Centerspace(CSR) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Earnings Release Centerspace reported Q2 2025 financial results, including a net loss, FFO growth, updated 2025 outlook, and recent acquisitions Financial & Operating Highlights Centerspace reported a Q2 2025 net loss of $0.87 per diluted share, with Core FFO growth and improved same-store NOI and occupancy Q2 2025 Key Financial Metrics (Per Share) | Per Common Share | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net loss - diluted | $(0.87) | $(0.19) | | FFO - diluted | $1.24 | $1.23 | | Core FFO - diluted | $1.28 | $1.27 | Q2 2025 Same-Store Performance vs. Prior Periods | Same-Store Results | Q2 2025 vs. Q2 2024 | Q2 2025 vs. Q1 2025 | | :--- | :--- | :--- | | Revenues | 2.7% | 1.1% | | Expenses | 2.4% | (1.3)% | | Net Operating Income (NOI) | 2.9% | 2.6% | Q2 2025 Same-Store Operating Metrics | Same-Store Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Weighted Average Occupancy | 96.1% | 95.9% | 95.5% | | Blended Lease Rate Growth | 2.4% | 0.6% | 3.4% | | Retention Rate | 60.2% | 49.2% | 59.1% | - Acquired Sugarmont, the company's first apartment community in Salt Lake City, Utah, for an aggregate purchase price of $149.0 million[5] - Total revenue for Q2 2025 increased by 5.4% to $68.5 million, compared to $65.0 million for Q2 2024[5] Balance Sheet Centerspace maintained $206.3 million in total liquidity at Q2 2025, primarily from available credit lines and cash - The company had $206.3 million of total liquidity, consisting of $194.0 million available under lines of credit and $12.4 million in cash and cash equivalents[7] Updated 2025 Financial Outlook Centerspace updated its 2025 outlook, raising Same-Store NOI growth guidance and adjusting Core FFO per diluted share forecast Updated 2025 Financial Outlook | Metric | Previous Outlook for 2025 | Updated Outlook for 2025 | | :--- | :--- | :--- | | Net loss per Share – diluted | $(0.71) - $(0.45) | $2.50 - $2.76 | | Same-Store Revenue | 1.50% - 3.50% | 2.00% - 3.00% | | Same-Store Expenses | 2.00% - 4.00% | 1.00% - 2.50% | | Same-Store NOI | 1.25% - 3.25% | 2.50% - 3.50% | | FFO per Share – diluted | $4.73 - $4.97 | $4.70 - $4.83 | | Core FFO per Share – diluted | $4.86 - $5.10 | $4.88 - $5.00 | - Additional assumptions for the 2025 outlook include proceeds from dispositions of $210.0 million to $230.0 million and value-add expenditures of $16.0 million to $18.0 million[13] Subsequent Events Post-quarter, Centerspace acquired Railway Flats, a 420-home apartment community in Loveland, CO, for $132.2 million - On July 29, 2025, the company acquired Railway Flats in Loveland, CO, for $132.2 million, which included assuming $76.5 million of mortgage debt[10] Supplemental Financial and Operating Data This section provides detailed financial statements, non-GAAP reconciliations, debt analysis, and portfolio performance metrics Common Share Data This section details Centerspace's common share performance and capitalization, including closing price, dividend yield, and market value Common Share Data Comparison | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Closing price at end of quarter | $60.19 | $67.63 | | Closing price dividend yield – annualized | 5.1% | 4.4% | | Total closing common shares, LP units, and Series E units (thousands) | 19,623 | 17,938 | | Closing market value (thousands) | $1,181,108 | $1,213,147 | Key Financial Data This section presents Centerspace's Condensed Consolidated Statements of Operations and Balance Sheets, detailing financial performance and position Condensed Consolidated Statements of Operations Q2 2025 revenue increased to $68.5 million, but a $14.5 million impairment charge led to a $16.8 million net loss Q2 2025 Statement of Operations Summary (in thousands) | Line Item | Three Months Ended 6/30/2025 | Three Months Ended 6/30/2024 | | :--- | :--- | :--- | | REVENUE | $68,549 | $65,043 | | Impairment of real estate investments | $14,543 | $— | | TOTAL EXPENSES | $75,345 | $57,851 | | Operating income (loss) | $(6,796) | $7,192 | | NET LOSS | $(16,785) | $(1,663) | | Net loss per common share - diluted | $(0.87) | $(0.19) | Condensed Consolidated Balance Sheets As of June 30, 2025, Centerspace reported $2.01 billion in total assets and $1.17 billion in total liabilities, with $137.4 million in assets held for sale Balance Sheet Summary (in thousands) | Line Item | As of 6/30/2025 | As of 12/31/2024 | | :--- | :--- | :--- | | Total real estate investments | $1,809,608 | $1,854,761 | | Assets held for sale, net | $137,366 | $— | | TOTAL ASSETS | $2,013,239 | $1,913,707 | | Revolving lines of credit | $216,030 | $47,359 | | TOTAL LIABILITIES | $1,168,347 | $1,014,704 | | TOTAL EQUITY | $833,582 | $882,443 | Non-GAAP Financial Measures and Reconciliations This section provides detailed reconciliations for key non-GAAP metrics, including NOI, FFO, Core FFO, and Adjusted EBITDA Net Operating Income (NOI) Total NOI increased 5.4% to $42.0 million in Q2 2025, driven by a 2.9% rise in same-store NOI Q2 2025 NOI Reconciliation and Breakdown (in thousands) | Category | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Operating income (loss) | $(6,796) | $7,192 | (194.5)% | | Net operating income (Total) | $42,018 | $39,854 | 5.4% | | Same-store NOI | $36,193 | $35,171 | 2.9% | Same-Store Controllable Expenses Q2 2025 same-store operating expenses rose 2.4%, with controllable expenses up 3.2% and non-controllable expenses up 1.2% Q2 2025 Same-Store Expense Breakdown (in thousands) | Expense Category | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Controllable Expenses | $13,444 | $13,026 | 3.2% | | Total Non-controllable Expenses | $8,436 | $8,337 | 1.2% | | Total Same-Store Expenses | $21,880 | $21,363 | 2.4% | Funds From Operations (FFO) and Core FFO Q2 2025 FFO per diluted share was $1.24, and Core FFO was $1.28, reflecting adjustments for depreciation and impairment Q2 2025 FFO and Core FFO Reconciliation (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net loss available to common shareholders | $(14,515) | $(2,903) | | FFO applicable to common shares and Units | $24,537 | $22,143 | | Core FFO applicable to common shares and Units | $25,297 | $22,801 | | FFO per share and Unit - diluted | $1.24 | $1.23 | | Core FFO per share and Unit - diluted | $1.28 | $1.27 | Adjusted EBITDA Adjusted EBITDA for Q2 2025 was $34.9 million, with the six-month total reaching $67.6 million, after adjusting for non-operating items Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended 6/30/2025 | Three Months Ended 6/30/2024 | | :--- | :--- | :--- | | Net loss attributable to controlling interests | $(14,515) | $(1,296) | | Adjusted EBITDA | $34,939 | $33,070 | Debt and Capital Analysis This section provides an overview of Centerspace's debt profile, capital structure, maturity schedule, and key capitalization metrics Debt Analysis As of June 30, 2025, total debt was $1.11 billion with a 3.90% weighted average interest rate, primarily long-term Debt Maturity Schedule as of June 30, 2025 | Maturity Year | Total Debt (in thousands) | % of Total Debt | | :--- | :--- | :--- | | 2025 (remainder) | $19,065 | 1.7% | | 2026 | $99,843 | 8.9% | | 2027 | $47,703 | 4.3% | | 2028 | $331,449 | 29.6% | | 2029 | $101,754 | 9.1% | | Thereafter | $521,478 | 46.4% | | Subtotal | $1,121,292 | 100.0% | - The weighted average interest rate on total debt was 3.90% as of June 30, 2025, up from 3.62% a year prior[50] Capital Analysis Q2 2025 total market capitalization was $2.31 billion, with total debt to market capitalization at 48.5% and Net Debt to Adjusted EBITDA at 7.93x Key Capitalization Metrics | Metric | 6/30/2025 | 6/30/2024 | | :--- | :--- | :--- | | Total market capitalization (in thousands) | $2,313,710 | $2,259,236 | | Total debt to total market capitalization | 48.5% | 41.4% | | Net debt/Adjusted EBITDA | 7.93x | 6.97x | | Payout ratio (Core FFO basis) | 60.2% | 59.1% | Portfolio Analysis This section details Centerspace's property portfolio, including same-store performance by region, overall operating metrics, and capital expenditures Same-Store Comparisons Same-store NOI grew 2.9% in Q2 2025, with regional variations, and weighted average occupancy increased to 96.1% Q2 2025 Same-Store Performance by Region (vs. Q2 2024) | Region | NOI % Change | Weighted Average Occupancy | Average Monthly Rental Rate | | :--- | :--- | :--- | :--- | | Denver, CO | (5.9)% | 93.8% | $1,973 | | Minneapolis, MN | 5.2% | 96.6% | $1,598 | | North Dakota | 10.0% | 97.2% | $1,404 | | Omaha, NE | 13.4% | 94.2% | $1,393 | | Same-Store Total | 2.9% | 96.1% | $1,621 | Portfolio Summary Centerspace's total portfolio comprised 11,842 homes with 94.5% occupancy and an average monthly rental rate of $1,625 Portfolio Metrics (All Communities) | Metric | 6/30/2025 | 6/30/2024 | | :--- | :--- | :--- | | Number of Apartment Homes | 11,842 | 12,883 | | Average Monthly Rental Rate | $1,625 | $1,566 | | Weighted Average Occupancy | 94.5% | 95.3% | Capital Expenditures Total capital spending was $11.1 million in Q2 2025, with same-store recurring capital expenditures at $4.1 million Capital Expenditures Summary (in thousands) | Category | Three Months Ended 6/30/2025 | Three Months Ended 6/30/2024 | | :--- | :--- | :--- | | Recurring Capital Expenditures - Same-Store | $4,100 | $2,850 | | Total Value Add - Same Store | $2,643 | $5,228 | | Total Capital Spend - All Properties | $11,056 | $15,537 | 2025 Revised Financial Outlook Centerspace revised its 2025 financial outlook, increasing Same-Store NOI growth guidance and adjusting Core FFO per diluted share Comparison of 2025 Full-Year Outlook | Metric | 2025 Previous Outlook Range | 2025 Updated Outlook Range | | :--- | :--- | :--- | | Same-Store Revenue Growth | 1.50% - 3.50% | 2.00% - 3.00% | | Same-Store Expense Growth | 2.00% - 4.00% | 1.00% - 2.50% | | Same-Store NOI Growth | 1.25% - 3.25% | 2.50% - 3.50% | | Core FFO per diluted share | $4.86 - $5.10 | $4.88 - $5.00 | - The updated outlook includes new assumptions for proceeds from dispositions, estimated to be between $210.0 million and $230.0 million for the full year[78] Reconciliation of 2025 Updated Outlook: Net Income to Core FFO | Metric (per share) | Low | High | | :--- | :--- | :--- | | Net (income) loss per share - diluted | $2.50 | $2.76 | | FFO per share - diluted | $4.70 | $4.83 | | Core FFO per share - diluted | $4.88 | $5.00 | Non-GAAP Financial Measures and Other Terms This section defines non-GAAP financial measures and key operating terms, including FFO, Core FFO, NOI, and Adjusted EBITDA - Funds From Operations (FFO) is defined according to Nareit standards as net income excluding real estate depreciation, gains/losses from property sales, and impairment write-downs[93][94][99] - Core FFO is a further adjustment to FFO, removing non-routine items or items not considered core to business operations to provide a clearer view of ongoing performance[97] - Net Operating Income (NOI) is defined as total real estate revenues less property operating expenses, used as a measure of property-level performance[103] - Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, and other non-operating or non-routine items, serving as a supplemental measure of income from operations[87]