CENTERSPACE Swings to Profit on $79.5M Asset Sale Gain

TL;DR

**CENTERSPACE's massive asset sale gain is a one-time boost, but watch that soaring debt for future stability.**

AI Summary

CENTERSPACE reported a significant turnaround in its financial performance for the three and nine months ended September 30, 2025. Revenue increased to $71.4 million for the three months, up from $65.0 million in the prior year, and reached $207.0 million for the nine months, compared to $194.6 million in 2024. The company swung to a net income of $65.4 million for the three-month period, a substantial improvement from a net loss of $1.95 million in 2024, primarily driven by a $79.5 million gain on the sale of real estate and other investments. For the nine-month period, net income was $44.4 million, reversing a net loss of $8.4 million in the previous year. Total assets grew to $2.10 billion as of September 30, 2025, from $1.91 billion at December 31, 2024, largely due to an increase in real estate investments and $86.3 million in assets held for sale. Liabilities also increased, with revolving lines of credit rising to $222.5 million from $47.4 million. The company reported a net income per common share (basic) of $3.22 for the three months and $2.12 for the nine months, a strong recovery from losses of $0.40 and $0.96, respectively, in 2024.

Why It Matters

This filing reveals CENTERSPACE's strategic shift towards asset monetization, evidenced by the significant gain on sale of real estate, which dramatically improved its net income. For investors, this indicates a potential focus on optimizing its portfolio and generating capital, which could lead to increased shareholder value or reinvestment opportunities. The substantial increase in revolving lines of credit, however, suggests a reliance on debt for operations or new acquisitions, which warrants careful monitoring. Competitively, this move could allow CENTERSPACE to reallocate capital to higher-growth markets or properties, potentially strengthening its position against other REITs in the apartment community sector.

Risk Assessment

Risk Level: medium — The company's total liabilities increased significantly to $1.21 billion as of September 30, 2025, from $1.01 billion at December 31, 2024, with revolving lines of credit jumping from $47.4 million to $222.5 million. This substantial increase in debt, alongside a $23.2 million impairment of real estate investments for the nine months ended September 30, 2025, indicates potential financial leverage and asset valuation risks.

Analyst Insight

Investors should scrutinize the details of the $79.5 million gain on sale of real estate to understand if this is a sustainable strategy or a one-off event. Monitor CENTERSPACE's debt levels, particularly the revolving lines of credit, and assess their impact on future interest expenses and cash flow. Evaluate the company's plans for the capital generated from asset sales and increased borrowing.

Financial Highlights

debt To Equity

1.37

revenue

$71.4M

operating Margin

108.1%

total Assets

$2.10B

total Debt

$1.21B

net Income

$65.4M

eps

$3.22

gross Margin

N/A

cash Position

$12.9M

revenue Growth

+9.8%

Revenue Breakdown

Key Numbers

• $71.4M — Q3 2025 Revenue (Increased from $65.0M in Q3 2024, a 9.8% increase.)
• $65.4M — Q3 2025 Net Income (Swung from a net loss of $1.95M in Q3 2024, driven by asset sales.)
• $79.5M — Gain on Sale of Real Estate (Key driver for the net income turnaround in Q3 and YTD 2025.)
• $2.10B — Total Assets (Increased from $1.91B at December 31, 2024, a 9.9% increase.)
• $1.21B — Total Liabilities (Increased from $1.01B at December 31, 2024, a 19.8% increase.)
• $222.5M — Revolving Lines of Credit (Significantly increased from $47.4M at December 31, 2024, a 369% increase.)
• $3.22 — Basic EPS (Q3 2025) (Improved from a loss of $0.40 in Q3 2024.)
• $23.2M — Impairment of Real Estate Investments (Recorded for the nine months ended September 30, 2025, indicating asset value adjustments.)
• 16,703,468 — Common Shares Outstanding (As of October 27, 2025, a slight decrease from 16,719,000 at December 31, 2024.)
• $85.7M — Net Cash from Operating Activities (YTD 2025) (Increased from $79.6M in YTD 2024, a 7.7% increase.)

Key Players & Entities

• CENTERSPACE (company) — North Dakota real estate investment trust
• $71,399 (dollar_amount) — Revenue for three months ended September 30, 2025
• $65,025 (dollar_amount) — Revenue for three months ended September 30, 2024
• $207,041 (dollar_amount) — Revenue for nine months ended September 30, 2025
• $194,574 (dollar_amount) — Revenue for nine months ended September 30, 2024
• $65,408 (dollar_amount) — Net income for three months ended September 30, 2025
• $79,531 (dollar_amount) — Gain on sale of real estate and other investments for three and nine months ended September 30, 2025
• $2,097,606 (dollar_amount) — Total assets as of September 30, 2025
• $1,210,682 (dollar_amount) — Total liabilities as of September 30, 2025
• $222,500 (dollar_amount) — Revolving lines of credit as of September 30, 2025

FAQ

Risk Factors

• Increased Debt Levels [medium — financial]: Total liabilities increased by 19.8% to $1.21 billion from $1.01 billion at December 31, 2024. Notably, revolving lines of credit surged by 369% to $222.5 million, indicating increased reliance on short-term borrowing.
• Real Estate Investment Impairment [medium — operational]: The company recorded an impairment of real estate investments totaling $23.2 million for the nine months ended September 30, 2025. This suggests potential overvaluation or underperformance of certain assets.
• Real Estate Market Fluctuations [medium — market]: The company's performance is tied to the real estate market. Fluctuations in property values, rental demand, and interest rates can significantly impact revenue and asset valuations.
• Dependence on Asset Sales for Profitability [high — financial]: The significant net income of $65.4 million in Q3 2025 was heavily influenced by a $79.5 million gain on the sale of real estate and other investments. This reliance on one-time gains suggests underlying operational profitability may be less robust.
• Compliance with Real Estate Regulations [low — regulatory]: As a real estate investment trust, CENTERSPACE is subject to various federal, state, and local regulations concerning property ownership, leasing, and environmental standards. Non-compliance can lead to fines and legal challenges.

Industry Context

CENTERSPACE operates within the real estate investment trust (REIT) sector, specifically focusing on self-storage facilities. The industry is characterized by stable demand driven by life events such as moving, downsizing, or business expansion. However, it faces increasing competition from both established players and new entrants, as well as sensitivity to economic cycles and interest rate changes.

Regulatory Implications

As a REIT, CENTERSPACE must adhere to specific tax regulations and operational standards. Changes in real estate laws, zoning, environmental regulations, or tax policies could impact its operations, profitability, and ability to distribute income to shareholders. Compliance with reporting requirements for public companies is also critical.

What Investors Should Do

1. Monitor Debt Levels and Interest Coverage
2. Analyze Sustainability of Profitability
3. Evaluate Real Estate Portfolio Performance
4. Assess Growth Strategy Beyond Asset Sales

Key Dates

• 2025-09-30: Quarter End and Nine Months End — Reporting period for the financial results showing a significant turnaround in net income driven by asset sales and growth in revenue.
• 2025-12-31: Prior Year End — Baseline for comparison of asset and liability growth, showing an increase in total assets to $2.10B and total liabilities to $1.21B.
• 2024-09-30: Prior Year Quarter and Nine Months End — Period of net loss, highlighting the substantial improvement in financial performance in 2025.

Glossary

Assets held for sale, net

Assets that are classified as held for sale, meaning management has committed to a plan to sell them, and they are available for immediate sale in their present condition. (An increase to $86.3 million in assets held for sale indicates strategic divestitures or portfolio adjustments by the company.)

Impairment of real estate investments

A reduction in the carrying amount of a real estate asset when its recoverable amount is less than its carrying amount, indicating a loss in value. (The $23.2 million impairment charge for the nine months suggests that some of the company's real estate assets have lost value.)

Gain (loss) on sale of real estate and other investments

The profit or loss realized from selling real estate properties or other investments. (A significant gain of $79.5 million in Q3 2025 was the primary driver of the company's swing to profitability for the period.)

Revolving lines of credit

A type of credit facility that allows a company to borrow, repay, and re-borrow funds up to a certain limit over a specified period. (The substantial increase to $222.5 million from $47.4 million indicates increased short-term borrowing to manage operations or fund investments.)

Common Shares of Beneficial Interest

Represents ownership in the company, entitling shareholders to voting rights and a share of profits. (The number of outstanding shares (16,703) is used to calculate Earnings Per Share (EPS).)

Year-Over-Year Comparison

Compared to the prior year's filing, CENTERSPACE demonstrates a significant financial recovery. Revenue for the nine months increased by 6.4% to $207.0 million, and the company swung from a net loss to a substantial net income of $44.4 million year-to-date. This turnaround was primarily driven by a $79.5 million gain on asset sales in Q3 2025, which offset operational expenses and a prior year's loss. Total assets have grown by 9.9% to $2.10 billion, but liabilities have also increased by 19.8% to $1.21 billion, with a notable surge in revolving credit usage, indicating a shift in financing strategy.

Filing Documents

• csr-20250930.htm (10-Q) — 2037KB
• centerspace093025-10qex311.htm (EX-31.1) — 16KB
• centerspace093025-10qex312.htm (EX-31.2) — 16KB
• centerspace093025-10qex321.htm (EX-32.1) — 6KB
• centerspace093025-10qex322.htm (EX-32.2) — 6KB
• 0000798359-25-000111.txt ( ) — 10739KB
• csr-20250930.xsd (EX-101.SCH) — 64KB
• csr-20250930_cal.xml (EX-101.CAL) — 79KB
• csr-20250930_def.xml (EX-101.DEF) — 417KB
• csr-20250930_lab.xml (EX-101.LAB) — 777KB
• csr-20250930_pre.xml (EX-101.PRE) — 594KB
• csr-20250930_htm.xml (XML) — 1948KB

Financial Information

Part I. Financial Information

Financial Statements - Third Quarter - 2025

Item 1. Financial Statements - Third Quarter - 2025: 3 Condensed Consolidated Balance Sheets September 30, 2025 (unaudited) and December 31, 2024 3 Condensed Consolidated Statements of Operations and Comprehensive Income ( Loss ) (unaudited) For the Three and Nine Months ended September 30, 2025 and 2024 4 Condensed Consolidated Statements of Equity (unaudited) For the Three and Nine Months ended September 30, 2025 and 2024 5 Condensed Consolidated Statements of Cash Flows (unaudited) For the Nine Months ended September 30, 2025 and 2024 7 Notes to Condensed Consolidated Financial Statements (unaudited) 9

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 28

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 42

Controls and Procedures

Item 4. Controls and Procedures 43

Other Information

Part II. Other Information

Legal Proceedings

Item 1. Legal Proceedings 44

Risk Factors

Item 1A. Risk Factors 44

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 44

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 44

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 44

Other Information

Item 5. Other Information 44

Exhibits

Item 6. Exhibits 45

Signatures

Signatures 46 2 Table of Contents PART I

Financial Statements

Item 1. Financial Statements. CENTERSPACE AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) September 30, 2025 December 31, 2024 ASSETS (Unaudited) Real estate investments Property owned $ 2,536,166 $ 2,480,741 Less accumulated depreciation ( 638,217 ) ( 625,980 ) Total real estate investments 1,897,949 1,854,761 Cash and cash equivalents 12,896 12,030 Restricted cash 52,943 1,099 Other assets 47,516 45,817 Assets held for sale, net 86,302 — TOTAL ASSETS $ 2,097,606 $ 1,913,707 LIABILITIES, MEZZANINE EQUITY, AND EQUITY LIABILITIES Accounts payable and accrued expenses $ 66,124 $ 59,319 Revolving lines of credit 222,500 47,359 Notes payable, net 299,564 299,520 Mortgages payable, net 622,074 608,506 Liabilities held for sale, net 420 — TOTAL LIABILITIES $ 1,210,682 $ 1,014,704 COMMITMENTS AND CONTINGENCIES (NOTE 10) SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $ 100 par value, 59 units issued and outstanding at September 30, 2025 and 166 units issued and outstanding at December 31, 2024, aggregate liquidation preference of $ 5,940 at September 30, 2025) $ 5,940 $ 16,560 EQUITY Common Shares of Beneficial Interest (Unlimited authorization, no par value, 16,703 shares issued and outstanding at September 30, 2025 and 16,719 shares issued and outstanding at December 31, 2024) 1,366,980 1,367,637 Accumulated distributions in excess of net income ( 618,341 ) ( 615,242 ) Accumulated other comprehensive loss — ( 407 ) Total shareholders' equity $ 748,639 $ 751,988 Noncontrolling interests – Operating Partnership and Series E preferred units 128,038 129,782 Noncontrolling interests – consolidated real estate entities 4,307 673 TOTAL EQUITY $ 880,984 $ 882,443 TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY $ 2,097,606 $ 1,913,707 See accompanying Notes to Condensed Consolidated Financial Statements. 3 Table of Contents CENTERSPACE AND SUBSIDIARIES CONDENSED CONSOLI

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View this 10-Q filing on SEC EDGAR