Executive Summary

Q2 delivered stable operations: Core FFO per diluted share was $1.28 (+0.8% YoY), same‑store NOI grew 2.9% YoY, and revenue rose 5.4% to $68.5m, underpinned by 96.1% occupancy and disciplined expense control .
Guidance mix-shift: Same‑store NOI guidance was raised to 2.5%–3.5% (from 1.25%–3.25%), same‑store expenses lowered to 1.0%–2.5% (from 2.0%–4.0%), while Core FFO per share midpoint fell $0.04 to $4.94 due to near‑term dilution from capital recycling (Minnesota dispositions offset by Colorado/Utah acquisitions) .
Portfolio repositioning advancing: Closed Sugarmont (Salt Lake City, 341 homes, $149.0m) and Railway Flats (Loveland, 420 homes, $132.2m including $76.5m debt at 3.26%); marketing sale of 12 Minnesota communities with expected proceeds of $210–$230m and pro forma margin uplift (65%–70% on acquisitions vs low‑50% on dispositions) .
Balance sheet and capital allocation: Expanded revolver capacity by $150m; pro forma weighted average debt rate ~3.6% and maturity ~7.3 years; net debt/EBITDA expected to revert to low–mid‑7x by year‑end; Board authorized up to $100m share repurchases through July 2026—an incremental stock‑reaction catalyst alongside asset sale execution .
Market dynamics: Denver remains a headwind (concessions and recent supply), but Midwest and tertiary markets (ND, Omaha, Rochester) show strong rent growth; leasing spreads blended +2.4% with renewals +2.6% in Q2 .

What Went Well and What Went Wrong

What Went Well

Same‑store execution: Revenues +2.7% YoY; NOI +2.9% YoY, with 96.1% occupancy and retention of 60.2% supporting earnings quality .
Strategic acquisitions: Entry into Salt Lake City (Sugarmont, off‑market) and scale in Colorado (Railway Flats with HUD debt at 3.26%) to improve portfolio quality and long‑term growth profile; “year one NOI margins ... between 65% and 70%” on acquisitions .
Expense discipline: Lowered full‑year controllable expense expectations; CFO: “now expect nominal growth in controllable expenses ... leading to total same store expense growth of 1% to 2.5%” and raised NOI growth midpoint by 70 bps .

Management quotes:

“Our Midwest focused markets continue to show their stability and consistency.”
“Leasing spreads ... second quarter same store lease growth of 2.4% ... new lease growth of 2.1% and renewal growth of 2.6%.”
“We added to our balance sheet flexibility ... expanding our line of credit capacity by $150,000,000.”

What Went Wrong

Denver softness: “Spike in concessions ... impacted occupancy as well as rent growth” with renewals “just above flat” (~0.6%); blended spreads diluted ~20–30 bps portfolio‑wide .
GAAP impairment charge: Booked $14.5m impairment tied to held‑for‑sale properties (excluded from non‑GAAP), contributing to diluted EPS of -$0.87 for Q2 .
Near‑term dilution from recycling: CFO estimated $0.06–$0.08 dilution in 2025 from timing/friction and proceeds holdback to complete reverse 1031, with full‑year annualized dilution ~$0.15 until portfolio fully reset .

Financial Results

Quarterly Comparatives vs Prior Periods

Metric	Q4 2024 (oldest)	Q1 2025	Q2 2025 (newest)
Revenue ($USD Millions)	$66.41	$67.09	$68.55
GAAP Diluted EPS	$(0.31)	$(0.22)	$(0.87)
FFO per Diluted Share	$1.09	$1.17	$1.24
Core FFO per Diluted Share	$1.21	$1.21	$1.28
Same‑Store NOI Growth % (YoY)	2.1%	2.1%	2.9%
Weighted Avg Occupancy % (Same‑Store)	95.5%	95.8%	96.1%

Leasing KPIs (Same‑Store)

KPI	Q2 2024 (oldest)	Q1 2025	Q2 2025 (newest)
New Lease Rate Growth %	3.2%	(1.2)%	2.1%
Renewal Lease Rate Growth %	3.5%	3.4%	2.6%
Blended Lease Rate Growth %	3.4%	0.6%	2.4%
Retention Rate %	59.1%	49.2%	60.2%

Segment Breakdown (Q2 2025 Same‑Store)

Region	Revenue ($000)	Expenses ($000)	NOI ($000)	Occupancy %
Denver, CO	$11,773	$4,432	$7,341	93.8%
Minneapolis, MN	$19,586	$7,791	$11,795	96.6%
Boulder/Ft. Collins, CO	$3,472	$1,162	$2,310	95.6%
North Dakota	$7,783	$2,746	$5,037	97.2%
Omaha, NE	$3,771	$1,499	$2,272	94.2%
Rochester, MN	$6,271	$2,319	$3,952	97.6%
Other Mountain West	$5,417	$1,931	$3,486	97.0%
Total	$58,073	$21,880	$36,193	96.1%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Same‑Store Revenue Growth %	FY 2025	1.5%–3.5%	2.0%–3.0%	Raised midpoint
Same‑Store Expenses Growth %	FY 2025	2.0%–4.0%	1.0%–2.5%	Lowered
Same‑Store NOI Growth %	FY 2025	1.25%–3.25%	2.5%–3.5%	Raised
FFO per Share – diluted ($)	FY 2025	$4.73–$4.97	$4.70–$4.83	Lowered
Core FFO per Share – diluted ($)	FY 2025	$4.86–$5.10	$4.88–$5.00	Narrowed; midpoint -$0.04 (CFO)
Net (Income)/Loss per Share – diluted ($)	FY 2025	$(0.71)–$(0.45)	$2.50–$2.76	Raised (expected gain on sale)
Disposition Proceeds ($m)	FY 2025	N/A	$210–$230	Added
Recurring CapEx per Home ($)	FY 2025	$1,125–$1,175	$1,150–$1,200	Raised modestly
Dividend per quarter ($)	Current run‑rate	$0.77	$0.77	Maintained
Share Repurchase Authorization ($m)	Through 7/31/2026	N/A	Up to $100	New program

Why: Expense control and stable occupancy underpin higher NOI, while near‑term dilution stems from timing/friction in recycling (reverse 1031, dispositions closing in late Q3/Q4) .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024 and Q1 2025)	Current Period (Q2 2025)	Trend
Capital recycling & market entry	Emphasis on balance sheet strength; reaffirmed 2025 guidance; discussed private vs public market disconnect; targeting Mountain West scale	Executed entry into Salt Lake City; acquired Railway Flats; marketing 12 MN assets; expect $210–$230m proceeds; margins accretive on acquisitions	Accelerating execution
Denver supply/concessions	Anticipated improvement as supply peaks; April new lease spread improved ~200–270 bps vs March	Concessions spiked late Q2; “turning the corner” in July; renewals ~+0.6%; portfolio impact 20–30 bps on blended spreads	Headwinds easing slowly
Midwest/Tertiary strength	North Dakota/Omaha strong spreads; Minneapolis ahead of portfolio average	ND and Omaha ~6%–7% rent growth; Minneapolis blended spreads +2.7% in Q2	Persistently strong
Leverage & balance sheet	Weighted avg debt cost ~3.6%; maturity ~5.4 years; >$223m liquidity	Expanded LOC +$150m; pro forma rate ~3.6%, maturity ~7.3 years; net debt/EBITDA to low–mid‑7x by YE	Flexibility increased
Buybacks vs acquisitions	Considered opportunistically; focus on strategic growth	Board authorized up to $100m repurchases; management weighing debt paydown vs buybacks vs M&A post‑blackout	Optionality added
Macro/regulatory (tariffs/agri)	Q&A: Minimal direct impact on employment centers; healthcare/education drive ND/NE metros	No new regulatory headwinds noted; transaction market “thawing” to pre‑COVID cadence	Neutral to slightly constructive

Management Commentary

Strategy: “...accelerating capital recycling efforts ... improving portfolio metrics, increasing exposure to institutional markets, and enhancing the overall growth profile while leveraging the stability of our strong Midwest portfolio.”
Operations: “Absorption remains at or near record levels ... 96.1% occupancy ... retention 60.2% ... exceptional expense control.”
Transactions: “Salt Lake City ... second highest level of momentum ... Railway Flats ... assumption of $76,000,000 ... at 3.26%.”
Guidance: “Core FFO per share of $4.88 to $5.00 ... NOI growth of 2.5% to 3.5% ... midpoint of $4.94 represents a 1.2% increase over the prior year.”
Balance sheet: “Expanded our line of credit capacity by $150,000,000 ... expect our net debt to EBITDA to trend back down to the low to mid seven times level by year end.”

Q&A Highlights

Guardrails on dilution: Management targets YOY earnings growth while accept limited dilution to advance market repositioning; balance sheet discipline with match‑funding dispositions to reduce leverage .
Disposition timing and pricing: St. Cloud expected close in September; Minneapolis in November; cap rates mid‑6% (St. Cloud) and mid‑5% (Minneapolis) on pro forma year‑one NOI; aggregate sale price indications support $210–$230m .
Denver update: Concessions elevated late Q2 but reversing; blended spreads across portfolio remain healthy; renewal growth in Denver ~+0.6%; turn positive towards year‑end as supply eases .
Renewal/new rates outlook: Renewals in “high twos to close to 3%” into October; H2 blended trade‑outs expected in line with H1; tertiary markets in high single‑digit rent growth .
Buyback vs growth: Management actively evaluating buybacks post‑blackout; weighing debt paydown/acquisitions; authorized up to $100m repurchases .

Estimates Context

Metric	Consensus (Q2 2025)	Actual (Q2 2025)	Surprise
Revenue ($USD)	$68.05m*	$68.55m	+$0.50m (beat)
FFO / Share (REIT)	$1.258*	$1.24	-$0.018 (slight miss vs FFO)
Core FFO / Share	N/A*	$1.28	N/A
GAAP Primary EPS	$(0.127)*	$(0.87)	Larger loss (EPS less relevant for REITs)
Target Price (Mean)	$66.45*	N/A	Informational only
Estimates Count (#)	Rev: 6, EPS: 3	N/A	Informational only

Values marked with * retrieved from S&P Global.

Implications: Revenue modestly beat; Core FFO aligned with internal cadence; NAREIT FFO slightly below consensus; GAAP EPS miss driven by non‑cash impairment, highlighting FFO as primary REIT performance metric .

Key Takeaways for Investors

Execution quality: Strong occupancy and retention with expense control drove same‑store NOI outperformance; Core FFO cadence intact despite recycling friction .
Repositioning catalyst: Successful Utah/Colorado acquisitions and Minnesota exits should lift portfolio margins and institutional exposure; watch September/November closing milestones .
Near‑term dilution priced: CFO quantified ~$0.06–$0.08 2025 dilution, ~$0.15 annualized until recycling completes; expect normalization as sales close and LOC paid down .
Balance sheet flexibility: Expanded revolver, low effective debt cost, long maturities; net debt/EBITDA targeted low–mid‑7x by YE—reduces risk into H2 .
Buyback optionality: New $100m authorization offers counter‑cyclical capital deployment lever amid private/public valuation gap—monitor post‑blackout activity .
Market mix: Midwest strength offsets Denver weakness near‑term; 2026–2027 job growth and supply taper in Denver are potential tailwinds for pricing power recovery .
Dividends sustained: $0.77 quarterly distribution with payout ~60% of Core FFO in Q2—supports income profile while pursuing growth and recycling .

CENTERSPACE (CSR)·Q2 2025 Earnings Summary