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. 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 yield 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 being 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 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, have 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 profiles 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 increase 88 basis points and same-store expenses increase 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 two 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.

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 point 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 have 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 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 seen 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, and 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, etc. 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 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 do 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 two 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 two 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 and definitely a relevant topic. Across the nation, we're seeing municipalities and states start to evaluate various factors, including fee income and regulatory requirements, beyond just rent control. We're pleased with the markets we're in, as we have strong operations and good scale in both Denver and Minneapolis, allowing us to effectively manage regulatory changes. When considering new markets, business friendliness is a crucial factor for us. This includes the regulatory environment, taxation—both property and income taxes—and how well they attract new businesses or offer subsidies. While we are assessing new markets, we are satisfied with the conditions in our current ones. We haven't observed any changes in states like Nebraska, North Dakota, South Dakota, or Montana regarding their regulatory requirements. Additionally, we've seen some reductions in regulation at the federal level, particularly concerning environmental issues.

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 one-time boost that doesn't really have a big impact?

The taxation relates more to the valuation cycle coming into 2021, and there is a delay between when taxes increase. Sorry.

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

Yes, that's an interesting question. We don't believe it's going to significantly impact demand, as it seems to be more of a one-time occurrence. Our bad debt situation is strong, and we're confident about resident health. We hope that when those tax refunds arrive, we might see a slight increase in consumer demand or overall better consumer credit. However, I think any increase in disposable income will not necessarily drive demand in the multifamily sector.

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 January. 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've kind of regained some of the occupancy back in January. So that's really what was driving the difference there.

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 the 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.

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 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, 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, as we've observed, many of our vendors have also experienced reduced turnover. Across our markets, employment is very strong with low unemployment. However, what we've noticed is significantly less turnover and more stability in employment. In the past, when vendors lost an employee, it was challenging for them to find a replacement, but now people are remaining in their positions longer. We've experienced this in our company as well, with increased tenure and reduced turnover. This has been beneficial for us in 2025, and we observed this 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 from Brad Heffern from RBC Capital Markets.

On Minneapolis, you noted there has been a lot of turmoil and unrest over the past few months. Did leasing activity change as a result? I realize it's not a busy leasing period, but I’m interested if you saw any impact. Are you anticipating any long-term effects? Has your forecast for Minneapolis this year changed compared to a few months ago?

Yes. We haven't seen any significant changes. In late 2025, we assessed the impact of immigration enforcement actions. What we observed in January began a few months prior, leading to minimal activity in our communities. We have a monitoring system in place, and interruptions have been limited to a few specific areas, mostly involving leasing issues and resident turnovers. So far, the overall impact has been minimal. It's worth noting that there was very low turnover with lease expirations in January, and typically, not many people are searching for housing during that time, making it difficult to assess any real impacts. We expect to see clearer trends once the leasing season starts. In Minnesota, we've observed an increase in migration for the first time, which positively impacted our community. This year, our population growth compensated for the lack of immigrant migration to an extent. We believe demand will remain strong in Minneapolis, especially given the limited supply and strong projected growth. Currently, we don't see much impact, but we are closely monitoring potential changes such as moratoriums on evictions. Overall, things seem to have stabilized, and we are in a wait-and-see mode regarding future developments.

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.