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Item 2. Management’s Discussion and Analysis

2022-08-01 compared with 2022-05-02 · 118 added, 84 removed, 219 unchanged (48% of the section changed)

Management’s Discussion and Analysis of Financial Conditions and Results of Operations

The following discussion and analysis should be read in conjunction with the unaudited Condensed Consolidated Financial Statements included in this report on Form 10-Q for the quarter ended March 31, 2022 (the “Report”), the audited financial statements for the year ended December 31, 2021, which are included in Form 10-K filed with the SEC on February 28, 2022, and the risk factors in Item 1A, “Risk Factors,” of Form 10-K for the year ended December 31, 2021.

The following discussion and analysis should be read in conjunction with the unaudited Condensed Consolidated Financial Statements included in this report on Form 10-Q for the quarter ended June 30, 2022 (the “Report”), the audited financial statements for the year ended December 31, 2021, which are included in Form 10-K filed with the SEC on February 28, 2022, and the risk factors in Item 1A, “Risk Factors,” of Form 10-K for the year ended December 31, 2021.

This discussion and analysis, and other sections of this Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to the expectations for future periods.

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and other countries, on inflation, trade, and general economic conditions;

• deteriorating economic conditions, including rising unemployment rates and inflation, in the markets where we own apartment communities or in which we may invest in the future;

• deteriorating economic conditions, including rising unemployment rates, energy costs, and inflation, in the markets where we own apartment communities or in which we may invest in the future;

• rental conditions in our markets, including occupancy levels and rental rates, potential inability to renew residents or obtain new residents upon expiration of existing leases, changes in tax and housing laws, or other factors, including the impact of the COVID-19-related governmental rules and regulations relating to rental rates, evictions, and other rental conditions;

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We own, manage, acquire, redevelop, and develop apartment communities.

We primarily focus on investing in markets characterized by stable and growing economic conditions, strong employment, and an attractive quality of life that we believe, in combination, lead to higher demand for apartment homes and retention of residents.

As of March 31, 2022, we owned interests in 83 apartment communities consisting of 14,838 apartment homes.

Property owned, as presented in our Condensed Consolidated Balance Sheets, was $2.4 billion at March 31, 2022, compared to $2.3 billion at December 31, 2021.

We primarily focus on investing in markets characterized by stable and growing economies, strong employment, and an attractive quality of life that we believe, in combination, lead to higher demand for apartment homes and retention of residents.

As of June 30, 2022, we owned interests in 83 apartment communities consisting of 14,838 apartment homes.

Property owned, as presented in our Condensed Consolidated Balance Sheets at historical cost, was $2.4 billion at June 30, 2022, compared to $2.3 billion at December 31, 2021.

Renting apartment homes is our primary source of revenue, and our business objective is to provide great homes for our residents.

We strive to maximize resident satisfaction and retention by investing in high-quality assets in desirable locations and

creating vibrant apartment communities through service-oriented operations.

We strive to maximize resident satisfaction and retention by investing in high-quality assets in desirable locations and creating vibrant apartment communities through service-oriented operations.

We believe that delivering superior resident experiences will enhance resident satisfaction while also driving profitability for our business and shareholders.

We have paid quarterly distributions continuously since our first distribution in 1971.

The COVID-19 pandemic has affected our business since March 2020, when it spread to many of the markets in which we own properties.

The COVID-19 pandemic has affected our business since March 2020.

Our first priority continues to be the health and well-being of our residents, team members, and the communities we serve.

Certain states and cities, including some of those in which our apartment communities are located, reacted to the COVID-19 pandemic by instituting quarantines, restrictions on travel, shelter-in-place or stay-at-home directives, restrictions on types of businesses that may continue to operate, and restrictions on the types of construction projects that may continue.

The availability of vaccines has led many states and cities to lift restrictions;

however, due to new variants of the virus, we cannot predict whether restrictions will be reinstated or if additional restrictions will be imposed in the future.

We implemented a plan to safely re-open common spaces in our communities while adhering to state and local guidelines, but recognize that an increase in COVID-19 cases in these markets could cause us to close common spaces or take other preventive measures.

Despite our efforts to manage our r esponse to the effects of the COVID-19 pandemic, the ultimate impact of the COVID-19 pandemic on rental revenue for 2022 and in future years cannot be determined at present.

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Our management remains committed to ensuring the safety of team members, residents, and communities, and to maintaining the financial stability of our business enterprise for the duration of the COVID-19 pandemic.

Overview of the Three Months Ended March 31, 2022

On January 4, 2022, we acquired a portfolio of three apartment communities located in Minneapolis, Minnesota for an aggregate purchase price of $70.3 million.

The acquisition was financed through the assumption of $41.6 million in mortgage debt, the issuance of 209,000 Units, and cash.

On January 26, 2022, we acquired Noko Apartments located in Minneapolis, Minnesota for an aggregate purchase price of $46.6 million.

We financed the development of Noko Apartments with a construction loan and a mezzanine loan, which were exchanged as partial consideration in the amount of $43.3 million for the acquisition with the remaining in cash.

See Note 8 of the Notes to Condensed Consolidated Financial Statements in this Report for a table detailing acquisitions and dispositions during the three months ended March 31, 2022 and 2021.

For the three months ended March 31, 2022, revenue increased by $13.7 million to $60.3 million, compared to $46.6 million for the three months ended March 31, 2021, primarily due to same-store and non-same-store communities, offset by dispositions.

Total expenses increased by $19.2 million to $64.2 million for the three months ended March 31, 2022, compared to $45.0 million for the three months ended March 31, 2021 primarily due to increased property operating expenses, real estate taxes, depreciation and amortization, and general and administrative expenses.

Funds from Operations (“FFO”) applicable to common shares and Units for the three months ended March 31, 2022 increased by $5.6 million to $18.5 million compared to $12.9 million for the three months ended March 31, 2021.

This increase was primarily due to increased NOI from same-store and non-same-store communities and a gain on the mark to market adjustment for an interest rate swap contract, offset by increased property management and general and administrative expenses, and decreased NOI from dispositions.

Overview of the Three Months Ended June 30, 2022

For the three months ended June 30, 2022, revenue increased by $16.5 million to $63.1 million, compared to $46.7 million for the three months ended June 30, 2021, due to same-store communities and 23 non-same-store communities, offset by dispositions.

Total expenses increased by $15.3 million to $59.3 million for the three months ended June 30, 2022, compared to $43.9 million for the three months ended June 30, 2021 due to increased property operating expenses, real estate taxes, depreciation and amortization, and general and administrative expenses.

Non-GAAP Funds from Operations (“FFO”) applicable to common shares and Units for the three months ended June 30, 2022 increased by $5.4 million to $19.1 million compared to $13.7 million for the three months ended June 30, 2021.

See the description of FFO on page 27 and the reconciliation of net income available to common shareholders to FFO on page 28.

This increase was primarily due to increased NOI from same-store and non-same-store communities, offset by increased interest, property management, and general and administrative expenses, and decreased interest income and NOI from dispositions.

The drivers of these changes are discussed in more detail in the “Results of Operations” section below.

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(in thousands, except percentages)

Three Months Ended March 31,

2022 2021 $ Change % Change

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

Operating income (loss) $ 3,835 $ 29,573 $ (25,738) (87.0) % $ (76) $ 31,214 $ (31,290) (100.2) %

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General and administrative expenses 5,221 3,797 1,424 37.5 % 9,721 7,703 2,018 26.2 %

Gain (loss) on sale of real estate and other investments (27) (26,840) 26,813 (99.9) % (27) (26,840) 26,813 (99.9) %

Net operating income $ 36,900 $ 27,896 $ 9,004 32.3 % $ 71,341 $ 55,303 $ 16,038 29.0 %

* Not a meaningful percentage

Consolidated Results of Operations

The following consolidated results of operations cover the three months ended March 31, 2022 and 2021.

The following consolidated results of operations cover the three and six months ended June 30, 2022 and 2021.

(in thousands, except percentages)

Three Months Ended March 31,

2022 2021 $ Change % Change

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

Same-store $ 48,867 $ 43,762 $ 5,105 11.7 % $ 95,758 $ 86,956 $ 8,802 10.1 %

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General and administrative expenses (5,221) (3,797) 1,424 37.5 % (9,721) (7,703) 2,018 26.2 %

Gain (loss) on sale of real estate and other investments 27 26,840 26,813 99.9 % 27 26,840 26,813 99.9 %

Interest expense (7,561) (7,089) 472 6.7 % (15,276) (14,320) 956 6.7 %

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NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $ (4,598) $ 19,931 $ (24,529) (123.1) % $ (14,794) $ 13,457 $ (28,251) (209.9) %

Three Months Ended March 31,

* Not a meaningful percentage

Three Months Ended June 30, Six Months Ended June 30,

Weighted Average Occupancy (1)

2022 2021 2022 2021

Same-store 94.8 % 94.9 % 94.3 % 94.8 %

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Weighted average occupancy may not completely reflect short-term trends in physical occupancy, and the calculation of weighted average occupancy may not be comparable to that disclosed by other REITs.

Number of Apartment Homes March 31, 2022 March 31, 2021

Number of Apartment Homes June 30, 2022 June 30, 2021

Same-store 11,319 11,319

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NOI is a non-GAAP financial measure, 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, casualty losses, and general and administrative expenses.

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, casualty losses, and general and administrative expenses.

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.

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The discussion below focuses on the main factors affecting real estate revenue and expenses from same-store apartment communities because changes from one year to another in real estate revenue and expenses from non-same-store apartment communities are generally due to the addition of those properties to the real estate portfolio, and accordingly provide less useful information for evaluating ongoing operational performance of the real estate portfolio.

For the comparison of the three months ended March 31, 2022 and 2021, 23 apartment communities were non-same-store.

For the comparison of the six months ended June 30, 2022 and 2021, 23 apartment communities were non-same-store.

Sold communities are included in “Dispositions,” while “Other” includes non-multifamily properties and the non-multifamily components of mixed-use properties.

Revenue increased by 29.3% to $60.3 million for the three months ended March 31, 2022, compared to $46.6 million in the three months ended March 31, 2021.

Revenue from non-same-store communities and other properties increased by $11.5 million and $248,000, respectively, offset by a decrease of $1.7 million from dispositions.

Revenue from same-store communities increased 8.6% or $3.7 million in the three months ended March 31, 2022, compared to the same period in the prior year.

The increase was attributable to 9.5% growth in average rental revenue for the three months ended March 31, 2022, offset by a decrease of 0.8% in occupancy as weighted average occupancy decreased from 94.7% in the three months ended March 31, 2021 to 93.9% for the three months ended March 31, 2022.

Revenue increased by 35.3% to $63.1 million for the three months ended June 30, 2022, compared to $46.7 million in the three months ended June 30, 2021.

Revenue from non-same-store communities increased by $12.1 million and revenue from other properties increased by $251,000, offset by a decrease of $1.0 million from dispositions.

Revenue from same-store communities increased 11.7% or $5.1 million in the three months ended June 30, 2022, compared to the same period in the prior year.

The increase was attributable to 11.8% growth in average monthly revenue per occupied home for the three months ended June 30, 2022, offset by a decrease of 0.1% in occupancy as weighted average occupancy decreased from 94.9% in the three months ended June 30, 2021 to 94.8% for the three months ended June 30, 2022.

Revenue increased by 32.3% to $123.4 million for the six months ended June 30, 2022, compared to $93.3 million in the six months ended June 30, 2021.

Revenue from non-same-store communities increased by $23.6 million and revenue from other properties increased by $499,000, offset by a decrease of $2.8 million from dispositions.

Revenue from same-store communities increased 10.1% or $8.8 million in the six months ended June 30, 2022, compared to the same period in the prior year.

The increase was attributable to 10.6% growth in average monthly revenue per occupied home for the six months ended June 30, 2022, offset by a decrease of 0.5% in occupancy as weighted average occupancy decreased from 94.8% in the six months ended June 30, 2021 to 94.3% for the six months ended June 30, 2022.

Property operating expenses, including real estate taxes .

Property operating expenses, including real estate taxes, increased by 34.5% to $25.9 million in the three months ended March 31, 2022, compared to $19.2 million in the same period of the prior year.

An increase of $6.0 million at non-same-store communities was offset by a decrease $1.1 million from dispositions.

Property operating expenses, including real estate taxes, at same-store communities increased by 9.6% or $1.7 million in the three months ended March 31, 2022, compared to the same period in the prior year.

At same-store communities, controllable expenses (which exclude insurance and real estate taxes) increased by $1.5 million, primarily due to increased utilities and repairs and maintenance costs.

Property operating expenses, including real estate taxes, increased by 39.7% to $26.2 million in the three months ended June 30, 2022, compared to $18.8 million in the same period of the prior year.

An increase of $5.9 million at non-same-store communities was offset by a decrease $535,000 from dispositions.

Property operating expenses, including real estate taxes, at same-store communities increased by 11.9% or $2.1 million in the three months ended June 30, 2022, compared to the same period in the prior year.

At same-store communities, controllable expenses (which exclude insurance and real estate taxes) increased by $1.8 million, primarily due to increased utilities, repairs and maintenance costs, and on-site compensation.

Non-controllable expenses at same-store communities increased by $305,000, due to insurance costs and real estate taxes.

Property operating expenses, including real estate taxes, increased by 37.1% to $52.1 million in the six months ended June 30, 2022, compared to $38.0 million in the same period of the prior year.

An increase of $11.9 million at non-same-store communities was offset by a decrease of $1.6 million from dispositions.

Property operating expenses, including real estate taxes, at same-store communities increased by 10.7% or $3.8 million in the six months ended June 30, 2022, compared to the same period in the prior year.

At same-store communities, controllable expenses (which exclude insurance and real estate taxes) increased by $3.3 million, primarily due to increased utilities, repairs and maintenance costs, and on-site compensation.

Non-controllable expenses at same-store communities increased by $494,000, primarily due to insurance costs.

Property management expenses .

Property management expense, consisting of property management overhead and property management fees paid to third parties increased by 27.5% to $2.3 million in the three months ended March 31, 2022, compared to $1.8 million in the same period of the prior year.

The increase is primarily due to $265,000 in compensation costs.

Property management expense, consisting of property management overhead and property management fees paid to third parties increased by 30.5% to $2.7 million in the three months ended June 30, 2022, compared to $2.1 million in the same period of the prior year.

The increase is primarily due to $490,000 in compensation costs and $136,000 related to technology initiatives.

Property management expense, consisting of property management overhead and property management fees paid to third parties increased by 29.1% to $5.0 million in the six months ended June 30, 2022, compared to $3.9 million in the same period of the prior year.

The increase is primarily due to $770,000 in compensation costs and $217,000 related to technology initiatives.

Casualty gain (loss).

Casualty gain (loss) increased by 492.1% to a loss of $598,000 in the three months ended March 31, 2022, compared to a loss of $101,000 in the same period of the prior year.

The increase is due to losses in the current year which did not occur in the prior year.

Casualty gain (loss) increased to a loss of $382,000 in the three months ended June 30, 2022, compared to a gain of $27,000 in the same period of the prior year.

The increase is due to lower than usual loss experience in the prior year.

Casualty gain (loss) increased to a loss of $980,000 in the six months ended June 30, 2022, compared to a loss of $74,000 in the same period of the prior year.

The increase is due to lower than usual loss experience in the prior year.

Depreciation and amortization.

Depreciation and amortization increased by 55.1% to $31.0 million in the three months ended March 31, 2022, compared to $20.0 million in the same period of the prior year, attributable to an increase of $12.2 million from non-same-store properties, offset by decreases from same-store and sold properties.

Depreciation and amortization increased by 28.3% to $24.8 million in the three months ended June 30, 2022, compared to $19.3 million in the same period of the prior year, attributable to an increase of $6.4 million from non-same-store properties, offset by decreases from same-store and sold properties.

Depreciation and amortization increased by 41.9% to $55.8 million in the six months ended June 30, 2022, compared to $39.3 million in the same period of the prior year, attributable to an increase of $18.6 million from non-same-store properties, offset by decreases from same-store and sold properties.

General and administrative expenses.

General and administrative expenses increased by 15.2% to $4.5 million in the three months ended March 31, 2022, compared to $3.9 million in the same period of the prior year, primarily attributable to $473,000 in compensation costs and $273,000 in professional and consulting fees, offset by a decrease of $376,000 in technology costs.

General and administrative expenses increased by 37.5% to $5.2 million in the three months ended June 30, 2022, compared to $3.8 million in the same period of the prior year, primarily attributable to $1.1 million from abandoned pursuit costs and increases in professional and consulting fees, travel costs, and salary related expense, offset by a decrease in short-term and long-term incentive costs.

General and administrative expenses increased by 26.2% to $9.7 million in the six months ended June 30, 2022, compared to $7.7 million in the same period of the prior year, primarily attributable to $1.1 million from abandoned pursuit costs, $495,000 in compensation costs and $364,000 in professional and consulting fees.

Interest expense.

Interest expense increased by 6.7% to $7.7 million in the three months ended March 31, 2022, compared to $7.2 million in the same period of the prior year, primarily due to the addition of new unsecured senior notes and the Fannie Mae credit facility, offset by a lower weighted average interest rate.

Interest expense increased by 6.7% to $7.6 million in the three months ended June 30, 2022, compared to $7.1 million in the same period of the prior year, primarily due to the addition of new unsecured senior notes and the Fannie Mae credit facility, offset by a lower weighted average interest rate.

Interest expense increased by 6.7% to $15.3 million in the six months ended June 30, 2022, compared to $14.3 million in the same period of the prior year, primarily due to the addition of new unsecured senior notes and the Fannie Mae credit facility, offset by a lower weighted average interest rate.

Interest and other income (loss).

Interest and other income increased to $1.1 million in the three months ended March 31, 2022, compared to $431,000 in the same period of the prior year.

The increase was primarily due to a $582,000 gain on the mark to market adjustment for an interest rate swap contract.

Interest and other income decreased to a loss of $17,000 in the three months ended June 30, 2022, compared to income of $619,000 in the same period of the prior year.

The decrease was primarily due to interest income on mortgages receivable that were outstanding in the prior year.

Interest and other income decreased to $1.0 million in the six months ended June 30, 2022, compared to $1.1 million in the same period of the prior year.

The decrease was primarily due to interest income on mortgages receivable outstanding in the prior year, offset by a gain on the mark to market adjustment for an interest rate swap contract.

Net income (loss) available to common shareholders.

Net loss available to common shareholders decreased to a loss of $10.2 million for the three months ended March 31, 2022, compared to a net loss of $6.5 million in the three months ended March 31, 2021.

Net loss available to common shareholders decreased to a loss of $4.6 million for the three months ended June 30, 2022, compared to net income of $19.9 million in the three months ended June 30, 2021.

Net loss available to common shareholders decreased to a loss of $14.8 million for the six months ended June 30, 2022, compared to net income of $13.5 million in the six months ended June 30, 2021.

Funds from Operations and Core Funds from Operations .

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Core Funds from Operations (“Core FFO”), a non-GAAP measure, is FFO adjusted for non-routine items or items not considered core to business operations.

By further adjusting for items that are not considered part of core business operations, the company believes that Core FFO provides investors with additional information to compare core operating and financial

performance between periods.

By further adjusting for items that are not considered part of core business operations, we believe that Core FFO provides investors with additional information to compare core operating and financial performance between periods.

Core FFO should not be considered as an alternative to net income or as any other GAAP measurement of performance, but rather should be considered an additional supplemental measure.

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Core FFO is a non-GAAP and non-standardized financial measure that may be calculated differently by other REITs and that should not be considered a substitute for operating results determined in accordance with GAAP.

FFO applicable to common shares and Units for the three months ended March 31, 2022, increased to $18.5 million compared to $12.9 million for the comparable period ended March 31, 2021, an increase of 43.3%.

This increase was primarily due to increased NOI from same-store and non-same-store communities and a gain on the mark to market adjustment for an interest rate swap contract, offset by increased interest, property management, and general and administrative expenses, and decreased NOI from dispositions.

FFO applicable to common shares and Units for the three months ended June 30, 2022, increased to $19.1 million compared to $13.7 million for the comparable period of the prior year, an increase of 39.6%.

FFO applicable to common shares and Units for the six months ended June 30, 2022, increased to $37.6 million compared to $26.6 million for the comparable period of the prior year, an increase of 41.4%.

This increase was primarily due to increased NOI from same-store and non-same-store communities, offset by increased interest, property management, general and administrative expenses, and casualty loss, and decreased NOI from dispositions.

Reconciliation of Net Income Available to Common Shareholders to Funds from Operations and Core Funds from Operations

(in thousands, except per share and unit amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net income (loss) available to common shareholders $ (4,598) $ 19,931 $ (14,794) $ 13,457

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Less depreciation – partially owned entities (7) (24) (28) (48)

(Gain) loss on sale of real estate and other investments (27) (26,840) (27) (26,840)

FFO applicable to common shares and Units $ 19,085 $ 13,674 $ 37,611 $ 26,601

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Non-cash casualty (gain) loss 163 — 188 —

Loss on extinguishment of debt 5 — 5 —

Technology implementation costs (1)

447 447 550 860

Interest rate swap termination, amortization, and mark-to-market 205 — (408) —

Amortization of assumed debt (116) — (231) —

Pursuit costs 1,127 — 1,127 —

Other miscellaneous items 100 3 96 3

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Core FFO per share and Unit - diluted $ 1.12 $ 0.98 $ 2.10 $ 1.93

Weighted average shares - basic 15,369 13,353 15,233 13,216

Effect of redeemable operating partnership units 995 916 978 939

Effect of Series D preferred units 228 228 228 228

Effect of Series E preferred units 2,186 — 2,186 —

Effect of dilutive restricted stock units and stock options 48 17 57 18

Weighted average shares and Units - diluted 18,826 14,514 18,682 14,401

(1) Costs are related to a two-year implementation.

Acquisitions and Dispositions

On January 4, 2022, we acquired a portfolio of three apartment communities located in Minneapolis, Minnesota for an aggregate purchase price of $70.3 million.

The acquisition was financed through the assumption of $41.6 million in mortgage debt, the issuance of 209,000 Units, and cash.

On January 26, 2022, we acquired Noko Apartments located in Minneapolis, Minnesota for an aggregate purchase price of $46.6 million.

We financed the development of Noko Apartments with a construction loan and a mezzanine loan which were exchanged as partial consideration for the acquisition.

We had no acquisitions or dispositions during the three months ended June 30, 2022.

Distributions Declared

Distributions of $0.73 and $0.70 per common share and Unit were declared during the three months ended March 31, 2022 and 2021, respectively.

Distributions of $0.4140625 per Series C preferred share were declared during the three months ended March 31, 2022 and 2021.

Distributions of $0.9655 per Series D preferred unit were declared during the three months ended March 31, 2022 and 2021.

Distributions of $0.968750 per Series E preferred unit were declared during the three months ended March 31, 2022.

Distributions of $0.73 and $1.46 per common share and Unit were declared during the three and six months ended June 30, 2022, respectively.

Distributions of $0.70 and $1.40 per common share and Unit were declared during the three and six months ended June 30, 2021, respectively.

Distributions of $0.4140625 and $0.828125 per Series C preferred share were declared during the three and six months ended June 30, 2022 and 2021.

Distributions of $0.9655 and $1.931 per Series D preferred unit

were declared during the three and six months ended June 30, 2022 and 2021.

Distributions of $0.968750 and $1.937500 per Series E preferred unit were declared during the three and six months ended June 30, 2022.

Liquidity and Capital Resources

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Although we believe that our financial condition and liquidity are sufficient to meet our reasonably anticipated liquidity demands, factors that could impact our future liquidity include, but are not limited to, volatility in capital and credit markets, the ability to access capital and credit markets, the effects of the COVID-19 pandemic, including its potential impact on our ability to access the capital and credit markets on reasonable terms (or at all), the minimum REIT dividend requirements, and our ability to complete asset purchases, sales, or developments.

As of March 31, 2022, we had total liquidity of approximately $223.3 million, which included $210.0 million available on the lines of credit and $13.3 million of cash and cash equivalents.

As of June 30, 2022, we had total liquidity of approximately $196.2 million, which included $183.0 million available on the lines of credit and $13.2 million of cash and cash equivalents.

As of December 31, 2021, we had total liquidity of approximately $211.3 million, which included $180.0 million on the lines of credit and $31.3 million of cash and cash equivalents.

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The amended agreement provides for a revolving line of credit for $250.0 million, an accordion option to increase borrowing capacity up to $400.0 million, and extended the maturity date to September 2025.

As of March 31, 2022, the line of credit had total commitments and borrowing capacity of $250.0 million, based on the value of unencumbered properties.

As of March 31, 2022, the additional borrowing availability was $204.0 million beyond the $46.0 million drawn.

As of June 30, 2022, the line of credit had total commitments and borrowing capacity of $250.0 million, based on the value of unencumbered properties.

As of June 30, 2022, the additional borrowing availability was $177.0 million beyond the $73.0 million drawn.

At December 31, 2021, the line of credit borrowing capacity was $250.0 million based on the value of unencumbered properties, of which $76.0 million was drawn on the line.

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

Under this agreement, we issued $200.0 million unsecured senior notes with $25.0 million remaining available.

In September 2021, we entered into a note purchase agreement for the issuance of $125.0 million of senior unsecured promissory notes, of which $25.0 million was under the private shelf agreement with PGIM.

The following table shows the notes issued under both agreements.

Under the private shelf agreement with PGIM, we have issued $200.0 million unsecured senior notes with $25.0 million remaining available.

The following table shows the notes issued under both private shelf agreements.

(in thousands)

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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 March 31, 2022 and December 31, 2021, the FMCF had a balance of $198.9 million.

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 June 30, 2022 and December 31, 2021, the FMCF had a balance of $198.9 million.

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

Mortgage loan indebtedness, excluding the FMCF, was $326.1 million and $284.9 million at March 31, 2022 and December 31, 2021, respectively.

Mortgage loan indebtedness, excluding the FMCF, was $302.4 million and $284.9 million at June 30, 2022 and December 31, 2021, respectively.

All of our mortgage debt is at fixed rates of interest, with staggered maturities.

This decreases the exposure to changes in interest rates, which reduces the effect of interest rate fluctuations on our results of operations and cash flows.

As of March 31, 2022, the weighted average interest rate on mortgage debt was 3.85%, compared to 3.81% as of December 31, 2021.

As of June 30, 2022, the weighted average interest rate on mortgage debt was 3.85%, compared to 3.81% as of December 31, 2021.

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

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We replaced the 2019 ATM Program with the 2021 ATM Program, through which 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.

The proceeds from the sale of common shares under the 2021 ATM program are intended to be used for general corporate purposes, which may include the funding of acquisitions and the repayment of indebtedness.

During the three months ended March 31, 2022, we issued 321,000 common shares under the 2021 ATM program at an average price of $98.89 per share, net of commissions.

The proceeds from the sale of common shares under the 2021 ATM program may be used for general corporate purposes, including the funding of acquisitions and the repayment of indebtedness.

During the six months ended June 30, 2022, we issued 321,000 common shares under the 2021 ATM program at an average price of $98.89 per share, net of commissions.

Total consideration, net of commissions and issuance costs, was $31.7 million.

As of March 31, 2022, common shares having an aggregate offering price of up to $126.6 million remained available under the 2021 ATM Program.

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.

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.

As of June 30, 2022, common shares having an aggregate offering price of up to $126.6 million remained available under the 2021 ATM Program.

On June 13, 2022, the Board of Trustees approved a new share repurchase program (the “Share Repurchase Program”), providing for the repurchase of up to an aggregate of $50.0 million of the Company's outstanding common shares.

Under the Share Repurchase Program, the Company is authorized to repurchase common shares through open market purchases, privately-negotiated transactions, block trades or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Securities and Exchange Act of 1934, as amended.

The repurchases have no time limit and may be suspended or discontinued completely at any time.

The specific timing and amount of repurchases will vary based on available capital resources or other financial and operational performance, market conditions, securities law limitations, and other factors.

During the six months ended June 30, 2022, the Company had no share repurchases under this program.

As of June 30, 2022, the Company had $50.0 million remaining authorized for purchase under this program.

Changes in Cash, Cash Equivalents, and Restricted Cash

The following discussion relates to changes in consolidated cash, cash equivalents, and restricted cash which are presented in the Condensed Consolidated Statements of Cash Flows in Part I, Item 1 above.

In addition to cash flow from operations, during the three months ended March 31, 2022, we generated capital from various activities, including:

In addition to cash flow from operations, during the six months ended June 30, 2022, we generated capital from various activities, including:

• Receiving $31.6 million in net proceeds from the issuance of 321,000 common shares under the 2021 ATM Program.

During the three months ended March 31, 2022, we used capital for various activities, including:

During the six months ended June 30, 2022, we used capital for various activities, including:

• Acquiring four apartment communities in Minneapolis, Minnesota for $9.1 million in cash with the remainder of the purchase price in issuance of Units, assumption of mortgage debt, and the exchange of mortgages receivable which we financed;

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There have been no material changes to our contractual obligations and other commitments since that report was filed.

Inflation and Supply Chain

Our apartment leases generally have terms of one year or less, which means that, in an inflationary environment, we would have the ability, subject to market conditions, to increase rents upon the commencement of new leases or renewal of existing leases to manage the impact of inflation on our business.

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We also continue to monitor pressures surrounding supply chain challenges.

A worsening of the current environment could contribute to delays in obtaining construction materials for maintenance or value add projects and result in higher than anticipated costs, which could prevent us from obtaining expected returns on value add projects.

Supply chain and inflationary pressures are likely to result in increasing operating expenses, specifically, increases in energy costs, salary related costs, and construction materials for repairs and maintenance or value add projects.

A worsening of the current environment could contribute to delays in obtaining construction materials and result in higher than anticipated costs, which could prevent us from obtaining expected returns on value add projects.

Access to the financial markets remains strong;

however, a prolonged disruption of the markets or a decline in credit and financing conditions could negatively affect our ability to access capital necessary to fund our operations or refinance maturing debt in the future.

Additionally, rising interest rates could negatively impact our borrowing costs for any variable rate borrowings or refinancing activity.

Off-Balance Sheet Arrangements

As of March 31, 2022, we had no significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

As of June 30, 2022, we had no significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Critical Accounting Policies

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A summary of critical accounting policies is included in our Form 10-K for the year ended December 31, 2021, filed with the SEC on February 28, 2022 under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Refer to Note 2 of the Notes to Condensed Consolidated Financial Statements in this report for additional information.

There have been no other significant changes to the our critical accounting policies during the three months ended March 31, 2022.

There have been no other significant changes to the our critical accounting policies during the six months ended June 30, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis