there.

Okay. I appreciate that. And then maybe just turning to the expense side. I think you guys are pretty well set up on Rob. You've gone through that the past couple of years. And then just kind of following the line of question earlier. Is there anything else that needs to be done in setting up rubs or any other expenses as we kind of head into winter? Or should we be thinking about with the winter months coming up.

Yes. I think we are really well set up. As you said, we had deployed rugs across the portfolio that's fully deployed -- all of our assets are on rubs to the extent they can. One thing to be thinking about, which isn't unique to us, but as an industry is that there has been some legislation in Colorado that will limit our ability to pass on RUB that will take effect January 1. And so that will have some negative impact, and we are working right now on what the steps we're going to take so that we can make sure that those are built directly to tenants rather than through rub. So there may be some disruption there. I think that will be market-wide in Denver as we look towards 2026.

Next question comes from Robert Stevenson from Janney.

You guys lowered the value-add expenditure guidance by $2 million at the midpoint -- was that due to the Minnesota sales? Or did you pull back on redevelopment within the core portfolio?

Rob. No, I think that was more timing driven than anything else. It wasn't really truly driven by the Minneapolis portfolio because we haven't really earmarked much capital to be deployed at those assets, knowing that we were going to dispose them. So it was -- it's more timing driven than anything else that's thematic.

Okay. How aggressive are you in starting new projects today given the status of your various markets operationally?.

I'd say right now, we're very focused on things that can enhance the portfolio overall. So broad-based ways to save water, electricity, value-add enhancements that can drive operating expense reductions, such as our smart rent implementation, where we installed leak detectors and keyless entries. But we're really trying to be mindful of our cost of capital that is driving up the return that we need to see on investments.

And then also with the softer market, we really wanted to have conviction around getting the premiums that we need in order to get to the hurdles that we want to see given our cost of capital and the return expected. So we pulled back a little bit on things like unit renovations and common area renovations, but we are still looking at broader portfolio-wide initiatives that can drive in particular operating expense reduction.

Okay. And then last one for me. Bhairav, when does the $93 million of secured debt mature in 2026? Is that early in the year, late in the year?

I think it's in the first half, some in the first quarter and some in the second quarter. So it's all done in the first half or by June.

Okay. And what is your best option for debt today to refinance? And where is that pricing?

Yes. I mean what's maturing is secured debt, that's available in the low 5% range can be driven a little bit lower based on leverage. So that's an option. The other option we have is following the pay down in the line of credit. Once we close the dispositions, we'll have a lot of capacity on the line of credit. One of the reasons we expanded the line of credit was to give us flexibility just given the disconnect between short-term rates and long-term rates. So that's another source of potential funding that allows us to keep the spread low and also pick up maybe a few basis points on the spread between short-term rates and long-term rates.

Overall, the availability of debt capital.It's a pretty favorable environment from a debt capital standpoint for the sector. So there's multiple sources of debt, including bank debt if needed. So we have a range of options that we can utilize to refinance the upcoming maturities.

Okay. Appreciate the time this morning.

Our next question comes from Ami Probandt with UBS.

The revenue growth leaders have been Omaha and North Dakota. And while those remained strong in the quarter, the same-store revenue growth is decelerating. So I'm wondering if there's anything to point to there that's leading to a bit lower growth.

Yes, Amy, it's really Denver. It's really the offset from Denver having still decelerating a little bit. and having negative new lease growth. So as strong as North Dakota and Omaha, they're smaller portions of our portfolio and really that deceleration overall in projected revenue growth for the year is because of Denver.

Okay. And is there anything to call out for Omaha or North Dakota specifically that they're also decelerating?

No, I think just see seasonality. We're getting into the winter months. We have fewer expirations. There is less demand as we move through the quarter. And we did see that peak leasing has really moved from what was the end of June, July historically into May. So that seasonality comes down a little bit faster during the year.

We see really strong renewals in both of those regions. So that is great to see and will help keep that revenue boosted.

Got it. And then I guess on that note, are you doing any lease expiration management to try to shift more of your leases towards more of that May peak leasing season, especially as opposed to the winter where there's not a ton of demand in those upper Midwest markets?

Yes, always. So we are constantly watching that lease expiration profile. It's a very large part of our revenue management as we look to see what the most attractive lease term for us is as well as where we can drive pricing those lease terms. So we have been consciously working on maintaining that -- you may recall, Amy, several years ago, we kind of completely redid the lease expiration profile after not having managed it to match the demand cycle, and that's been a constant focus for us these past few years.

Got it. And then last 1 for me. You've seen a pretty consistent trend of same-store revenue per home growth being above same-store rent growth. Is that mainly driven by -- or is there something else that's causing that spread to remain elevated? And do you think it's sustainable?

Yes. It is mostly driven by Rob. We also have things like pet rents -- and that is sustainable. That has grown over time, where we see more and more people having that ancillary items on their lease? And then Bhairav, do you want to comment on that as well?

Yes. And when you kind of think about it specifically on a quarter-to-quarter basis, there can be some timing volatility. But overall, as Anne mentioned, it's really some of the other line items from a revenue standpoint.

Our next question comes from Rich Anderson with Cantor Fitzgerald.

Just a couple of really quick modeling questions first. So NAREIT FFO went up $0.02. Core FFO went down $0.02. Can you just -- what's the $0.04 swing factor in the normalized lines?

Yes. I mean I can look into it further. But overall, from a core FFO standpoint, the key driver is really the G&A spike that we saw in Q3 that kind of stays with us in Q4. So that's really what's driving the core FFO and I can look into it further and tell you what the difference is between the two.

Okay. And then in terms of expense growth, you talked a lot about tax true-ups and whatnot. But if I'm doing this right, the 4Q number is sort of very impressive from a year-over-year basis, something like 4% reduction in same-store expenses. Is that in the ballpark that what you're seeing? Or are we doing something wrong here?

Yes. So that's in the ballpark. One of the reasons is it's a favorable comp for us this quarter because we had some R&M expenses last year. that were pushed into Q4 and some -- so that was really driving the R&M expense higher last year. So it is a favorable comp. There is some benefit from the valuations that we received in Colorado, plus we expect some additional benefit in some of the other jurisdictions.

So when you kind of put it all together, -- that is what's creating that year-over-year number that you're seeing is in the ballpark that we have as well.

Okay. Great. All right. Now some real questions. So you've had some success in St. Cloud, as you mentioned, and you did better than you thought. -- still the negative spread between sales and purchases some 150, 200 basis points. Now as you look ahead into 2026 you're not going to give me guidance, I don't think, but do you think that, that spread will hold as you continue to pursue this trade strategy? Or is there something about the environment or where you might sell and where you might buy where that spread between buys and sells might change in one direction or another?

Yes, I'll start, and then I'll ask Grant to comment on where you think cap rates are and going into 2026 for the markets that we're targeting. I don't think there's going to be a big change. We haven't seen much volatility in cap rates overall, either in the regional markets where we may look to sell or the markets that we're buying in. With respect to the current portfolio and where we might target sales, where we may see some difference is if we do have the experience, particularly in Minneapolis, that we're projecting into 2026 where they're well into the recovery demand and absorption has been really strong, and we're expecting strong rent growth.

We could see the cap rates on the sales on any sales in Minneapolis and even places like North Dakota, where we have had a really good experience, and they've now had several years of very strong growth. We could see those come in a little bit. And then Grant, what do you think about any movements on target market cap rates?

Yes. Target market cap rates have been pretty constant here recently, well-located core communities in Denver, pricing in the high 4s, Salt Lake City, mid- to high 4s. Core communities in Minneapolis pricing in the low 5s. And then when you slide into the Class B space, well located, Minneapolis or Denver B is generally, call it, 5.5 to 5 in 3 quarters. We don't see -- as we sit today, any significant change to that profile. I think one theme that we have seen as we've explored sales in markets like St. Cloud or talk to others is there really is a deep bid right now for the secondary and tertiary market products.

So there's a lot of capital desiring to be in those locations. They can obtain financing that is attractive to them. So we've really seen a strong bid and strong pricing in those markets. That's something we are monitoring as we think about our future actions where were those cap rates settle.

We're clearly focused on what's that differential and what does it do to our earnings and the immediate future of our earnings. But we're really trying to balance that with what is the best growth profile for the company longer term and what provides us with the liquidity we need that's demanded by public market investors and where we can take the company from a growth perspective over a longer period of time.

Great. Okay. And then on Denver, you mentioned maybe fortunate to start to turn in 2027. It is a big market for you, of course. Have you given any thought to moving around within Denver? Or do you think that the exposure to Denver will change as your -- as the world around it changes? And the reason I ask is you could probably get some decent cap rates there if you were to sell some assets and reduce your exposure to Denver, I don't know that, that's your plan.

But I'm just wondering if you're having any change of thought about your exposure to Denver and if there might be any transaction activity buys or cells, maybe you get in front of what will be a recovery eventually. I'm just curing if you have any change of heart around Denver and your process in the transaction market.

We like our position in Denver. We like how our portfolio lays out geographically as well as the different product type offerings that we have within our portfolio. So I would say no concrete plans to significantly change that composition via transactions. With that said, we always pick up the phone if people reach out and have an idea or a thought and we'll continue to do that. So if somebody reaches out regarding one of our Denver communities, we will listen to them. But overall, we like our position.

I think more so the exposure level that Denver provides within our portfolio will change as the world around it, as you alluded to, pages here over the course of 2026 and 2027.

Great. And last for me, leverage ticks down to low 7s after you're done with everything that's on the plate right now. Do you foresee a 6 handle at some point in your future in 2026? Or should we be assuming kind of a 7-ish type of leverage number for you guys -- for the foreseeable future?

Yes. I mean the 6 comes through some natural deleveraging as earnings grow. Obviously, as you know, there's some portfolio repositioning that we've been doing. So things may be volatile for a while, as you saw this year. But from our perspective, the focus always remains on managing it at -- in the low 7s at the moment and then learning a tick down with some natural deleveraging to earnings.

Our next question comes from Mason Guell with Baird.

Which of your smaller markets do you expect to outperform next year? And then when do you expect your larger markets to take lead in the portfolio over your smaller markets?

Yes. I think we really have a lot of confidence that North Dakota is going to continue to perform. It's been outperforming our other markets. We see that continuing into 2026. I think Minneapolis is going to be close on its tail next year with some really good tailwinds we have here, particularly with respect to how much demand we've seen in this market.

And then I think it's 2027, as Graham kind of alluded to before, we're really seeing the dearth of new supply coming online that can impact growth rates overall. So next year, I keep a close eye on North Dakota again. And then into 2027, we might see Denver and Minneapolis really start to outpace that.

Great. And can you talk about what drove the [indiscernible] guidance?

I'm sorry, Mason. Can you repeat that question?

Yes. Just could you talk about what drove the lower disposition proceeds guidance?

Yes. Mason, from overall, the disposition proceeds when you compare it for all the assets were in line. We outperformed in St. Cloud a little bit. Minneapolis came in a little bit below what we had initially expected. That is mostly driven by the fact that the portfolio in Minneapolis is a little disparate. It's a collection of different kind of assets. And we were prioritizing execution there. through the sale to a single bidder, which helps us from a 1031 standpoint, which was an integral part of this overall recycling. -- transaction.

So a bunch of different factors led us to prioritize execution we're just optimizing the proceeds given everything that was incorporated within the transaction.

[Operator Instructions]

Our next question comes from Buck Horne with Raymond James.

Just a couple of quick ones for me. it sounds like you're doing a great job on resident retention in this environment and managing through the supply and sounds like there's not a lot of movement from existing tenants. I'm just wondering though, to what extent -- I mean, there's been a lot of talk about the weakening of the job market, particularly for young adults, recent college graduates just kind of financial pressures that are building on kind of the younger cohort.

Are you seeing any signs of that in your recent new lease traffic? Or any thought -- is there any degradation in the renter tenant profiles? Or what are you kind of seeing in terms of front door leasing demand?

Yes. This is a great question. We haven't seen anything now. It's a little hard to bifurcate. So a couple of things that we have seen. -- that we mentioned. -- incomes continue to rise. So -- and rent-to-income ratios are staying pretty steady. I think we're at 22%. So the -- our bad debt has held really low, which is great. So we feel great about the health of the renter. Retention is higher, as you mentioned, the average age of our resident has ticked up. And also the average amount of time that their tenure with us overall is ticking up.

So it's hard to say if you look at that age is going up. Is that an indication that we're not seeing as many younger renters coming to the market? Maybe it could also just be a factor of the not as many people able to buy homes at the same age as they historically have. But we're not seeing any degradation in traffic overall other than just in Denver, the market the traffic has been a little softer in the market.

But it has no indication that we're -- there hasn't been a big spike in age of resonance showing that we are getting that younger, younger renters still in -- we haven't seen a change in the average residents per household either. So there's really no evidence that people are starting to double up. If anything, buck, it may bode well for us if they're moving home for their parents, that will create future demand for us.

Right.Right. No, I appreciate the color there. That's very helpful. And just last one, following up the value-add CapEx shift. I mean, would that -- it sounds like the hurdle rate is getting a little higher, would you consider diverting some of those previously budgeted proceeds to share repurchases in the year-end?

Yes. I think when I -- the levers that we have to pull would be not only share repurchases, but debt reduction. So we're looking at every option. It's too small amount to really allocate in a meaningful way to new acquisitions, but definitely look at debt reduction and share repurchases as alternative uses of that capital.

Thank you very much. We currently have no further questions, so I'll hand back over to Anne for any closing remarks.

Yes. Thanks, everyone, for joining us today. We'd be remiss if we didn't acknowledge again our team who did such a great job this quarter and we are going to continue into 2026. Given the environment, we think we're putting up great results for our shareholders, and we're going to keep that at the forefront of everything we do. Have a great day.

Thank you very much, Anne thank you, everyone, for joining. That concludes today's call. You may now disconnect your lines.

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.

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 cenespacehomes.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 CenterState's President and CEO, Anne Olson, 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, 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. 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 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 Center space.

Grant, I'll turn it over to you for a discussion of the transactions and current transaction market.

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 Sugar mat, 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 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 sign 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.

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 controller 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 charges 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. As Anne alluded to in our remarks, we have maintained our focus and discipline on managing expenses and not expect nominal growth in control 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, that 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 the 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 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.

Operator, please open the line for questions.

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

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?

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.

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

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.

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. .

Okay. And then just 1 more little accounting thing, Bhairav, can you just give the net impact of the acquisition and disposition activity on the guidance?

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 is 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. .

The next question comes from Jamie Feldman with Wells Fargo.

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?

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.

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?

Jamie, this is Grant. From a bed 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.

Okay. And this is on what forward NOI or trailing NOI these cap rates?

That would be on pro forma year 1.

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?

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 5 there look 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.

The next question comes from Connor Mitchell with Piper Sandler.

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. .

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 48. In the case of Sugar mount and Salt Lake City, 46547. 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.

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.

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 1 of those drives movement into territory where we think that's really a cash flow accretive acquisition.

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 Tecate 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 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 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.

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, had 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.

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 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 focused on scaling in Salt Lake City.

The next question comes from Rob Stevenson with Janie.

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?

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 and the high 2s, Rochester Nebraska in that same range, high 2s, low [indiscernible] not a huge impact, but some.

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?

Yes, well we factored into our guidance, which is about $11.75 it 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 cost is going to outweigh those increases. So yes, we expect from a CapEx perspective for the portfolio to be more efficient going forward.

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?

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.

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?

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

The next question comes from Ari Robin with UBS.

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?

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 to 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.

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 this media decision to not push us hard to really boost occupancy?

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 Brad 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.

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?

Amy, I would say a couple of thoughts. One, Sugar mount 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.

The next question comes from Mason Guell with Baird.

Good morning, everyone. Just curious what you're sending renewals about today for August and September and then maybe what you expect blended rates to be in the second half of the year.

So, 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 Ann 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. .

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?

Yes. So certainly for the second quarter, we had about to 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 Contorion 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.

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

Great. So I had some back and forth with some investors during the call, so I figured we just asked 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.

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.

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?

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. SP379294617 Okay. All right.

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.

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. .

That will conclude the Centerspace Second Quarter 2021 Earnings Call. Thank you so much for your participation. You may now disconnect your lines.