D/B/A Centerspace

I would now like to pass the conference over to our host, Josh Klage with CenterSpace. You may proceed.

Good morning, everyone. CenterSpace's Form 10Q for the quarter ended June 30, 2025 was filed with the SEC yesterday after the market closed. Additionally, our earnings release and supplemental disclosure package have been posted to our website at centerspacehomes.com and filed on Form 8K. It's important to note that today's remarks will include statements about our business outlook and other forward-looking statements that are based on management's current views and assumptions. These statements are subject to risks and uncertainties discussed in our filing under the section titled Risk Factors and in our other filings with the SEC. We cannot guarantee that any forward-looking statements will materialize, and your caution not to place undue reliance on these forward-looking statements. Please refer to our earnings release for reconciliations of any non-GAAP information which may be discussed on today's call. I'll now turn it over to CenterSpace'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 in Capital Markets, Grant Campbell, and our CFO, Bharat Patel. Last night, we reported strong results from our same-store portfolio, with a .7% -over-year increase in revenues, driving .9% -over-year growth in NOI. However, due to our planned strategic transactions, we're lowering the midpoint of our guidance by 4 cents to account for the impact of capital recycling activities. While Bharat 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 .1% occupancy in the quarter. Combined with high retention of .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 .4% on a blended basis, with new lease growth of .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 decrease in 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 .7% in the quarter, which consisted of new leases increasing .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 pick-up 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 remains strong, with -to-income ratio of .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 .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, but maintaining -in-class operations, driving shareholder results through continued -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 macrovolatility, we are excited about the path forward for CenterSpace. Grant, I'll turn it over to you for a discussion of the transactions and current transaction market.

Thanks, Anne, and good morning, everyone. Our transaction initiatives include two recent acquisitions, both of which we have completed, and the disposition of 12 communities in St. Cloud and Minneapolis, Minnesota. We closed on the acquisition of SugarMont, a 341-home community in Salt Lake City, at the end of May for $149 million. The property was built in 2021 and is located in Sugar House, one of Salt Lake City's most desirable submarkets. Salt Lake City is a natural extension of our existing Mountain West footprint, our team has been spending a lot of time in market, and we have been actively pursuing opportunities there. That -the-ground presence is what led to this off-market acquisition. The Salt Lake City Valley features a diverse and growing economic base with a large presence of jobs in technology, finance, education, and healthcare, along with four large universities totaling approximately 145,000 students. 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 -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 and 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 three communities located in the Boulder-Fort Collins market as well as with our broader Colorado portfolio. Fort Collins is a market that has displayed relative outperformance in annual rent growth and vacancy when compared to Metro Denver fundamentals. To fund these acquisitions, we are currently marketing for sale 12 communities in Minnesota. Buyer interest has been strong for individual community offers and portfolio offers. We are under letter of intent to sell the entirety of our St. Cloud portfolio, which includes five communities totaling 832 apartment homes. Closing of this sale is anticipated in September. In addition, we are currently in the marketing phase for seven communities in Minneapolis totaling 679 apartment homes. First round bids for these Minneapolis communities will be received this week and closing is anticipated in Q4. Pricing indications to date remain supportive of the $210-230 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 rates that our stock currently trades at. Taken together, these acquisitions and planned dispositions improve our diversification, reducing Minneapolis NOI exposure in our portfolio by 300 basis points while adding exposure to a new institutional market in Salt Lake City. They improve our portfolio quality with pro forma average portfolio rent increasing $50 versus Q1 2025 levels and they improve our portfolio margins with year one NOI margins on acquisitions projected to be between 65 and 70% while the disposition communities are low 50%. Taking a step back, our transaction events also coincide with a broader song 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 Bharav 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 .9% year on year increase to same store NOI. This NOI growth was driven by a .7% increase in same store revenues with revenue growth composed of a 60 basis point increase in occupancy and a .1% increase in average monthly revenue per occupied home. On the same store expense side, Q2 numbers were up .4% year over year with controllable expenses up .2% and non-controllables up 1.2%. Please note that same store results excluded 12 communities that are currently being marketed for sale. These properties have been carved out of the same store pool and included in the health for sale category on our balance sheet. Relatedly, we have booked an impairment charge of $14.5 million with the shorter holding period of the properties driving the impairment assessment. To clarify, the impairment charge is based on our gap carrying value and like depreciation, is excluded from our non-gap 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 .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 .5% for the year. And as Anne alluded to in her 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 .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 dispositions that Grant discussed in his remarks. To reiterate collectively, they represent progress on the planned evolution of our portfolio. They will improve the quality of our portfolio and enhance our market exposure, thereby lifting margins and the long-term growth profile of the company, all while maintaining our differentiated footprint. And as we do so, we are still growing earnings, which at the midpoint of $4.94 per share represents a .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 to anticipate paying down the facility as our dispositions close later this year. We expect our net debt to even out to trend back down to the low to mid 7 times level by year end as this occurs. Our transaction activity also helps extend our maturity profile. Performer for the transactions, our debt has a rated average rate of .6% and a rated average time to maturity of 7.3 years. We conclude Q2 with another good quarter for CenterSpace with our results benefiting from continued occupancy growth, high retention, and continued expense controls, all of which set us up well into the back half of this year. Operator, please open the line for questions.

Absolutely. We will now begin the question and answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If you need to remove your question, please press star followed by 2. Again, to ask a question, please press star 1. As a reminder, if you're using the speakerphone, please remember to pick up your handset before asking your question. The first question comes from Brad Heffern with RBC. Your line is now open.

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

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

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

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

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

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

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

Okay. Thank you.

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

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

Yeah, as we look and forecast out into the back half of the year, I'd say our expectations for Denver have come in a little bit. 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 Bharat noted, that comes a little bit with a lot of concessions. So I'd say we pulled in our revenue expectations for Denver, but that's really been offset by the really strong performance in the tertiary markets. If you, you know, across North Dakota, we're seeing just tremendous growth. You know, these areas with no supply, we're really seeing good rent growth. We're still encountering high cost of housing, high mortgage rates, and, you know, very high retention. So I think as it, as it met it out, you know, we, we feel confident about where the revenue was. We're just getting to the, our initial revenue projections in a little bit different way. So softer in Denver, better in the rest of the portfolio.

Okay, that's helpful. And then, you know, the comments about the disposition market heating up. Can you talk more about the types of buyers that are out there? The pipeline of buyers for the assets you're trying to sell? I mean, is it multiple bids? 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?

Yeah, morning, Jamie. This is Grant from a bid sheet or bid depth perspective. Multiple offers are certainly there. There's been a whole host of interested parties for both of the offerings that we have in the market ranging from local capital that may be interested in one specific community to national platform capital that may be interested in an entire portfolio or a sub portfolio of the offering. So it really runs the gamut. And there is a lot of depth there that we're seeing currently from an underwriting and financing 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-5. 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. Thanks for that. And this is on what forward NOI or trailing NOI cap rates?

That would be on pro forma year one.

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

Yeah. I mean, long-term, we'd really like leverage to be lower than seven. Ideally, I think over a period of time, we'd like to get down into the five. There's a few steps there, right? So we need to one, make our cost of capital work. And I think this capital recycling is really an effort by us to show where the value is in the portfolio and start bridging that gap between where from where we're trading, you know, to what we actually think the portfolio is worth. Both the sales are going to give everyone some good marks. And then, of course, the acquisitions are going to be in markets where there's high visibility into what cap rates are and what valuation and what the market trends are. Once we can do that, I think the 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, you know, we're thinking about ways to take opportunities to lower that leverage while still repositioning repositioning the market exposure of the company. But I think it's going to take a little time. It's going to take a little bit bigger scale.

OK, thanks for your thoughts.

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

Hey, good morning. Thanks for taking my questions. First off, maybe I missed it, but can you just remind us what the cap rates were on the recent acquisitions for the Colorado assets, Salt Lake City? And then what's the timeline or what's the inflection point that you're expecting for these acquisitions, especially maybe the Denver and Colorado markets to turn 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 and you had a few comments on maybe the job growth for the market. Anything we could think about for maybe the timeline for when when these lower cap rate acquisitions will turn more accretive for the overall portfolio?

Hey, good morning, Connor. This is Grant to your first question from a cap rate perspective on the recent acquisitions high floors. In the case of Railway, it was an unlevered four eight in the case of Sugarmont and Salt Lake City four, six, five, four, seven. As we alluded to in our remarks related to Railway, there was debt that we assumed there at a three point two six percent 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 know, you also alluded to jobs. And when you look at the job growth profile of Salt Lake, it's been a clear out performer for a very long period of time. Also, this asset is located in some market that is highly, highly desirable. So when we put those variables alongside the physical quality of the asset, we do think the growth potential is there. And as you move into years two and three of the pro forma, start to think that we'll see some some healthy growth on cash flows.

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

Yeah, I'll I'll I'll try that one. So I think on Salt Lake City, we're not expecting any boost from bringing it down to our platform. In fact, during this first year, it's going to continue to be managed while we build from additional scale. It'll be continued to be managed by a Cottonwood residential on their platform. So not anything immediate from that standpoint. And then I'd say, you know, the impact of tapering supply in Salt Lake City is going to be very positive and that's going to be exacerbated by the strong job growth. So, you know, I think the fundamental change is going to be the supply is diminishing in Salt Lake City and they have very, very high absorption, you know, given the given the strong underlying growth. Fundamentals of population and jobs. So I say there is probably fifty fifty on, you know, what which one of those drives drives movement into territory where we think that's really a cash flow creative acquisition.

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

Yeah, this is a great question and one I think that we spend a lot of time on both with our management team and in our boardroom. You know, historically, over the last three, four years, really, since twenty, twenty, twenty, twenty, twenty one, 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 the 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 counter cyclically. One of the things about these markets is right now and for the past three years, few years, they've had no supply and very good regional economies. But it's also the case that because they're small, a small amount of supply or a small interruption in job growth or the economy there can have a really big impact. And I would use St. Cloud that we're selling as an example of that. One thing that we're, you know, over the history, it's provided really good returns for us, but we've been seeing some shifts in the fundamentals there, including declining enrollments at the university, just overall shrinking of the job base. And so we feel like those are things that we really need to watch carefully because, you know, the small things have a big impact on a small company. But, you know, overall, we really would like to grow on top of those markets and continue to have them. 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. Thank you. And then maybe just one follow up or one additional question just quickly with the interest of the Salt Lake, if you guys continue to acquire in Colorado and those markets, just how would you prioritize expanding into Salt Lake to more of additional assets continuing to scale in Denver, Boulder, Fort Collins, Colorado? And then any expansion into new markets as well? If you were to prioritize kind of those three or something else that 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. You know, I mentioned earlier that we are having the seller Cottonwood residential continue to manage it on their platform. While we find our next acquisition and really grow that regional scale, it's important because we manage these on our own platform to have a little bit larger team to be able to get some centralization efficiencies in Salt Lake City. And so I think that's our first priority. Our second priority would be to start really assessing what the next market will be for us. And we're keeping a really close pulse on what the trends are, what the fundamental trends are related to population growth, job growth, household incomes, the kinds of jobs, and also the business friendliness of other markets. And we really do want to remain differentiated. So I think we've turned, we've definitely been over the past couple of years, really focused on opportunistic acquisitions in Minneapolis. I think our shift for Denver is leaning a little bit that way where we're looking more at real off market opportunities or opportunities that are a good fit for us that might not be widely bid on in the Denver market with really a pretty laser focus on scaling in Salt Lake City.

All right, appreciate it. Thank you.

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

Good morning, guys. Can you talk about how much of a drag Denver was on the .6% renewal lease rate growth? And were there any other markets that had an outsize impact on that number?

Yeah, I think Denver really is the only market that had an impact on that on that lease rate growth. And it probably brought it in, you know, 20 to 30 basis points overall, given the given the weighting, you know, Denver renewal. On the on the renewal side, we're just above flat. So you know, point 6% on renewal relative to the other markets where we were, you know, we were really seeing, you know, North Dakota and the five Minneapolis and the high twos, Rochester, Nebraska, you know, in that same range high to low. So not a huge impact, but, but some.

Okay, and then brav post sale of these 1500 units, does that do anything material to the annual per unit maintenance capex of 1150 to 1200 that you have in the guidance for this year?

Yes, we'll be factored in to our guidance, which is about 1175 at the midpoint is some shift in capex dollars from from the assets that we expect to sell to the now smaller same store portfolio. Overall, when you think about capex as we move forward, it is on 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 two assets. So, you know, a lot less to maintain these assets, you know, some increase in turn capex because these are higher quality assets, but overall reduction and maintenance cost is going to outweigh. You know those increases. So yes, we expect from a capex perspective for the portfolio to be more efficient going forward.

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

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

Okay, and that guidance basically assumes that St. Cloud closes sometime in September and then the Minneapolis assets are sometime in the fourth quarter at this point.

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

Okay, alright. Thanks guys. Appreciate the time this morning.

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

Hi, thanks. 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 year 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 tradeouts may have been pressured because of Denver, our occupancy is ahead of where we expected. We expect to kind of sustain the momentum leading into the, or going to the second half of the year. We don't expect on an overall portfolio basis for the lease tradeouts to change materially, and we do expect to maintain the higher occupancy. 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. You know, 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 is this maybe a decision to not push as hard to really boost occupancy?

Yeah, Amy, I think it really lies in the blend of the portfolio. So if you look at where our strongest occupancies are, we're also getting our strongest rent growth, and those would be in markets like North Dakota, 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 Barab noted, we've been seeing quite a bit of concessions. And so a lot of competition for residents, and that puts a lot of pressure on the rates. So I think 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 have been really strong. When you put it all together, it does get offset somewhat by the softness in Denver.

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

Morning, Amy. I would say a couple 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, you know, just a bit outside from from where we needed to be from an underwriting and mass perspective. We feel confident that we'll continue to build pipeline and continue to see opportunities in that market moving forward.

Great. Thank you.

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

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

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

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

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

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

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

Yeah, I think this is something we're also thinking a lot about Jamie is just timing and I don't feel like we do feel like we have a time clock that we're racing. I do think that 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, you know, when we. When we, when we look at same with railway, you know, that was that was a property that we had been following for a long time. We had the opportunity to acquire it with. With the existing debt in place, so I do think we're taking advantage of opportunities. I think our history also would show that we really are. We really are. That's a good track record of taking advantage of opportunities, such as, you know, we bought back stock at the end of 23, you know, when it was at 54, we reissued that stock at 75. We've taken down leverage, so we are looking for those pockets of opportunities, but we're also really trying to be mindful of the fact that. You know, we're not getting credit for the results that we're putting up out of these tertiary markets. So, you know, we really do want to make sure we're articulating our strategy and that we're making progress on our strategy. But really not a not a gun to the head and and when we think about the timing of the acquisitions that we made, you know, the stock was, it 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 are, how do you guys think about the moving pieces?

Yeah, absolutely. And in fact. You know, we, we are looking constantly at what the levels of the buyback are and how we balance that with just overall float and the and leverage, you know, as you as you know, we took leverage up in the in the 2nd quarter. But we do want to make sure that we're ready to execute on buybacks if and when we we think that it's the it's the right time. I would know, you know, I'm sure you're aware, like, you know, where the stock is trading today, we're, we're really thinking hard about it. And every dollar that we have to use, Jamie, we're thinking, where does it go? Does it go to debt? Paydowns is go to new acquisitions and a lot of our a lot of the strategy of trying to grow and scale the company. A lot of those things, you know, really do compete with each other. So, you know, we want to make sure that we're ready to take advantage of stock buybacks. And obviously with with earnings just released, we're coming out of our blackout period now. So now would be the time we could take advantage of it. The last 30 days. We've. We've not been able to.

Okay, all right. Thanks for your thoughts.

Thank you so much for your question. There are no additional questions at this time. So I'd like to remind everyone to ask a question to start followed by one. We will pause briefly if questions are registered. There are no additional questions registered at this time, so I'd like to pass the conference back over to and also for any closing remarks.

Thanks everyone for joining us today and for the really great questions and the interest in center space. You know, we're excited about the results we're putting up. We're also, you know, being carefully optimistic about execution of our strategic plan and happy with the progress we've made to date. And I especially want to thank all our team for all the hard work that they've put 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 center space second quarter 2025 earnings call. Thank you so much for your participation. You may not disconnect your line.