CENTERSPACE 10-K

Item 9A. Controls and Procedures Disclosure Controls and Procedures : 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 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 Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2021. Our internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP. As of December 31, 2021, management conducted an assessment of the effectiveness of our internal control over financial reporting, based on the framework established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management has determined that our internal control over financial reporting as of December 31, 2021, was effective. Our internal control over financial reporting includes policies and procedures that: • pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions, acquisitions and dispositions of assets; • provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and the trustees; and • provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements. Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions or deterioration in the degree of compliance with the policies or procedures. Our internal control over financial reporting as of December 31, 2021 has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in their report on page F-4 of our consolidated financial statements contained in our Annual Report on Form 10-K, which expresses an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2021. Item 9B. Other Information None. PART III Item 10. 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,” 40 Table of Contents 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. Item 11. Executive Compensation The information required by this Item is incorporated by reference to the information under “Trustee Compensation,” “Compensation Discussion and Analysis” and “Executive Officer Compensation Tables” 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. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters The information required by this Item is incorporated by reference to the information under “Securities Authorized for Issuance Under Equity Compensation Plans” and “Security Ownership of Certain Beneficial Owners and Management” 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. Item 13. Certain Relationships and Related Transactions, and Trustee Independence The information required by this Item is incorporated by reference to the information under “Relationships and Related Party Transactions” and “Corporate Governance and Board Matters” 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. Item 14. Principal Accounting Fees and Services The information required by this Item is incorporated by reference to the information under “Accounting and Audit Committee Matters” 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. PART IV Item 15. Exhibits, Financial Statement Schedules The following documents are filed as part of this report : 1. Financial Statements See the “Table of Contents” to our consolidated financial statements on page F-1 of this Report. 2. Financial Statement Schedules See the “Table of Contents” to our consolidated financial statements on page F-1 of this Report. The following financial statement schedules should be read in conjunction with the financial statements referenced in Part II, Item 8 of this Report: Schedule III Real Estate and Accumulated Depreciation 3. Exhibits See the Exhibit Index set forth in part (b) below. The Exhibit Index below lists the exhibits to this Report. We will furnish a printed copy of any exhibit listed below to any security holder who requests it upon payment of a fee of 15 cents per page. All Exhibits are either contained in this Report or are incorporated by reference as indicated below. Item 16. 10-K Summary None. 41 Table of Contents EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 1.1 Equity Distribution Agreement dated November 7, 2019 between the Company and BMO Capital Markets Corp., BTIG, LLC, Jefferies LLC, Raymond James & Associates, Inc. and Robert W. Baird & Co. 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. 3.1. 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). 3.2 Seventh Restated Trustee’s Regulations (Bylaws) of Investors Real Estate Trust, adopted on April 27, 2020 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 1, 2020). 3.3 Articles Supplementary to the Company’s Articles of Amendment and Third Restated Declaration of Trust designating the Company’s 6.625% Series C Cumulative Redeemable Preferred Shares, no par value per share (incorporated by reference to Exhibit 3. 2 of the Company’s Registration Statement on Form 8-A filed with the SEC on September 28, 2017). 4.1 Note Purchase and Private Shelf Agreement, dated as of September 13, 2019, by and among IRET Properties, a North Dakota Limited Partnership, as the Issuer, Investors Real Estate Trust, as the Parent, IRET, 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 September 17, 2019). 4.2 Form of Series A Senior Note under the Note Agreement (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 17, 2019). 4.3 Form of Series B Notes under the Note Agreement (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K dated October 1, 2019). 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 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). 42 Table of Contents EXHIBIT NO. DESCRIPTION 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). 10.1** 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). 10.2** Amendment to 2015 Incentive Plan dated April 19, 2016 (incorporated herein by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K filed with the Commission on June 29, 2016). 10.3** Amendment to 2015 Incentive Plan dated March 13, 2020 (incorporated herein by reference to Appendix B to the Company's Proxy Statement on Schedule 14A filed with the Commission on April 6, 2020). 10.4** Form of Trustee Stock Award Agreement under the 2015 Incentive Plan dated June 22, 2016 (incorporated herein by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K filed with the Commission on June 29, 2016). 10.5** Form of Performance Stock Award Agreement under the 2015 Incentive Plan dated June 22, 2016 (incorporated herein by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K filed with the Commission on June 29, 2016). 10.6** Form of Stock Award Agreement under the 2015 Incentive Plan dated June 22, 2016 (incorporated herein by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K filed with the Commission on June 29, 2016). 10.7** Form of Stock Award Agreement (one-year measurement period) under the 2015 Incentive Plan dated September 16, 2015 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2015). 10.8** Form of Stock Award Agreement (two-year measurement period) under the 2015 Incentive Plan dated September 16, 2015 (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2015). 10.9** Form of Stock Award Agreement (three-year measurement period) under the 2015 Incentive Plan dated September 16, 2015 (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2015). 10.10** Form of Change in Control Severance Agreement (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 7, 2015). 10.11** Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2015). 10.12 Second Amended and Restated Credit Agreement and related Annex I attached thereto, dated as of August 31, 2018, by and among IRET Properties, a North Dakota Limited Partnership, as the Borrower, the Guarantors party thereto, the several financial institutions party thereto, as Lenders, and the Bank of Montreal, as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on September 6, 2018). 10.13 First Amendment to Second Amended and Restated Credit Agreement and related Annex I attached thereto, by and among IRET Properties, a North Dakota Limited Partnership, as the Borrower, the Guarantors party thereto, the several financial institutions party thereto, as Lenders, and the Bank of Montreal, as Administrative Agent (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on From 10-K filed with the Commission on February 19, 2020). 10.14 Second Amendment to Second Amended and Restated Credit Agreement and related Annex I attached thereto, by and among IRET Properties, a North Dakota Limited Partnership, as the Borrower, the Guarantors party thereto, the several financial institutions party thereto, as Lenders, and the Bank of Montreal, as Administrative Agent (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on September 17, 2019). 10.15 Amended and Restated Agreement of Limited Partnership of IRET Properties, A North Dakota Limited Partnership (as amended and restated through February 27, 2019) (incorporated by reference to Exhibit 10.30 to the Company's Transition Report on Form 10-K filed with the Commission on February 27, 2019). 43 Table of Contents EXHIBIT NO. DESCRIPTION 10.16 Third Amendment to the Amended and Restated Agreement of Limited Partnership of IRET Properties, A North Dakota Limited Partnership (incorporated herein by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed on October 2, 2017). 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). 21.1 † Subsidiaries of Centerspace 23.1 † Consent of Independent Registered Public Accounting Firm 24.1 † Power of Attorney (included on the signature page to this Annual Report on Form 10-K and incorporated by reference herein). 31.1 † Section 302 Certification of President and Chief Executive Officer 31.2 † Section 302 Certification of Chief Financial Officer 32.1 † Section 906 Certification of the President and Chief Executive Officer 32.2 † Section 906 Certification of the Chief Financial Officer 101 † The following materials from our Annual Report on Form 10-K for the twelve-months ended December 31, 2021 formatted in Inline eXtensible Business Reporting Language ("iXBRL"): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Equity, (iv) the Consolidated Statements of Cash Flows, (v) notes to these consolidated financial statements, and (vi) the Cover Page to our Annual Report on From 10-K. 104 Cover Page Interactive Data File (formatted as Inline iXBRL and contained in Exhibit 101) † Filed herewith ** Indicates management compensatory plan, contract or arrangement. 44 Table of Contents SIGNATURES 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. Date: February 28, 2022 Centerspace By: /s/ Mark O. Decker, Jr. Mark O. Decker, Jr. President & Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Signature Title Date /s/ John A. Schissel John A. Schissel Trustee & Chairman February 28, 2022 /s/ Mark O. Decker, Jr. Mark O. Decker, Jr. President & Chief Executive Officer (Principal Executive Officer); Trustee February 28, 2022 /s/ Bhairav Patel Bhairav Patel Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) February 28, 2022 /s/ Michael T. Dance Michael T. Dance Trustee February 28, 2022 /s/ Emily Nagle Green Emily Nagle Green Trustee February 28, 2022 /s/ Linda J. Hall Linda J. Hall Trustee February 28, 2022 /s/ Jeffrey P. Caira Jeffrey P. Caira Trustee February 28, 2022 /s/ Mary J. Twinem Mary J. Twinem Trustee February 28, 2022 /s/ Rodney Jones-Tyson Rodney Jones-Tyson Trustee February 28, 2022 45 Table of Contents CENTERSPACE AND SUBSIDIARIES TABLE OF CONTENTS PAGE REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID Number 248 ) F- 2 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheets F- 5 Consolidated Statements of Operations F- 6 Consolidated Statements of Comprehensive Income F- 7 Consolidated Statements of Equity F- 8 Consolidated Statements of Cash Flows F- 9 Notes to Consolidated Financial Statements F- 11 ADDITIONAL INFORMATION Schedule III - Real Estate and Accumulated Depreciation F- 31 Schedules other than those listed above are omitted since they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes thereon. F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Trustees and Shareholders Centerspace Opinion on the financial statements 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. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 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. 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. F-2 Table of Contents • 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 We have served as the Company’s auditor since 2013. Minneapolis, Minnesota February 28, 2022 F-3 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Trustees and Shareholders Centerspace Opinion on internal control over financial reporting 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. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2021, and our report dated February 28, 2022 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Minneapolis, Minnesota February 28, 2022 F-4 Table of Contents CENTERSPACE AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) December 31, 2021 December 31, 2020 ASSETS Real estate investments Property owned $ 2,271,170 $ 1,812,557 Less accumulated depreciation ( 443,592 ) ( 399,249 ) 1,827,578 1,413,308 Mortgage loans receivable 43,276 24,661 Total real estate investments 1,870,854 1,437,969 Cash and cash equivalents 31,267 392 Restricted cash 7,358 6,918 Other assets 30,582 18,904 TOTAL ASSETS $ 1,940,061 $ 1,464,183 LIABILITIES, MEZZANINE EQUITY, AND EQUITY LIABILITIES Accounts payable and accrued expenses $ 62,403 $ 55,609 Revolving lines of credit 76,000 152,871 Notes payable, net of unamortized loan costs of $ 656 and $ 754 , respectively 299,344 269,246 Mortgages payable, net of unamortized loan costs of $ 3,187 and $ 1,371 , respectively 480,703 297,074 TOTAL LIABILITIES $ 918,450 $ 774,800 COMMITMENTS AND CONTINGENCIES (NOTE 12) 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 EQUITY 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 Common Shares of Beneficial Interest (Unlimited authorization, no par value, 15,016 shares issued and outstanding at December 31, 2021 and 13,027 shares issued and outstanding at December 31, 2020) 1,157,255 968,263 Accumulated distributions in excess of net income ( 474,318 ) ( 427,681 ) Accumulated other comprehensive income (loss) ( 4,435 ) ( 15,905 ) Total shareholders’ equity $ 772,032 $ 618,207 Noncontrolling interests – Operating Partnership and Series E preferred units 223,600 53,930 Noncontrolling interests – consolidated real estate entities 648 686 TOTAL EQUITY $ 996,280 $ 672,823 TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY $ 1,940,061 $ 1,464,183 See Notes to Consolidated Financial Statements. F-5 Table of Contents CENTERSPACE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS ( in thousands, except per share data) Year Ended December 31, 2021 2020 2019 REVENUE $ 201,705 $ 177,994 $ 185,755 EXPENSES Property operating expenses, excluding real estate taxes 57,753 51,625 57,249 Real estate taxes 24,104 21,533 21,066 Property management expense 8,752 5,801 6,186 Casualty loss 344 1,662 1,116 Depreciation and amortization 92,165 75,593 74,271 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 Interest expense ( 29,078 ) ( 27,525 ) ( 30,537 ) Loss on extinguishment of debt ( 535 ) ( 23 ) ( 2,360 ) Interest and other income (loss) ( 2,380 ) ( 1,552 ) 2,092 Gain (loss) on litigation settlement — — 6,586 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 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 Net income (loss) attributable to controlling interests ( 29 ) 4,441 78,669 Dividends to preferred shareholders ( 6,428 ) ( 6,528 ) ( 6,821 ) Redemption of preferred shares — 297 — NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $ ( 6,457 ) $ ( 1,790 ) $ 71,848 NET EARNINGS (LOSS) PER COMMON SHARE – BASIC $ ( 0.47 ) $ ( 0.15 ) $ 6.06 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. F-6 Table of Contents CENTERSPACE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Year Ended December 31, 2021 2020 2019 NET INCOME (LOSS) $ ( 2,101 ) $ 4,743 $ 84,822 Other comprehensive income: Unrealized gain (loss) from derivative instrument 2,383 ( 11,068 ) ( 7,040 ) (Gain) loss on derivative instrument reclassified into earnings 9,087 2,770 289 Total comprehensive income (loss) $ 9,369 $ ( 3,555 ) $ 78,071 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 Comprehensive income (loss) attributable to controlling interests $ 13,682 $ ( 2,547 ) $ 73,149 See Notes to Consolidated Financial Statements. F-7 Table of Contents CENTERSPACE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (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 interest and noncontrolling interests 78,669 5,790 84,459 Change in fair value of derivatives ( 6,751 ) ( 6,751 ) Distributions – common shares and Units ($ 2.80 per share and Unit) ( 32,996 ) ( 3,414 ) ( 36,410 ) Distributions – Series C preferred shares ($ 1.65625 per Series C share) ( 6,821 ) ( 6,821 ) 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 Other ( 7 ) ( 87 ) ( 220 ) ( 307 ) 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 share and Unit) ( 35,695 ) ( 2,842 ) ( 38,537 ) Distributions – Series C preferred shares ($ 1.65625 per Series C share) ( 6,528 ) ( 6,528 ) 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 — Shares repurchased ( 5,926 ) 297 ( 5,629 ) Acquisition of nonredeemable noncontrolling interests – consolidated real estate entities ( 7,584 ) ( 4,637 ) ( 12,221 ) Other ( 1 ) ( 761 ) ( 166 ) ( 927 ) Balance at December 31, 2020 $ 93,530 13,027 $ 968,263 $ ( 427,681 ) $ ( 15,905 ) $ 54,616 $ 672,823 Net income (loss) attributable to controlling interests and noncontrolling interests ( 29 ) ( 2,712 ) ( 2,741 ) Change in fair value of derivatives 11,470 11,470 Distributions – common shares and Units ($ 2.84 per share and Unit) ( 40,180 ) ( 2,489 ) ( 42,669 ) Distributions – Series C preferred shares ($ 1.65625 per Series C share) ( 6,428 ) ( 6,428 ) Distributions – Series E preferred units ($ 1.301667 per unit) ( 2,343 ) ( 2,343 ) Share-based compensation, net of forfeitures 28 2,689 2,689 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 — Change in value of Series D preferred units — ( 8,771 ) ( 8,771 ) Other — ( 1,155 ) ( 146 ) ( 1,301 ) Balance at December 31, 2021 $ 93,530 15,016 $ 1,157,255 $ ( 474,318 ) $ ( 4,435 ) $ 224,248 $ 996,280 See Notes to Consolidated Financial Statements. F-8 Table of Contents CENTERSPACE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2021 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ ( 2,101 ) $ 4,743 $ 84,822 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 93,110 76,596 75,408 (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 — (Gain) loss on extinguishment of debt and discontinued operations 535 23 2,360 (Gain) loss on litigation settlement — — ( 1,349 ) Share-based compensation expense 2,687 2,106 1,905 (Gain) loss on interest rate swap termination, amortization, and mark-to-market 4,931 — — Bad debt expense 2,304 2,332 1,050 Other, net ( 268 ) 1,310 46 Changes in other assets and liabilities: Other assets ( 5,402 ) ( 4,818 ) 1,076 Accounts payable and accrued expenses 15,750 1,061 1,930 Net cash provided (used) by operating activities $ 84,028 $ 61,228 $ 69,624 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from repayment of mortgage loans receivable — 10,020 — Proceeds from sale of marketable securities — 3,856 — Increase in mortgages and notes receivable ( 18,614 ) ( 24,862 ) ( 6,279 ) Purchase of marketable securities — ( 179 ) ( 6,942 ) Proceeds from sale of real estate and other investments 61,334 43,686 199,282 Payments for acquisitions of real estate assets ( 273,566 ) ( 168,696 ) ( 158,466 ) Payments for improvements of real estate assets ( 35,877 ) ( 30,315 ) ( 20,954 ) Other investing activities ( 502 ) 1,525 366 Net cash provided (used) by investing activities $ ( 267,225 ) $ ( 164,965 ) $ 7,007 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from mortgages payable 196,725 — 59,900 Principal payments on mortgages payable ( 36,282 ) ( 33,422 ) ( 177,743 ) Proceeds from revolving lines of credit 258,580 155,028 245,397 Principal payments on revolving lines of credit ( 335,451 ) ( 52,235 ) ( 252,818 ) Proceeds from notes payable and other debt 174,544 — 124,878 Principal payments on notes payable and other debt ( 145,000 ) — — 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 ) Repurchase of common shares — — ( 18,023 ) Repurchase of preferred shares — ( 5,629 ) — Repurchase of partnership units — ( 50 ) ( 8,147 ) Distributions paid to common shareholders ( 38,487 ) ( 35,045 ) ( 32,891 ) Distributions paid to preferred shareholders ( 6,428 ) ( 6,528 ) ( 6,821 ) 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 ) Other financing activities ( 367 ) ( 280 ) ( 254 ) Net cash provided (used) by financing activities $ 214,512 $ 64,930 $ ( 49,770 ) NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 31,315 ( 38,807 ) 26,861 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF YEAR 7,310 46,117 19,256 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF YEAR $ 38,625 $ 7,310 $ 46,117 F-9 Table of Contents CENTERSPACE AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (in thousands) Year Ended December 31, 2021 2020 2019 SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES 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 Real estate assets acquired through exchange of note receivable — 17,663 — Note receivable exchanged through real estate acquisition — ( 17,663 ) — Real estate acquired through issuance of Series E preferred units 217,513 — — SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest 26,528 26,051 28,679 (in thousands) Balance sheet description December 31, 2021 December 31, 2020 December 31, 2019 Cash and cash equivalents $ 31,267 $ 392 $ 26,579 Restricted cash 7,358 6,918 19,538 Total cash, cash equivalents and restricted cash $ 38,625 $ 7,310 $ 46,117 See Notes to Consolidated Financial Statements. F-10 Table of Contents CENTERSPACE AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021, 2020, and 2019 NOTE 1 • ORGANIZATION 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, our, or us refer to Centerspace and its consolidated subsidiaries. NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying consolidated financial statements include our accounts and the accounts of all our subsidiaries in which we maintain a controlling interest, including the Operating Partnership. All intercompany balances and transactions are eliminated in consolidation. 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. The consolidated financial statements also reflect the ownership by the Operating Partnership of certain joint venture entities in which the Operating Partnership has a general partner’s or controlling interest. These entities are consolidated into our other operations with noncontrolling interests reflecting the noncontrolling partners’ share of ownership, income, and expenses. 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. RECENT ACCOUNTING PRONOUNCEMENTS The following table provides a brief description of recent GAAP accounting standards updates (“ASUs”). Standard Description Date of Adoption Effect on the Financial Statements or Other Significant Matters ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting This ASU contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. This ASU is optional and may be elected over time. 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 This ASU simplifies accounting for convertible instruments and removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception. This ASU also simplifies the diluted earnings per share calculation in certain areas and provide updated disclosure requirements. This ASU is effective for annual reporting periods beginning after December 31, 2021. Early adoption is permitted. 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. F-11 Table of Contents RECLASSIFICATIONS Certain previously reported amounts have been reclassified to conform to the current financial statement presentation. 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. REAL ESTATE INVESTMENTS Real estate investments are recorded at cost less accumulated depreciation and an adjustment for impairment, if any. Property, consisting primarily of real estate investments, totaled $ 1.8 billion and $ 1.4 billion as of December 31, 2021 and 2020, respectively. Upon acquisitions of real estate, we assess the fair value of acquired tangible assets (including land, buildings and personal property), which is determined by valuing the property as if it were vacant, and consider whether there were significant intangible assets acquired (for example, above- and below-market leases, the value of acquired in-place leases and resident relationships) and assumed liabilities, and allocate the purchase price based on these assessments. The as-if-vacant value is allocated to land, buildings, and personal property based on our determination of the relative fair values of these assets. 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 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. Land value is assigned based on the purchase price if land is acquired separately or based on a relative fair value allocation if acquired in a portfolio acquisition. Other intangible assets acquired include amounts for in-place lease values that are based upon our evaluation of the specific characteristics of the leases. Factors considered in the fair value analysis include an estimate of carrying costs and foregone rental income during hypothetical expected lease-up periods, considering current market conditions, and costs to execute similar leases. We also consider information about each property obtained during pre-acquisition due diligence, marketing, and leasing activities in estimating the relative fair value of the tangible and intangible assets acquired. Acquired above- and below-market lease values are recorded as the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market value lease rates for the corresponding in-place leases. The capitalized above- and below-market lease values are amortized as adjustments to rental revenue over the remaining terms of the respective leases. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. We use a 10 - 37 year estimated life for buildings and improvements and a 5 - 10 year estimated life for furniture, fixtures, and equipment. We follow the real estate project costs guidance in ASC 970, Real Estate – General, in accounting for the costs of development and redevelopment projects. As real estate is undergoing development or redevelopment, all project costs directly associated with and attributable to the development and construction of a project, including interest expense and real estate tax expense, are capitalized to the cost of the real property. The capitalization period begins when development activities and expenditures begin and are identifiable to a specific property and ends upon completion, which is when the asset is ready for its intended use. Generally, rental property is considered substantially complete upon issuance of a certificate of occupancy. General and administrative costs are expensed as incurred. 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. Renovations and improvements that improve and/or extend the useful life of the asset are capitalized and depreciated over their estimated useful life, generally five to twenty years . Property sales or dispositions are recorded when control of the assets transfers to the buyer and we have no significant continuing involvement with the property sold. We periodically evaluate our long-lived assets, including real estate investments, for impairment indicators. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each property, and legal and environmental concerns. If indicators exist, we compare the expected future undiscounted cash flows for the property against the carrying amount of that property. If the sum of the estimated undiscounted cash flows is less than the carrying amount, an impairment loss is recorded for the difference between the estimated fair value and the carrying amount. 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 F-12 Table of Contents 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. Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal costs. Our determination of fair value is based on inputs management believes are consistent with those that market participants would use. Estimates are significantly impacted by estimates of sales price, selling velocity, and other factors. Due to uncertainties in the estimation process, actual results could differ from such estimates. Depreciation is not recorded on assets classified as held for sale. We classify properties as held for sale when they meet the GAAP criteria, which include: (a) management commits to and initiates a plan to sell the asset; (b) the sale is probable and expected to be completed within one year under terms that are usual and customary for sales of such assets; and (c) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. We generally consider these criteria met when the transaction has been approved by our Board of Trustees, there are no known significant contingencies related to the sale, and management believes it is probable that the sale will be completed within one year . We had no properties classified as held for sale at December 31, 2021 and 2020. CASH, CASH EQUIVALENTS, AND RESTRICTED CASH Cash and cash equivalents include all cash and highly liquid investments purchased with maturities of three months or less. Cash and cash equivalents consist of our bank deposits, short-term investment certificates acquired subject to repurchase agreements, and our deposits in a money market mutual fund. We are potentially exposed to credit risk for cash deposited with FDIC-insured financial institutions in accounts which, at times, may exceed federally insured limits. We have not experienced any losses in such accounts. As of December 31, 2021 restricted cash consisted of $ 5.0 million of real estate deposits for property acquisitions and $ 2.4 million in escrows held by lenders. As of December 31, 2020, restricted cash consisted primarily of net tax-deferred exchange proceeds remaining from a portion of our dispositions and escrows held by lenders. Escrows include funds deposited with a lender for payment of real estate taxes and insurance, and reserves to be used for replacement of structural elements and mechanical equipment at certain communities. The funds are under the control of the lender. Disbursements are made after supplying written documentation to the lender . LEASES As a lessor, we primarily lease multifamily apartment homes which qualify as operating leases with terms that are generally one year or less. Rental revenues are recognized in accordance with ASC 842, Leases, using a method that represents a straight-line basis over the term of the lease. Rental income represents approximately 98.2 % of our total revenues and includes gross market rent less adjustments for concessions, vacancy loss, and bad debt. Other property revenues represent the remaining 1.8 % of our total revenues and are primarily driven by other fee income, which is typically recognized when earned, at a point in time. Some of our apartment communities have commercial spaces available for lease. Lease terms for these spaces typically range from three to fifteen years . The leases for commercial spaces generally include options to extend the lease for additional terms. 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. 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. We have elected the practical expedient to combine lease and non-lease components for all asset classes. The combined components are included in lease income and are accounted for under ASC 842. The aggregate amount of future scheduled lease income on our operating leases for commercial spaces, excluding any variable lease income and non-lease components, as of December 31, 2021, was as follows: F-13 Table of Contents (in thousands) 2022 $ 2,447 2023 2,455 2024 2,453 2025 2,400 2026 1,804 Thereafter 880 Total scheduled lease income - operating leases $ 12,439 REVENUE 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: We recognize revenue for rental related income not included as a component of a lease, such as other application fees, as earned, and have concluded that this is appropriate under the new standard. • Gains or losses on sales of real estate: 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. 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, Revenue Stream Applicable Standard 2021 2020 2019 Fixed lease income - operating leases Leases $ 189,452 $ 168,119 $ 176,706 Variable lease income - operating leases Leases 8,565 7,068 5,586 Other property revenue Revenue from contracts with customers 3,688 2,807 3,463 Total revenue $ 201,705 $ 177,994 $ 185,755 INCOME TAXES 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, 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. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates (including any alternative minimum tax) and may not be able to qualify as a REIT for the four subsequent taxable years. Even as a REIT, we may be subject to certain state and local income and property taxes, and to federal income and excise taxes on undistributed taxable income. In general, however, if we qualify as a REIT, no provisions for federal income taxes are necessary except for taxes on undistributed REIT taxable income and taxes on the income generated by a taxable REIT subsidiary (TRS). 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, 2021, 2020, and 2019. We conduct our business activity as an Umbrella Partnership Real Estate Investment Trust (“UPREIT”) through our Operating Partnership. UPREIT status allows us to accept the contribution of real estate in exchange for Units. Generally, such a contribution to a limited partnership allows for the deferral of gain by an owner of appreciated real estate. F-14 Table of Contents 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 Tax status of distributions Capital gain 0.92 % 13.62 % 38.53 % Ordinary income 7.82 % 7.91 % 23.43 % Return of capital 91.26 % 78.47 % 38.04 % VARIABLE INTEREST ENTITY We have determined that our Operating Partnership and each of our less-than-wholly owned real estate partnerships is a variable interest entity (“VIE”), as the limited partners or the functional equivalent of limited partners lack substantive kick-out rights and substantive participating rights. We are the primary beneficiary of the VIEs, and the VIEs are required to be consolidated on our balance sheet because we have a controlling financial interest in the VIEs and have both the power to direct the activities of the VIEs that most significantly impact the economic performance of the VIEs as well as the obligation to absorb losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs. Because our Operating Partnership is a VIE, all of our assets and liabilities are held through a VIE. OTHER ASSETS As of December 31, 2021 and 2020, other assets consisted of the following amounts: in thousands December 31, 2021 December 31, 2020 Receivable arising from straight line rents $ 343 $ 336 Accounts receivable, net of allowance 667 523 Real estate related loans receivable 6,208 6,332 Prepaid and other assets 9,693 5,702 Intangible assets, net of accumulated amortization 7,370 1,150 Property and equipment, net of accumulated depreciation 3,370 2,674 Goodwill 866 986 Deferred charges and leasing costs 2,065 1,201 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 Property and equipment consists primarily of office equipment located at our corporate offices in Minot, North Dakota and in Minneapolis, Minnesota. The consolidated balance sheets reflects these assets at cost, net of accumulated depreciation, and are included within Other Assets. As of December 31, 2021 and 2020, property and equipment cost was $ 4.7 million and $ 4.7 million, respectively. Accumulated depreciation was $ 1.4 million and $ 2.0 million as of December 31, 2021 and 2020, respectively, and are included within other assets in the consolidated balance sheets. 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 an initial principal balance of $ 6.6 million. 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 F-15 Table of Contents 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. The loans represent an investment in an unconsolidated variable interest entity. 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. MARKETABLE SECURITIES Marketable securities consisted of equity securities. 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. 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 During the year ended December 31, 2019, we recorded a gain on litigation settlement of $ 6.6 million from the settlement on a construction defect claim. The gain consisted of $ 5.2 million of cash received and $ 1.4 million of liabilities waived under the terms of the settlement. NOTE 3 • EARNINGS PER SHARE 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, 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, 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 , 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. 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, 2021, 2020, and 2019: F-16 Table of Contents (in thousands, except per share data) Year Ended December 31, 2021 2020 2019 NUMERATOR Net income (loss) attributable to controlling interests ( 29 ) 4,441 78,669 Dividends to preferred shareholders ( 6,428 ) ( 6,528 ) ( 6,821 ) Redemption of preferred shares — 297 — Numerator for basic earnings per share – net income (loss) available to common shareholders ( 6,457 ) ( 1,790 ) 71,848 Noncontrolling interests – Operating Partnership and Series E preferred units ( 2,806 ) ( 212 ) 6,752 Dividends to preferred unitholders 640 640 537 Numerator for diluted earnings (loss) per share $ ( 8,623 ) $ ( 1,362 ) $ 79,137 DENOMINATOR Denominator for basic earnings per share weighted average shares 13,803 12,564 11,744 Effect of redeemable operating partnership units 899 1,030 1,237 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 NET EARNINGS (LOSS) PER COMMON SHARE – BASIC $ ( 0.47 ) $ ( 0.15 ) $ 6.06 NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED $ ( 0.47 ) $ ( 0.15 ) $ 6.00 NOTE 4 • EQUITY AND MEZZANINE EQUITY Operating Partnership Units. 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 in exchange for common shares during the years ended December 31, 2021 and 2020 as detailed in the table below. (in thousands) Number of Total Book Units Value Year ended December 31, 2021 144 $ ( 4,714 ) 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, 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 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 F-17 Table of Contents 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. The table below provides details on the sale of common shares during the years ended December 31, 2021 and 2020. (in thousands, except per share amounts) Number of Common Shares Total Consideration (1) Average Price Per Share (1) Year ended December 31, 2021 1,817 $ 156,449 $ 86.13 Year ended December 31, 2020 829 $ 59,187 $ 71.39 (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 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 year ended December 31, 2020 are detailed in the table below. (in thousands, except per share amounts) Number of Preferred Shares Aggregate Cost (1) Average Price Per Share (1) Year ended December 31, 2020 237 $ 5,629 $ 23.75 (1) Amount includes commissions. Issuance of Series C Preferred Shares . 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 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 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. 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 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. NOTE 5 • NONCONTROLLING INTERESTS Interests in the Operating Partnership held by limited partners are represented by Units. The Operating Partnership’s income is allocated to holders of Units based upon the ratio of their holdings to the total Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to noncontrolling interests in accordance with the terms of the Operating Partnership’s Agreement of Limited Partnership. We reflect noncontrolling interests in consolidated real estate entities on the Balance Sheet for the portion of properties consolidated by us that are not wholly owned by us. The earnings or losses from these properties attributable to the noncontrolling interests are reflected as net income attributable to noncontrolling interests – consolidated real estate entities in the consolidated statements of operations. During the year ended December 31, 2020, we acquired the 47.4 % noncontrolling interests in the real estate partnership that owns 71 France for $ 12.2 million. Our noncontrolling interests – consolidated real estate entities at December 31, 2021 and 2020 were as follows: F-18 Table of Contents (in thousands) December 31, 2021 December 31, 2020 IRET - Cypress Court Apartments, LLC $ 648 $ 686 NOTE 6 • DEBT 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 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. 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 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. F-19 Table of Contents 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 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: (in thousands) December 31, 2021 December 31, 2020 Weighted Average Maturity in Years Lines of credit $ 76,000 $ 152,871 3.75 Term loans (1) — 145,000 Unsecured senior notes (1) 300,000 125,000 8.63 Unsecured debt 376,000 422,871 7.84 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 Annual Weighted Average Interest Rates 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 - 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. (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) 2022 $ 27,113 2023 45,067 2024 4,054 2025 108,850 2026 49,047 Thereafter 625,653 Total payments $ 859,784 NOTE 7 • DERIVATIVE INSTRUMENTS 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 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 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, 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 F-20 Table of Contents 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. (in thousands) December 31, 2021 December 31, 2020 Balance Sheet Location Fair Value Fair Value 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, 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 Cash and cash equivalents, restricted cash, accounts payable, accrued expenses, and other liabilities are carried at amounts that reasonably approximate their fair value due to their short-term nature. For variable rate line of credit debt that re-prices frequently, fair values are based on carrying values. In determining the fair value of other financial instruments, we apply Financial Accounting Standard Board ASC 820, Fair Value Measurement and Disclosures . Fair value hierarchy under ASC 820 distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (Levels 1 and 2) and the reporting entity’s own assumptions about market participant assumptions (Level 3). Fair value estimates may differ from the amounts that may ultimately be realized upon sale or disposition of the assets and liabilities. F-21 Table of Contents Fair Value Measurements on a Recurring Basis (in thousands) Total Level 1 Level 2 Level 3 December 31, 2021 Assets Mortgages and notes receivable $ 49,484 $ — $ — $ 49,484 Liabilities Derivative instruments - interest rate swaps $ 5,707 $ — $ — $ 5,707 December 31, 2020 Assets Mortgages and notes receivable $ 30,994 $ — $ — $ 30,994 Liabilities Derivative instruments - interest rate swaps $ 15,905 $ — $ — $ 15,905 The fair value of our interest rate swaps is determined using the market standard methodology of netting discounted expected variable cash payments and receipts. The variable cash payments and receipts are based on an expectation of future interest rates (a forward curve) derived from observable market interest rate curves. We consider both our own nonperformance risk and the counterparty’s nonperformance risk in the fair value measurement. 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 %). Changes in fair value of these receivables from period to period are reported in interest and other income on our Consolidated Statements of Operations. (in thousands) Fair Value Measurement Other Gains (Losses) Interest Income Total Changes in Fair Value Included in Current Period Earnings 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 There were no non-financial assets measured at fair value on a nonrecurring basis at December 31, 2021 and 2020. Financial Assets and Liabilities Not Measured at Fair Value The fair value of mortgages payable and unsecured senior notes is estimated based on the discounted cash flows of the loans using market research and management estimates of comparable interest rates (Level 3). The estimated fair values of our financial instruments as of December 31, 2021 and 2020 are as follows: (in thousands) December 31, 2021 December 31, 2020 Amount Fair Value Amount Fair Value FINANCIAL ASSETS Cash and cash equivalents $ 31,267 $ 31,267 $ 392 $ 392 Restricted cash 7,358 7,358 6,918 6,918 FINANCIAL LIABILITIES Revolving lines of credit (1) 76,000 76,000 152,871 152,871 Term loans (1) — — 145,000 145,000 Unsecured senior notes 300,000 308,302 125,000 133,181 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. F-22 Table of Contents NOTE 9 • ACQUISITIONS AND DISPOSITIONS ACQUISITIONS We acquired $ 499.8 million and $ 191.0 million of new real estate during the years ended December 31, 2021 and 2020, respectively. Our acquisitions during 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 (1) Cash Units (2) Other (3) 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. Cloud, MN 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. Cloud, MN 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. Cloud, MN 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. F-23 Table of Contents Year Ended December 31, 2020 (in thousands) Total Form of Consideration Investment Allocation Date Acquisition Intangible Acquisitions Acquired Cost Cash Other (1) Land Building Assets Other (2) Multifamily 182 homes - Ironwood Apartments - New Hope, MN March 5, 2020 $ 46,263 $ 28,600 $ 17,663 $ 2,165 $ 36,869 $ 824 $ 6,405 465 homes - Parkhouse Apartments - Thornton, CO September 22, 2020 144,750 144,750 — 10,474 132,105 2,171 — Total Acquisitions $ 191.013 $ 173,350 $ 17,663 $ 12,639 $ 168,974 $ 2,995 $ 6,405 (1) Payoff of note receivable and accrued interest by seller at closing. (2) Consists of TIF note acquired. Refer to Note 2 for further discussion. DISPOSITIONS 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) Date Book Value Dispositions Disposed Sales Price and Sale Cost Gain/(Loss) Multifamily 76 homes-Crystal Bay-Rochester, MN May 25, 2021 $ 13,650 $ 10,255 $ 3,395 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 Other Minot IPS October 18, 2021 $ 2,250 $ 1,573 $ 677 Total Dispositions $ 62,250 $ 34,733 $ 27,517 Year Ended December 31, 2020 (in thousands) Date Book Value Dispositions Disposed Sales Price and Sale Cost Gain/(Loss) Multifamily 268 homes - Forest Park - Grand Forks, ND August 18, 2020 $ 19,625 $ 6,884 $ 12,741 90 homes - Landmark - Grand Forks, ND August 18, 2020 3,725 1,348 2,377 164 homes - Southwind - Grand Forks, ND August 18, 2020 10,850 4,573 6,277 168 homes - Valley Park - Grand Forks, ND August 18, 2020 8,300 4,059 4,241 $ 42,500 $ 16,864 $ 25,636 Other Dakota West August 7, 2020 $ 500 $ 474 $ 26 Unimproved Land Rapid City Land - Rapid City, SD June 29, 2020 $ 1,300 $ 1,490 $ ( 190 ) Total Dispositions $ 44,300 $ 18,828 $ 25,472 F-24 Table of Contents NOTE 10 • SEGMENTS We operate in a single reportable segment which includes the ownership, management, development, redevelopment, and acquisition of apartment communities. Each of our operating properties is considered a separate operating segment because each property earns revenues, incurs expenses, and has discrete financial information. Our chief operating decision-makers evaluate each property’s operating results to make decisions about resources to be allocated and to assess performance. We do not group our operations based on geography, size, or type. Our apartment communities have similar long-term economic characteristics and provide similar products and services to our residents. No apartment community comprises more than 10% of consolidated revenues, profits, or assets. Accordingly, our apartment communities are aggregated into a single reportable segment. “All other” is composed of non-multifamily properties, non-multifamily components of mixed use properties, and properties disposed or designated as held for sale. Our executive management team comprises our chief operating decision-makers. This team measures the performance of our reportable segment based on net operating income (“NOI”), which we define as total real estate revenues less property operating expenses, including real estate taxes. We believe that NOI is an important supplemental measure of operating performance for real estate because it provides a measure of operations that is unaffected by depreciation, amortization, financing, property management overhead, and general and administrative expense. 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, 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. (in thousands) Year ended December 31, 2021 Multifamily All Other Total Revenue $ 195,624 $ 6,081 $ 201,705 Property operating expenses, including real estate taxes 79,096 2,761 81,857 Net operating income $ 116,528 $ 3,320 $ 119,848 Property management expenses ( 8,752 ) Casualty loss ( 344 ) Depreciation and amortization ( 92,165 ) General and administrative expenses ( 16,213 ) Gain (loss) on sale of real estate and other investments 27,518 Interest expense ( 29,078 ) Loss on debt extinguishment ( 535 ) Interest and other income (loss) ( 2,380 ) Net income (loss) $ ( 2,101 ) (in thousands) Year ended December 31, 2020 Multifamily All Other Total Revenue $ 164,126 $ 13,868 $ 177,994 Property operating expenses, including real estate taxes 66,356 6,802 73,158 Net operating income $ 97,770 $ 7,066 $ 104,836 Property management expenses ( 5,801 ) Casualty loss ( 1,662 ) Depreciation and amortization ( 75,593 ) General and administrative expenses ( 13,440 ) Gain (loss) on sale of real estate and other investments 25,503 Interest expense ( 27,525 ) Loss on debt extinguishment ( 23 ) Interest and other income ( 1,552 ) Net income (loss) $ 4,743 F-25 Table of Contents (in thousands) Year ended December 31, 2019 Multifamily All Other Total Revenue $ 148,644 $ 37,111 $ 185,755 Property operating expenses, including real estate taxes 60,760 17,555 78,315 Net operating income $ 87,884 $ 19,556 $ 107,440 Property management expenses ( 6,186 ) Casualty loss ( 1,116 ) Depreciation and amortization ( 74,271 ) General and administrative expenses ( 14,450 ) Gain (loss) on sale of real estate and other investments 97,624 Interest expense ( 30,537 ) Loss on debt extinguishment ( 2,360 ) Interest and other income 2,092 Income (loss) before gain on litigation settlement 78,236 Gain (loss) on litigation settlement 6,586 Net income (loss) $ 84,822 Segment Assets and Accumulated Depreciation (in thousands) As of December 31, 2021 Multifamily All Other Total Segment assets Property owned $ 2,244,250 $ 26,920 $ 2,271,170 Less accumulated depreciation ( 436,004 ) ( 7,588 ) ( 443,592 ) Total property owned $ 1,808,246 $ 19,332 $ 1,827,578 Cash and cash equivalents 31,267 Restricted cash 7,358 Other assets 30,582 Mortgage loans receivable 43,276 Total Assets $ 1,940,061 (in thousands) As of December 31, 2020 Multifamily All Other Total Segment assets Property owned $ 1,727,287 $ 85,270 $ 1,812,557 Less accumulated depreciation ( 368,717 ) ( 30,532 ) ( 399,249 ) Total property owned $ 1,358,570 $ 54,738 $ 1,413,308 Cash and cash equivalents 392 Restricted cash 6,918 Other assets 18,904 Mortgage loans receivable 24,661 Total Assets $ 1,464,183 NOTE 11 • RETIREMENT PLANS We sponsor a defined contribution 401(k) plan to provide retirement benefits for employees that meet minimum employment criteria. 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. 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 Legal Proceedings . We are involved in various lawsuits arising in the normal course of business. We believe that such matters will not have a material adverse effect on our consolidated financial statements. Environmental Matters . It is generally our policy to obtain a Phase I environmental assessment of each property that we seek to acquire. 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 F-26 Table of Contents (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. With respect to certain other properties, we have not recorded any related asset retirement obligation as the fair value of the liability cannot be reasonably estimated due to insufficient information. We believe we do not have sufficient information to estimate the fair value of the asset retirement obligations for these properties because a settlement date or range of potential settlement dates has not been specified by others and, additionally, there are currently no plans or expectation of plans to demolish these properties or to undertake major renovations that would require removal of the asbestos, lead and/or underground storage tanks. These properties are expected to be maintained by repairs and maintenance activities that would not involve the removal of the asbestos, lead and/or underground storage tanks. Also, a need for renovations caused by resident changes, technology changes or other factors has not been identified. Insurance. We carry insurance coverage on our properties in amounts and types that we believe are customarily obtained by owners of similar properties and are sufficient to achieve our risk management objectives. Restrictions on Taxable Dispositions. 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 Code. Otherwise, we may be required to provide tax indemnification payments to the parties to these agreements. Redemption Value of Units . Pursuant to a Unitholder’s exercise of its Exchange Rights, we have the right, in our sole discretion, to acquire such Units by either making a cash payment or acquiring the Units for our common shares, on a one -for-one basis. All Units receive the same per Unit cash distributions as the per share dividends paid on common shares. Units are redeemable for an amount of cash per Unit equal to the average of the daily market price of our common shares for the ten consecutive trading days immediately preceding the date of valuation of the Unit. 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 13 • SHARE BASED COMPENSATION Share-based awards are provided to officers, non-officer employees, and trustees under our 2015 Incentive Plan approved by shareholders on September 15, 2015, as amended and restated on May 18, 2021 which allows for awards in the form of cash, unrestricted, and restricted common shares, stock options, stock appreciation rights, and restricted stock units (“RSUs”) up to an aggregate of 775,000 shares over the ten-year period in which the plan will be in effect. Under our 2015 Incentive Plan, officers and non-officer employees may earn share awards under a long-term incentive plan, which is a forward-looking program that measures long-term performance over the stated performance period. These awards are payable to the extent deemed earned in shares. The terms of the long-term incentive awards granted under the program may vary from year to year. 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, RSUs, and stock options when they occur instead of estimating the forfeitures. Year Ended December 31, 2021 LTIP Awards 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: Exercise price $ 70.64 Risk-free rate 0.650 % Expected term 6.25 years Expected volatility 21.08 % Dividend Yield 3.963 % F-27 Table of Contents 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, 2021, 2020, and 2019, for all share-based awards was as follows: (in thousands) 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 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 Wtd Avg Grant- Shares Date Fair Value Unvested at December 31, 2018 7,191 Granted — Vested ( 4,999 ) $ 61.06 Forfeited — Unvested at December 31, 2019 2,192 59.20 Granted — Vested ( 2,192 ) $ 59.20 Forfeited — Unvested at December 31, 2020 — Restricted Stock Units During the year ended December 31, 2021, we issued 7,416 time-based RSUs to employees and 6,277 to trustees. The RSUs to employees generally vest over a three-year period and the RSUs to trustees generally vest over a one-year period. The fair value of the time-based RSUs granted during the year ended December 31, 2021 was $ 980,000 . 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 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: F-28 Table of Contents RSUs with Service Conditions RSUs with Market Conditions Wtd Avg Grant- Wtd Avg Grant- Shares Date Fair Value Shares Date Fair Value Unvested at December 31, 2018 18,260 $ 55.13 25,319 $ 62.84 Granted 16,084 $ 59.76 12,978 $ 79.49 Vested ( 11,633 ) $ 55.35 — — Forfeited ( 365 ) $ 51.73 ( 475 ) $ 57.70 Unvested at December 31, 2019 22,346 $ 58.41 37,822 $ 68.62 Granted 17,981 $ 68.25 — $ — Vested ( 14,991 ) $ 59.10 ( 13,357 ) 74.68 Change in awards (1) — $ — 4,436 $ — Forfeited ( 508 ) $ 62.99 ( 1,907 ) $ 63.92 Unvested at December 31, 2020 24,828 $ 65.03 26,994 $ 67.87 Granted 13,693 $ 71.54 19,224 $ 87.04 Vested ( 17,065 ) $ 63.42 ( 35,920 ) $ 65.34 Change in awards (1) — — 8,926 — Forfeited ( 482 ) $ 70.44 — $ — Unvested at December 31, 2021 20,974 $ 69.97 19,224 $ 87.04 (1) Represents the change in the number of restricted stock units earned at the end of the measurement period. Stock Options During the year ended December 31, 2021, we issued 43,629 stock options to employees. The stock options vest over a four-year period. The fair value of the stock options granted during the year ended December 31, 2021 was $ 7.383 per share. 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 years ended December 31, 2021 and 2020 was as follows: Number of Shares Weighted Average Exercise Price Outstanding at December 31, 2019 — — Granted 141,000 $ 66.36 Exercised — — Forfeited ( 1,952 ) $ 66.36 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, 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 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 F-29 Table of Contents 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. F-30 Table of Contents CENTERSPACE AND SUBSIDIARIES December 31, 2021 Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands) Gross amount at which carried at Life on which Initial Cost to Company close of period depreciation in Costs capitalized Date of latest income Buildings & subsequent to Buildings & Accumulated Construction statement is Description Encumbrances (1) Land Improvements acquisition Land Improvements Total Depreciation or Acquisition computed Same-Store 71 France - Edina, MN $ 52,149 $ 4,721 $ 61,762 $ 625 $ 4,801 $ 62,307 $ 67,108 $ ( 17,093 ) 2016 30 - 37 years Alps Park - Rapid City, SD — 287 5,551 691 336 6,193 6,529 ( 1,817 ) 2013 30 - 37 years Arcata - Golden Valley, MN — 2,088 31,036 413 2,128 31,409 33,537 ( 9,627 ) 2015 30 - 37 years Ashland - Grand Forks, ND — 741 7,569 364 823 7,851 8,674 ( 2,688 ) 2012 30 - 37 years Avalon Cove - Rochester, MN — 1,616 34,074 825 1,808 34,707 36,515 ( 7,327 ) 2016 30 - 37 years Boulder Court - Eagan, MN — 1,067 5,498 3,124 1,576 8,113 9,689 ( 4,590 ) 2003 30 - 37 years Canyon Lake - Rapid City, SD — 305 3,958 2,285 420 6,128 6,548 ( 3,287 ) 2001 30 - 37 years Cardinal Point - Grand Forks, ND — 1,600 33,400 400 1,727 33,673 35,400 ( 4,132 ) 2013 30 - 37 years Castlerock - Billings, MT — 736 4,864 2,257 1,045 6,812 7,857 ( 4,582 ) 1998 30 - 37 years Chateau - Minot, ND — 301 20,058 1,185 326 21,218 21,544 ( 6,880 ) 2013 30 - 37 years Cimarron Hills - Omaha, NE 8,700 706 9,588 4,684 1,639 13,339 14,978 ( 7,998 ) 2001 30 - 37 years Commons and Landing at Southgate - Minot, ND — 5,945 47,512 2,448 6,424 49,481 55,905 ( 15,690 ) 2015 30 - 37 years Connelly on Eleven - Burnsville, MN — 2,401 11,515 16,010 3,206 26,720 29,926 ( 14,315 ) 2003 30 - 37 years Cottonwood - Bismarck, ND — 1,056 17,372 5,799 1,962 22,265 24,227 ( 13,046 ) 1997 30 - 37 years Country Meadows - Billings, MT — 491 7,809 1,623 599 9,324 9,923 ( 5,872 ) 1995 30 - 37 years Cypress Court - St. Cloud, MN 11,338 1,583 18,879 545 1,625 19,382 21,007 ( 5,995 ) 2012 30 - 37 years Deer Ridge - Jamestown, ND — 711 24,129 348 785 24,403 25,188 ( 7,292 ) 2013 30 - 37 years Donovan - Lincoln, NE 11,270 1,515 15,730 4,952 1,817 20,380 22,197 ( 6,531 ) 2012 30 - 37 years 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 years 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 years Grand Gateway - St. Cloud, MN — 814 7,086 2,152 970 9,082 10,052 ( 3,972 ) 2012 30 - 37 years GrandeVille Shores - Rochester, MN 46,320 6,588 67,072 5,741 6,776 72,625 79,401 ( 16,311 ) 2015 30 - 37 years Greenfield - Omaha, NE — 578 4,122 3,007 876 6,831 7,707 ( 2,769 ) 2007 30 - 37 years Homestead Garden - Rapid City, SD — 655 14,139 1,219 792 15,221 16,013 ( 3,944 ) 2015 30 - 37 years Lakeside Village - Lincoln, NE 11,158 1,215 15,837 3,369 1,476 18,945 20,421 ( 6,098 ) 2012 30 - 37 years Legacy - Grand Forks, ND — 1,362 21,727 10,958 2,474 31,573 34,047 ( 19,735 ) 1995-2005 30 - 37 years Legacy Heights - Bismarck, ND — 1,207 13,742 290 1,142 14,097 15,239 ( 3,102 ) 2015 30 - 37 years 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 years Monticello Crossings - Monticello, MN — 1,734 30,136 649 1,951 30,568 32,519 ( 6,660 ) 2017 30 - 37 years Monticello Village - Monticello, MN — 490 3,756 1,211 655 4,802 5,457 ( 2,655 ) 2004 30 - 37 years Northridge - Bismarck, ND — 884 7,515 296 1,048 7,647 8,695 ( 1,912 ) 2015 30 - 37 years Olympic Village - Billings, MT — 1,164 10,441 4,047 1,885 13,767 15,652 ( 8,539 ) 2000 30 - 37 years 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 years Park Place - Plymouth, MN — 10,609 80,781 13,587 10,819 94,158 104,977 ( 15,767 ) 2018 30 years F-31 Table of Contents CENTERSPACE AND SUBSIDIARIES December 31, 2021 Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands) Gross amount at which carried at Life on which Initial Cost to Company close of period depreciation in Costs capitalized Date of latest income Buildings & subsequent to Buildings & Accumulated Construction statement is Description Encumbrances (1) Land Improvements acquisition Land Improvements Total Depreciation or Acquisition computed Plaza - Minot, ND — 867 12,784 3,118 1,011 15,758 16,769 ( 6,270 ) 2009 30 - 37 years Pointe West - Rapid City, SD — 240 3,538 2,209 463 5,524 5,987 ( 4,044 ) 1994 30 - 37 years Ponds at Heritage Place - Sartell, MN — 395 4,564 540 419 5,080 5,499 ( 1,773 ) 2012 30 - 37 years Quarry Ridge - Rochester, MN 23,409 2,254 30,024 5,223 2,412 35,089 37,501 ( 12,114 ) 2006 30 - 37 years Red 20 - Minneapolis, MN 20,775 1,900 24,116 521 1,908 24,629 26,537 ( 7,560 ) 2015 30 - 37 years Regency Park Estates - St. Cloud, MN 7,167 702 10,198 6,155 1,179 15,876 17,055 ( 5,205 ) 2011 30 - 37 years Rimrock West - Billings, MT — 330 3,489 2,044 568 5,295 5,863 ( 3,403 ) 1999 30 - 37 years River Ridge - Bismarck, ND — 576 24,670 1,154 922 25,478 26,400 ( 9,018 ) 2008 30 - 37 years Rocky Meadows - Billings, MT — 656 5,726 1,632 840 7,174 8,014 ( 4,817 ) 1995 30 - 37 years Rum River - Isanti, MN — 843 4,823 515 870 5,311 6,181 ( 2,358 ) 2007 30 - 37 years Silver Springs - Rapid City, SD — 215 3,007 1,077 273 4,026 4,299 ( 1,142 ) 2015 30 - 37 years South Pointe - Minot, ND — 550 9,548 5,814 1,489 14,423 15,912 ( 10,819 ) 1995 30 - 37 years Southpoint - Grand Forks, ND — 576 9,893 284 663 10,090 10,753 ( 2,696 ) 2013 30 - 37 years 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 years Thomasbrook - Lincoln, NE 13,100 600 10,306 5,474 1,710 14,670 16,380 ( 9,080 ) 1999 30 - 37 years West Stonehill - Waite Park, MN 16,425 939 10,167 10,933 1,912 20,127 22,039 ( 12,812 ) 1995 30 - 37 years Westend - Denver, CO — 25,525 102,180 935 25,532 103,108 128,640 ( 13,525 ) 2018 30 years Whispering Ridge - Omaha, NE 19,187 2,139 25,424 3,715 2,551 28,727 31,278 ( 9,162 ) 2012 30 - 37 years Woodridge - Rochester, MN — 370 6,028 5,380 761 11,017 11,778 ( 6,625 ) 1997 30 - 37 years Total Same-Store $ 262,673 $ 129,597 $ 1,258,137 $ 180,716 $ 146,004 $ 1,422,446 $ 1,568,450 $ ( 419,730 ) Non-Same-Store 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 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 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 ) Total Multifamily $ 483,783 $ 193,982 $ 1,858,287 $ 191,980 $ 211,363 $ 2,032,886 $ 2,244,249 $ ( 436,003 ) F-32 Table of Contents CENTERSPACE AND SUBSIDIARIES December 31, 2021 Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands) Gross amount at which carried at Life on which Initial Cost to Company close of period depreciation in Costs capitalized Date of latest income Buildings & subsequent to Buildings & Accumulated Construction statement is Description Encumbrances (1) Land Improvements acquisition Land Improvements Total Depreciation or Acquisition computed Other - Mixed Use 71 France - Edina, MN — $ — $ 5,879 $ 867 $ — $ 6,746 $ 6,746 $ ( 1,399 ) 2016 30 - 37 years Lugano at Cherry Creek - Denver, CO — — 1,600 657 — 2,257 2,257 ( 148 ) 2019 30 years Oxbo - St Paul, MN — — 3,472 54 — 3,526 3,526 ( 541 ) 2015 30 years Plaza - Minot, ND — 389 5,444 3,447 607 8,673 9,280 ( 4,303 ) 2009 30 - 37 years Red 20 - Minneapolis, MN — — 2,525 475 — 3,000 3,000 ( 810 ) 2015 30 - 37 years Total Other - Mixed Use — $ 389 $ 18,920 $ 5,500 $ 607 $ 24,202 $ 24,809 $ ( 7,201 ) Other - Commercial 3100 10th St SW - Minot, ND — $ 246 $ 1,866 $ — $ 246 $ 1,866 $ 2,112 $ ( 388 ) 2019 30 years Total Other - Commercial — $ 246 $ 1,866 $ — $ 246 $ 1,866 $ 2,112 $ ( 388 ) Total $ 483,783 $ 194,617 $ 1,879,073 $ 197,480 $ 212,216 $ 2,058,954 $ 2,271,170 $ ( 443,592 ) (1) Amounts in this column are the mortgages payable balance as of December 31, 2021. These amounts do not include amounts owing under the Company's multi-bank line of credit, term loans, or unsecured senior notes. F-33 Table of Contents CENTERSPACE AND SUBSIDIARIES December 31, 2021 and 2020 Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands) Reconciliations of the carrying value of total property owned for the years ended December 31, 2021 and 2020 are as follows: (in thousands) Year Ended December 31, 2021 2020 Balance at beginning of year $ 1,812,557 $ 1,643,078 Additions during year Multifamily and Other 491,648 181,771 Improvements and Other 34,427 27,460 2,338,632 1,852,309 Deductions during year Cost of real estate sold ( 57,698 ) ( 38,111 ) Other (1) ( 9,764 ) ( 1,641 ) Balance at close of year $ 2,271,170 $ 1,812,557 Reconciliations of accumulated depreciation/amortization for the years ended December 31, 2021 and 2020 are as follows: (in thousands) Year Ended December 31, 2021 2020 Balance at beginning of year $ 399,249 $ 349,122 Additions during year Provisions for depreciation 78,268 72,051 Deductions during year Accumulated depreciation on real estate sold or classified as held for sale ( 24,161 ) ( 21,440 ) Other (1) ( 9,764 ) ( 484 ) Balance at close of year $ 443,592 $ 399,249 F-34 Table of Contents CENTERSPACE AND SUBSIDIARIES December 31, 2021 and 2020 Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands) Reconciliations of unimproved land for the years ended December 31, 2021 and 2020 are as follows: (in thousands) Year Ended December 31, 2021 2020 Balance at beginning of year $ — $ 1,376 Deductions during year Cost of real estate sold — ( 1,376 ) Balance at close of year — — Total real estate investments, excluding mortgage notes receivable (2) $ 1,827,578 $ 1,413,308 (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. F-35