Sterling Multifamily Trust Sees Steady Growth

The Fargo-based REIT posts higher revenues, expands residential holdings, and navigates strategic transitions.

August 08, 2025

Rental Income Is Climbing

Sterling Multifamily Trust posted a solid second quarter, driven by consistent growth in its residential portfolio and continued movement away from commercial real estate. Revenue is up, occupancy remains strong, and cash flows from operations are covering dividends with room to spare.

The trust, headquartered in Fargo, manages 177 properties across 11,955 multifamily units and nearly 1.2 million square feet of commercial space. At the end of Q2, real estate investments totaled $1.1 billion, with a net book value of $857 million. Residential assets remain the focus. Commercial exposure is steadily shrinking.

Rental income for the first half of the year came in at $85.2 million, up 11% year-over-year. The second quarter saw a 9.4% increase over the same period last year. Residential income was the driver, up 13.5%. Occupancy in residential units rose slightly to 93.8%. Commercial income dipped as Sterling continued to sell down those assets.

Operating income also improved. Q2 net operating income rose to $22.1 million, up from $18.6 million the prior year. For the first half of 2025, Sterling posted $42.6 million in net operating income.

Portfolio Composition Continues to Shift Toward Multifamily

Residential now accounts for nearly 83% of the portfolio by cost. Sterling’s residential properties span North Dakota, Minnesota, Missouri, Nebraska, and Texas. The commercial portfolio, meanwhile, is winding down. It now makes up just 11.6% of rental income.

Sterling didn’t acquire or sell any properties in the first half of 2025. That changed just after quarter-end. On July 16, Sterling closed on a new residential acquisition in Grand Forks, ND for $21.3 million. Additional transactions are under review, but still subject to standard contingencies.

Construction Spend Remains Focused and Measured

Construction-in-progress stood at $19.1 million at the end of the quarter. One of the largest active projects is a new parking structure and lot at Rosedale Estates in Roseville, MN, with over $7 million in budgeted spend. Other investments include:

• Roof replacements


• Security upgrades


• Common-area renovations

Capital expenditures for the first half totaled $7.9 million. Another $4 million has been accrued for upcoming work. These projects are aimed at improving tenant experience and long-term asset value.

Balance Sheet Stays Stable

Total assets at quarter-end reached $940 million. Shareholders’ equity was $318 million, and liabilities came in at $622 million. Debt remains manageable. Total mortgage and affiliate borrowings were $556 million. Of that, $125 million in variable rate debt is hedged using interest rate swaps.

Interest expense rose 16% year-over-year to $12.6 million, mostly tied to financing activity from 2024’s Lexington Lofts acquisition. Mortgage principal payments were $16 million in the first half, and debt reduction is expected to continue.

Lines of credit were more actively used, with $24 million outstanding at quarter-end. Total available credit stands at $28 million. The trust also held $5.7 million in unrestricted cash.

Joint Ventures Provide Additional Exposure to Development

Sterling holds minority stakes in ten joint ventures. Most are tied to residential development in Minnesota, Texas, and Iowa. These investments are accounted for using the equity method and totaled $28 million as of June 30.

Some affiliates remain in early development stages and posted operating losses. Still, these assets are positioned to contribute over time. In parallel, Sterling provided $7.8 million in mezzanine financing to related ventures. These loans generated $285,000 in interest income in the first half.

Dividend Payments Remain Consistent

Sterling paid $0.60 per share in dividends through June. That distribution was fully covered by operating cash flows. Approximately 54% of dividends were reinvested through the dividend reinvestment plan. Operating Partnership unit holders received the same per-unit payout.

The trust expects to maintain REIT status and has no federal income tax liability recorded. Distributions remain tied to the requirement to pay out at least 90% of taxable income.

Related Party Relationships Remain Active

As in prior quarters, Sterling disclosed activity with entities tied to its senior leadership. GOLDMARK Property Management and Sterling Management LLC handled property operations and advisory services, respectively. The trust also works with Trumont Construction and Bell Bank, among others, for project development and financing.

All related party transactions are reviewed by independent trustees. No development fees were paid in the first half of 2025.

Tax Law Changes on the Horizon

On July 4, Congress passed H.R. 1—the One Big Beautiful Bill Act. Several changes to federal tax law, including bonus depreciation and interest expense deductibility, go into effect for 2025. These changes weren’t reflected in the Q2 results. Management is still reviewing how they’ll affect future reporting periods.

Sterling aims to bolster its multifamily footprint while managing debt, refining operations, and leveraging partnerships.