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Operator: Hello, everyone, and welcome to the Centerspace Q3 2025 Earnings Call. My name is Ezra, and I will be your coordinator today. [Operator Instructions] I will now hand over the call to Josh Klaetsch from Centerspace to begin. Please go ahead.

Joshua Klaetsch: Good morning, everyone. Centerspace’s Form 10-Q for the quarter ended September 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 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 are 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.

Anne Olson: Thank you for joining us today. I’m here with our SVP of Investments and Capital Markets, Grant Campbell, who will provide some comments on the transaction market; and our CFO, Bhairav Patel, who will discuss our guidance and balance sheet. Centerspace’s third quarter and year-to-date results are a testament to the health of our smaller regional markets, our operating platform, which helped us drive exceptional expense control and the strength of our team, which has remained focused even in light of the significant sale and acquisition activity that we have undertaken. For the third quarter, we reported 4.5% year-over-year growth in NOI within our same-store portfolio. This is being driven by solid increases in revenue, coupled with excellent execution on expenses.

That said, due to timing adjustments related to our planned strategic transactions and associated G&A costs, we are lowering the midpoint of our Core FFO guidance by $0.02 to $4.92. Bhairav will further discuss the impact of our capital recycling activities when he speaks to our outlook. In June, we announced strategic initiatives that included acquisitions in both Colorado and Utah and dispositions that reduced our portfolio concentration in Minnesota. We expect to close on the sale of 7 communities in the Minneapolis area yet this month, at which time we will have recycled approximately $212 million of capital and increase the quality and efficiency of our portfolio. While our current cost of capital has impeded our ability to execute on external growth opportunities, we are committed to enhancing our market position and value for our shareholders.

We have many levers we can use to do that, and we will remain disciplined and flexible. Operationally, our portfolio continues to benefit from the stability of our Midwest markets. Like in 2024, lease rates peaked in mid-Q2 and remain positive for us, up 1.3% on a blended basis in the quarter and 1.6% year-to-date. Retention has exceeded our initial expectations, hitting 60% in both of our peak leasing quarters. In our largest market of Minneapolis, results benefited from the dual tailwinds of improved occupancy and increasing rental rates, where we saw improvement in both new and renewal leases in the quarter, leading to blended increases of 2.1%. In our other markets, North Dakota continues to be a standout with portfolio-leading blended increases of 5.2% in the quarter.

Our Denver portfolio has been challenged by supply pressures, and Q3 blended lease rates were down 3.5%. Digging more into Denver, we believe our experience there is truly the result of supply. Based on absorption data, 2025 has been Denver’s second best year ever. In our portfolio, we’re seeing higher closing of lease with our Q3 lead to lease up 275 basis points year-over-year and higher tenant incomes, which are up 7% versus last year as well as a 70 basis point improvement in our occupancy over Q2. Some of that occupancy was driven by our decision to offer concessions in this market. We anticipate Denver will return to a more normal environment as we move through 2026, and we remain optimistic. I’ll ask Grant to comment on the state of the transaction market.

Grant Campbell: Thanks, Anne, and good morning, everyone. On a macro level, while we do not expect transaction volumes to return to 2021 and 2022 levels in the near term, this year has produced more transaction activity compared to the last 2 years. We are seeing investors display conviction in placing capital, and this dynamic should drive value for our shareholders. Our recent transaction initiatives position the portfolio well for continued long-term growth. In May, we closed the acquisition of Sugarmont in Salt Lake City. And in July, we expanded our Fort Collins presence with the acquisition of Railway Flats in Loveland, Colorado, both of which were discussed in detail on last quarter’s call. In the case of Railway Flats, Fort Collins has been a target geography for us as evidenced by 2 of our recent investments occurring there.

This market has displayed outperformance in annual rent growth, absorption and vacancy when compared to Metro Denver. Within our portfolio, Fort Collins retention is 800 basis points ahead of Denver in the quarter, and Fort Collins occupancy is our strongest year-over-year increase across our portfolio markets. To fund these acquisitions, we completed the sale of our St. Cloud, Minnesota portfolio in September for $124 million, exiting us from that market. Investor reception was strong with buyer interest ranging from individual community offers to portfolio offers. This portfolio transaction of lower growth prospect communities priced at a mid-6% cap rate well inside of the mid-7% implied portfolio cap rate our stock trades at today. In addition, this week, we anticipate closing the sale of 7 communities in Minneapolis for $88.1 million.

These 7 assets are smaller communities, totaling 679 homes. This transaction will price at a high 5% cap rate, again, well inside the implied portfolio cap rate we trade at today. Upon completion of the sale, our remaining Minneapolis portfolio will be higher quality, increasingly suburban with 87% of NOI located in suburban submarkets and operationally more efficient with NOI margin for the Minneapolis portfolio increasing approximately 90 basis points as a result of the impending 7 community sale. Recent comparable trades support low 5% to 5.75% cap rates for our remaining Minneapolis portfolio. Lastly, on the capital allocation front, we repurchased 63,000 shares in the quarter at an average price of $54.86 per share, driven by the current disconnect between public and private market valuation.

I’ll now turn it over to Bhairav to discuss our financial results and guidance.

Bhairav Patel: Thanks, Grant, and hello, everyone. Last night, we reported third quarter Core FFO of $1.19 per diluted share, driven by a 4.5% year-over-year increase in same-store NOI. This NOI growth was driven by a 2.4% increase in same-store revenues with revenue growth composed of a 20 basis point increase in occupancy and a 2.2% increase in average monthly revenue per occupied home. On the same-store expense side, Q3 numbers were down 80 basis points year-over-year with controllable expenses up 3.4% and noncontrollables down 7.6% due to favorability in both property taxes and insurance. Specifically on property taxes, we trued up our accrual based on recently received assessments of value for Colorado, which were much lower than initially anticipated.

Turning to guidance. We now anticipate full year core FFO per diluted share of $4.88 to $4.96 per share with expectations for 2025 same-store NOI growth of 3% to 3.5%. Within NOI, we expect same-store revenues to grow by 2% to 2.5% for the year. This reduction is driven mainly by the impact of concessionary activity in Denver. As a reminder, concessions are amortized over the lease term, and as such, a portion of the noncash amortization will be realized in the fourth quarter and in 2026. Positive results and expenses are more than offsetting this with same-store expenses now expected to only increase by 75 basis points. Core FFO guidance is lower at the midpoint by $0.02 per share due to higher expectations for G&A and interest expense, offset by higher NOI with the timing of our dispositions playing a significant role in those differences.

On our balance sheet, our recent acquisition of Railway Flats, which included the assumption of $76 million of long-dated low rate debt at 3.26% as well as the completed St. Cloud and planned Minneapolis dispositions has improved our debt profile. As these transactions conclude, we expect our net debt to EBITDA to move into a low 7x level by year-end with a pro forma debt profile with an average rate of 3.6% and average time to maturity of 7.2 years. To conclude, this was a good quarter for Centerspace with our results demonstrating our commitments to both operational excellence and financial discipline and setting us up for the fourth quarter and into 2026. Operator, please open the line for questions.

Operator: [Operator Instructions] Our first question comes from Brad Heffern with RBC Capital Markets.

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Brad Heffern: On the repurchase, obviously, very attractive use of capital right now, just given where the stock is trading, but it does compete against your goals of reducing leverage and increasing the float. So I’m just wondering how you think about the balance.

Anne Olson: Yes. Brad, thanks for the question. That’s something we think about every day when we have the opportunity to buy back. And I think as you’ll see in this quarter, it was a very small use of proceeds, just a few million dollars. Really, we outperformed on the St. Cloud sale from where we thought that, that would trade, having gross purchase price of $124 million. And so when we looked at the allocation of capital there, we took some of those excess proceeds. We agree that this is a good use of capital and really sends another signal about where we think the value of the company is and our conviction about what we think it’s worth.

Brad Heffern: Okay. Got it. And then for Minneapolis, you gave some numbers in the prepared comments. It seems like the market is showing some pretty strong signs of recovery. Can you just talk about your expectations going forward? Is that sort of a return to normalcy over the next couple of years? Or would you expect to see a period of above-average performance as sort of a catch-up?

Anne Olson: I think we’re seeing right now a return to normalcy in Minneapolis. And as we look towards next year, we are expecting that it’s going to outperform its historical. It hit its peak deliveries. We’ve had excellent absorption. And if we look at third-party data, CoStar, RealPage, other, Minneapolis is really slated to be in that kind of top 5 of U.S. markets for rent growth headed into 2026. So we are expecting a little bit of outperformance there next year. We’re optimistic that we’re going to be able to capture that strong rent growth and hold our expenses in line to drive good NOI out of Minneapolis.

Operator: Our next question comes from John Kim with BMO Capital Markets.

Robin Haneland: This is Robin Haneland sitting in for John. It sounds like same-store revenue was mostly flat driven by Denver weakness. Could you maybe update us on what you’re expecting for the earn-in for ’26?

Bhairav Patel: Yes, sure. From an earn-in perspective, we’re sitting just a shade above 1% at the moment. And as you said, Robin, it captures some of the weakness in Denver, where we’re seeing some heavy concessions. So at the moment, about 1%, maybe slightly above.

Robin Haneland: Got it. And then specifically on Denver, could you just elaborate on the concession levels and how long you expect them to persist?

Anne Olson: Yes, certainly. So I’d say concession levels in Denver within our portfolio range from no concessions at a couple of our properties where we have still seen strong occupancy and good absorption demand there to 6 weeks free, maybe some waiving of application fees. On the market as a whole, it varies pretty widely. We’re seeing up to 2 months free, 8 weeks free, 10 in some pretty isolated instances. But I’d say with respect to our portfolio’s concession relative to the market, we’re either at or a little bit under what market concessions are.

Robin Haneland: So the portfolio is taking a little bit of a — doing quite a little bit of recycling for Collins, Loveland seems to be targeted markets today. Could you just maybe give us how new lease performed in those 2 markets and how they differ from Denver fundamentals?

Anne Olson: Yes. So we are looking at Fort Collins, as you said, that is a target market for us. And what we’re thinking about there is really just trying to get a little bit of scale in that market. We now have 2 assets in the Fort Collins area. And I’d say when we look at outperformance there relative to the Denver submarket, Grant commented a little on that, and I’m going to have him just take that and give you some stats on what the difference is there between Fort Collins and Denver.

Grant Campbell: Yes. I think that outperformance is a result of the supply dynamic, deliveries peaked there in 2024, really concentrated in the second and third quarter. In terms of the total number of units delivered at the peak, it was measured at about 7% to 8% of total inventory. So a more overall more muted supply profile. And then when you look at really any time period kind of over the last 3 years, you’ll see rent growth that has outpaced Denver to the tune of about 450 basis points. And then also absorption or demand as a percent of inventory has been pretty robust as well, outperforming to the tune of 600 to 700 basis points compared to Denver over that same time period.

Robin Haneland: And lastly for me, how are you thinking about recycling the $88 million of sales expected across repurchases, acquisitions and debt?

Anne Olson: Yes. Sorry, Robin, was that question about recycling with respect to the sales that are pending here in Minneapolis?

Robin Haneland: Yes.

Anne Olson: Yes. So we have already acquired that has already — those proceeds have already been spoken for. And so that is part of the acquisitions that we did in Salt Lake City and Fort Collins. So these proceeds will be used solely to pay down the debt that we incurred when we undertook those transactions.

Operator: Our next question comes from Jamie Feldman with Wells Fargo.

James Feldman: So can you talk about your blended lease growth expectations for the fourth quarter? Where are you sending out new and renewal leases? And then also just as we think about — we’re in the slowest time of the year, what do you think January, February could look like before we get back to spring leasing season?

Bhairav Patel: Yes. So for the fourth quarter, renewals are out for the rest of the year. October renewals still in the high 2% to low 3% range. So that’s pretty strong. But the new lease trade-outs remain negative. So there’s no real material change in trend relative to Q3 that we’ve seen so far. But from an occupancy standpoint, it remains stable and the exposure is trending in the right direction. So overall, for the portfolio, we are showing exposure in the low 5% range, which is a good place to be. As we think about Jan and Feb, it’s hard to say. We still need to make it through the next couple of months from a concession standpoint in Denver. And if we see some reversal in concessions and stabilization in occupancy, which we are seeing, that will give us a better indication of where next year may start.

James Feldman: Okay. And then can you talk on the expense side, can you talk about the drivers of the higher G&A expense for the year? And then also, just as we think about modeling ’26, any specific line items that you think could be materially savings year-over-year or growth year-over-year? I know you mentioned the Colorado taxes. Just any onetime items we should be thinking about that could help or hurt?

Bhairav Patel: Yes. So I’ll take the G&A question first. There were some additional fees and legal expenses that we incurred in the quarter plus some true-ups, which had an impact on the Q3 numbers. More importantly, none of these are run rate items. So from a run rate perspective, our run rate remains in the $28 million range, in line with what we had previously disclosed. With respect to Q3, there was a true-up in taxes, specifically in Colorado, which drove the reduction in expense there. We still expect some true-ups in Q4 in other jurisdictions. But overall, that should just bring taxes in about the 2% range growth year-over-year, which is pretty normalized. When we think about 2026, there aren’t really particularly onetime items that come to mind.

One of the expense items that in recent years has driven some volatility is insurance. We should be renewing it in the next couple of weeks. And at this point, we don’t really anticipate a big increase, which is a good outcome just given the 12% reduction we experienced last year. That has typically driven some volatility in year-over-year expense growth over the past couple of years, but that is expected to be a nonfactor when it comes to 2026. So there’s no real particular items that come to mind with these updates to taxes. It just seems like taxes would be in a normalized year-over-year pattern.

James Feldman: Okay. And since you mentioned insurance, are you able to ballpark or just give us a range on how they may look across the industry next year? I know you probably don’t want to talk about years specifically yet.

Bhairav Patel: Yes. No, I mean, I think a lot of it depends on when your renewal cycle falls. I mean we are in the process of having those discussions. And over the past couple of months, we’ve had several discussions with the hope that it remains in the low single digits, and that’s where it’s trending. It might be a little bit favorable, but too early to tell, even though it’s just a couple of weeks away. But I think overall, it’s a huge factor, the renewal cycle with us being at the fag end of the year, there might be some activity that drives losses, which we haven’t really seen this year. So we’re expecting a favorable outcome this year, which, as I said, is a good follow-up to last year’s 12% reduction.

Operator: Our next question comes from Connor Mitchell with Piper Sandler.

Connor Mitchell: Anne, you mentioned you had some open commentary on Denver and the supply drag and then Grant on some of your kind of focus on the Boulder and Fort Collins and how that’s kind of comparing in better rent growth to Denver. I guess just kind of drilling down on both of those. Could you guys maybe just give us an idea of when you really see Denver like turning the corner for supply, whether it’s earlier in the year or later in the year, it seems like there’s kind of more of a drag than we had expected earlier this year into ’26. And then the demand around that as well, it sounds like the income is still growing for Denver and the Colorado markets. But maybe any other influences or factors that are really giving you guys some good conviction on Denver and then also the comparison to how you guys want to keep scaling up in Boulder and Fort Collins, how you kind of compare those 2 markets within the same state?

Grant Campbell: Connor, on the supply front in Denver, obviously, it experienced its peak delivery levels later in the cycle relative to many institutional markets. When we look ahead, we really think demand will start to outpace supply in the back half of 2026 and that will certainly carry forward into 2027. So late ’26 into ’27 is when we expect demand to start to exceed supply. From a scaling perspective, obviously, Boulder and Fort Collins, that is a smaller geographic market relative to the size of Denver. We really like our position in that market with 3 assets now totaling about 980 homes. We do think there could be additional opportunity there, but we’re going to be selective, and we’re going to be targeted in our approach as it relates to that market.

We do have desires to scale other regions within the portfolio, including Salt Lake City, which is a new market for us. So Fort Collins, certainly happy with the performance. We’ll continue to look at opportunities there but we’ll be targeted in that approach. And then supply in Fort Collins, as I touched on earlier, certainly a more muted supply profile peaked in second and third quarter of 2024. That continued demand and absorption that I alluded to earlier is really creating a strong backdrop for fundamentals right now.

Connor Mitchell: Okay. And then maybe just following that line of thinking as well, you guys entered Salt Lake and you’re scaling up in Fort Collins and Boulder in Loveland. And then I know that you guys have mentioned just thinking of other markets for new entries as well. Maybe if you could just stack rank that as those 3 options for the capital recycling program and then thinking of expanding presence in the current markets, the ones that you’re expanding in Fort Collins, Boulder and then Salt Lake or even entering a new market that’s been discussed.

Grant Campbell: Our priority in that ranking, if you will, would be Salt Lake City. We do desire to scale that market. That is important to us, and we’re highly focused on that. So that would be at the top of the list with the caveat that it has to be the right opportunity. We’re not going to buy product there just to fill out the pie chart, if you will, it has to make sense, be the right opportunity, and we’re going to continue to seek those. In terms of new markets, we’re always thinking about markets internally. We’re always having those discussions. We’ll continue to do that and more to come from our perspective there.

Connor Mitchell: Okay. I appreciate that. And then maybe just turning to the expense side. I think you guys are pretty well set up on RUBS. You’ve gone through that the past couple of years. And then just kind of following the line of questioning earlier, is there anything else that needs to be done in setting up RUBS or any other expenses as we kind of head into winter? Or should be thinking about with the winter months coming up?

Anne Olson: Yes. I think we are really well set up. As you said, we had deployed RUBS across the portfolio. That’s fully deployed. All of our assets are on RUBS to the extent they can. One thing to be thinking about, which isn’t unique to us, but as an industry is that there has been some legislation in Colorado that will limit our ability to pass on RUBS. That will take effect January 1. And so that will have some negative impact, and we are working right now on what the steps we’re going to take so that we can make sure that those are billed directly to tenants rather than through RUBS. So there may be some disruption there. I think that will be market-wide in Denver as we look towards 2026.

Operator: Our next question comes from Rob Stevenson with Janney.

Robert Stevenson: You guys lowered the value-add expenditure guidance by $2 million at the midpoint. Was that due to the Minnesota sales? Or did you pull back on redevelopment within the core portfolio?

Bhairav Patel: Rob, no, I think that was more timing driven than anything else. It wasn’t really truly driven by the Minneapolis portfolio because we hadn’t really earmarked much capital to be deployed at those assets, knowing that we were going to dispose them. So it was — it’s more timing driven than anything else that’s thematic.

Robert Stevenson: Okay. How aggressive are you in starting new projects today given the status of your various markets operationally?

Anne Olson: I’d say right now, we’re very focused on things that can enhance the portfolio overall. So broad-based ways to save water, electricity, value-add enhancements that can drive operating expense reductions, such as our SmartRent implementation where we install leak detectors and keyless entries. But we’re really trying to be mindful of our cost of capital that is driving up the return that we need to see on investments. And then also with the softer market, we really want to have conviction around getting the premiums that we need in order to get to the hurdles that we want to see given our cost of capital and the return expected. So we pulled back a little bit on things like unit renovations and common area renovations, but we are still looking at broader portfolio-wide initiatives that can drive, in particular, operating expense reduction.

Robert Stevenson: Okay. And then last one for me. Bhairav, when does the $93 million of secured debt mature in 2026? Is that early in the year, late in the year?

Bhairav Patel: I think it’s in the first half, some in the first quarter and some in the second quarter. So it’s all done in the first half or by June.

Robert Stevenson: Okay. And what is your best option for debt today to refinance? And where is that pricing?

Bhairav Patel: Yes. I mean what’s maturing is secured debt. That’s available in the low 5% range, can be driven a little bit lower based on leverage. So that’s an option. The other option we have is following the paydown in the line of credit, once we close the dispositions, we’ll have a lot of capacity on the line of credit. One of the reasons we extended the line of credit was to give us flexibility just given the disconnect between short-term rates and long-term rates. So that’s another source of potential funding that allows us to keep the spread low and also pick up maybe a few basis points on the spread between short-term rates and long-term rates. Overall, the availability of debt capital, it’s a pretty favorable environment from a debt capital standpoint for the sector. So there’s multiple sources of debt, including bank debt if needed. So we have a range of options that we can utilize to refinance the upcoming maturities.

Operator: Our next question comes from Ami Probandt with UBS.

Ami Probandt: The revenue growth leaders have been Omaha and North Dakota. And while those remained strong in the quarter, the same-store revenue growth is decelerating. So I’m wondering if there’s anything to point to there that’s leading to a bit lower growth.

Anne Olson: Yes. Ami, it’s really Denver. It’s really the offset from Denver having — still decelerating a little bit and having negative new lease growth. So as strong as North Dakota and Omaha, they’re smaller portions of our portfolio and really that deceleration overall in projected revenue growth for the year is because of Denver.

Ami Probandt: Okay. And is there anything to call out for Omaha or North Dakota specifically that they’re also decelerating?

Anne Olson: No, I think just seasonality. We’re getting into the winter months. We have fewer expirations. There is less demand as we move through the quarter. And we did see with that peak leasing has really moved from what was the end of June, July historically into May. So that seasonality comes down a little bit faster during the year. We see really strong renewals in both of those regions. So that is great to see and will help keep that revenue boosted.

Ami Probandt: Got it. And then I guess on that note, are you doing any lease expiration management to try to shift more of your leases towards more of that May peak leasing season, especially as opposed to the winter where there’s not a ton of demand in those upper Midwest markets?

Anne Olson: Yes, always. So we are constantly watching that lease expiration profile. It’s a very large part of our revenue management as we look to see what the most attractive lease term for us is as well as where we can drive pricing for those lease terms. So we have been consciously working on maintaining that. You may recall, Ami, several years ago, we kind of completely redid the lease expiration profile after not having managed it to match the demand cycle, and that’s been a constant focus for us these past few years.

Ami Probandt: Got it. And then last one for me. You’ve seen a pretty consistent trend of same-store revenue per home growth being above same-store rent growth. Is that mainly driven by RUBS? Or is there something else that’s causing that spread to remain elevated? And do you think it’s sustainable?

Anne Olson: Yes, it is mostly driven by RUBS. We also have things like pet rents, and that is sustainable. That has grown over time where we see more and more people having that ancillary items on their lease. And then, Bhairav, do you want to comment on that as well?

Bhairav Patel: Yes. And then you kind of think about it specifically on a quarter-to-quarter basis, there can be some timing-driven volatility. But overall, as Anne mentioned, it’s really some of the other line items from a revenue standpoint.

Operator: Our next question comes from Rich Anderson with Cantor Fitzgerald.

Richard Anderson: Just a couple of really quick modeling questions first. So NAREIT FFO went up $0.02, Core FFO went down $0.02. Can you just — what’s the $0.04 swing factor in the normalized lines?

Bhairav Patel: Yes. I mean I can look into it further. But overall, from a Core FFO standpoint, the key driver is really the G&A spike that we saw in Q3 that kind of stays with us in Q4. So that’s really what’s driving the Core FFO, and I can look into it further and tell you what the difference is between the two.

Richard Anderson: Okay. And then in terms of expense growth, you talked a lot about tax true-ups and whatnot. But if I’m doing this right, the 4Q number is sort of very impressive from a year-over-year basis, something like 4% reduction in same-store expenses. Is that in the ballpark that what you’re seeing? Or are we doing something wrong here?

Bhairav Patel: Yes. So that’s in the ballpark. One of the reasons is it’s a favorable comp for us this quarter because we had some R&M expenses last year that were pushed into Q4 and some — so that was really driving the R&M expense higher last year. So it is a favorable comp. There is some benefit from the valuations that we received in Colorado, plus we expect some additional benefit in some of the other jurisdictions. When you kind of put it all together, that is what’s creating that year-over-year number that you’re seeing is in the ballpark that we have as well.

Richard Anderson: Okay. Great. All right. Now some real questions. So you’ve had some success in St. Cloud, as you mentioned, and you did better than you thought. Still the negative spread between sales and purchases is some 150, 200 basis points. Now as you look ahead into 2026, you’re not going to give me guidance, I don’t think. But do you think that, that spread will hold as you continue to pursue this trade strategy? Or is there something about the environment or where you might sell and where you might buy where that spread between buys and sells might change in one direction or another?

Anne Olson: Yes, I’ll start, and then I’ll ask Grant to comment on where he thinks cap rates are and going into 2026 for the markets that we’re targeting. I don’t think there’s going to be a big change. We haven’t seen much volatility in cap rates overall, either in the regional markets where we may look to sell or the markets that we’re buying in. With respect to the current portfolio and where we might target sales, where we may see some difference is if we do have the experience, particularly in Minneapolis that we’re projecting into 2026, where they’re well into the recovery, demand and absorption has been really strong, and we’re expecting strong rent growth. We could see the cap rates on the sales — on any sales in Minneapolis and even places like North Dakota, where we have had a really good experience and they’ve now had several years of very strong growth.

We could see those come in a little bit. And then Grant, what do you think about any movement on target market cap rates?

Grant Campbell: Yes. Target market cap rates have been pretty constant here recently, well-located core communities in Denver, pricing in the high 4s, Salt Lake City, mid- to high 4s. Core communities in Minneapolis pricing in the low 5s. And then when you slide into the Class B space, well-located Minneapolis or Denver B is generally, call it, 5.5% to 5.75%. We don’t see, as we sit today, any significant change to that profile. I think one theme that we have seen as we’ve explored sales in markets like St. Cloud or talked to others is there really is a deep bid right now for the secondary and tertiary market products. So there’s a lot of capital desiring to be in those locations. They can obtain financing that is attractive to them. So we’ve really seen a strong bid and strong pricing in those markets. So that’s something we are monitoring as we think about our future actions and where would those cap rates settle.

Anne Olson: Yes. We’re clearly focused on what’s that differential and what does it do to our earnings and the immediate future of our earnings. But we’re really trying to balance that with what is the best growth profile for the company longer term and what provides us with the liquidity we need that’s demanded by public market investors and where we can take the company from a growth perspective over a longer period of time.

Richard Anderson: Great. Okay. And then on Denver, you mentioned maybe fortune to start to turn in 2027. It is a big market for you, of course. Have you given any thought to moving around within Denver? Or do you think that the exposure to Denver will change as your — as the world around it changes? And the reason I ask is you could probably get some decent cap rates there if you were to sell some assets and reduce your exposure to Denver. I don’t know that, that’s your plan. But I’m just wondering if you’re having any change of thought about your exposure to Denver and if there might be any transaction activity buys or sells, maybe you get in front of what will be a recovery eventually. I’m just curious if you have any change of heart around Denver and your process in the transaction market.

Grant Campbell: We like our position in Denver. We like how our portfolio lays out geographically as well as the different product type offerings that we have within our portfolio. So I would say no concrete plans to significantly change that composition via transactions. With that said, we always pick up the phone if people reach out and have an idea or a thought, and we’ll continue to do that. So if somebody reaches out regarding one of our Denver communities, we will listen to them. But overall, we like our position. I think more so, the exposure level that Denver provides within our portfolio will change as the world around it, as you alluded to, changes here over the course of 2026 and 2027.

Richard Anderson: Great. And last for me, leverage ticks down to low 7s after you’re done with everything that’s on the plate right now. Do you foresee a 6 handle at some point in your future in 2026? Or should we be assuming kind of a 7-ish type of leverage number for you guys for now and for the foreseeable future?

Bhairav Patel: Yes. I mean the 6 handle comes through some natural deleveraging as earnings grow. Obviously, as you know, there’s some portfolio repositioning that we’ve been doing. So things may be volatile for a while, as you saw this year. But from our perspective, the focus always remains on managing it at — in the low 7s at the moment and then letting it tick down with some natural deleveraging through earnings.

Operator: Our next question comes from Mason Guell with Baird.

Mason P. Guell: Which of your smaller markets do you expect to outperform next year? And then when do you expect your larger markets to take lead in the portfolio over your smaller markets?

Anne Olson: Yes. I think we’re really have a lot of confidence that North Dakota is going to continue to perform. It’s been outperforming our other markets. We see that continuing into 2026. I think Minneapolis is going to be close on its tail next year with some really good tailwinds we have here, particularly with respect to how much demand we’ve seen in this market. And then I think it’s 2027, as Grant kind of alluded to before, we’re really seeing the dearth of new supply coming online that can impact that can impact growth rates overall. So next year, I’d keep a close eye on North Dakota again. And then into 2027, we might see Denver and Minneapolis really start to outpace that.

Mason P. Guell: Great. And can you talk about what drove the lower disposition proceeds guidance?

Anne Olson: I’m sorry, Mason. Can you repeat that question?

Mason P. Guell: Yes. Just could you talk about what drove the lower disposition proceeds guidance?

Bhairav Patel: Yes. Mason, overall, the disposition proceeds when you compare it for all the assets were in line. We outperformed in St. Cloud a little bit. Minneapolis came in a little bit below what we had initially expected. That is mostly driven by the fact that the portfolio in Minneapolis is a little disparate. It’s a collection of different kind of assets, and we were prioritizing execution there through the sale to a single bidder, which helps us from a 1031 standpoint, which was an integral part of this overall recycling transaction. So a bunch of different factors led us to prioritize execution over just optimizing the proceeds given everything that was incorporated within the transaction.

Operator: [Operator Instructions] Our next question comes from Buck Horne with Raymond James.

Buck Horne: Just a couple of quick ones for me. It sounds like you’re doing a great job on resident retention in this environment and managing through the supply and sounds like there’s not a lot of movement from existing tenants. I’m just wondering, though, to what extent — I mean, there’s been a lot of talk about the weakening of the job market, particularly for young adults, recent college graduates, just kind of financial pressures that are building on kind of the younger cohort. Are you seeing any signs of that in your recent new lease traffic? Or any — is there any degradation in the renter tenant profiles? Or what are you kind of seeing in terms of front door leasing demand?

Anne Olson: Yes. This is a great question. We haven’t seen anything. Now it’s a little hard to bifurcate. So a couple of things that we have seen that we mentioned. Incomes continue to rise. So — and rent-to-income ratios are staying pretty steady. I think we’re at 22%. So our bad debt has held really low, which is great. So we feel great about the health of the renter. Retention is higher, as you mentioned. The average age of our resident has ticked up and the — and also the average amount of time that their tenure with us overall is ticking up. So it’s hard to say if you look at that age is going up. Is that an indication that we’re not seeing as many younger renters coming to the market? Maybe. It could also just be a factor of the — not as many people able to buy homes at the same age as they historically have.

But we’re not seeing any degradation in traffic overall other than just in Denver, the market — the traffic has been a little softer in the market but no indication that we’re — there hasn’t been a big spike in age of residents showing that we aren’t getting that younger renters still in. We haven’t seen a change in the average residents per household either. So there’s really no evidence that people are starting to double up. If anything, Buck, it may bode well for us if they’re moving home for their parents, that will create future demand for us.

Buck Horne: Great. Great. I appreciate the color there. That’s very helpful. And just last one, following up the value-add CapEx shift. I mean, would that — it sounds like the hurdle rate is getting a little higher. Would you consider diverting some of those previously budgeted proceeds to share repurchases in the year-end?

Anne Olson: Yes. I think when I — the levers that we have to pull would be not only share repurchases, but debt reduction. So we’re looking at every option. It’s too small amount to really allocate in a meaningful way to new acquisitions, but definitely look at debt reduction and share repurchases as alternative uses of that capital.

Operator: We currently have no further questions. So I’ll hand back over to Anne for any closing remarks.

Anne Olson: Yes. Thanks, everyone, for joining us today. We’d be remiss if we didn’t acknowledge again our team who did such a great job this quarter. And we are going to continue into 2026, given the environment, we think we’re putting up great results for our shareholders, and we’re going to keep that at the forefront of everything we do. Have a great day.

Operator: Thank you very much, Anne, and thank you, everyone, for joining. That concludes today’s call. You may now disconnect your lines.

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