CENTERSPACE 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our exposure to market risk is primarily related to fluctuations in the general level of interest rates on our current and future fixed and variable rate debt obligations. We have used interest rate swaps to offset the impact of interest rate fluctuations on our variable-rate debt. During the year ended December 31, 2021, we prepaid two variable rate term loans and terminated two of our four interest rate swaps. As of December 31, 2021, we had a swap with a notional of $75.0 million on the line of credit and which has an average pay rate of 2.81% and a forward swap with a notional of $70.0 million. The aggregate fair value of our interest rate swaps is a liability of $5.7 million, as of December 31, 2021. We do not enter into derivative instruments for trading or speculative purposes. The interest rate swaps expose us to credit risk in the event of non-performance by the counterparty under the terms of the agreement. We have a private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc. (collectively, PGIM) for the issuance of up to $225.0 million of unsecured senior promissory notes (“unsecured senior notes”). 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, of which $25.0 million was under the private shelf agreement with PGIM. The following table shows the notes issued under both agreements. The table below shows the notes issued under both agreements. 38 Table of Contents (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 % During the year ended December 31, 2021, we entered into a $198.9 million Fannie Mae Credit Facility Agreement (“FMCF”) for the financing of 16 apartment communities acquired. 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. As of December 31, 2021, we had no variable-rate mortgage debt outstanding and $76.0 million of variable-rate borrowings under our line of credit, of which $75.0 million is fixed through interest rate swaps. We estimate that a change in 30-day LIBOR of 100 basis points with constant risk spreads would not have a significant impact on our net income due to our interest rate swap on our line of credit. Mortgage loan indebtedness, excluding the FMCF, decreased by $13.5 million as of December 31, 2021, compared to December 31, 2020, primarily due to loan maturities and prepayments. As of December 31, 2021 and 2020, 100.0% of our $284.9 million of mortgage debt was at fixed rates of interest, with staggered maturities. As of December 31, 2021, the weighted average rate of interest on our mortgage debt was 3.81%, compared to 3.93% on December 31, 2020. Even though our goal is to maintain a fairly low exposure to interest rate risk, we may become vulnerable to significant fluctuations in interest rates on any future repricing or refinancing of our fixed or variable rate debt or future debt. The following table provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. Average variable rates are based on rates in effect at the reporting date. Future Principal Payments (in thousands, except percentages) Fair Debt 2022 2023 2024 2025 2026 Thereafter Total Value Fixed Rate $ 27,113 $ 45,067 $ 4,054 $ 32,850 $ 49,047 $ 625,653 $ 783,784 $ 791,698 Average Interest Rate (1) 3.85 % 3.83 % 3.80 % 3.80 % 3.84 % 3.15 % 3.25 % Variable Rate (2) $ — $ — — $ 76,000 $ — — $ 76,000 $ 76,000 Average Interest Rate (1) — — — 2.74 % — — 2.74 % (1) Interest rate is annualized and includes the effect of our interest rate swaps. (2) Includes our line of credit, of which $75.0 million is synthetically fixed with an interest rate swap.