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Item 9A. Controls and Procedures

2022-02-28 compared with 2021-02-22 · 379 added, 528 removed, 949 unchanged (49% of the section changed)

1 unchanged sentence

Disclosure Controls and Procedures :

As of December 31, 2020, the end of the period covered by this Report, our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act).

As of December 31, 2021, the end of the period covered by this Report, our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting :

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fourth quarter of the year to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of the year to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

12 unchanged sentences

Trustees, Executive Officers and Corporate Governance

The information required by this Item regarding Trustees is incorporated by reference to the information under “Election of Trustees,” “Information About Our Executive Officers,” “Code of Conduct and Code of Ethics for Senior Financial Officers,” and “Board Committees” in our definitive proxy statement for our 2021 Annual Meeting of Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Report.

and “Board Committees” in our definitive proxy statement for our 2022 Annual Meeting of Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Report.

Executive Compensation

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Incorporated (incorporated herein by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the Commission on November 7, 2019).

1.2 Equity Distribution Agreement dated September 10, 2021 between the Company and BMO Capital Markets Corp., BTIG, LLC, Jefferies LLC, Raymond James & Associates, Inc., BofA Securities, Inc., UBS Securities LLC, Piper Sandler & Co., and certain of their affiliates (incorporated herein by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 10, 2021.

Articles of Amendment and Third Restated Declaration of Trust of Investors Real Estate Trust adopted on September 23, 2003, as amended on September 18, 2007 (incorporated herein by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed with the Commission on June 30, 2014).

6 unchanged sentences

4.4 Form of Guaranty Agreement under the Note Agreement (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the Commission on September 17, 2019).

4.5 Description of Securities (incorporated by reference to Exhibit 4.5 to the Company 's Annual Report on Form 10-K filed wi th the Commission on February 19, 2020) .

4.5 Description of Securities (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K filed with the Commission on February 19, 2020).

4.6 Amendment to Note Purchase and Private Shelf Agreement, dated as of September 13, 2019, by and among Centerspace, LP, a North Dakota Limited Partnership, as the Issuer, Investors Real Estate, as the Parent, Centerspace, Inc., as the General Partner, certain subsidiaries of the Parent, PGIM Inc., an affiliate of Prudential Financial, Inc., certain affiliates of PGIM, Inc., and the Purchasers of the Series A Notes (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the Commission on January 7, 2021).

4.7 Form of Series C Notes under Note Agreement (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed with the Commission on January 7, 2021).

4.8 Confirmation of Guarantee Agreement, dated as of January 6, 2021, by an among Centerspace, Inc., Investors Real Estate Trust, IRET - Grand Gateway Apartments, LLC, IRET - Homestead Gardens II, LLC, IRET - River Ridge Apartments, LLC, IRET - Valley Park Manor, LLC, and the Holders of Notes thereto (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the Commission on January 7, 2021).

4.9 Note Purchase Agreement, dated September 17, 2021, by and among Centerspace, Centerspace, LP, Centerspace, Inc., Allianz Life Insurance Company of North America, Nationwide Life and Annuity Insurance Company, Nationwide Life Insurance Company, Prudential Annuities Life Assurance Corporation, The Prudential Insurance Company of America, The Prudential Life Insurance Company, Ltd., and Nassau Life Insurance Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).

4.10 Form of Series 2021-A Senior Note (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).

4.11 Form of Series 2021-B Senior Note (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).

4.12 Form of Series 2021-C Senior Note (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).

4.13 Form of Series 2021-D Senior Note (incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).

4.14 Guarantee Agreement, dated September 17, 2021 of Centerspace, LP Note (incorporated by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).

4.15 Amendment No.

2 to Note Purchase and Private Shelf Agreement, dated September 17, 2021, and related Exhibit B attached thereto, by and among Centerspace, Centerspace, LP, Centerspace, Inc., PGIM, Inc., an affiliate of Prudential Financial, Inc.

and certain affiliates of PGIM, Inc.

Note (incorporated by reference to Exhibit 4.7 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).

2015 Incentive Plan dated June 23, 2015 (incorporated herein by reference to Appendix A to the Company’s Proxy Statement on Schedule 14A filed with the Commission on August 3, 2015).

15 unchanged sentences

10.17 Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of IRET Properties, A North Dakota Limited Partnership, dated as of February 26, 2019 (incorporated by reference to Exhibit 10.32 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on February 27, 2019).

10.18 Form of Contribution Agreement, dated as of June 3, 2021, by and between Seller and Centerspace, (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 3, 2021).

10.19 Form of Tax Protection Agreement, by and among Seller, Centerspace, and Centerspace, LP (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on June 3, 2021).

10.20 Amendment to Limited Partnership Agreement of the Partnership, dated September 1, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 2, 2021).

10.21 Master Credit Facility, dated as of September 1, 2021, among certain wholly-owned subsidiaries of Centerspace and Walker & Dunlop, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on September 2, 2021).

10.22 Assumption Agreement and Amendment to Loan Documents, dated as of September 1, 2021, among CSR - Palisades, LLC, Minnesota Life Insurance Company and Palisades Limited Partnership (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on September 2, 2021).

10.23 Third Amended and Restated Credit Agreement, dated as of September 30, 2021, among Centerspace, LP, the Guarantors from time to time party thereto, the Lenders from time to time party thereto, KeyBank, National Association and PNC Bank, National Association, as Syndicated Agents, and Bank of Montreal, as Administrative Agent Note (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 30, 2021).

Subsidiaries of Centerspace

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

February 22, 2021 Investors Real Estate Trust dba Centerspace

February 28, 2022 Centerspace

President & Chief Executive Officer

1 unchanged sentence

Signature Title Date

/s/ Jeffrey P.

Caira Trustee & Chairman February 22, 2021

Schissel Trustee & Chairman February 28, 2022

President & Chief Executive Officer

1 unchanged sentence

Trustee February 28, 2022

Kirchmann Executive Vice President and Chief Financial Officer

/s/ Bhairav Patel

Bhairav Patel Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer) February 28, 2022

4 unchanged sentences

Hall Trustee February 28, 2022

/s/ Terrance P.

Maxwell Trustee February 22, 2021

Schissel Trustee February 22, 2021

/s/ Jeffrey P.

Caira Trustee February 28, 2022

Twinem Trustee February 28, 2022

/s/ Rodney Jones-Tyson

Rodney Jones-Tyson Trustee February 28, 2022

CENTERSPACE AND SUBSIDIARIES

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID Number 248 )

CONSOLIDATED FINANCIAL STATEMENTS

10 unchanged sentences

Board of Trustees and Shareholders

Investors Real Estate Trust

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Investors Real Estate Trust (a North Dakota real estate investment trust) and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for the years ended December 31, 2020 and 2019, eight month period ended December 31, 2018, and the year ended April 30, 2018, and the related notes and financial statement schedule included under Item 15 (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years ended December 31, 2020 and 2019, eight month period ended December 31, 2018, and the year ended April 30, 2018, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Centerspace (a North Dakota real estate investment trust) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for the three years in the period ended December 31, 2021, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 28, 2022 expressed an unqualified opinion.

10 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Accounting for Series E preferred units issued.

As described in Note 4 to the financial statements, in September 2021, the Company issued 1.8 million Series E preferred units with a par value of $100 per Series E preferred unit as partial consideration for the acquisition of 17 apartment communities.

The Series E preferred unit holders receive a preferred distribution at the rate of 3.875% per year.

Each Series E preferred unit is convertible, at the holder’s option, into 1.2048 Units, representing a conversion exchange rate of $83.00 per unit.

The Series E preferred units have an aggregate liquidation preference of $181.4 million.

The holders of the Series E preferred units do not have voting rights and are required to hold the units for one year before they may elect to convert.

The Company recorded the Series E preferred units as a noncontrolling interest within permanent equity on the consolidated balance sheet at fair value.

We have identified the accounting for the Series E preferred units as a critical audit matter.

The principal consideration for our determination that accounting for the Series E preferred units is a critical audit matter is it involved a high degree of judgment in assessing management’s conclusions that the Series E preferred units are a noncontrolling interest within permanent equity.

Our audit procedures related to the accounting for the Series E preferred units included the following, among others.

• We tested the design and operating effectiveness of management’s internal controls over their accounting of the Series E preferred units, including controls over the evaluation and application of the appropriate accounting principles.

• We inspected the contribution agreements, Series E preferred unit agreement, and operating partnership agreement to identify and understand the rights of the unit holders and provisions relevant to management’s conclusions.

• We evaluated relevant provisions within these agreements to determine whether management’s conclusions were consistent with the relevant accounting guidance, specifically whether the Series E preferred units were a noncontrolling interest within permanent equity.

• We consulted our firm’s subject matter expert regarding the appropriateness of management’s conclusions on the accounting for the Series E preferred units.

/s/ GRANT THORNTON LLP

4 unchanged sentences

Board of Trustees and Shareholders

Investors Real Estate Trust

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Investors Real Estate Trust (a North Dakota real estate investment trust) and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

We have audited the internal control over financial reporting of Centerspace (a North Dakota real estate investment trust) and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

21 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(in thousands)

(in thousands, except per share data)

December 31, 2021 December 31, 2020

3 unchanged sentences

1,827,578 1,413,308

Unimproved land — 1,376

Mortgage loans receivable 43,276 24,661

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COMMITMENTS AND CONTINGENCIES (NOTE 12)

SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $ 100 par value, 165,600 units issued and outstanding at December 31, 2020 and December 31, 2019, aggregate liquidation preference of $ 16,560,000 )

SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $ 100 par value, 166 units issued and outstanding at December 31, 2021 and 2020, aggregate liquidation preference of $ 16,560 )

$ 25,331 $ 16,560

Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 3,881,453 shares issued and outstanding at December 31, 2020, aggregate liquidation preference of $ 97,036,325 and 4,118,460 shares issued and outstanding at December 31, 2019, aggregate liquidation preference of $ 102,971,475 )

Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 3,881 shares issued and outstanding at December 31, 2021 and 2020, aggregate liquidation preference of $ 97,036 )

93,530 93,530

4 unchanged sentences

Total shareholders’ equity $ 772,032 $ 618,207

Noncontrolling interests – Operating Partnership ( 976,516 units at December 31, 2020 and 1,058,142 units at December 31, 2019)

53,930 55,284

Noncontrolling interests – Operating Partnership and Series E preferred units 223,600 53,930

Noncontrolling interests – consolidated real estate entities 648 686

5 unchanged sentences

( in thousands, except per share data)

Year Ended December 31, Eight Months Ended December 31, Fiscal Year Ended April 30,

Year Ended December 31,

2021 2020 2019

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Depreciation and amortization 92,165 75,593 74,271

Impairment of real estate investments — — 1,221 18,065

General and administrative expenses 16,213 13,440 14,450

TOTAL EXPENSES 199,331 169,654 174,338

Gain (loss) on sale of real estate and other investments 27,518 25,503 97,624

Operating income (loss) 29,892 33,843 109,041

2 unchanged sentences

Interest and other income (loss) ( 2,380 ) ( 1,552 ) 2,092

Income (loss) before gain (loss) on sale of real estate and other investments, gain (loss) on litigation settlement, and income (loss) from discontinued operations ( 20,760 ) ( 19,388 ) ( 15,597 ) ( 57,314 )

Gain (loss) on sale of real estate and other investments 25,503 97,624 9,707 20,120

Gain (loss) on litigation settlement — — 6,586

Income (loss) from continuing operations 4,743 84,822 ( 5,890 ) ( 37,194 )

Income (loss) from discontinued operations — — 570 164,823

NET INCOME (LOSS) ( 2,101 ) 4,743 84,822

Dividends to preferred unitholders ( 640 ) ( 640 ) ( 537 )

Net (income) loss attributable to noncontrolling interests – Operating Partnership 212 ( 6,752 ) 1,032 ( 12,702 )

Net (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units 2,806 212 ( 6,752 )

Net (income) loss attributable to noncontrolling interests – consolidated real estate entities ( 94 ) 126 1,136

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NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $ ( 6,457 ) $ ( 1,790 ) $ 71,848

Earnings (loss) per common share from continuing operations – basic $ ( 0.15 ) $ 6.06 $ ( 0.79 ) $ ( 3.54 )

Earnings (loss) per common share from discontinued operations – basic — — $ 0.04 $ 12.25

NET EARNINGS (LOSS) PER COMMON SHARE – BASIC $ ( 0.47 ) $ ( 0.15 ) $ 6.06

Earnings (loss) per common share from continuing operations – diluted $ ( 0.15 ) $ 6.00 $ ( 0.79 ) $ ( 3.54 )

Earnings (loss) per common share from discontinued operations – diluted — — $ 0.04 $ 12.25

NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED $ ( 0.47 ) $ ( 0.15 ) $ 6.00

Weighted average shares - basic 13,803 12,564 11,744

Weighted average shares - dilutive 15,704 13,594 13,182

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Year Ended December 31, Eight Months Ended December 31, Fiscal Year Ended April 30,

Year Ended December 31,

2021 2020 2019

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Total comprehensive income (loss) $ 9,369 $ ( 3,555 ) $ 78,071

Net comprehensive (income) loss attributable to noncontrolling interests – Operating Partnership 882 ( 6,058 ) 1,032 ( 12,888 )

Net comprehensive (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units 4,407 882 ( 6,058 )

Net comprehensive (income) loss attributable to noncontrolling interests – consolidated real estate entities ( 94 ) 126 1,136

8 unchanged sentences

SHARES SHARES SHARES NET INCOME INCOME INTERESTS EQUITY

Balance at April 30, 2017 $ 111,357 12,120 $ 908,905 $ ( 466,541 ) — $ 82,437 $ 636,158

Balance at December 31, 2018 $ 99,456 11,942 $ 899,234 $ ( 429,048 ) $ ( 856 ) $ 74,663 $ 643,449

Net income (loss) attributable to controlling interest and noncontrolling interests 78,669 5,790 84,459

2 unchanged sentences

( 32,996 ) ( 3,414 ) ( 36,410 )

Distributions – Series B preferred shares ($ 0.9938 per Series B share)

( 4,571 ) ( 4,571 )

Distributions – Series C preferred shares ($ 1.65625 per Series C share)

1 unchanged sentence

Share-based compensation, net of forfeitures 11 1,905 1,905

Issuance of Series C preferred shares 99,456 99,456

Sale of common shares, net 308 22,019 22,019

Redemption of Units for common shares 173 7,823 ( 7,823 ) —

1 unchanged sentence

Shares repurchased ( 329 ) ( 18,023 ) ( 18,023 )

Contributions from nonredeemable noncontrolling interests – consolidated real estate entities 619 619

Acquisition of redeemable noncontrolling interests 4,529 4,529

Other ( 7 ) ( 87 ) ( 220 ) ( 307 )

Balance at April 30, 2018 $ 99,456 11,953 $ 900,097 $ ( 395,669 ) $ 1,779 $ 81,900 $ 687,563

Cumulative adjustment upon adoption of ASC 606 and ASC 610-20 627 627

Balance on May 1, 2018 99,456 11,953 900,097 ( 395,042 ) 1,779 81,900 688,190

Balance at December 31, 2019 $ 99,456 12,098 $ 917,400 $ ( 390,196 ) $ ( 7,607 ) $ 60,849 $ 679,902

Net income (loss) attributable to controlling interests and noncontrolling interests 4,441 ( 338 ) 4,103

5 unchanged sentences

Share-based compensation, net of forfeitures 20 2,106 2,106

Sale of common shares, net 829 58,852 58,852

Redemption of Units for common shares 81 ( 1,750 ) 1,750 —

Redemption of Units for cash ( 498 ) ( 498 )

Shares repurchased ( 5,926 ) 297 ( 5,629 )

Distributions to nonredeemable noncontrolling interests - consolidated real estate entities ( 2,432 ) ( 2,432 )

Conversion to equity of notes receivable from nonredeemable noncontrolling interests – consolidated real estate entities ( 392 ) ( 392 )

Acquisition of nonredeemable noncontrolling interests – consolidated real estate entities ( 7,584 ) ( 4,637 ) ( 12,221 )

1 unchanged sentence

Balance at December 31, 2020 $ 93,530 13,027 $ 968,263 $ ( 427,681 ) $ ( 15,905 ) $ 54,616 $ 672,823

See Notes to Consolidated Financial Statements.

CENTERSPACE AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (continued)

(in thousands, except per share amounts)

NUMBER ACCUMULATED ACCUMULATED

OF DISTRIBUTIONS OTHER NONREDEEMABLE

PREFERRED COMMON COMMON IN EXCESS OF COMPREHENSIVE NONCONTROLLING TOTAL

SHARES SHARES SHARES NET INCOME INCOME INTERESTS EQUITY

Balance at December 31, 2018 $ 99,456 11,942 $ 899,234 $ ( 429,048 ) $ ( 856 ) $ 74,663 $ 643,449

Net income (loss) attributable to controlling interests and noncontrolling interests ( 29 ) ( 2,712 ) ( 2,741 )

4 unchanged sentences

( 6,428 ) ( 6,428 )

Share-based compensation, net of forfeitures 11 1,905 1,905

Sale of common shares, net 308 22,019 22,019

Redemption of Units for common shares 173 7,823 ( 7,823 ) —

Redemption of Units for cash ( 8,147 ) ( 8,147 )

Shares repurchased ( 329 ) ( 18,023 ) ( 18,023 )

Acquisition of redeemable noncontrolling interests 4,529 4,529

Distributions to nonredeemable noncontrolling interests - consolidated real estate entities ( 220 ) ( 220 )

Other ( 7 ) ( 87 ) ( 87 )

Balance at December 31, 2019 $ 99,456 12,098 $ 917,400 $ ( 390,196 ) $ ( 7,607 ) $ 60,849 $ 679,902

Net income (loss) attributable to controlling interests and noncontrolling interests 4,441 ( 338 ) 4,103

Change in fair value of derivatives ( 8,298 ) ( 8,298 )

Distributions – common shares and Units ($ 2.80 per common share and Unit)

( 35,695 ) ( 2,842 ) ( 38,537 )

Distributions – Series C preferred shares ($ 1.65625 per Series C share)

Distributions – Series E preferred units ($ 1.301667 per unit)

( 2,343 ) ( 2,343 )

1 unchanged sentence

Sale of common shares, net 1,817 156,038 156,038

Issuance of Series E preferred units 44,905 172,608 217,513

Redemption of Units for common shares 144 ( 4,714 ) 4,714 —

Redemption of Units for cash ( 50 ) ( 50 )

Shares repurchased ( 5,926 ) — — 297 ( 5,629 )

Acquisition of noncontrolling interests - consolidated real estate entities ( 7,584 ) ( 4,637 ) ( 12,221 )

Change in value of Series D preferred units — ( 8,771 ) ( 8,771 )

Other — ( 1,155 ) ( 146 ) ( 1,301 )

4 unchanged sentences

(in thousands)

Year Ended December 31, Eight Months Ended December 31, Fiscal Year Ended April 30,

Year Ended December 31,

2021 2020 2019

3 unchanged sentences

Depreciation and amortization 93,110 76,596 75,408

Depreciation and amortization from discontinued operations — — — 8,526

(Gain) loss on sale of real estate, land, other investments and discontinued operations ( 25,503 ) ( 97,624 ) ( 10,277 ) ( 183,687 )

(Gain) loss on sale of real estate, land, and other investments ( 27,518 ) ( 25,503 ) ( 97,624 )

Realized (gain) loss on marketable securities — 3,378 —

2 unchanged sentences

Share-based compensation expense 2,687 2,106 1,905

Impairment of real estate investments — — 1,221 18,065

(Gain) loss on interest rate swap termination, amortization, and mark-to-market 4,931 — —

Bad debt expense 2,304 2,332 1,050

9 unchanged sentences

Purchase of marketable securities — ( 179 ) ( 6,942 )

Proceeds from sale of discontinued operations — — — 426,131

Proceeds from sale of real estate and other investments 61,334 43,686 199,282

10 unchanged sentences

Principal payments on notes payable and other debt ( 145,000 ) — —

Payoff of financing liability — — — ( 7,900 )

Payments for termination of interest rate swaps ( 3,804 ) — —

Proceeds from sale of common shares, net of issuance costs 156,038 58,852 22,019

Payments for acquisition of noncontrolling interests – consolidated real estate entities — ( 12,221 ) ( 1,260 )

Proceeds from sale of preferred shares — — — 99,467

Repurchase of common shares — — ( 18,023 )

3 unchanged sentences

Distributions paid to preferred shareholders ( 6,428 ) ( 6,528 ) ( 6,821 )

Distributions paid to noncontrolling interests – Unitholders of the Operating Partnership ( 2,900 ) ( 3,630 ) ( 1,959 ) ( 4,096 )

Distributions paid to noncontrolling interests – consolidated real estate entities ( 116 ) ( 220 ) ( 2,432 ) ( 99 )

Distributions paid to noncontrolling interests – Operating Partnership and Series E preferred units ( 4,916 ) ( 2,900 ) ( 3,630 )

Distributions paid to preferred unitholders ( 640 ) ( 640 ) ( 377 )

6 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

Year Ended December 31, Eight Months Ended December 31, Fiscal Year Ended April 30,

(in thousands)

Year Ended December 31,

2021 2020 2019

1 unchanged sentence

Accrued capital expenditures $ ( 802 ) $ ( 1,420 ) $ 1,273

Operating partnership units converted to shares ( 4,714 ) ( 1,750 ) 7,823

Distributions declared but not paid 11,411 9,802 9,210

Retirement of shares withheld for taxes 933 — —

Real estate assets acquired through assumption of debt 20,000 — —

Fair value adjustment to debt 2,367 — —

Property acquired through issuance of Series D preferred units — — 16,560

1 unchanged sentence

Note receivable exchanged through real estate acquisition — ( 17,663 ) —

Conversion to equity of notes receivable from noncontrolling interests - consolidated real estate entities — — 670 —

Construction debt reclassified to mortgages payable — — — 23,300

Increase in mortgage notes receivable due to sale of real estate — — — 10,329

Real estate acquired through issuance of Series E preferred units 217,513 — —

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest, net of amounts capitalized of $ 0 , $ 0 , $ 0 and $ 431 , respectively

26,051 28,679 24,135 35,758

Cash paid for interest 26,528 26,051 28,679

(in thousands)

Balance sheet description December 31, 2020 December 31, 2019 December 31, 2018 April 30, 2018

Balance sheet description December 31, 2021 December 31, 2020 December 31, 2019

Cash and cash equivalents $ 31,267 $ 392 $ 26,579

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020, 2019, 2018, and April 30, 2018

December 31, 2021, 2020, and 2019

NOTE 1 • ORGANIZATION

Investors Real Estate Trust doing business as Centerspace (“Centerspace,” “we,” “our,” or “us”) is a real estate investment trust (“REIT”) focused on the ownership, management, acquisition, redevelopment and development of apartment communities.

Centerspace (“Centerspace,” “we,” “our,” or “us”) is a real estate investment trust (“REIT”) focused on the ownership, management, acquisition, redevelopment and development of apartment communities.

As of December 31, 2021, we held for investment 79 apartment communities with 14,441 homes.

We conduct a majority of our business activities through our consolidated operating partnership, Centerspace, LP, (the “Operating Partnership”), as well as through a number of other subsidiary entities.

All references to Centerspace, we, or us refer to Centerspace and its consolidated subsidiaries.

All references to Centerspace, we, our, or us refer to Centerspace and its consolidated subsidiaries.

NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

2 unchanged sentences

All intercompany balances and transactions are eliminated in consolidation.

On September 20, 2018, our Board of Trustees approved a change in our fiscal year-end from April 30 to December 31, effective as of January 1, 2019.

As a result of this change, we filed a transition report on Form 10-KT for the eight-month transition period ended December 31, 2018, in accordance with SEC rules and regulations.

The references in these notes to the consolidated financial statements to the terms listed below reflect the respective periods presented in the consolidated financial statements:

Term Financial Reporting Period

Year ended December 31, 2020 January 1, 2020 through December 31, 2020

Year ended December 31, 2019 January 1, 2019 through December 31, 2019

Transition period ended December 31, 2018 May 1, 2018 through December 31, 2018

Fiscal year ended April 30, 2018 May 1, 2017 through April 30, 2018

Our interest in the Operating Partnership as of December 31, 2021 and 2020 was 83.3 % and 93.0 %, respectively, of the limited partnership units of the Operating Partnership (“Units”), which includes 100 % of the general partnership interest.

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These entities are consolidated into our other operations with noncontrolling interests reflecting the noncontrolling partners’ share of ownership, income, and expenses.

SIGNIFICANT RISKS AND UNCERTAINTIES

The COVID-19 pandemic is a source of significant risk and uncertainty that could have an adverse impact on our business.

the COVID-19 pandemic has adversely impacted the global economy and financial markets, and multifamily residents and commercial tenants have experienced financial hardship or closure.

The extent to which the COVID-19 pandemic could have an adverse effect on our financial condition, results of operations, and cash flows is uncertain and will depend on future developments.

The COVID-19 pandemic has not had a material adverse impact on our financial condition, results of operations, and cash flows for the year ended December 31, 2020;

however, we continue to monitor the impact on all aspects of our business and cannot predict the impact it may have on our financial condition, results of operations, and cash flows in the future.

USE OF ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

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Standard Description Date of Adoption Effect on the Financial Statements or Other Significant Matters

ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments;

ASU 2018-19, Codification Improvements to Topic 326;

ASU 2019-05, Financial Instruments - Credit Losses - Targeted Transition Relief;

ASU 2019-11, Codification improvements to Topic 326, Financial Instruments - Credit Losses

These ASUs require entities to estimate a lifetime expected credit loss for most financial assets, such as loans and other financial instruments, and to present the net amount expected to be collected.

In 2018, another ASU was issued to amend ASU 2016-13 which clarifies that it does not apply to operating lease receivables.

In 2019, an additional ASU was issued to provide transition relief in which an entity is allowed to elect the fair value option on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326.

These ASUs are effective for annual reporting periods beginning after December 15, 2019.

Early adoption is permitted.

We elected the fair value option for all of our mortgages and notes receivable at January 1, 2020, as allowed by ASU 2019-05.

As a result, we do not have any receivables or other financial instruments to which we are applying this standard.

ASU 2018-13, Fair Value Measurements (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirement for Fair Value Measurements

This ASU eliminates certain disclosure requirements affecting all levels of measurement, and modifies and adds new disclosure requirements for Level 3 measurements.

This ASU is effective for annual reporting periods beginning after December 15, 2019.

Early adoption is permitted.

The new standard did not have a material impact on our consolidated financial statements.

ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting

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This ASU is optional and may be elected over time.

We are currently evaluating the practical expedients and the impact they may have on our consolidated financial statements.

We adopted this guidance in June 2021 on a prospective basis.

This adoption did not have a material impact on the Consolidated Financial Statements.

ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entitiy's Own Equity

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Early adoption is permitted.

We are currently evaluating the ASU and the impact it may have on our consolidated financial statements.

We early adopted this guidance in the first quarter of 2021 using the modified retrospective method.

The adoption did not have a material impact on the Consolidated Financial Statements.

RECLASSIFICATIONS

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These reclassifications had no impact on net income as reported in the consolidated statement of operations, total assets, liabilities or equity as reported in the consolidated balance sheets and total shareholder’s equity.

We report in discontinued operations the results of operations and the related gains or losses of properties that have either been disposed or classified as held for sale and for which the disposition represents a strategic shift that has or will have a major effect on our operations and financial results.

REAL ESTATE INVESTMENTS

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The estimated fair value of the property is the amount that would be recoverable upon the disposition of the property.

Techniques used to estimate fair value include discounted cash flow analysis and reference to recent sales of comparable

Techniques used to estimate fair value include discounted cash flow analysis and reference to recent sales of comparable properties.

Estimates of future cash flows are based on a number of factors, including the historical operating results, known trends, and market/economic conditions that may affect the property.

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General and administrative costs are expensed as incurred.

Interest of approximately $ 4,000 was capitalized in continuing and discontinued operations for the fiscal year ended April 30, 2018.

We did not capitalize interest during the years ended December 31, 2020 and 2019, or the transition period ended December 31, 2018.

We did no t capitalize interest during the years ended December 31, 2021, 2020, and 2019.

Expenditures for ordinary maintenance and repairs are expensed to operations as incurred.

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If our anticipated holding period for properties, the estimated fair value of properties or other factors change based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements.

The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future physical occupancy, rental rates, and capital requirements that could differ materially from actual results.

The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future physical occupancy, rental rates, and capital

requirements that could differ materially from actual results.

Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.

During the years ended December 31, 2021, 2020, and 2019 we did not incur a loss for impairment on real estate.

During the transition period ended December 31, 2018, we incurred a loss of $ 1.2 million due to impairment of a parcel of land in Bismarck, North Dakota.

The parcel was written-down to estimated fair value based on receipt of a market offer to purchase and our intent to dispose of the property.

During the fiscal year ended April 30, 2018, we incurred a loss of $ 18.1 million due to impairment of one apartment community, three other commercial properties, and four parcels of land.

We recognized impairments of $ 12.2 million on one apartment community in Grand Forks, North Dakota;

$ 1.4 million on an industrial property in Bloomington, Minnesota;

$ 922,000 on an industrial property in Woodbury, Minnesota;

and $ 630,000 on a retail property in Minot, North Dakota.

These properties were written-down to estimated fair value based on independent appraisals and market data or, in the case of the retail property, receipt of a market offer to purchase and our intent to dispose of the property.

We recognized impairments of $ 428,000 on a parcel of land in Williston, North Dakota;

$ 1.5 million on a parcel of land in Grand Forks, North Dakota;

$ 256,000 and $ 709,000 on two parcels of land in Bismarck, North Dakota.

These parcels were written down to estimated fair value based on independent appraisals and market data.

CHANGE IN DEPRECIABLE LIVES OF REAL ESTATE ASSETS

Effective May 1, 2017, we changed the estimated useful lives of our real estate assets to better reflect the estimated periods during which they would be of economic benefit.

Generally, the estimated lives of buildings and improvements that previously were 20 - 40 years were decreased to 10 - 37 years, while those that were previously nine years were changed to 5 - 10 years.

The effect of this change in estimate for the fiscal year ended April 30, 2018, was to increase depreciation expense by approximately $ 29.3 million, decrease net income by $ 29.3 million, and decrease earnings per share by $ 0.22 .

REAL ESTATE HELD FOR SALE

Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal costs.

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We had no properties classified as held for sale at December 31, 2021 and 2020.

We report in discontinued operations the results of operations and the related gains or losses on the sales of properties that have either been disposed of or classified as held for sale and meet the classification of a discontinued operation as described in ASC 205 - Presentation of Financial Statements and ASC 360 - Property, Plant, and Equipment:

Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity .

Under these standards, a disposal (or classification as held for sale) of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

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Disbursements are made after supplying written documentation to the lender .

Effective January 1, 2019, we adopted ASUs 2016-02, 2018-10, 2018-11, 2018-20, and 2019-01 related to leases using the modified retrospective approach.

We elected to adopt the package of practical expedients permitted under the transition guidance, which permits us to not reassess prior conclusions about lease identification, classification, and initial direct costs under the new standard, and the practical expedient related to land easements, which allows us to not evaluate existing or expired land easements that were not previously accounted for under ASC 840.

We made an accounting policy election to exclude leases in which we are a lessee with a term of 12 months or less from the balance sheet.

As a lessor, we primarily lease multifamily apartment homes which qualify as operating leases with terms that are generally one year or less.

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The leases for commercial spaces generally include options to extend the lease for additional terms.

Beginning in April 2020, we offered multifamily residents suffering from financial hardship related to the COVID-19 pandemic the option to apply for a rent deferral.

We elected to account for these accommodations as though enforceable rights and obligations for the accommodations existed without evaluating if such a right or obligation existed under the lease agreement, as allowed by the FASB Q&A released on April 10, 2020 related to lease modification guidance under ASC 842.

Beginning in April 2020, we abated rent, common area maintenance, and real estate taxes for commercial tenants that experienced government-mandated interruptions or closures of their businesses.

We elected to account for these accommodations as though enforceable rights and obligations existed without evaluating if such a right or obligation existed under the lease agreement, as allowed by the FASB Q&A released on April 10, 2020.

The accommodations were recognized as variable lease payments.

As of December 31, 2020, approximately $ 99,600 remained outstanding under the rent deferral agreements offered to multifamily residents.

We also abated rent, common area maintenance, and real estate taxes for commercial tenants that experienced government-mandated interruptions or closures of their businesses.

The accommodations were recognized as variable lease payments, as allowed by the FASB Q&A released on April 10, 2020.

During the year ended December 31, 2020, we recognized a reduction in revenue of $ 656,000 due to the abatement of amounts due from our commercial tenants.

During the years ended December 31, 2021 and 2020, we recognized a reduction in revenue of $ 47,000 and $ 656,000 , respectively, due to the abatement of amounts due from our commercial tenants.

Many of our leases contain non-lease components for utility reimbursement from our residents.

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Total scheduled lease income - operating leases $ 12,439

We adopted ASU 2014-09, Revenue from Contracts with Customers, as of May 1, 2018, using the modified retrospective approach.

We elected to apply the new standard to contracts that were not complete as of May 1, 2018.

Under the new standard, revenue is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration the company expects to be entitled for those goods and services.

Revenue streams that are included in ASU 2014-09 include:

Revenue is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration the company expects to be entitled for those goods and services.

Revenue streams that are included in revenues from contracts with customers include:

• Other property revenues:

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• Gains or losses on sales of real estate:

Subsequent to the adoption of the new standard, a gain or loss is recognized when the criteria for derecognition of an asset are met, including when (1) a contract exists and (2) the buyer obtained control of the nonfinancial asset that was sold.

A gain or loss is recognized when the criteria for derecognition of an asset are met, including when (1) a contract exists and (2) the buyer obtained control of the nonfinancial asset that was sold.

As a result, we may recognize a gain on real estate disposition transactions that previously did not qualify as a sale or for full profit recognition under the previous accounting standard.

Any gain or loss on real estate dispositions is net of certain closing and other costs associated with the disposition.

We concluded that the adoption of the new standard required a cumulative adjustment of $ 627,000 to the opening balance of retained earnings as of May 1, 2018, due to the sale of a group of properties in the prior fiscal year.

The sale of properties was previously accounted for using the installment method.

Under the installment method, we recorded a mortgage receivable net of the deferred gain on sale, which was to be recognized as payments were received.

The gain on sale under the new revenue standard is recognized when control of the assets is transferred to the buyer.

As a result of our adoption of the new standard, we

recorded a cumulative adjustment to retained earnings and increased the mortgage receivable by $ 627,000 to recognize the previously deferred gain on sale.

The following table presents the disaggregation of revenue streams of our rental income for the years ended December 31, 2020 and 2019, and the transition period ended December 31, 2018:

The following table presents the disaggregation of revenue streams of our rental income for the years ended December 31, 2021, 2020, and 2019:

(in thousands)

Year ended December 31, Transition period ended

Revenue Stream Applicable Standard 2020 2019 December 31, 2018

Year ended December 31,

Revenue Stream Applicable Standard 2021 2020 2019

Fixed lease income - operating leases Leases $ 189,452 $ 168,119 $ 176,706

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Total revenue $ 201,705 $ 177,994 $ 185,755

We operate in a manner intended to enable us to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended.

We operate in a manner intended to enable us to continue to qualify as a REIT under Sections 856-860 of the Code.

Under those sections, a REIT which distributes at least 90 % of its REIT taxable income, excluding capital gains, as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to shareholders.

For the years ended December 31, 2020 and 2019, the transition period ended December 31, 2018 and the fiscal year ended April 30, 2018, we distributed in excess of 90 % of our taxable income and realized capital gains from property dispositions within the prescribed time limits.

For the years ended December 31, 2021, 2020, and 2019, we distributed in excess of 90 % of our taxable income and realized capital gains from property dispositions within the prescribed time limits.

Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements.

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We have one TRS, which is subject to corporate federal and state income taxes on its taxable income at regular statutory rates.

There were no income tax provisions or material deferred income tax items for our TRS for the years ended December 31, 2020 and 2019, the transition period ended December 31, 2018, and the fiscal year ended April 30, 2018.

There were no income tax provisions or material deferred income tax items for our TRS for the years ended December 31, 2021, 2020, and 2019.

We conduct our business activity as an Umbrella Partnership Real Estate Investment Trust (“UPREIT”) through our Operating Partnership.

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Generally, such a contribution to a limited partnership allows for the deferral of gain by an owner of appreciated real estate.

The following table indicates how distributions were characterized for federal income tax purposes for the years ended December 31, 2020, December 31, 2019, and December 31, 2018:

The following table indicates how distributions were characterized for federal income tax purposes for the years ended December 31, 2021, 2020, and 2019:

CALENDAR YEAR 2021 2020 2019

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Real estate related loans receivable 6,208 6,332

Marketable securities — 7,055

Prepaid and other assets 9,693 5,702

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Total Other Assets $ 30,582 $ 18,904

Intangible assets consist of in-place leases valued at the time of acquisition.

For the years ended December 31, 2021, 2020, and 2019, we recognized $ 13.5 million, $ 3.1 million, and $ 2.0 million, respectively, of amortization expense related to these intangibles, included within depreciation and amortization in the consolidated statements of operations.

The intangible assets remaining at December 31, 2021 will be amortized in 2022.

PROPERTY AND EQUIPMENT

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MORTGAGE LOANS RECEIVABLE AND NOTES RECEIVABLE

I n March 2020, in connection with our acquisition of Ironwood, an apartment community in New Hope, Minnesota, we acquired a tax increment financing note receivable (“TIF”) with a principal balance of $ 6.6 million, which appears within Other Assets in our consolidated balance sheets.

As of December 31, 2021 and 2020, the principal balance was $ 6.4 million and $ 6.6 million, respectively, which appears within Other Assets in our Consolidated Balance Sheets.

The note bears an interest rate of 4.5 % with payments due in February and August of each year.

I n December 2019, we originated a $ 29.9 million construction loan and a $ 15.3 million mezzanine loan for the development of a multifamily development located in Minneapolis, Minnesota.

The construction and mezzanine loans bear interest at 4.5 % and 11.5 %, respectively.

As of December 31, 2020 and 2019, we had funded $ 24.7 million and $ 6.2 million, respectively, of the construction loan, which appears within mortgages receivable in our consolidated balance sheets.

The construction and mezzanine loans bear interest at 4.5 % and

11.5 %, respectively.

As of December 31, 2021, we had fully funded the $ 29.9 million construction loan and $ 13.4 million of the mezzanine loan, both of which appear within mortgage loans receivable in our Consolidated Balance Sheets.

As of December 31, 2020, we had funded $ 24.7 million of the construction loan.

The loans are secured by mortgages and mature on December 31, 2023, and the agreement provides us with an option to purchase the development.

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We are not the primary beneficiary of the VIE as we do not have the power to direct the activities which most significantly impact the entity’s economic performance nor do we have significant influence over the entity.

In August 2017, we sold 13 apartment communities in exchange for cash and an $ 11.0 million note secured by a mortgage on the assets.

As of December 31, 2020, the note was paid in full.

As of December 31, 2019 the remaining balance on the mortgage was $ 10.0 million.

The note had an interest rate of 5.5 %.

Monthly payments were interest-only, with the principal balance payable at maturity.

We received and recognized approximately $ 279,000 , $ 570,000 , $ 448,000 , and $ 372,000 of interest income during the years ended December 31, 2020 and 2019, the transition period ended December 31, 2019, and the fiscal year ended April 30, 2018, respectively.

In July 2017, we originated a $ 16.2 million loan in a multifamily development located in New Hope, Minnesota, a Minneapolis suburb.

We funded an additional $ 341,000 upon satisfaction of certain conditions set forth in the loan agreement.

The note had an interest rate of 6 %.

During the year ended December 31, 2020, we executed the purchase option for the apartment community (refer to Note 9 for details on acquisition).

The note was paid in full as part of our acquisition of this apartment community.

MARKETABLE SECURITIES

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We report equity securities at fair value based on quoted market prices (Level 1 inputs).

Any unrealized gains or losses are included in interest and other income (loss) on the consolidated statements

of operations.

As of December 31, 2020, we had no marketable securities.

As of December 31, 2019, the cost basis of marketable securities was $ 6.9 million, the gross unrealized gain was $ 113,000 , and the carrying value was $ 7.1 million.

During the year ended December 31, 2020, we had a realized loss of $ 3.4 million arising from the disposal of such securities.

Any unrealized gains or losses are included in interest and other income (loss) on the consolidated statements of operations.

During the year ended December 31, 2020, we had a realized loss of $ 3.4 million arising from marketable securities which were disposed during the year ended December 31, 2020.

As of December 31, 2021 and 2020, we had no marketable securities.

GAIN ON LITIGATION SETTLEMENT

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Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period.

We have issued restricted stock units (“RSUs”) and incentive stock options (“ISOs”) under our 2015 Incentive Plan and Series D Convertible Preferred Units (“Series D preferred units”), which could have a dilutive effect on our earnings per share upon exercise of the RSUs, ISOs, or upon conversion of the Series D preferred units (refer to Note 4 for further discussion of the preferred units).

Other than the issuance of RSUs, ISOs, and Series D preferred units, we have no outstanding options, warrants, convertible stock, or other contractual obligations requiring issuance of additional common shares that would result in a dilution of earnings.

We have issued restricted stock units (“RSUs”) and incentive stock options (“ISOs”) under our 2015 Incentive Plan, Series D Convertible Preferred Units (“Series D preferred units”), and Series E Convertible Preferred Units (“Series E preferred units”), which could have a dilutive effect on our earnings per share upon exercise of the RSUs, ISOs, or upon conversion of the Series D or Series E preferred units (refer to Note 4 for further discussion of the preferred units).

Other than the issuance of RSUs, ISOs, Series D preferred units, and Series E preferred units, we have no outstanding options, warrants, convertible stock, or other contractual obligations requiring issuance of additional common shares that would result in a dilution of earnings.

Under the terms of the Operating Partnership’s Agreement of Limited Partnership, limited partners have the right to require the Operating Partnership to redeem their limited partnership units (“Units”) any time following the first anniversary of the date they acquired such Units (“Exchange Right”).

Upon the exercise of Exchange Rights, and in our sole discretion, we may issue common shares in exchange for Units on a one -for-one-basis.

For the years ended December 31, 2020 and 2019, and the transition period ended December 31, 2018, performance-based restricted stock awards of 26,994 , 37,822 , and 25,300 were excluded from the calculation of diluted earnings per share because the assumed proceeds per share plus the average unearned compensation were greater than the average market price of the common shares for the periods presented and, therefore, were anti-dilutive.

For the years ended December 31, 2021, 2020, and 2019, performance-based restricted stock awards of 31,821 , 26,994 , and 37,822 were excluded from the calculation of diluted earnings per share because the assumed proceeds per share plus the average unearned compensation were greater than the average market price of the common shares for the periods presented and, therefore, were anti-dilutive.

Refer to Note 16 - Share-Based Compensation for discussion of the terms for these awards.

For the year ended December 31, 2020, Series D preferred units of 228,000 and time-based RSUs of 13,000 were excluded from the calculation of diluted earnings per shares because they were anti-dilutive because including these items would have improved earnings per share.

For the year ended December 31, 2020, weighted average stock options of 86,000 were excluded from the calculation of diluted earnings per share because the assumed proceeds per share plus the average unearned compensation were greater than the average market price of common shares for the period and were, therefore, anti-dilutive.

The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the consolidated financial statements for the years ended December 31, 2020 and 2019, the transition period ended December 31, 2018, and the fiscal year ended April 30, 2018:

For the year ended December 31, 2020, Series D preferred units of 228,000 , stock options of 86,000 , and time-based RSUs of 13,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

Including these items would have improved earnings per share.

(in thousands, except per share data)

Year Ended December 31, Period Ended Fiscal Year Ended

2020 2019 December 31, 2018 April 30, 2018

Income (loss) from continuing operations – controlling interests $ 4,441 $ 78,669 $ ( 4,908 ) $ ( 30,266 )

Income (loss) from discontinued operations – controlling interests — — 510 147,054

Year Ended December 31,

2021 2020 2019

Net income (loss) attributable to controlling interests ( 29 ) 4,441 78,669

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Numerator for basic earnings per share – net income (loss) available to common shareholders ( 6,457 ) ( 1,790 ) 71,848

Noncontrolling interests – Operating Partnership ( 212 ) 6,752 ( 1,032 ) 12,702

Noncontrolling interests – Operating Partnership and Series E preferred units ( 2,806 ) ( 212 ) 6,752

Dividends to preferred unitholders 640 640 537

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Effect of Series D preferred units 228 — 193

Effect of Series E preferred units 729 — —

Effect of diluted restricted stock awards and restricted stock units 45 — 8

Denominator for diluted earnings per share 15,704 13,594 13,182

Earnings (loss) per common share from continuing operations – basic $ ( 0.15 ) $ 6.06 $ ( 0.79 ) $ ( 3.54 )

Earnings (loss) per common share from discontinued operations – basic — — 0.04 12.25

NET EARNINGS (LOSS) PER COMMON SHARE – BASIC $ ( 0.47 ) $ ( 0.15 ) $ 6.06

Earnings (loss) per common share from continuing operations – diluted $ ( 0.15 ) $ 6.00 $ ( 0.79 ) $ ( 3.54 )

Earnings (loss) per common share from discontinued operations – diluted — — 0.04 12.25

NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED $ ( 0.47 ) $ ( 0.15 ) $ 6.00

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Operating Partnership Units.

Outstanding Units in the Operating Partnership were 1.0 million Units at December 31, 2020 and 1.1 million Units at December 31, 2019.

Outstanding Units in the Operating Partnership were 832,000 Units at December 31, 2021 and 977,000 Units at December 31, 2020.

Exchange Rights.

Pursuant to the exercise of Exchange Rights, we redeemed Units for cash during the years ended December 31, 2020 and 2019 as detailed in the table below.

(in thousands, except per Unit amounts)

Number of Aggregate Average Price

Units Cost Per Unit

Year Ended December 31, 2020 1 $ 50 $ 70.10

Year Ended December 31, 2019 136 $ 8,142 $ 60.02

We also redeemed Units in exchange for common shares during the years ended December 31, 2020 and 2019 as detailed in the table below.

Pursuant to the exercise of Exchange Rights, we redeemed Units in exchange for common shares during the years ended December 31, 2021 and 2020 as detailed in the table below.

(in thousands)

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Year ended December 31, 2020 81 $ ( 1,750 )

Series E Preferred Units (Noncontrolling interest).

On September 1, 2021, we issued 1.8 million Series E preferred units with a par value of $ 100 per Series E preferred unit as partial consideration for the acquisition of 17 apartment communities.

The Series E preferred unit holders receive a preferred distribution at the rate of 3.875 % per year.

Each Series E preferred unit is convertible, at the holder’s option, into 1.2048 Units, representing a conversion exchange rate of $ 83 per unit.

We have the option, at our sole election, to convert Series E preferred units into OP Units if our stock has traded at or above $ 83 per share for 15 of 30 consecutive trading days and we have made at least three consecutive quarters of distributions with a rate of at least $ 0.804 per OP unit.

The Series E preferred units have an aggregate liquidation preference of $ 181.4 million.

The holders of the Series E preferred units do not have voting rights and are required to hold the units for one year before they may elect to convert.

Common Shares and Equity Awards .

Common shares outstanding on December 31, 2021 and 2020, totaled 15.0 million and 13.0 million, respectively.

During the years ended December 31, 2020 and 2019, we issued approximately 21,000 and 18,000 common shares, respectively, with a total grant-date value of $ 1.0 million and $ 1.1 million, respectively, under our 2015 Incentive Plan, as share-based compensation for employees and trustees.

During the years ended December 31, 2021 and 2020, we issued approximately 27,351 and 21,000 common shares, respectively, with a total grant-date value of $ 1.0 million, under our 2015 Incentive Plan, as share-based compensation for employees and trustees.

During the years ended December 31, 2021 and 2020, approximately 500 and 2,400 common shares were forfeited under the 2015 Incentive Plan, respectively.

Equity Distribution Agreement.

In November 2019, we entered into an equity distribution agreement in connection with an at-the-market offering ("2019 ATM Program") through which we may offer and sell common shares having an aggregate sales price of up to $ 150.0 million, in amounts and at times as we determine.

The proceeds from the sale of common shares under the 2019 ATM Program are intended to be used for general corporate purposes, which may include the funding of future acquisitions, community renovations, and the repayment of indebtedness.

In September 2021, we entered into an equity distribution agreement in connection with a new at-the-market offering program (“2021 ATM Program”), replacing our prior at-the-market offering program (“2019 ATM Program”).

Under the 2021 ATM Program, we may offer and sell common shares having an aggregate sales price of up to $ 250.0 million, in amounts and at times determined by management.

Under the 2021 ATM Program, we may enter into separate forward sale agreements.

The proceeds from the sale of common shares under the 2021 ATM Program are intended to be used for general purposes, which may include the funding of acquisitions, construction or mezzanine loans, community

renovations, and the repayment of indebtedness.

As of December 31, 2021, we had common shares having an aggregate offering price of up to $ 158.7 million remaining available under the 2021 ATM Program.

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Year ended December 31, 2020 829 $ 59,187 $ 71.39

(1) Total consideration is net of $ 901,000 and $ 310,000 in commissions for the years ended December 31, 2020 and 2019, respectively.

(1) Total consideration is net of $ 2.1 million and $ 901,000 in commissions for the years ended December 31, 2021 and 2020, respectively.

Share Repurchase Program .

On December 7, 2016, our Board of Trustees authorized a share repurchase program to repurchase up to $ 50 million of our common shares over a one year period.

This program was reauthorized for two additional one year periods.

On December 5, 2019, our Board of Trustees terminated this share repurchase program and authorized a new share purchase program to repurchase up to $ 50 million of our common or preferred shares over a one-year period.

Under this new repurchase program, we could repurchase common or preferred shares in open-market purchases, including pursuant to Rule 10b5-1 and Rule 10b-18 plans, as determined by management and in accordance with the requirements of the SEC.

On December 5, 2019, our Board of Trustees terminated the existing share repurchase program and authorized a new share purchase program to repurchase up to $ 50 million of our common or preferred shares over a one-year period.

Under this repurchase program, we could repurchase common or preferred shares in open-market purchases, including pursuant to Rule 10b5-1 and Rule 10b-18 plans, as determined by management and in accordance with the requirements of the SEC.

This program expired on December 5, 2020.

Shares repurchased during the years ended December 31, 2020 and 2019 are detailed in the table below.

Shares repurchased during the year ended December 31, 2020 are detailed in the table below.

(in thousands, except per share amounts)

Number of Common Shares Number of Preferred Shares Aggregate Cost (1)

Number of Preferred Shares Aggregate Cost (1)

Average Price Per Share (1)

Year ended December 31, 2020 237 $ 5,629 $ 23.75

Year ended December 31, 2019 (2)

329 — $ 18,023 $ 54.69

(1) Amount includes commissions.

(2) Repurchases during the year were under the prior repurchase program.

Issuance of Series C Preferred Shares .

In the fiscal year ended April 30, 2018, we issued 4.1 million shares of our 6.625 % Series C Cumulative Redeemable Preferred Shares ("Series C preferred shares").

As of December 31, 2020 and 2019, we had 3.9 million and 4.1 million Series C preferred shares outstanding, respectively.

On October 2, 2017, we issued 4.1 million shares of our 6.625 % Series C Cumulative Redeemable Preferred Shares (“Series C preferred shares”).

As of December 31, 2021 and 2020, we had 3.9 million Series C preferred shares outstanding.

The Series C preferred shares are nonvoting and redeemable for cash at $ 25.00 per share at our option on or after October 2, 2022.

Holders of these shares are entitled to cumulative distributions, payable quarterly (as and if declared by the Board of Trustees).

Distributions accrue at an annual rate of $ 1.65625 per share, which is equal to 6.625 % of the $ 25.00 per share liquidation preference ($ 97.0 million and $ 103.0 million liquidation preference in the aggregate, as of December 31, 2020 and 2019, respectively).

Distributions accrue at an annual rate of $ 1.65625 per share, which is equal to 6.625 % of the $ 25.00 per share liquidation preference ($ 97.0 million liquidation preference in the aggregate, as of December 31, 2021 and 2020).

Series D Preferred Units (Mezzanine Equity).

On February 26, 2019, we issued 165,600 newly created Series D preferred units at an issuance price of $ 100 per preferred unit as partial consideration for the acquisition of SouthFork Townhomes.

On February 26, 2019, we issued 165,600 Series D preferred units at an issuance price of $ 100 per preferred unit as partial consideration for the acquisition of SouthFork Townhomes.

The Series D preferred unit holders receive a preferred distribution at the rate of 3.862 % per year.

The Series D preferred units have a put

option which allows the holder to redeem any or all of the Series D preferred units for cash equal to the issue price.

The Series D preferred units have a put option which allows the holder to redeem any or all of the Series D preferred units for cash equal to the issue price.

Each Series D preferred unit is convertible, at the holder's option, into 1.37931 Units, representing a conversion exchange rate of $ 72.50 per unit.

Changes in the redemption value are charged to common shares on our consolidated balance sheets from period to period.

Changes in the redemption value are based on changes in the trading value of our common shares and are charged to common shares on our Consolidated Balance Sheets each quarter.

The holders of the Series D preferred units do not have any voting rights.

Distributions to Series D unitholders are presented in the consolidated statements of equity within net income (loss) attributable to controlling interests and noncontrolling interests.

Redeemable Noncontrolling Interests (Mezzanine Equity).

Redeemable noncontrolling interests on our consolidated balance sheets represent the noncontrolling interest in a joint venture in which our unaffiliated partner, at its election, could require us to buy its interest at a purchase price to be determined by an appraisal conducted in accordance with the terms of the agreement, or at a negotiated price.

Redeemable noncontrolling interests are presented at the greater of their carrying amount or redemption value at the end of each reporting period.

Changes in the value from period to period are charged to common shares on our consolidated balance sheets.

During the year ended December 31, 2019, we acquired the remaining 34.5 % noncontrolling interests in the real estate partnership that owns Commons and Landing at Southgate for $ 1.3 million.

Activity of the redeemable noncontrolling interests is detailed in the table below.

(in thousands)

Year ended December 31,

Balance at beginning of fiscal year $ 5,968

Contributions —

Net (loss) income ( 174 )

Acquisition of redeemable noncontrolling interests ( 5,794 )

Balance at close of fiscal year $ —

NOTE 5 • NONCONTROLLING INTERESTS

8 unchanged sentences

December 31, 2021 December 31, 2020

IRET - 71 France, LLC $ — $ 4,817

IRET - Cypress Court Apartments, LLC $ 648 $ 686

Noncontrolling interests – consolidated real estate entities $ 686 $ 5,565

NOTE 6 • DEBT

As of December 31, 2020, 47 of our apartment communities were not encumbered by mortgages, with 34 of those apartment communities providing credit support for our unsecured borrowings.

As of December 31, 2021, 48 apartment communities were not encumbered by mortgages and are available to provide credit support for our unsecured borrowings.

Our primary unsecured credit facility (“unsecured credit facility”) is a revolving, multi-bank line of credit, with the Bank of Montreal serving as administrative agent.

Our line of credit has total commitments and borrowing capacity of $ 250.0 million, based on the value of properties contained in the unencumbered asset pool (“UAP”).

As of December 31, 2020, we had additional borrowing availability of $ 97.1 million beyond the $ 152.9 million drawn, including the balance on our operating line of credit (discussed below), priced at an interest rate of 2.85 %, including the impact of our interest rate swap.

This credit facility matures on August 31, 2022, with one 12 -month option to extend the maturity date at our election.

At December 31, 2019, the line of credit borrowing capacity was $ 250.0 million based on the UAP, of which $ 50.1 million was drawn on the line.

Under our unsecured credit facility, we also have unsecured term loans of $ 70.0 million and $ 75.0 million, included within notes payable on the consolidated balance sheets, which mature on January 15, 2024 and August 31, 2025, respectively.

The interest rates on the line of credit and term loans are based, at our option, on the lender's base rate plus a margin, ranging from 35 - 85 basis points, or the London Interbank Offered Rate (“LIBOR”), plus a margin that ranges from 135 - 190 basis points based on our consolidated leverage.

Our line of credit has total commitments and borrowing capacity of $ 250.0 million, based on the value of unencumbered properties.

As of December 31, 2021, we had additional borrowing availability of $ 173.5 million beyond the $ 76.0 million drawn, priced at an interest rate of 2.74 %, including the impact of our interest rate swap.

At December 31, 2020, the line of credit borrowing capacity was $ 250.0 million based on the value of our unencumbered asset pool (“UAP”), of which $ 152.9 million was drawn on the line.

This credit facility was amended on September 30, 2021 to extend the maturity date to September 2025 and has an accordion option to increase borrowing capacity up to $ 400.0 million.

Prior to the amendment, the unsecured credit facility also had unsecured term loans of $ 70.0 million and $ 75.0 million, included within notes payable on the consolidated balance sheets.

These terms loans were paid in full as of December 31, 2021.

The interest rate on the line of credit is based, at our option, on the lender's base rate plus a margin, ranging from 25 - 80 basis points, or the London Interbank Offered Rate (“LIBOR”), plus a margin that ranges from 125 - 180 basis points based on our consolidated leverage, as defined under the Third Amended and Restated Credit Agreement.

Our unsecured credit facility and unsecured senior notes are subject to customary financial covenants and limitations.

We believe that we are in compliance with all such financial covenants and limitations as of December 31, 2021.

We have a private shelf agreement for the issuance of up to $ 150.0 million of unsecured senior promissory notes (“unsecured senior notes”).

Under this agreement, we issued $ 75.0 million of Series A notes due September 13, 2029, bearing interest at a rate of 3.84 % annually, and $ 50.0 million of Series B notes due September 30, 2028, bearing interest at a rate of 3.69 % annually.

We have $ 25.0 million remaining available under the private shelf agreement.

As of December 31, 2020, we owned 20 apartment communities that served as collateral for mortgage loans.

In January 2021, we amended and expanded our private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc.

(collectively, PGIM) to increase the aggregate amount available for issuance of unsecured senior promissory notes (“unsecured senior notes”) to $ 225.0 million.

We also issued $ 50.0 million of unsecured senior notes in connection with the amendment.

Under this agreement, we issued $ 200.0 million unsecured senior notes with $ 25.0 million remaining available as of December 31, 2021.

In September 2021, we entered into a note purchase agreement for the issuance of $ 125.0 million senior unsecured promissory notes.

The following table shows the notes issued under both agreements.

(in thousands)

Amount Maturity Date Interest Rate

Series A $ 75,000 September 13, 2029 3.84 %

Series B $ 50,000 September 30, 2028 3.69 %

Series C $ 50,000 June 6, 2030 2.70 %

Series 2021-A $ 35,000 September 17, 2030 2.50 %

Series 2021-B $ 50,000 September 17, 2031 2.62 %

Series 2021-C $ 25,000 September 17, 2032 2.68 %

Series 2021-D $ 15,000 September 17, 2034 2.78 %

In September 2021, we entered into a $ 198.9 million Fannie Mae Credit Facility Agreement (“FMCF”) for financing the acquisition of 16 apartment communities.

The FMCF is currently secured by mortgages on those apartment communities.

The notes are interest-only, have varying maturity dates of 7 , 10 , and 12 years, and a blended weighted average interest rate of 2.78 %.

As of December 31, 2021, the FMCF had a balance of $ 198.9 million.

The FMCF is included within mortgages payable on the Consolidated Balance Sheets.

As of December 31, 2021, we owned 15 apartment communities that served as collateral for mortgage loans, in addition to the apartment communities secured by the FMCF.

All of these mortgage loans were non-recourse to us other than for standard carve-out obligations.

Interest rates on mortgage loans range from 3.47 % to 5.73 %, and the mortgage loans have varying maturity dates from June 1, 2021, through September 1, 2031.

Interest rates on mortgage loans range from 3.47 % to 4.31 %, and the mortgage loans have varying maturity dates from July 1, 2022, through September 1, 2031.

As of December 31, 2021, we believe there are no material defaults or instances of material noncompliance in regards to any of these mortgage loans.

We also have a $ 6.0 million operating line of credit.

We also have a $ 6.0 million unsecured operating line of credit.

This operating line of credit is designed to enhance treasury management activities and more effectively manage cash balances.

This operating line has a one-year term, with pricing based on a market spread plus the one-month LIBOR index rate.

This operating line matures on November 29, 2022, with pricing based on a market spread plus the one-month LIBOR index rate.

The following table summarizes our indebtedness:

3 unchanged sentences

Term loans (1)

145,000 145,000 3.88

Unsecured senior notes (1)

1 unchanged sentence

Unsecured debt 376,000 422,871 7.84

Mortgages payable - fixed 298,445 331,376 5.23

Mortgages payable - Fannie Mae credit facility 198,850 — 9.56

Mortgages payable - other 284,934 298,445 4.93

Total debt $ 859,784 $ 721,316 7.19

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Lines of credit (rate with swap) (2)

2.74 % 2.85 %

Term loans (rate with swaps) — 4.15 %

Unsecured senior notes 3.12 % 3.78 %

Mortgages payable 3.93 % 4.02 %

Mortgages payable - Fannie Mae credit facility 2.78 % —

Mortgages payable - other 3.81 % 3.93 %

Total debt 3.26 % 3.62 %

(1) Included within notes payable on our consolidated balance sheets.

The aggregate amount of required future principal payments on mortgages payable and notes payable as of December 31, 2020 is as follows:

(2) The current rate on our line of credit is LIBOR plus 150 basis points.

The LIBOR exposure on the line of credit as of December 31, 2021 was hedged using an interest rate swap with a notional of $ 75.0 million and a fixed rate of 2.81 %.

The interest rate swap was terminated in February 2022.

The aggregate amount of required future principal payments on mortgages payable, notes payable, and lines of credit as of December 31, 2021 is as follows:

(in thousands)

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Our objective in using interest rate derivatives is to add stability to interest expense and to manage our exposure to interest rate fluctuations.

To accomplish this objective, we primarily use interest rate swap contracts to fix the variable rate interest on our term loans and a portion of our primary line of credit.

The interest rate swap contracts qualify as cash flow hedges.

To accomplish this objective, we primarily use interest rate swap contracts to fix the variable rate interest debt.

The ineffective portion of a hedging instrument is not recognized currently in earnings or disclosed.

Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income and subsequently reclassified into earnings in the period that the hedged transaction affects earnings.

Amounts reported in accumulated other comprehensive income for our interest rate swap will be reclassified to interest expense as interest payments are made on our term loan and line of credit.

Amounts reported in accumulated other comprehensive income for our interest rate swaps will be reclassified to interest expense as interest payments are made on our term loan and line of credit.

During the next 12 months, we estimate an additional $ 1.5 million will be reclassified as an increase to interest expense.

At December 31, 2020, we had three interest rate swap contracts in effect with a notional amount of $ 195.0 million and one additional interest rate swap that becomes effective on January 31, 2023 with a notional amount of $ 70.0 million.

At December 31, 2021, we had one interest rate swap contract designated as a cash flow hedge of interest rate risk with a total notional amount of $ 75.0 million to fix the interest rate on the line of credit.

We also had one interest rate swap with a notional amount of $ 70.0 million that is not effective until January 31, 2023 and was not designated as a hedge in a qualifying hedging relationship.

At December 31, 2020, we had three interest rate swap contracts designated as cash flow hedges of interest rate risk with a total notion amount of $ 195.0 million and one additional interest rate swap that becomes effective on January 31, 2023, with a

notional amount of $ 70.0 million.

These interest rate swaps fixed the interest on the term loans and a portion of the line of credit.

In September 2021, we paid $ 3.8 million to terminate our $ 50.0 million interest rate swap and our $ 70.0 million interest rate swap in connection with the pay down of our term loans (see Note 6 - Debt for additional details).

We accelerated the reclassification of a $ 5.4 million loss from OCI into other income loss in Consolidated Statements of Operations as a result of the hedged transactions becoming probable not to occur.

Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements.

Changes in fair value of derivatives not designated in hedging relationships are recorded directly into earnings within other income loss in the Consolidated Statements of Operations.

For the year ended December 31, 2021, we recorded a gain of $ 419,000 related to the interest rate swap not designated in a hedging relationship.

As of December 31, 2020, we did not have any outstanding interest rate hedges that were not designated as hedges in a qualifying hedging relationship.

The fair value of our derivative financial instruments as well as their classification on our Consolidated Balance Sheets as of December 31, 2021 and 2020 is detailed below.

2 unchanged sentences

Balance Sheet Location Fair Value Fair Value

Total derivative instruments designated at hedging instruments - interest rate swaps Accounts Payable and Accrued Expenses $ 15,905 $ 7,607

The effect of the Company's derivative financial instruments on the consolidated statements of operations as of December 31, 2020, December 31, 2019, December 31, 2018, and April 30, 2018 is detailed below.

Total derivative instruments designated as hedging instruments - interest rate swaps Accounts Payable and Accrued Expenses $ 4,610 $ 15,905

Total derivative instruments not designated as hedging instruments - interest rate swaps Accounts Payable and Accrued Expenses $ 1,097 $ —

The effect of the Company's derivative financial instruments on the consolidated statements of operations as of December 31, 2021, 2020, and 2019 is detailed below.

(in thousands)

Gain (Loss) Recognized in OCI Location of Gain (Loss) Reclassified from Accumulated OCI into Income Gain (Loss) Reclassified from Accumulated OCI into Income

Year Ended December 31, Transition Period Ended December 31, Fiscal Year Ended April 30, Year Ended December 31, Transition Period Ended December 31, Fiscal Year Ended April 30,

Year Ended December 31, Year Ended December 31,

2021 2020 2019 2021 2020 2019

Total derivatives in cash flow hedging relationships - interest rate swaps $ 2,383 $ ( 11,068 ) $ ( 7,040 ) Interest expense $ ( 9,087 ) $ ( 2,770 ) $ ( 289 )

We have agreements with each of our derivative counterparties that contain a provision where if we either default or are capable of being declared in default on any of our indebtedness, then we could also be declared in default on our derivative obligations.

NOTE 8 • FAIR VALUE MEASUREMENTS

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December 31, 2020

Mortgages and notes receivable $ 30,994 $ — $ — $ 30,994

Derivative instruments - interest rate swaps $ 15,905 $ — $ — $ 15,905

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We consider both our own nonperformance risk and the counterparty’s nonperformance risk in the fair value measurement.

Effective January 1, 2020, we elected the fair value option for our mortgage loans receivable and notes receivable, as allowed under ASU 2019-05 which provided transition relief upon adoption of ASU 2016-13, "Financial Instruments - Credit Losses." We utilize an income approach with level 3 inputs based on expected future cash flows to value these instruments.

We utilize an income approach with level 3 inputs based on expected future cash flows to value these instruments.

The inputs include market transactions for similar instruments, management estimates of comparable interest rates (range of 3.75 % to 10.75 %), and instrument specific credit risk (range of 0.5 % to 1.0 %).

3 unchanged sentences

Year ended December 31, 2021 $ 49,484 $ 14 $ 2,403 $ 2,417

Year ended December 31, 2020 $ 30,994 $ 12 $ 1,442 $ 1,454

As of December 31, 2021, we had an investment of $ 903,000 in a real estate technology venture consisting of privately held entities that develop technology related to the real estate industry.

The investment is measured at net asset value (“NAV”) as a practical expedient under ASC 820.

As of December 31, 2021, we had unfunded commitments of $ 1.2 million.

Fair Value Measurements on a Nonrecurring Basis

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Restricted cash 7,358 7,358 6,918 6,918

Mortgage and note receivables (1)

— — 32,810 32,810

FINANCIAL LIABILITIES

4 unchanged sentences

Unsecured senior notes 300,000 308,302 125,000 133,181

Mortgages payable 298,445 308,855 331,376 332,471

(1) As of January 1, 2020, we elected the fair value option, as allowed under ASU 2019-05.

Fair value for these instruments is discussed within the Fair Value Measurements on a Recurring Basis section above.

Mortgages payable - Fannie Mae credit facility 198,850 198,850 — —

Mortgages payable - other 284,934 284,546 298,445 308,855

(1) Excluding the effect of the interest rate swap agreement.

6 unchanged sentences

Date Acquisition Intangible

Acquisitions Acquired Cost (1)

Cash Units (2)

Land Building Assets Other (4)

256 homes -Union Pointe Apartment Homes - Longmont, CO

January 6, 2021 $ 76,900 $ 76,900 $ — $ — $ 5,727 $ 69,966 $ 1,207 $ —

120 homes - Bayberry Place - Minneapolis, MN

September 1, 2021 16,673 898 9,855 5,920 1,807 14,113 753 —

251 homes - Burgandy & Hillsboro Court - Minneapolis, MN

September 1, 2021 35,569 2,092 22,542 10,935 2,834 31,148 1,587 —

97 homes - Venue on Knox - Minneapolis, MN

September 1, 2021 18,896 500 11,375 7,021 3,438 14,743 715 —

120 homes - Gatewood - St.

September 1, 2021 7,781 378 3,388 4,015 327 6,858 596 —

84 homes - Grove Ridge - Minneapolis, MN

September 1, 2021 12,060 121 8,579 3,360 1,250 10,271 539 —

119 homes - The Legacy - St.

September 1, 2021 10,560 229 5,714 4,617 412 9,556 592 —

151 homes - New Hope Garden & Village - Minneapolis, MN

September 1, 2021 15,006 1,435 10,812 2,759 1,603 12,578 825 —

330 homes - Palisades - Minneapolis, MN

September 1, 2021 53,354 2,884 30,470 20,000 6,919 46,577 2,211 ( 2,353 )

96 homes - Plymouth Pointe - Minneapolis, MN

September 1, 2021 14,450 370 9,061 5,019 1,042 12,809 599 —

93 homes - Pointe West - St.

September 1, 2021 7,558 91 3,605 3,862 246 6,849 463 —

301 homes - River Pointe - Minneapolis MN

September 1, 2021 38,348 2,249 21,653 14,446 3,346 33,117 1,885 —

70 homes - Southdale Parc - Minneapolis, MN

September 1, 2021 9,670 165 7,907 1,598 1,569 7,740 361 —

62 homes - Portage - Minneapolis, MN

September 1, 2021 9,171 323 5,588 3,260 2,133 6,685 353 —

200 homes - Windsor Gates - Minneapolis, MN

September 1, 2021 22,231 1,122 12,080 9,029 2,140 18,943 1,148 —

136 homes - Wingate - Minneapolis, MN

September 1, 2021 15,784 723 10,246 4,815 1,480 13,530 774 —

178 homes - Woodhaven - Minneapolis, MN

September 1, 2021 25,009 1,682 15,200 8,127 3,940 20,080 989 —

288 homes - Woodland Pointe - Minneapolis, MN

September 1, 2021 47,796 437 29,438 17,921 5,367 40,422 2,007 —

176 homes - Civic Lofts - Denver, CO

December 21, 2021 63,000 63,000 — — 6,166 55,204 1,630 —

Total Acquisitions $ 499,816 $ 155,599 $ 217,513 $ 126,704 $ 51,746 $ 431,189 $ 19,234 $ ( 2,353 )

(1) Includes $ 36.1 million for additional fair value of Series E preferred units with a liquidation preference of $ 181.4 million for the September 1, 2021 portfolio acquisition.

(2) Fair value of Series E preferred units at the acquisition date.

(3) Payoff of debt or assumption of seller's debt upon closing.

(4) Debt discount on assumed mortgage.

Year Ended December 31, 2020

(in thousands)

Total Form of Consideration Investment Allocation

Date Acquisition Intangible

Acquisitions Acquired Cost Cash Other (1)

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Refer to Note 2 for further discussion.

During the year ended December 31, 2021, we continued our portfolio transformation by disposing of five apartment communities and one commercial property for a total sales price of $ 62.3 million.

The dispositions for the years ended December 31, 2021 and 2020 are detailed below.

Year Ended December 31, 2021

(in thousands)

Total Form of Consideration Investment Allocation

Date Acquisition Intangible

Acquisitions Acquired Cost Cash Units (1)

Land Building Assets

272 homes - SouthFork Townhomes - Lakeville, MN

February 26, 2019 $ 44,000 $ 27,440 $ 16,560 $ 3,502 $ 39,950 $ 548

96 homes - FreightYard Townhomes and Flats - Minneapolis, MN

September 6, 2019 26,000 26,000 — 1,889 23,615 496

328 homes - Lugano at Cherry Creek - Denver, CO (3)

September 26, 2019 99,250 99,250 — 7,679 89,365 1,781

$ 169,250 $ 152,690 $ 16,560 $ 13,070 $ 152,930 $ 2,825

Minot 3100 10th St SW - Minot, ND (2)

Date Book Value

Dispositions Disposed Sales Price and Sale Cost Gain/(Loss)

76 homes-Crystal Bay-Rochester, MN

May 25, 2021 $ 13,650 $ 10,255 $ 3,395

Total Acquisitions $ 171.362 $ 154,802 $ 16,560 $ 13,316 $ 154,796 $ 2,825

(1) Value of Series D preferred units at the acquisition date.

(2) Acquired for use as our Minot corporate office building after renovations have been completed.

(3) Investment allocation excludes a $ 425 acquisition credit related to retail space lease-up.

During the year ended December 31, 2020, we continued our portfolio transformation by disposing of four apartment communities, one commercial property and one parcel of unimproved land for a total sales price of $ 44.3 million.

T he dispositions for the years ended December 31, 2020 and 2019 are detailed below.

40 homes-French Creek-Rochester, MN

May 25, 2021 6,700 4,474 2,226

182 homes-Heritage Manor-Rochester, MN

May 25, 2021 14,125 4,892 9,233

140 homes-Olympik Village-Rochester, MN

May 25, 2021 10,725 6,529 4,196

151 -homes-Winchester/Village Green-Rochester, MN

May 25, 2021 14,800 7,010 7,790

$ 60,000 $ 33,160 $ 26,840

Minot IPS October 18, 2021 $ 2,250 $ 1,573 $ 677

Total Dispositions $ 62,250 $ 34,733 $ 27,517

Year Ended December 31, 2020

15 unchanged sentences

Total Dispositions $ 44,300 $ 18,828 $ 25,472

Year Ended December 31, 2019

(in thousands)

Date Book Value

Dispositions Disposed Sales Price and Sale Cost Gain/(Loss)

21 homes - Pinehurst - Billings, MT

July 26, 2019 $ 1,675 $ 961 $ 714

160 homes - Brookfield Village - Topeka, KS

September 24, 2019 10,350 5,853 4,497

220 homes - Crown Colony - Topeka, KS

September 24, 2019 17,200 7,876 9,324

54 homes - Mariposa - Topeka, KS

September 24, 2019 6,100 4,290 1,810

300 homes - Sherwood - Topeka, KS

September 24, 2019 26,150 11,536 14,614

308 homes - Villa West - Topeka, KS

September 24, 2019 22,950 15,165 7,785

152 homes - Crestview - Bismarck, ND

October 29, 2019 8,250 2,681 5,569

73 homes - North Pointe - Bismarck, ND

October 29, 2019 5,225 3,179 2,046

108 homes - Kirkwood - Bismarck, ND

October 29, 2019 5,400 2,518 2,882

65 homes - Westwood Park - Bismarck, ND

October 29, 2019 4,250 1,931 2,319

16 homes - Pebble Springs - Bismarck, ND

October 29, 2019 875 573 302

192 homes - Arbors - Sioux City, IA

December 11, 2019 16,200 6,110 10,090

120 homes - Indian Hills - Sioux City, IA

December 11, 2019 8,100 5,302 2,798

132 homes - Ridge Oaks - Sioux City, IA

December 11, 2019 7,700 4,006 3,694

50 homes - Cottage West - Sioux Falls, SD

December 12, 2019 6,991 4,391 2,600

24 homes - Gables - Sioux Falls, SD

December 12, 2019 2,515 2,052 463

79 homes - Oakmont - Sioux Falls, SD

December 12, 2019 7,010 3,917 3,093

160 homes - Oakwood - Sioux Falls, SD

December 12, 2019 12,090 3,056 9,034

120 homes - Oxbow Park - Sioux Falls, SD

December 12, 2019 10,452 2,713 7,739

48 homes - Prairie Winds - Sioux Falls, SD

December 12, 2019 3,763 1,112 2,651

44 homes - Sierra Vista - Sioux Falls, SD

December 12, 2019 3,178 2,292 886

$ 186,424 $ 91,514 $ 94,910

Minot 1400 31st Ave SW - Minot, ND May 23, 2019 $ 6,530 $ 6,048 $ 482

Woodbury 1865 Woodland - Woodbury, MN November 1, 2019 5,765 4,079 1,686

$ 12,295 $ 10,127 $ 2,168

Unimproved Land

Creekside Crossing - Bismarck, ND March 1, 2019 $ 3,049 $ 3,205 $ ( 156 )

Minot 1525 24th Ave SW - Minot, ND April 3, 2019 725 593 132

Weston - Weston, WI July 31, 2019 600 427 173

$ 4,374 $ 4,225 $ 149

Total Dispositions $ 203,093 $ 105,866 $ 97,227

NOTE 10 • DISCONTINUED OPERATIONS

Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.

Under this standard, a disposal (or classification as held for sale) of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.

We determined that our strategic decision to exit our healthcare segment met the criteria for discontinued operations, and we consequently classified 27 property dispositions as discontinued operations during the fiscal year ended April 30, 2018.

We classified no dispositions as discontinued operations during the years ended December 31, 2020 and 2019, and the transition period ended December 31, 2018.

We had no gains or losses from the sale of properties classified as discontinued operations for the years ended December 31, 2020 and 2019.

The following information shows the effect on net income and the gains or losses from the sale of properties classified as discontinued operations for the transition period ended December 31, 2018 and the fiscal year ended April 30, 2018.

(in thousands)

Transition Period Ended Fiscal Year Ended

December 31, 2018 April 30, 2018

Real estate rentals $ — $ 19,744

Tenant reimbursement — 11,650

TOTAL REVENUE — 31,394

Property operating expenses, excluding real estate taxes — 6,350

Real estate taxes — 5,191

Property management expense — 206

Depreciation and amortization — 8,445

TOTAL EXPENSES — 20,192

Operating income (loss) — 11,202

Interest expense (1)

Gain (loss) on extinguishment of debt (1)

Interest income — 661

Other income — 73

Income (loss) from discontinued operations before gain on sale — 1,256

Gain (loss) on sale of discontinued operations 570 163,567

INCOME (LOSS) FROM DISCONTINUED OPERATIONS $ 570 $ 164,823

All other $ 570 $ 164,823

Total $ 570 $ 164,823

(in thousands)

Transition Period Ended Fiscal Year Ended

December 31, 2018 April 30, 2018

Property Sale Data

Sales price $ — $ 437,652

Net book value and sales costs — ( 274,085 )

Gain on sale of discontinued operations $ — $ 163,567

As of December 31, 2020 and 2019, we had no assets or liabilities classified as held for sale.

NOTE 10 • SEGMENTS

7 unchanged sentences

“All other” is composed of non-multifamily properties, non-multifamily components of mixed use properties, and properties disposed or designated as held for sale.

Prior to the third quarter of fiscal year 2018, we reported our results in two reportable segments:

multifamily and healthcare.

We sold substantially all of our healthcare portfolio during the third quarter of fiscal year 2018 and classified it as discontinued operations, at which point healthcare no longer met the quantitative thresholds for reporting as a separate reportable segment.

Our executive management team comprises our chief operating decision-makers.

2 unchanged sentences

NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income, net income available for common shareholders, or cash flow from operating activities as a measure of financial performance.

The following tables present NOI for the years ended December 31, 2020 and 2019, the transition period ended December 31, 2018, and the fiscal year ended April 30, 2018 from our reportable segment and reconcile net operating income to net income as reported in the consolidated financial statements.

The following tables present NOI for the years ended December 31, 2021, 2020, and 2019 from our reportable segment and reconcile net operating income to net income as reported in the consolidated financial statements.

Segment assets are also reconciled to total assets as reported in the consolidated financial statements.

8 unchanged sentences

General and administrative expenses ( 16,213 )

Gain (loss) on sale of real estate and other investments 27,518

Interest expense ( 29,078 )

1 unchanged sentence

Interest and other income (loss) ( 2,380 )

Income (loss) before gain (loss) on sale of real estate and other investments ( 20,760 )

Gain (loss) on sale of real estate and other investments 25,503

Net income (loss) $ ( 2,101 )

8 unchanged sentences

General and administrative expenses ( 13,440 )

Interest expense ( 30,537 )

Loss on debt extinguishment ( 2,360 )

Interest and other income 2,092

Income (loss) before gain on sale of real estate and other investments and gain (loss) on litigation settlement ( 19,388 )

Gain (loss) on sale of real estate and other investments 25,503

Gain (loss) on litigation settlement 6,586

Net income (loss) $ 84,822

(in thousands)

Transition period ended December 31, 2018 Multifamily All Other Total

Revenue $ 96,234 $ 25,637 $ 121,871

Property operating expenses, including real estate taxes 39,360 11,359 50,719

Net operating income $ 56,874 $ 14,278 $ 71,152

Property management expenses ( 3,663 )

Casualty loss ( 915 )

Depreciation and amortization ( 50,456 )

Impairment of real estate investments ( 1,221 )

General and administrative expenses ( 9,812 )

Interest expense ( 27,525 )

1 unchanged sentence

Interest and other income ( 1,552 )

Income (loss) before gain on sale of real estate and other investments ( 15,597 )

Gain (loss) on sale of real estate and other investments 9,707

Income (loss) from continuing operations ( 5,890 )

Income (loss) from discontinued operations 570

Net income (loss) $ 4,743

(in thousands)

Fiscal Year ended April 30, 2018 Multifamily (1)

All Other (1)

Year ended December 31, 2019 Multifamily All Other Total

Revenue $ 148,644 $ 37,111 $ 185,755

4 unchanged sentences

Depreciation and amortization ( 74,271 )

Impairment of real estate investments ( 18,065 )

General and administrative expenses ( 14,450 )

Acquisition and investment related costs ( 51 )

Gain (loss) on sale of real estate and other investments 97,624

Interest expense ( 30,537 )

1 unchanged sentence

Interest and other income 2,092

Income (loss) before loss on sale of real estate and other investments and income (loss) from discontinued operations ( 57,314 )

Gain (loss) on sale of real estate and other investments 20,120

Income (loss) from continuing operations ( 37,194 )

Income (loss) from discontinued operations 164,823

Income (loss) before gain on litigation settlement 78,236

Gain (loss) on litigation settlement 6,586

Net income (loss) $ 84,822

(1) Revenue, property operating expenses, including real estate taxes, and net operating income for the year ended April 30, 2018 have not been updated for properties sold during the years ended December 31, 2020 and 2019.

Segment Assets and Accumulated Depreciation

19 unchanged sentences

Other assets 18,904

Unimproved land 1,376

Mortgage loans receivable 24,661

3 unchanged sentences

We currently match, dollar for dollar, employee contributions to the 401(k) plan in an amount equal to up to 5.0 % of the eligible wages of each participating employee.

401(k) matching contributions are fully vested when made.

We recognized expense of approximately $ 875,000 , $ 738,000 , $ 476,000 , and $ 838,000 in the years ended December 31, 2020 and 2019, the transition period ended December 31, 2018, and the fiscal year ended April 30, 2018, respectively.

NOTE 13 • TRANSACTIONS WITH RELATED PARTIES

Transactions with BMO Capital Markets

We have an historical and ongoing relationship with BMO Capital Markets (“BMO”).

On July 17, 2017, we engaged BMO to provide financial advisory services in connection with the proposed disposition of our healthcare property portfolio.

A family member of Mark O.

Decker, Jr., our President and Chief Executive Officer, is an employee of BMO and could have an indirect material interest in any such engagement and related transaction(s).

The Board pre-approved the engagement of BMO.

During the fiscal year ended April 30, 2018, we completed the disposition of 27 of our 28 healthcare properties and paid BMO a transaction fee of $ 1.8 million in connection with this engagement.

Matching contributions are fully vested when made.

We recognized expense of approximately $ 1.0 million, $ 875,000 , and $ 738,000 in the years ended December 31, 2021, 2020, and 2019, respectively.

NOTE 12 • COMMITMENTS AND CONTINGENCIES

5 unchanged sentences

Such assessments have not revealed, nor are we aware of, any environmental liabilities that we believe would have a material adverse effect on our financial position or results of operations.

We own properties that contain or potentially contain (based on the age of the property) asbestos or lead.

We own properties that contain or potentially contain

(based on the age of the property) asbestos, lead, or underground storage tanks.

For certain of these properties, we estimated the fair value of the conditional asset retirement obligation and chose not to book a liability because the amounts involved were immaterial.

5 unchanged sentences

Restrictions on Taxable Dispositions.

Twenty of our apartment communities, consisting of approximately 4,032 homes, are subject to restrictions on taxable dispositions under agreements entered into with some of the sellers or contributors of the properties and are effective for varying periods.

Thirty-four of our apartment communities, consisting of approximately 6,511 homes, are subject to restrictions on taxable dispositions under agreements entered into with some of the sellers or contributors of the properties and are effective for varying periods.

We do not believe that the agreements materially affect the conduct of our business or our decisions whether to dispose of restricted properties during the restriction period because we generally hold these and our other properties for investment purposes rather than for sale.

Where we deem it to be in our shareholders’ best interests to dispose of such properties, we generally seek to structure sales of such properties as tax deferred transactions under Section 1031 of the Internal Revenue Code.

Otherwise, we may be required to provide tax indemnification payments to the parties to these agreements.

4 unchanged sentences

As of December 31, 2021 and 2020, the aggregate redemption value of the then-outstanding Units owned by limited partners, as determined by the ten-day average market price for our common shares, was approximately $ 90.9 million and $ 69.0 million, respectively.

NOTE 15 • QUARTERLY RESULTS OF CONSOLIDATED OPERATIONS (unaudited)

(in thousands, except per share data)

QUARTER ENDED March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020

Revenues $ 44,406 $ 43,910 $ 44,138 $ 45,540

Net income (loss) attributable to controlling interests $ ( 7,007 ) $ ( 3,803 ) $ 19,629 $ ( 4,378 )

Net income (loss) available to common shareholders $ ( 8,439 ) $ ( 5,387 ) $ 18,021 $ ( 5,985 )

Net income (loss) per common share - basic $ ( 0.69 ) $ ( 0.44 ) $ 1.40 $ ( 0.46 )

Net income (loss) per common share - diluted $ ( 0.67 ) $ ( 0.44 ) $ 1.38 $ ( 0.46 )

(in thousands, except per share data)

QUARTER ENDED March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019

Revenues $ 45,608 $ 46,934 $ 47,436 $ 45,777

Net income (loss) attributable to controlling interests $ ( 4,698 ) $ 3,113 $ 31,596 $ 48,658

Net income (loss) available to common shareholders $ ( 6,403 ) $ 1,407 $ 29,891 $ 46,953

Net income (loss) per common share - basic $ ( 0.54 ) $ 0.11 $ 2.57 $ 3.95

Net income (loss) per common share - diluted $ ( 0.54 ) $ 0.11 $ 2.54 $ 3.89

The above financial information is unaudited.

In the opinion of management, all adjustments (which are of a normal recurring nature) have been included for a fair presentation.

NOTE 13 • SHARE BASED COMPENSATION

4 unchanged sentences

Through December 31, 2021, awards under the 2015 Incentive Plan consisted of restricted and unrestricted common shares, RSUs, and stock options.

We account for forfeitures of restricted and unrestricted common shares and RSUs when they occur instead of estimating the forfeitures.

We account for forfeitures of restricted and unrestricted common shares, RSUs, and stock options when they occur instead of estimating the forfeitures.

Year Ended December 31, 2021 LTIP Awards

Awards granted to trustees on May 19, 2020 consisted of 8,272 RSUs, which vest on May 19, 2021.

All of these awards are classified as equity awards.

We recognize compensation expense associated with the time-based awards ratably over the requisite service period.

The fair value of share awards at grant date for non-employee trustees was approximately $ 533,000 , $ 505,000 , $ 348,000 , and $ 389,000 for the years ended December 31, 2020 and 2019, the transition period ended December 31, 2018, and the fiscal year ended April 30, 2018, respectively.

Awards granted to employees on March 13, 2020, consist of an aggregate of 8,806 time-based RSU awards.

The time-based RSUs vest as to one-third of the shares on each of March 13, 2021, March 13, 2022, and March 13, 2023.

Awards granted to employees on August 12, 2020 consist of 480 time-based RSUs, which vest on August 12, 2021.

Awards granted to employees on November 19, 2020 and November 30, 2020 consist of 281 and 142 time-based RSUs, respectively.

These awards vest as to 50% on each the first and second anniversary of the grant date.

These awards are classified as equity awards.

Awards granted to employees on May 21, 2020, consist of 141,000 stock options which vest as to 25 % on each of May 21, 2021, January 1, 2022, January 1, 2023 and January 1, 2024 and expire 10 years after grant date.

Awards granted to employees on January 1, 2021, consist of an aggregate of 6,410 time-based RSU awards, 19,224 performance based RSUs based on total shareholder return (“TSR”), and 43,629 stock options.

The time-based RSUs vest as to one-third of the shares on each of January 1, 2022, January 1, 2023, and January 1, 2024.

The stock options vest as to 25 % on each of January 1, 2022, January 1, 2023, January 1, 2024, and January 1, 2025 and expire 10 years after grant date.

The fair value of stock options was $ 7.383 per share and was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

4 unchanged sentences

Dividend Yield 3.963 %

The TSR performance RSUs are earned based on the Company’s TSR as compared to the FTSE Nareit Apartment Index over a forward looking three-year period.

The maximum number of RSUs eligible to be earned is 38,448 RSUs, which is 200 % of the RSUs granted.

Earned awards (if any) will fully vest as of the last day of the measurement period.

These awards have market conditions in addition to service conditions that must be met for the awards to vest.

Compensation expense is recognized ratably based on the grant date fair value, as determined using the Monte Carlo valuation model, regardless of whether the market conditions are achieved and the awards ultimately vest.

Therefore, previously recorded compensation expense is not adjusted in the event that the market conditions are not achieved.

The Company based the expected volatility on a weighted average of the historical volatility of the Company’s daily closing share price and a select peer average volatility, the risk-free interest rate on the interest rates on U.S.

treasury bonds with a maturity equal to the remaining performance period of the award, and the expected term on the performance period of the award.

The assumptions used to value the TSR performance RSUs were an expected volatility of 20.63 %, a risk-free interest rate of 0.17 %, and an expected life of 3 years.

The share price at the grant date, January 1, 2021, was $ 70.64 per share.

Awards granted to trustees in May 2021 consisted of 6,061 RSUs with a one-year vesting period.

All of these awards are classified as equity awards.

We recognize compensation expense associated with the time-based awards ratably over the requisite service period.

The fair value of share awards at grant date for non-employee trustees was approximately $ 425,000 , $ 533,000 , and $ 505,000 for the years ended December 31, 2021, 2020, and 2019, respectively.

Share-Based Compensation Expense

Total share-based compensation expense recognized in the consolidated financial statements for the years ended December 31, 2020 and 2019, the transition period ended December 31, 2018, and the fiscal year ended April 30, 2018, for all share-based awards was as follows:

Total share-based compensation expense recognized in the consolidated financial statements for the years ended December 31, 2021, 2020, and 2019, for all share-based awards was as follows:

(in thousands)

Year Ended December 31, Transition Period Ended Fiscal Year Ended April 30,

2020 2019 December 31, 2018 2018

Year Ended December 31,

2021 2020 2019

Share based compensation expense $ 2,687 $ 2,106 $ 1,905

Restricted Share Awards

The total fair value of time-based share grants vested during the years ended December 31, 2020 and 2019, the transition period ended December 31, 2018, and the fiscal year ended April 30, 2018 was $ 136,000 , $ 310,000 , $ 147,000 , and $ 1.1 million, respectively.

The activity for the years ended December 31, 2020 and 2019, the transition period ended December 31, 2018, and the fiscal year ended April 30, 2018, related to our restricted share awards was as follows:

The total fair value of time-based share grants vested during the years ended December 31, 2020 and 2019 was $ 136,000 and $ 310,000 , respectively.

The activity for the years ended December 31, 2020 and 2019, related to our restricted share awards was as follows:

Awards with Service Conditions

1 unchanged sentence

Shares Date Fair Value

Unvested at April 30, 2017 19,511

Granted 9,136 $ 57.55

Vested ( 18,545 ) $ 59.89

Forfeited ( 202 ) $ 62.40

Unvested at April 30, 2018 9,900

Vested ( 2,709 ) $ 63.21

Unvested at December 31, 2018 7,191

8 unchanged sentences

The total compensation cost related to non-vested time-based RSUs not yet recognized is $ 491,000 , which we expect to recognize over a weighted average period of 1.2 years.

The unamortized value of awards and RSUs with market conditions as of December 31, 2020, December 31, 2019, December 31, 2018, and April 30 2018, was approximately $ 487,000 , $ 1.3 million, $ 1.1 million, and $ 448,000 respectively.

The activity for the years ended December 31, 2020 and 2019, the transition period ended December 31, 2018, and the fiscal year ended April 30, 2018, related to our RSUs was as follows:

The unamortized value of RSUs with market conditions as of December 31, 2021, 2020, and 2019, was approximately $ 1.1 million, $ 487,000 , and $ 1.3 million, respectively.

The activity for the years ended December 31, 2021, 2020, and 2019, related to our RSUs was as follows:

RSUs with Service Conditions RSUs with Market Conditions

1 unchanged sentence

Shares Date Fair Value Shares Date Fair Value

Unvested at April 30, 2017 — — — —

Granted 6,994 $ 60.54 11,538 $ 70.90

Vested ( 207 ) $ 50.30 — —

Forfeited — — — —

Unvested at April 30, 2018 6,787 $ 60.85 11,538 $ 70.90

Unvested at December 31, 2018 18,260 $ 55.13 25,319 $ 62.84

Granted 16,084 $ 59.76 12,978 $ 79.49

4 unchanged sentences

Vested ( 14,991 ) $ 59.10 ( 13,357 ) 74.68

Change in awards (1)

— $ — 4,436 $ —

Forfeited ( 508 ) $ 62.99 ( 1,907 ) $ 63.92

11 unchanged sentences

The total compensation costs related to non-vested stock options not yet recognized is $ 387,000 , which we expect to recognize over a weighted average period of 2.4 years.

The stock option activity for the year ended December 31, 2020 was as follows:

The stock option activity for the years ended December 31, 2021 and 2020 was as follows:

Number of Shares Weighted Average Exercise Price

Outstanding at beginning of year — —

Outstanding at December 31, 2019 — —

Granted 141,000 $ 66.36

1 unchanged sentence

Forfeited ( 1,952 ) $ 66.36

Outstanding at end of year 139,048 $ 66.36

Exercisable at end of year — —

Outstanding at December 31, 2020 139,048 $ 66.36

Exercisable at December 31, 2020 — —

Granted 43,629 70.64

Exercised — —

Forfeited — —

Outstanding at December 31, 2021 182,677 67.38

Exercisable at December 31, 2021 34,758 66.36

The intrinsic value of a stock option represents the amount by which the current price of the underlying stock exceeds the exercise price of the option.

As of December 31, 2020, stock options outstanding had an aggregate intrinsic value of $ 595,000 with a weighted average remaining contractual term of 9.39 years.

As of December 31, 2021, stock options outstanding had an aggregate intrinsic value of $ 8.0 million with a weighted average remaining contractual term of 8.54 years.

NOTE 14 • SUBSEQUENT EVENTS

On January 6, 2021, we acquired Union Pointe Apartment Homes, a 256 home apartment community located in Longmont, Colorado, for an aggregate purchase price of $ 76.9 million.

On January 6, 2021, we also issued $ 50.0 million of 2.7 % unsecured Series C notes due on June 6, 2030.

In concert with the issuance, we amended and expanded our Note Purchase Private Shelf Agreement (the “Agreement”) with Prudential to increase the aggregate amount available under the agreement from $ 150.0 million to $ 225.0 million.

After the close of the Series C Notes, we have $ 175.0 million outstanding with an additional $ 50.0 million of capacity remaining under the Agreement.

On January 4, 2022, we acquired a portfolio of three apartment communities located in the Minneapolis, Minnesota region for an aggregate purchase price of $ 68.1 million.

The acquisition was financed through the assumption of $ 41.6 million in mortgage debt, the issuance of 209,156 Units, and cash.

On January 26, 2022, we acquired Noko Apartments in Minneapolis, Minnesota for an aggregate purchase price of $ 46.4 million.

We financed the development of Noko Apartments with a construction loan and a mezzanine loan which had

principal balances of $ 29.9 million and $ 13.4 million, respectively, as of December 31, 2021.

The loans were exchanged to fund, in part, the acquisition.

On February 23, 2022, we paid $ 3.3 million to terminate our $ 75.0 million interest rate swap and our $ 70.0 million forward swap.

CENTERSPACE AND SUBSIDIARIES

15 unchanged sentences

Cardinal Point - Grand Forks, ND — 1,600 33,400 400 1,727 33,673 35,400 ( 4,132 ) 2013 30 - 37

Cascade Shores - Rochester, MN 11,400 1,585 16,710 149 1,587 16,857 18,444 ( 2,967 ) 2016 30 - 37

Castlerock - Billings, MT — 736 4,864 2,257 1,045 6,812 7,857 ( 4,582 ) 1998 30 - 37

1 unchanged sentence

Cimarron Hills - Omaha, NE 8,700 706 9,588 4,684 1,639 13,339 14,978 ( 7,998 ) 2001 30 - 37

Colonial Villa - Burnsville, MN — 2,401 11,515 15,595 3,206 26,305 29,511 ( 12,940 ) 2003 30 - 37

Colony - Lincoln, NE 11,610 1,515 15,730 3,131 1,817 18,559 20,376 ( 5,412 ) 2012 30 - 37

Commons and Landing at Southgate - Minot, ND — 5,945 47,512 2,448 6,424 49,481 55,905 ( 15,690 ) 2015 30 - 37

Connelly on Eleven - Burnsville, MN — 2,401 11,515 16,010 3,206 26,720 29,926 ( 14,315 ) 2003 30 - 37

Cottonwood - Bismarck, ND — 1,056 17,372 5,799 1,962 22,265 24,227 ( 13,046 ) 1997 30 - 37

Country Meadows - Billings, MT — 491 7,809 1,623 599 9,324 9,923 ( 5,872 ) 1995 30 - 37

Crystal Bay - Rochester, MN — 433 11,425 360 479 11,739 12,218 ( 1,984 ) 2016 30 - 37

Cypress Court - St.

1 unchanged sentence

Deer Ridge - Jamestown, ND — 711 24,129 348 785 24,403 25,188 ( 7,292 ) 2013 30 - 37

Donovan - Lincoln, NE 11,270 1,515 15,730 4,952 1,817 20,380 22,197 ( 6,531 ) 2012 30 - 37

Dylan - Denver, CO — 12,155 77,215 1,138 12,241 78,267 90,508 ( 10,892 ) 2018 30 years

Evergreen - Isanti, MN — 1,129 5,524 628 1,159 6,122 7,281 ( 2,290 ) 2008 30 - 37

French Creek - Rochester, MN — 201 4,735 256 212 4,980 5,192 ( 809 ) 2016 30 - 37

Freightyard - Minneapolis, MN — 1,889 23,616 1,296 1,895 24,906 26,801 ( 2,091 ) 2019 30 years

Gardens - Grand Forks, ND — 518 8,702 141 535 8,826 9,361 ( 2,100 ) 2015 30 - 37

1 unchanged sentence

Cloud, MN — 814 7,086 2,152 970 9,082 10,052 ( 3,972 ) 2012 30 - 37

GrandeVille at Cascade Lake - Rochester, MN 36,000 5,003 50,363 2,089 5,188 52,267 57,455 ( 10,304 ) 2015 30 - 37

GrandeVille Shores - Rochester, MN 46,320 6,588 67,072 5,741 6,776 72,625 79,401 ( 16,311 ) 2015 30 - 37

Greenfield - Omaha, NE — 578 4,122 3,007 876 6,831 7,707 ( 2,769 ) 2007 30 - 37

Heritage Manor - Rochester, MN — 403 6,968 3,741 790 10,322 11,112 ( 6,243 ) 1998 30 - 37

Homestead Garden - Rapid City, SD — 655 14,139 1,219 792 15,221 16,013 ( 3,944 ) 2015 30 - 37

2 unchanged sentences

Legacy Heights - Bismarck, ND — 1,207 13,742 290 1,142 14,097 15,239 ( 3,102 ) 2015 30 - 37

Lugano at Cherry Creek - Denver, CO — 7,679 87,766 1,317 7,679 89,083 96,762 ( 7,670 ) 2019 30 years

Meadows - Jamestown, ND — 590 4,519 2,075 730 6,454 7,184 ( 4,101 ) 1998 30 - 37

1 unchanged sentence

Monticello Village - Monticello, MN — 490 3,756 1,211 655 4,802 5,457 ( 2,655 ) 2004 30 - 37

Northridge - Bismarck, ND — 884 7,515 296 1,048 7,647 8,695 ( 1,912 ) 2015 30 - 37

Olympic Village - Billings, MT — 1,164 10,441 4,047 1,885 13,767 15,652 ( 8,539 ) 2000 30 - 37

Oxbo - St Paul, MN — 5,809 51,586 263 5,822 51,836 57,658 ( 8,896 ) 2018 30 years

Park Meadows - Waite Park, MN — 1,143 9,099 9,976 2,140 18,078 20,218 ( 13,170 ) 1997 30 - 37

Park Place - Plymouth, MN — 10,609 80,781 13,587 10,819 94,158 104,977 ( 15,767 ) 2018 30 years

CENTERSPACE AND SUBSIDIARIES

7 unchanged sentences

Land Improvements acquisition Land Improvements Total Depreciation or Acquisition computed

Northridge - Bismarck, ND $ — $ 884 $ 7,515 $ 278 $ 1,048 $ 7,629 $ 8,677 $ ( 1,641 ) 2015 30 - 37

Olympic Village - Billings, MT — 1,164 10,441 4,175 1,885 13,895 15,780 ( 8,287 ) 2000 30 - 37

Olympik Village - Rochester, MN — 1,034 6,109 3,459 1,450 9,152 10,602 ( 4,136 ) 2005 30 - 37

Oxbo - St Paul, MN — 5,809 51,586 214 5,822 51,787 57,609 ( 7,107 ) 2018 30 years

Park Meadows - Waite Park, MN — 1,143 9,099 10,277 2,140 18,379 20,519 ( 12,605 ) 1997 30 - 37

Park Place - Plymouth, MN — 10,609 80,781 10,433 10,819 91,004 101,823 ( 11,303 ) 2018 30 years

Plaza - Minot, ND — 867 12,784 3,118 1,011 15,758 16,769 ( 6,270 ) 2009 30 - 37

12 unchanged sentences

Southpoint - Grand Forks, ND — 576 9,893 284 663 10,090 10,753 ( 2,696 ) 2013 30 - 37

Southfork - Lakeville, MN 21,675 3,502 40,153 8,626 3,583 48,698 52,281 ( 6,292 ) 2019 30 years

Sunset Trail - Rochester, MN — 336 12,814 3,429 826 15,753 16,579 ( 9,579 ) 1999 30 - 37

Thomasbrook - Lincoln, NE 13,100 600 10,306 5,474 1,710 14,670 16,380 ( 9,080 ) 1999 30 - 37

Village Green - Rochester, MN — 234 2,296 1,083 361 3,252 3,613 ( 1,682 ) 2003 30 - 37

West Stonehill - Waite Park, MN 16,425 939 10,167 10,933 1,912 20,127 22,039 ( 12,812 ) 1995 30 - 37

1 unchanged sentence

Whispering Ridge - Omaha, NE 19,187 2,139 25,424 3,715 2,551 28,727 31,278 ( 9,162 ) 2012 30 - 37

Winchester - Rochester, MN — 748 5,622 3,040 1,112 8,298 9,410 ( 4,418 ) 2003 30 - 37

Woodridge - Rochester, MN — 370 6,028 5,380 761 11,017 11,778 ( 6,625 ) 1997 30 - 37

1 unchanged sentence

Non-Same-Store

FreightYard Townhomes & Flats - Minneapolis, MN — 1,889 23,616 877 1,895 24,487 26,382 ( 1,171 ) 2019 30 years

Bayberry Place - Minneapolis, MN 11,048 1,807 14,113 538 1,865 14,593 16,458 ( 177 ) 2021 30 years

Burgundy and Hillsboro Court - Minneapolis, MN 23,570 2,834 31,149 1,177 2,913 32,247 35,160 ( 398 ) 2021 30 years

Civic Lofts - Denver, CO — 6,166 55,182 51 6,171 55,228 61,399 ( 148 ) 2021 30 years

Gatewood - St Cloud, MN 5,156 327 6,858 348 342 7,191 7,533 ( 95 ) 2021 30 years

Grove Ridge - Minneapolis, MN 7,992 1,250 10,271 405 1,293 10,633 11,926 ( 133 ) 2021 30 years

Ironwood - Minneapolis, MN — 2,165 36,874 238 2,167 37,110 39,277 ( 2,564 ) 2020 30 years

Lugano at Cherry Creek - Denver, CO — 7,679 87,766 635 7,679 88,401 96,080 ( 4,330 ) 2019 30 years

Legacy Waite Park - St Cloud, MN 6,923 412 9,556 428 426 9,970 10,396 ( 135 ) 2021 30 years

New Hope Garden and Village - Minneapolis, MN 9,943 1,603 12,578 480 1,651 13,010 14,661 ( 170 ) 2021 30 years

Palisades - Minneapolis, MN 22,260 6,919 46,577 386 6,959 46,923 53,882 ( 574 ) 2021 30 years

Parkhouse - Thornton, CO — 10,474 132,105 987 10,484 133,082 143,566 ( 6,922 ) 2020 30 years

SouthFork Townhomes - Lakeville, MN 21,675 3,502 40,153 7,122 3,583 47,194 50,777 ( 3,638 ) 2019 30 years

Plymouth Pointe - Minneapolis, MN 9,575 1,042 12,810 526 1,073 13,305 14,378 ( 174 ) 2021 30 years

Pointe West St Cloud - St Cloud, MN 5,008 246 6,850 437 260 7,273 7,533 ( 98 ) 2021 30 years

Portage - Minneapolis, MN 5,991 2,133 6,685 415 2,226 7,007 9,233 ( 83 ) 2021 30 years

River Pointe - Minneapolis, MN 25,412 3,346 33,118 951 3,426 33,989 37,415 ( 422 ) 2021 30 years

Southdale Parc - Minneapolis, MN 5,301 1,569 7,740 302 1,618 7,993 9,611 ( 96 ) 2021 30 years

Union Pointe - Denver, CO — 5,727 69,966 336 5,736 70,293 76,029 ( 2,723 ) 2021 30 years

Venue on Knox - Minneapolis, MN 11,660 3,438 14,743 548 3,530 15,199 18,729 ( 177 ) 2021 30 years

Windsor - Minneapolis, MN 14,731 2,140 18,943 738 2,204 19,617 21,821 ( 243 ) 2021 30 years

Wingate - Minneapolis, MN $ 10,459 $ 1,480 $ 13,530 $ 503 $ 1,526 $ 13,987 $ 15,513 $ ( 180 ) 2021 30 years

Woodhaven - Minneapolis, MN 14,408 3,940 20,080 627 4,040 20,607 24,647 ( 245 ) 2021 30 years

Woodland Pointe - Minneapolis, MN 31,673 5,367 40,422 843 5,449 41,183 46,632 ( 516 ) 2021 30 years

Total Non-Same-Store $ 221,110 $ 64,385 $ 600,150 $ 11,264 $ 65,359 $ 610,440 $ 675,799 $ ( 16,273 )

18 unchanged sentences

3100 10th St SW - Minot, ND — $ 246 $ 1,866 $ — $ 246 $ 1,866 $ 2,112 $ ( 388 ) 2019 30 years

Minot IPS - Minot, ND — 416 5,952 — 416 5,952 6,368 ( 4,509 ) 2012 30 - 37

Total Other - Commercial — $ 246 $ 1,866 $ — $ 246 $ 1,866 $ 2,112 $ ( 388 )

25 unchanged sentences

Accumulated depreciation on real estate sold or classified as held for sale ( 24,161 ) ( 21,440 )

Write down of asset and accumulated depreciation on impaired assets — —

( 9,764 ) ( 484 )

12 unchanged sentences

$ 1,827,578 $ 1,413,308

(1) Consists of miscellaneous disposed assets.

(1) Consists of the write off of fully depreciated assets and accumulated amortization and miscellaneous disposed assets.

(2) The net basis, including held for sale properties, for Federal Income Tax purposes was $ 1.8 billion and $ 1.4 billion at December 31, 2021 and December 31, 2020, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures