CENTERSPACE Q4 FY2024 earnings call

• 2024 was a year of positive platform execution with stable revenue growth, strong occupancy, and expense control despite supply and market uncertainty. Delivered $4.88 core FFO per share. Expanded portfolio in Denver by purchasing the Lydian. Simplified balance sheet by redeeming Series B preferred shares and improving leverage via ATM issuance. Had positive blended leasing spreads each quarter and ended 2024 with high Q4 occupancy. Team volunteered over 2,700 hours, increased online review scores, and improved resident satisfaction metrics with a 5.3% overall satisfaction increase and 56.6% same-store resident retention rate. Named Minneapolis Star Tribune Great Workplace for fifth consecutive year and won six industry awards. Board increased quarterly dividend to $0.77 per share. In 2025, will remain vigilant about cost of capital and leverage current portfolio position. Mentioned past actions like purchasing Lake Vista in Fort Collins, buying back shares, and acquiring Lydian in Denver. Leasing trends: Q4 same-store revenues up 3.1% y-o-y, full-year up 3.3%; same-store new lease trade-outs down 3.3% while renewals up 3.2%, resulting in 45 basis point blended leasing spreads. Markets had lower supply leading to stable fundamentals, with healthy regional economies and low rent-to-income ratios and bad debt.

In 2024, CenterSpace achieved stable revenue growth. Same-store revenues for the fourth quarter increased 3.1% over Q4 2023, bringing full-year 2024 same-store growth to 3.3%. North Dakota communities led the portfolio with blended spreads of 4.4%, Nebraska and Rochester communities saw strong blended growth at 2.5% and 2.3% respectively. Minneapolis had marginally up blended spreads while Denver was down 140 basis points. Occupancy increased to 95.5%, a 70 basis point improvement year-over-year. Core FFO per share was $4.88 in 2024, driven by sector-leading same-store NOI growth.

• 2025 core FFO expected at midpoint of $4.98, ~2% growth over 2024 final results and 18 cents ahead of initial 2024 guidance. Same-store net operating income expected to rise 2.25% at midpoint, same-store revenue up 2.5%, same-store expenses grow 3%. Blended leasing spreads assumed at 2.4%, with renewals expected to lead new lease spreads. G&A and property management expenses range $27.9M - $28.4M, interest expense $38.8M - $49M. Capital expenditures: value-add expenditures $16 - $18M, recurring CapEx per home ~$1,150 per unit. Same-store pool in 2025 includes The Lydian (acquired in 2024) and Bosc (under repositioning).

• Market uncertainty and supply headwinds. Interest rate volatility affecting transaction velocity and cost of capital. Bid-ask spread issues in the transaction market. Muted real-time transaction velocity due to continued interest rate volatility and pricing perspectives of asset owners. Potential impact of softer market rents and higher cost of capital on value-add spending.

Q: How do Minneapolis and Denver align with portfolio fundamentals?

A: Anne Olson said supply pressure eased in Minneapolis earlier than Denver. Both markets have strong absorption. Minneapolis is turning the corner, Denver is positioning for tailwinds in 2025.

Q: Break down 2025 blended spreads between new and renewal?

A: Bhairav Patel said renewals expected at ~3%, new leases in high 1% to 2% range. Guidance has conservatism due to high retention rates in previous years and market uncertainties.

Q: Expectation on acquisition and disposition activity in 2025?

A: Grant Campbell said evaluating opportunities to grow, mindful of cost of capital, wanting defined path to positive leverage. Anne Olson hoped to be net acquirers, focusing on strategic and creative opportunities.

Q: Key factors driving same-store expense guidance?

A: Bhairav Patel said centralization efforts expected to save ~$500k and favorable insurance renewal saving ~$900k are key factors.

Q: Impact of market conditions on portfolio balance timeline?

A: Anne Olson said timeline may be longer due to lack of transaction volume, but continuing to work on portfolio strategy, being nimble and ready to execute on opportunities when they arise.

Q: Catalysts to bring bid-ask spread together in acquisition environment?

A: Grant Campbell said reduction in interest rate volatility is needed. Anne Olson added if rents start rising in markets with passed peak supply, it could help move pricing towards ask.

Q: Trend of renewal and blended rates in 2025?

A: Grant Campbell said renewals will lead new leasing spreads in first half, and gain price power in second half, especially in larger markets.

Q: Update on current lending loan?

A: Grant Campbell said the project is on budget and track, first phases turned over to developer, expected to stabilize midyear 2026 with potential purchase in mid-2026.