What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-21 compared with 2022-02-28 · 344 added, 375 removed, 953 unchanged (43% of the section changed)

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Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Trustees, Executive Officers and Corporate Governance

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.

The information required by this Item regarding Trustees is incorporated by reference to the information under “Election of Trustees,” “Information About Our Executive Officers,” “Code of Conduct and Code of Ethics for Senior Financial Officers,” and “Board Committees” in our definitive proxy statement for our 2023 Annual Meeting of Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Report.

Executive Compensation

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EXHIBIT INDEX

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.

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

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

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

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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).

10.24 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).

10.25 Term Loan Agreement, dated as of November 22, 2022, among Centerspace, LP, the Guarantors from time to time party thereto, the Lenders from time to time party thereto, and PNC Bank, National Association, as Administrative Agent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on November 28, 2022).

Subsidiaries of Centerspace

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Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Equity

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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”).

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, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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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:

Critical audit matters

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

(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.

• 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.

We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

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Interest expense ( 32,750 ) ( 29,078 ) ( 27,525 )

Loss on extinguishment of debt ( 535 ) ( 23 ) ( 2,360 )

Interest and other income (loss) 1,248 ( 2,915 ) ( 1,575 )

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

NET INCOME (LOSS) ( 17,641 ) ( 2,101 ) 4,743

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NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $ ( 20,537 ) $ ( 6,457 ) $ ( 1,790 )

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

NET EARNINGS (LOSS) PER COMMON SHARE – BASIC AND DILUTED $ ( 1.35 ) $ ( 0.47 ) $ ( 0.15 )

Weighted average shares - basic 15,216 13,803 12,564

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NET INCOME (LOSS) $ ( 17,641 ) $ ( 2,101 ) $ 4,743

Other comprehensive income:

Other comprehensive income (loss):

Unrealized gain (loss) from derivative instrument 1,581 2,383 ( 11,068 )

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

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

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

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

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

Change in fair value of derivatives and amortization of swap settlements 11,470 11,470

Distributions – common shares and Units ($ 2.84 per share and Unit)

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( 6,428 ) ( 6,428 )

Distributions - Series E preferred units ($ 1.291667 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 —

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

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

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

Other — ( 1,155 ) ( 146 ) ( 1,301 )

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Net income (loss) attributable to controlling interests and noncontrolling interests ( 14,109 ) ( 4,172 ) ( 18,281 )

Change in fair value of derivatives 11,470 11,470

Change in fair value of derivatives and amortization of swap settlements 2,380 2,380

Distributions – common shares and Units ($ 2.92 per share and Unit)

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Sale of common shares, net 321 31,439 31,439

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

Issuance of units 13,023 9,859 22,882

Redemption of Units for common shares 24 ( 1,353 ) 1,353 —

Redemption of Units for cash ( 4,141 ) ( 4,141 )

Redemption of Series E preferred units for common shares 67 ( 3,667 ) 3,667 —

Shares repurchased ( 432 ) ( 29,059 ) ( 29,059 )

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

Shares withheld for taxes ( 1,284 ) ( 1,284 )

Other ( 1 ) ( 256 ) ( 148 ) ( 404 )

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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 2,615 2,689 2,106

(Gain) loss on interest rate swap termination, amortization, and mark-to-market ( 118 ) 4,931 —

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

Provision for bad debt 1,355 2,304 2,332

Other, net ( 392 ) 265 1,333

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Increase in mortgages and notes receivable — ( 18,614 ) ( 24,862 )

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

Proceeds from sale of real estate and other investments 41 61,334 43,686

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Payments for improvements of real estate assets ( 56,568 ) ( 31,303 ) ( 28,638 )

Payments for non-real estate assets ( 122 ) ( 1,264 ) ( 1,677 )

Other investing activities 1,221 ( 3,812 ) 1,346

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Principal payments on revolving lines of credit ( 154,360 ) ( 335,451 ) ( 52,235 )

Proceeds from notes payable and other debt 174,544 — 124,878

Net proceeds from notes payable and other debt 99,529 174,544 —

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

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Accrued capital expenditures $ 6,008 $ 5,253 $ 4,302

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

Operating partnership units converted to common shares ( 1,353 ) ( 4,714 ) ( 1,750 )

Distributions declared but not paid 11,625 11,411 9,802

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Real estate assets acquired through assumption of debt 41,623 20,000 —

Real estate assets acquired through issuance of operating partnership units 22,882 — —

Fair value adjustment to debt 1,224 2,367 —

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

Series E preferred units converted to common shares ( 3,667 ) — —

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

Real estate assets acquired through exchange of note receivable 43,276 — 17,663

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2021, 2020, and 2019

December 31, 2022

NOTE 1 • ORGANIZATION

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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.

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, and have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”).

All intercompany balances and transactions are eliminated in consolidation.

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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.

RECLASSIFICATIONS

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

We reclassified certain items within cash flows from investing activities on the Consolidated Statements of Cash Flows.

REAL ESTATE INVESTMENTS

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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.

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We use a 10 - 37 year estimated life for buildings and improvements and a 5 - 10 year estimated life for furniture, fixtures, and equipment.

Land is not depreciated.

We follow the real estate project costs guidance in ASC 970, Real Estate – General, in accounting for the costs of development and redevelopment projects.

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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 indicators exist, we compare the estimated 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 generally 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

requirements that could differ materially from actual results.

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

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

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

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.

During the years ended December 31, 2022, 2021, and 2020 we did not record a loss for impairment on real estate.

We classify properties as held for sale when they meet the GAAP criteria, which include:

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We had no properties classified as held for sale at December 31, 2022 and 2021.

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.

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.

Cash and cash equivalents consist of our bank deposits 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.

As of December 31, 2022 restricted cash consisted of $ 1.4 million in escrows held by lenders.

As of December 31, 2021, restricted cash consisted $ 5.0 million of real estate deposits for property acquisitions and $ 2.4 million in 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.

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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.

For the years ended December 31, 2022, 2021, and 2020, rental income represents approximately 97.9 %, 98.2 %, and 98.4 %, respectively, of our total revenues and includes gross market rent less adjustments for concessions, vacancy loss, and bad debt.

For the years ended December 31, 2022, 2021, and 2020, other property revenues represent the remaining 2.1 %, 1.8 %, and 1.6 %, respectively, 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.

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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.

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Total scheduled lease income - operating leases $ 19,235

REVENUES AND GAINS ON SALE OF REAL ESTATE

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.

Revenue streams that are included in revenues from contracts with customers include other property revenues such as application fees and other miscellaneous items.

We recognize revenue for these rental related items not included as a component of a lease as earned.

The following table presents the disaggregation of revenue streams of our rental income for the years ended December 31, 2022, 2021, and 2020:

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Total revenue $ 256,716 $ 201,705 $ 177,994

In addition to lease income and other property revenue, we recognize gains or losses on the sale of real estate 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.

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

MARKET CONCENTRATION RISK

We are subject to increased exposure from economic and other competitive factors specific to markets where we hold a significant percentage of the carrying value of our real estate portfolio.

As of December 31, 2022, we held more than 10% of the carrying value of our real estate portfolio in the Minneapolis, Minnesota and Denver, Colorado markets.

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

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

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

There were no income tax provisions or material deferred income tax items including any valuation allowances for our TRS for the years ended December 31, 2022, 2021, and 2020.

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

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For the years ended December 31, 2022, 2021, and 2020, we recognized $ 12.3 million, $ 13.5 million, and $ 3.1 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.

The intangible assets remaining at December 31, 2022 will be fully amortized in 2023.

PROPERTY AND EQUIPMENT

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Accumulated depreciation was $ 1.8 million and $ 1.4 million as of December 31, 2022 and 2021, 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.

MORTGAGE LOANS RECEIVABLE AND REAL ESTATE RELATED NOTES RECEIVABLE

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, 2022 and 2021, the principal balance was $ 6.1 million and $ 6.4 million, respectively, which appears within Other Assets in our Consolidated Balance Sheets at fair value.

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

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

The construction and mezzanine loans bear interest at 4.5 % and

11.5 %, respectively.

In 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 bore and accrued interest at 4.5 % and 11.5 %, respectively.

During the year ended December 31, 2022, we exercised our option to purchase the apartment community in exchange for the loans and cash.

As of December 31, 2022, the loans had no remaining balance.

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.

ADVERTISING COSTS

Advertising costs are expensed as incurred and reported on the Consolidated Statement of Operations within the Property operating expenses, excluding real estate taxes line item.

During the years ended December 31, 2022, 2021, and 2020 total advertising expense was $ 3.2 million, $ 2.5 million, and $ 2.1 million, respectively.

MARKETABLE SECURITIES

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

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

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, 2022 and 2021, 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).

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.

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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.

For the year ended December 31, 2022, Units of 978,000 , Series E preferred units of 2.2 million, as converted, Series D preferred units of 228,000 , as converted, stock options of 28,000 , time-based RSUs of 10,000 , and performance-based restricted stock awards of 30,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

Including these items would have improved earnings per share.

For the year ended December 31, 2021, Units of 899,000 , Series E preferred units of 729,000 , as converted, Series D preferred units of 228,000 , as converted, stock options of 30,000 , time-based RSUs of 15,000 , and performance-based restricted stock awards of 32,000 , were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

Including these items would have improved earnings per share.

For the year ended December 31, 2020, Units of 1.0 million, Series D preferred Units of 228,000 , as converted, stock options of 86,000 , time-based RSUs of 13,000 , and performance-based restricted stock awards of 27,000 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, 2022, 2021, and 2020:

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Numerator for diluted earnings (loss) per share $ ( 24,196 ) $ ( 8,623 ) $ ( 1,362 )

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

Denominator for basic earnings (loss) per share weighted average shares 15,216 13,803 12,564

Denominator for diluted earnings (loss) per share 15,216 13,803 12,564

NET EARNINGS (LOSS) PER COMMON SHARE – BASIC AND DILUTED $ ( 1.35 ) $ ( 0.47 ) $ ( 0.15 )

NOTE 4 • EQUITY AND MEZZANINE EQUITY

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Outstanding Units in the Operating Partnership were 971,000 Units at December 31, 2022 and 832,000 Units at December 31, 2021.

During the year ended December 31, 2022, we issued 209,000 Units as partial consideration for the acquisition of three apartment communities located in Minneapolis, Minnesota.

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.

We redeemed Units in exchange for common shares in connection with Unitholders exercising their exchange rights during the years ended December 31, 2022 and 2021 as detailed in the table below.

(in thousands)

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Year ended December 31, 2021 144 $ ( 4,714 )

We redeemed Units for cash in connection with Unitholders exercising their exchange rights during the years ended December 31, 2022 and 2021 as detailed in the table below.

(in thousands, except per Unit data)

Number of Aggregate Average Price

Units Cost Per Unit

Year ended December 31, 2022 46 $ 4,141 $ 90.18

Year ended December 31, 2021 — $ — $ —

Series E Preferred Units (Noncontrolling interest).

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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.

Each Series E preferred unit is convertible, at the holder’s option, into 1.2048 Units.

We have the option, at our sole election, to convert Series E preferred units into 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 Unit.

The Series E preferred units have an aggregate liquidation preference of $ 175.8 million at December 31, 2022.

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

We redeemed Series E preferred units in exchange for common shares in connection with Series E unitholders exercising their exchange rights during the year ended December 31, 2022 as detailed below.

(in thousands)

Number of Series E Number of Total

Preferred Units Redeemed Common Shares Issued Value

Year ended December 31, 2022 56 67 $ 3,667

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.

Common shares outstanding on December 31, 2022 and 2021, totaled 15.0 million.

During the years ended December 31, 2022 and 2021, we issued approximately 24,613 and 27,351 common shares, respectively, with a total grant-date value of $ 1.3 million and $ 1.0 million, respectively, under our 2015 Incentive Plan, as share-based compensation for employees and trustees.

During the years ended December 31, 2022 and 2021, approximately 2,000 and 500 common shares were forfeited under the 2015 Incentive Plan, respectively.

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

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

renovations, and the repayment of indebtedness.

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, construction or mezzanine loans, community renovations, and the repayment of indebtedness.

As of December 31, 2022, we had common shares having an aggregate offering price of up to $ 126.6 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.

The table below provides details on the sale of common shares under the 2021 ATM Program and the 2019 ATM Program during the years ended December 31, 2022 and 2021.

(in thousands, except per share amounts)

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Year ended December 31, 2021 1,817 $ 156,449 $ 86.13

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

(1) Total consideration is net of $ 338,000 and $ 2.1 million in commissions for the years ended December 31, 2022 and 2021, 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.

On March 10, 2022, the Board of Trustees approved a share repurchase program (the “ Share Repurchase Program”), providing for the repurchase of up to an aggregate of $ 50 million of our outstanding common shares.

Under the Share Repurchase Program, we are 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 Exchange Act of 1934, as amended.

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.

The table below provides details on the shares repurchased during the year ended December 31, 2022.

As of December 31, 2022, we had $ 21.0 million remaining authorized for purchase under this program.

(in thousands, except per share amounts)

Number of Preferred Shares Aggregate Cost (1)

Number of Common Shares Aggregate Cost (1)

Average Price Per Share (1)

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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.

Series D preferred units outstanding were 165,600 preferred units as of December 31, 2022 and 2021.

The Series D preferred units have a par value of $ 100 per preferred unit.

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.

Each Series D preferred unit is convertible, at the holder's option, into 1.37931 Units.

The Series D preferred units have an aggregate liquidation value of $ 16.6 million.

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.

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NOTE 6 • DEBT

The following table summarizes our indebtedness, excluding deferred financing costs:

(in thousands)

December 31, 2022 December 31, 2021 Weighted Average Maturity in Years

Lines of credit $ 113,500 $ 76,000 2.75

Term loans (1)

100,000 — 0.89

Unsecured senior notes (1)

300,000 300,000 8.26

Unsecured debt 513,500 376,000 6.15

Mortgages payable - Fannie Mae credit facility 198,850 198,850 8.34

Mortgages payable - other (2)

299,427 284,934 4.79

Total debt $ 1,011,777 $ 859,784 5.76

Annual Weighted Average Interest Rates

Lines of credit (rate with swap) (3)

4.12 % 2.74 %

Term loan 5.57 % —

Unsecured senior notes 3.12 % 3.12 %

Mortgages payable - Fannie Mae credit facility 2.78 % 2.78 %

Mortgages payable - other 3.85 % 3.81 %

Total debt 3.62 % 3.26 %

(1) Included within notes payable on our Consolidated Balance Sheets.

(2) Net of fair value adjustments on acquisition of mortgage.

(3) The interest rate swap was terminated in February 2022.

Refer to Note 7 - Derivative Instruments for more information.

As of December 31, 2022, 53 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 primary unsecured credit facility (“unsecured credit facility”) is a revolving, multi-bank line of credit, with 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.

As of December 31, 2022, we had additional borrowing availability of $ 136.5 million beyond the $ 113.5 million drawn, priced at an interest rate of 4.12 %.

At December 31, 2021, the $ 250.0 million line of credit had borrowing capacity of $ 173.5 million based on the value of unencumbered properties, of which $ 76.0 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.

The terms of our unsecured credit facility allow for the transition to an alternate benchmark interest rate, including the secured overnight financing rate (“SOFR”), to replace any outstanding LIBOR borrowings at the time LIBOR is no longer published.

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, 2022.

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 August 31, 2024, with pricing based on SOFR.

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.

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

Under the private shelf agreement with PGIM, we issued $ 200.0 million unsecured senior notes with $ 25.0 million remaining available as of December 31, 2022.

The following table shows the notes issued under both agreements.

(in thousands)

Amount Maturity Date Interest Rate

Amount Maturity Date Fixed Interest Rate

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

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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.

In November 2022, we entered into a $ 100.0 million term loan agreement (“Term Loan”) with PNC Bank, National Association as administrative agent.

The interest rate on the Term Loan is based on SOFR, plus a margin that ranges from 120 to 175 basis points based on our consolidated leverage ratio.

The Term Loan has a 364 -day term but may be extended, at our option and subject to certain conditions, for one additional 364-day term.

We have a $ 198.9 million Fannie Mae Credit Facility Agreement (“FMCF”).

The FMCF is currently secured by mortgages on 16 apartment communities.

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

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

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

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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.

Interest rates on mortgage loans range from 3.47 % to 4.57 %, and the mortgage loans have varying maturity dates from May 1, 2023, through September 1, 2031.

As of December 31, 2022, we believe there are no material defaults or instances of material noncompliance in regards to any of these mortgage loans.

We also have a $ 6.0 million 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)

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:

The aggregate amount of required future principal payments on lines of credit, notes payable, and mortgages payable, as of December 31, 2022 is as follows:

(in thousands)

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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.

We used interest rate derivatives to stabilize interest expense and to manage our exposure to interest rate fluctuations.

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

Changes in the fair value of derivatives designated and that qualify as cash flow hedges were recorded in accumulated other comprehensive income (loss) (“OCI”) and subsequently reclassified into earnings in the period that the hedged transaction affects earnings.

Amounts reported in accumulated other comprehensive income (loss) will be reclassified to interest expense as interest payments are made on our variable rate debt.

During the next 12 months, we estimate an additional $ 936,000 will be reclassified as an increase to interest expense.

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

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

For the years ended December 31, 2022 and 2021, we recorded a gain of $ 582,000 and $ 419,000 , respectively, related to the interest rate swap not designated in a hedging relationship prior to its termination.

In February 2022, we paid $ 3.2 million to terminate our $ 75.0 million interest rate swap and our $ 70.0 million forward swap.

As of December 31, 2022, we had no remaining interest rate swaps.

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

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

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

notional amount of $ 70.0 million.

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

We also had one interest rate swap with a notional

amount of $ 70.0 million that was not effective until January 31, 2023 and was not designated as a hedge in a qualifying hedging relationship.

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.

The fair value of the derivative financial instruments as well as their classification on our Consolidated Balance Sheets as of December 31, 2022 and 2021 is detailed below.

(in thousands)

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(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

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

Year Ended December 31, Year Ended December 31,

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Total derivatives in cash flow hedging relationships - interest rate swaps $ 1,581 $ 2,383 $ ( 11,068 ) Interest expense $ ( 799 ) $ ( 9,087 ) $ ( 2,770 )

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.

Cash and cash equivalents, restricted cash, accounts payable, and accrued expenses are carried at amounts that reasonably approximate their fair value due to their short-term nature.

For variable rate line of credit debt and notes payable 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 .

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(in thousands)

Total Level 1 Level 2 Level 3

Balance Sheet Location Total Level 1 Level 2 Level 3

December 31, 2022

Mortgages and notes receivable $ 49,484 $ — $ — $ 49,484

Derivative instruments - interest rate swaps $ 5,707 $ — $ — $ 5,707

Notes receivable Other assets $ 5,871 $ — $ — $ 5,871

December 31, 2021

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

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.

Mortgages and notes receivable Mortgages receivable $ 49,484 $ — $ — $ 49,484

Derivative instruments - interest rate swaps Accounts payable and accrued expenses $ 5,707 $ — $ — $ 5,707

The fair value of our interest rate swaps was 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 (Level 3).

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 %).

The unobservable 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.

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

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, 2022 and 2021, we had investments totaling $ 1.6 million and $ 903,000 , respectively, in real estate technology venture funds consisting of privately held entities that develop technology related to the real estate industry.

These investments appear within other assets on our Consolidated Balance Sheets The investments are measured at net asset value (“NAV”) as a practical expedient under ASC 820.

As of December 31, 2022, we had unfunded commitments of $ 1.4 million.

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December 31, 2022 December 31, 2021

Amount Fair Value Amount Fair Value

Balance Sheet Location 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

Cash and cash equivalents Cash and cash equivalents $ 10,458 $ 10,458 $ 31,267 $ 31,267

Restricted cash Restricted cash 1,433 1,433 7,358 7,358

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.

Revolving lines of credit 113,500 113,500 76,000 76,000

Notes payable 100,000 100,000 — —

Unsecured senior notes Notes payable 300,000 238,446 300,000 308,302

Mortgages payable - Fannie Mae credit facility Mortgages payable 198,850 161,297 198,850 198,850

Mortgages payable - other Mortgages payable 299,427 274,029 284,934 284,546

(1) Excluding the effect of the interest rate swap agreement at December 31, 2021.

NOTE 9 • ACQUISITIONS AND DISPOSITIONS

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Year Ended December 31, 2022

Acquired (in thousands)

Form of Consideration Investment Allocation

Acquisitions Cash Units (2)

Land Building Intangible

Assets Other (4)

191 homes - Martin Blu - Minneapolis, MN

January 4, 2022 $ 49,825 $ 3,031 $ 18,885 $ 27,909 $ 3,547 $ 45,212 $ 1,813 $ ( 747 )

31 homes - Elements - Minneapolis, MN

January 4, 2022 9,066 1,290 1,748 6,028 941 7,853 335 ( 63 )

45 homes - Zest - Minneapolis, MN

January 4, 2022 11,364 1,429 2,249 7,686 936 10,261 574 ( 407 )

130 homes - Noko Apartments - Minneapolis, MN

January 26, 2022 46,619 3,343 — 43,276 1,915 42,754 1,950 —

215 homes - Lyra Apartments - Centennial, CO

September 30, 2022 95,000 95,000 — — 6,473 86,149 2,378 —

Total Acquisitions $ 211,874 $ 104,093 $ 22,882 $ 84,899 $ 13,812 $ 192,229 $ 7,050 $ ( 1,217 )

(1) Excludes $ 573,000 in capitalized transaction cost.

(2) Fair value of operating partnership units issued on acquisition.

(3) Assumption of seller's debt upon closing for Martin Blu, Zest, and Elements.

Mezzanine and construction loans, financed by Centerspace, exchanged as partial consideration for the acquisition of Noko Apartments.

(4) Debt discount on assumed mortgage.

Year Ended December 31, 2021

(in thousands)

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

251 homes - Burgandy & Hillsboro Court - Minneapolis, MN

251 homes - Burgundy & Hillsboro Court - Minneapolis, MN

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

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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.

(1) Includes $ 36.1 million for additional fair value of Series E preferred units and excludes $ 9.1 million in capitalized transaction costs for the September 1, 2021 portfolio acquisition.

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

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(4) Debt discount on assumed mortgage.

Year Ended December 31, 2020

(in thousands)

Total Form of Consideration Investment Allocation

Date Acquisition Intangible

Acquisitions Acquired Cost Cash Other (1)

Land Building Assets Other (2)

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.

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.

We had no dispositions during the year ended December 31, 2022 compared to dispositions of $ 62.3 million during the year ended December 31, 2021.

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

Year Ended December 31, 2021

15 unchanged sentences

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)

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

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

NOTE 10 • SEGMENTS

24 unchanged sentences

Interest expense ( 32,750 )

Loss on debt extinguishment ( 535 )

Interest and other income (loss) 1,248

11 unchanged sentences

Interest expense ( 29,078 )

Loss on debt extinguishment ( 23 )

Interest and other income ( 2,915 )

11 unchanged sentences

Interest expense ( 27,525 )

Loss on debt extinguishment ( 2,360 )

Interest and other income ( 1,575 )

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

Gain (loss) on litigation settlement 6,586

Net income (loss) $ 4,743

9 unchanged sentences

Other assets 22,687

Mortgage loans receivable 43,276

Total Assets $ 2,033,301

14 unchanged sentences

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.

We recognized expense of approximately $ 1.3 million, $ 1.0 million, and $ 875,000 in the years ended December 31, 2022, 2021, and 2020, 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.

We are currently the named defendant in a lawsuit where the owner of a neighboring property claims a retaining wall at one of our properties is causing water damage to the neighboring property.

The claim is for damage to the property and monetary losses.

We cannot, with any level of certainty, predict the outcome of the lawsuit or provide an estimate for any potential settlement.

We are involved in various lawsuits arising in the normal course of business and believe that such matters will not have a material adverse effect on our consolidated financial statements.

Environmental Matters .

1 unchanged sentence

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

We own properties that contain or potentially contain

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

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

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

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.

Under various federal, state, and local laws, ordinances, and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal of, or remediation of, certain hazardous or toxic substances in, on, around, or under the property.

While the Company currently has no knowledge of any material violation of environmental laws, ordinances, or regulations at any of the properties, there can be no assurance that areas of contamination will not be identified at any of its properties or that changes in environmental laws, regulations, or cleanup requirements would not result in material costs.

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.

Thirty-seven of our apartment communities, consisting of approximately 6,758 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.

6 unchanged sentences

As of December 31, 2022 and 2021, 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 $ 58.0 million and $ 90.9 million, respectively.

Unfunded Commitments.

Centerspace has unfunded commitments of $ 1.4 million in two real estate technology venture funds.

Refer to Note 8 - Fair Value Measurements for additional information regarding these investments.

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.

Under our 2015 Incentive Plan,

officers and non-officer employees may earn share awards under a long-term incentive plan (“LTIP”), 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.

22 unchanged sentences

The share price at the grant date, January 1, 2022, was $ 110.90 per share.

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

Awards granted to employees on February 1, 2022, consist of an aggregate of 1,295 time-based RSU awards which vest as to one-third of the RSUs on each of February 1, 2023, February 1, 2024, and February 1, 2025.

Awards granted to trustees on May 17, 2022 consisted of 6,563 RSUs with a one-year vesting period.

All of these awards are classified as equity awards.

7 unchanged sentences

Share based compensation expense $ 2,615 $ 2,689 $ 2,106

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

Vested ( 4,999 ) $ 61.06

Unvested at December 31, 2019 2,192 59.20

Vested ( 2,192 ) $ 59.20

Unvested at December 31, 2020 —

Restricted Stock Units

1 unchanged sentence

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 fair value of the time-based RSUs granted during the year ended December 31, 2022 was $ 1.5 million.

The total compensation cost

related to non-vested time-based RSUs not yet recognized is $ 646,000 , which we expect to recognize over a weighted average period of 1.3 years.

The unamortized value of RSUs with market conditions as of December 31, 2022, 2021, and 2020, was approximately $ 1.7 million, $ 1.1 million, and $ 487,000 , respectively.

The activity for the years ended December 31, 2022, 2021, and 2020, related to our RSUs was as follows:

5 unchanged sentences

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

Change in awards (1)

Forfeited ( 508 ) 62.99 ( 1,907 ) 63.92

3 unchanged sentences

Change in awards (1)

— $ — 4,436 $ —

Forfeited ( 482 ) 70.44 — —

2 unchanged sentences

Vested ( 13,357 ) 69.24 — —

Change in awards (1)

Forfeited ( 1,562 ) 76.49 ( 2,741 ) 87.04

4 unchanged sentences

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 weighted average grant date fair value of the stock options granted during the year ended December 31, 2022 was $ 17.02 per share.

The total compensation costs related to non-vested stock options not yet recognized is $ 363,000 , which we expect to recognize over a weighted average period of 2.53 years.

12 unchanged sentences

Exercisable at December 31, 2021 34,758 66.36

Granted 30,245 110.67

Exercised — —

Forfeited ( 16,299 ) 67.59

Outstanding at December 31, 2022 196,623 $ 74.02

Exercisable at December 31, 2022 80,421 $ 66.94

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.

As of December 31, 2022, stock options outstanding had no aggregate intrinsic value with a weighted average remaining contractual term of 6.74 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

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.

Subsequent to December 31, 2022, we entered into definitive purchase and sale agreements for nine communities and believe they will close in the first quarter.The closing of pending transactions is subject to certain conditions and restrictions;

therefore, there can be no assurance that the transactions will be consummated or that the final terms will not differ in material respects .

CENTERSPACE AND SUBSIDIARIES

8 unchanged sentences

71 France - Edina, MN $ 50,933 $ 4,721 $ 61,762 $ 781 $ 4,801 $ 62,463 $ 67,264 $ ( 19,278 ) 2016 30 - 37

Alps Park - Rapid City, SD — 287 5,551 691 336 6,193 6,529 ( 1,817 ) 2013 30 - 37

Arcata - Golden Valley, MN — 2,088 31,036 413 2,128 31,409 33,537 ( 9,627 ) 2015 30 - 37

Ashland - Grand Forks, ND — 741 7,569 364 823 7,851 8,674 ( 2,688 ) 2012 30 - 37

Avalon Cove - Rochester, MN — 1,616 34,074 825 1,808 34,707 36,515 ( 7,327 ) 2016 30 - 37

Boulder Court - Eagan, MN — 1,067 5,498 3,124 1,576 8,113 9,689 ( 4,590 ) 2003 30 - 37

Canyon Lake - Rapid City, SD — 305 3,958 2,285 420 6,128 6,548 ( 3,287 ) 2001 30 - 37

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

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

Chateau - Minot, ND — 301 20,058 1,185 326 21,218 21,544 ( 6,880 ) 2013 30 - 37

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

Alps Park Apartments - Rapid City, SD — 287 5,551 731 336 6,233 6,569 ( 2,053 ) 2013 30 - 37

Arcata Apartments - Golden Valley, MN

— 2,088 31,036 576 2,128 31,572 33,700 ( 10,664 ) 2015 30 - 37

Ashland Apartment Homes - Grand Forks, ND — 741 7,569 402 823 7,889 8,712 ( 2,981 ) 2012 30 - 37

Avalon Cove Townhomes - Rochester, MN — 1,616 34,074 1,880 1,808 35,762 37,570 ( 8,751 ) 2016 30 - 37

Boulder Court Apartment Homes - Eagan, MN — 1,067 5,498 3,179 1,576 8,168 9,744 ( 4,980 ) 2003 30 - 37

Canyon Lake Apartments - Rapid City, SD — 305 3,958 2,471 420 6,314 6,734 ( 3,645 ) 2001 30 - 37

Cardinal Point Apartments - Grand Forks, ND — 1,600 33,400 540 1,727 33,813 35,540 ( 5,318 ) 2013 30 - 37

Cascade Shores Townhomes + Flats - Rochester, MN 45,100 6,588 67,072 9,623 6,776 76,507 83,283 ( 19,922 ) 2015-2016 30 - 37

Castlerock Apartment Homes - Billings, MT — 736 4,864 2,441 1,045 6,996 8,041 ( 4,917 ) 1998 30 - 37

Chateau Apartment Homes - Minot, ND — 301 20,058 1,256 326 21,289 21,615 ( 7,659 ) 2013 30 - 37

Cimarron Hills Apartments - Omaha, NE 8,700 706 9,588 5,256 1,639 13,911 15,550 ( 8,665 ) 2001 30 - 37

Commons and Landing at Southgate - Minot, ND — 5,945 47,512 2,793 6,424 49,826 56,250 ( 17,451 ) 2015 30 - 37

Connelly on Eleven - Burnsville, MN — 2,401 11,515 17,012 3,206 27,722 30,928 ( 16,356 ) 2003 30 - 37

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

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

Cypress Court - St.

Cottonwood Apartment Homes - Bismarck, ND — 1,056 17,372 6,308 1,962 22,774 24,736 ( 13,762 ) 1997 30 - 37

Country Meadows Apartment Homes - Billings, MT — 491 7,809 1,742 599 9,443 10,042 ( 6,184 ) 1995 30 - 37

Cypress Court Apartments - St.

Cloud, MN 11,023 1,583 18,879 666 1,625 19,503 21,128 ( 6,593 ) 2012 30 - 37

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

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

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

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

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

Grand Gateway - St.

Deer Ridge Apartment Homes - Jamestown, ND — 711 24,129 459 785 24,514 25,299 ( 8,119 ) 2013 30 - 37

Donovan Apartment Homes - Lincoln, NE — 1,515 15,730 6,822 1,817 22,250 24,067 ( 7,838 ) 2012 30 - 37

Dylan at RiNo - Denver, CO — 12,155 77,215 1,208 12,241 78,337 90,578 ( 13,596 ) 2018 30 years

Evergreen Apartment Homes - Isanti, MN — 1,129 5,524 713 1,159 6,207 7,366 ( 2,550 ) 2008 30 - 37

FreightYard Townhomes & Flats - Minneapolis, MN — 1,889 23,616 1,372 1,895 24,982 26,877 ( 3,031 ) 2019 30 years

Gardens Apartments - Grand Forks, ND — 518 8,702 160 535 8,845 9,380 ( 2,441 ) 2015 30 - 37

Grand Gateway Apartment Homes - St.

Cloud, MN — 814 7,086 2,388 970 9,318 10,288 ( 4,316 ) 2012 30 - 37

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

Greenfield - Omaha, NE — 578 4,122 3,241 876 7,065 7,941 ( 3,324 ) 2007 30 - 37

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

Lakeside Village - Lincoln, NE 11,158 1,215 15,837 3,369 1,476 18,945 20,421 ( 6,098 ) 2012 30 - 37

Legacy - Grand Forks, ND — 1,362 21,727 10,958 2,474 31,573 34,047 ( 19,735 ) 1995-2005 30 - 37

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

Homestead Garden Apartments - Rapid City, SD — 655 14,139 1,547 792 15,549 16,341 ( 4,560 ) 2015 30 - 37

Ironwood - New Hope, MN — 2,165 36,874 540 2,167 37,412 39,579 ( 3,966 ) 2020 30 years

Lakeside Village Apartment Homes - Lincoln, NE — 1,215 15,837 5,069 1,476 20,645 22,121 ( 7,156 ) 2012 30 - 37

Legacy Apartments - Grand Forks, ND — 1,362 21,727 11,036 2,474 31,651 34,125 ( 20,814 ) 1995-2005 30 - 37

Legacy Heights Apartment Homes - Bismarck, ND

— 1,207 13,742 399 1,142 14,206 15,348 ( 3,592 ) 2015 30 - 37

Lugano at Cherry Creek - Denver, CO — 7,679 87,766 3,577 7,679 91,343 99,022 ( 11,223 ) 2019 30 years

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

Meadows Apartments - Jamestown, ND — 590 4,519 2,103 730 6,482 7,212 ( 4,287 ) 1998 30 - 37

Monticello Crossings - Monticello, MN

— 1,734 30,136 631 1,951 30,550 32,501 ( 7,538 ) 2017 30 - 37

Monticello Village - Monticello, MN — 490 3,756 1,263 655 4,854 5,509 ( 2,865 ) 2004 30 - 37

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

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

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

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

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

Northridge Apartments - Bismarck, ND — 884 7,515 266 1,048 7,617 8,665 ( 2,182 ) 2015 30 - 37

Olympic Village Apartments - Billings, MT — 1,164 10,441 4,464 1,885 14,184 16,069 ( 9,160 ) 2000 30 - 37

Oxbo Urban Rentals - St Paul, MN — 5,809 51,586 565 5,822 52,138 57,960 ( 10,412 ) 2018 30 years

Park Meadows Apartment Homes - Waite Park, MN — 1,143 9,099 10,149 2,140 18,251 20,391 ( 13,904 ) 1997 30 - 37

Park Place Apartments - Plymouth, MN — 10,609 80,781 19,032 10,819 99,603 110,422 ( 21,002 ) 2018 30 years

Parkhouse Apartment Homes - Thornton, CO — 10,474 132,105 1,583 10,484 133,678 144,162 ( 12,245 ) 2020 30 years

CENTERSPACE AND SUBSIDIARIES

7 unchanged sentences

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

Pointe West - Rapid City, SD — 240 3,538 2,209 463 5,524 5,987 ( 4,044 ) 1994 30 - 37

Plaza Apartments - Minot, ND — 867 12,784 3,160 1,011 15,800 16,811 ( 6,823 ) 2009 30 - 37

Pointe West Apartments - Rapid City, SD — 240 3,538 2,299 463 5,614 6,077 ( 4,303 ) 1994 30 - 37

Ponds at Heritage Place - Sartell, MN — 395 4,564 566 419 5,106 5,525 ( 1,993 ) 2012 30 - 37

Quarry Ridge - Rochester, MN 23,409 2,254 30,024 5,223 2,412 35,089 37,501 ( 12,114 ) 2006 30 - 37

Red 20 - Minneapolis, MN 20,775 1,900 24,116 521 1,908 24,629 26,537 ( 7,560 ) 2015 30 - 37

Prosper West - Waite Park, MN 16,425 939 10,167 17,243 1,912 26,437 28,349 ( 14,646 ) 1995 30 - 37

Quarry Ridge Apartments - Rochester, MN 22,733 2,254 30,024 8,777 2,412 38,643 41,055 ( 14,145 ) 2006 30 - 37

Red 20 Apartments - Minneapolis, MN 20,256 1,900 24,116 758 1,908 24,866 26,774 ( 8,313 ) 2015 30 - 37

Regency Park Estates - St.

Cloud, MN 6,923 702 10,198 8,040 1,179 17,761 18,940 ( 6,476 ) 2011 30 - 37

Rimrock West - Billings, MT — 330 3,489 2,044 568 5,295 5,863 ( 3,403 ) 1999 30 - 37

River Ridge - Bismarck, ND — 576 24,670 1,154 922 25,478 26,400 ( 9,018 ) 2008 30 - 37

Rocky Meadows - Billings, MT — 656 5,726 1,632 840 7,174 8,014 ( 4,817 ) 1995 30 - 37

Rum River - Isanti, MN — 843 4,823 515 870 5,311 6,181 ( 2,358 ) 2007 30 - 37

Silver Springs - Rapid City, SD — 215 3,007 1,077 273 4,026 4,299 ( 1,142 ) 2015 30 - 37

South Pointe - Minot, ND — 550 9,548 5,814 1,489 14,423 15,912 ( 10,819 ) 1995 30 - 37

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

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

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

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

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

Rimrock West Apartments - Billings, MT — 330 3,489 2,102 568 5,353 5,921 ( 3,623 ) 1999 30 - 37

River Ridge Apartment Homes - Bismarck, ND — 576 24,670 1,214 922 25,538 26,460 ( 9,992 ) 2008 30 - 37

Rocky Meadows Apartments - Billings, MT — 656 5,726 1,732 840 7,274 8,114 ( 5,084 ) 1995 30 - 37

Rum River Apartments - Isanti, MN

— 843 4,823 542 870 5,338 6,208 ( 2,591 ) 2007 30 - 37

Silver Springs Apartment Homes - Rapid City, SD

— 215 3,007 1,116 273 4,065 4,338 ( 1,319 ) 2015 30 - 37

South Pointe Apartment Homes - Minot, ND — 550 9,548 6,374 1,489 14,983 16,472 ( 11,368 ) 1995 30 - 37

SouthFork Townhomes + Flats - Lakeville, MN 21,675 3,502 40,153 11,146 3,583 51,218 54,801 ( 9,354 ) 2019 30 years

Southpoint Apartments - Grand Forks, ND — 576 9,893 444 663 10,250 10,913 ( 3,098 ) 2013 30 - 37

Sunset Trail Apartment Homes - Rochester, MN — 336 12,814 3,621 826 15,945 16,771 ( 10,109 ) 1999 30 - 37

Thomasbrook Apartment - Lincoln, NE 13,100 600 10,306 6,391 1,710 15,587 17,297 ( 9,677 ) 1999 30 - 37

Westend - Denver, CO — 25,525 102,180 1,270 25,532 103,443 128,975 ( 17,153 ) 2018 30 years

Whispering Ridge - Omaha, NE 18,691 2,139 25,424 5,780 2,551 30,792 33,343 ( 10,636 ) 2012 30 - 37

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

Woodridge on Second - Rochester, MN — 370 6,028 6,373 761 12,010 12,771 ( 7,328 ) 1997 30 - 37

Total Same-Store $ 235,559 $ 142,236 $ 1,427,116 $ 225,192 $ 158,655 $ 1,635,889 $ 1,794,544 $ ( 497,331 )

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

Bayberry Place - Eagan, MN 11,048 1,807 14,113 801 1,865 14,856 16,721 ( 736 ) 2021 30 years

Burgundy & Hillsboro - New Hope, MN 23,570 2,834 31,149 1,816 2,913 32,886 35,799 ( 1,686 ) 2021 30 years

Civic Lofts - Denver, CO — 6,166 55,182 172 6,171 55,349 61,520 ( 2,318 ) 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

Elements of Linden Hills - Minneapolis, MN 5,969 941 7,853 178 949 8,023 8,972 ( 332 ) 2022 30 years

Gatewood - Waite Park, MN 5,156 327 6,858 808 342 7,651 7,993 ( 428 ) 2021 30 years

Grove Ridge - Cottage Grove, MN 7,992 1,250 10,271 551 1,293 10,779 12,072 ( 546 ) 2021 30 years

Legacy Waite Park - Waite Park, MN 6,923 412 9,556 1,008 426 10,550 10,976 ( 580 ) 2021 30 years

Lyra Apartments - Centennial, CO — 6,473 86,149 163 6,481 86,304 92,785 ( 1,123 ) 2022 30 years

Martin Blu - Eden Prairie, MN 27,939 3,547 45,212 323 3,560 45,522 49,082 ( 1,854 ) 2022 30 years

New Hope Garden & Village - New Hope, MN 9,943 1,603 12,578 1,032 1,651 13,562 15,213 ( 742 ) 2021 30 years

Noko Apartments - Minneapolis, MN — 1,915 42,636 98 1,918 42,731 44,649 ( 1,690 ) 2022 30 years

Palisades - Roseville, MN 22,048 6,919 46,577 1,010 6,959 47,547 54,506 ( 2,360 ) 2021 30 years

Plymouth Pointe - Plymouth, MN 9,575 1,042 12,810 801 1,073 13,580 14,653 ( 723 ) 2021 30 years

Pointe West - St.

Cloud, MN 5,008 246 6,850 765 260 7,601 7,861 ( 422 ) 2021 30 years

Portage - Minneapolis, MN 5,991 2,133 6,685 535 2,226 7,127 9,353 ( 348 ) 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

River Pointe - Fridley, MN 25,412 3,346 33,118 2,144 3,426 35,182 38,608 ( 1,764 ) 2021 30 years

Southdale Parc - Richfield, MN 5,301 1,569 7,740 466 1,618 8,157 9,775 ( 401 ) 2021 30 years

Union Pointe - Longmont, CO — 5,727 69,966 624 5,736 70,581 76,317 ( 5,495 ) 2021 30 years

Venue on Knox - Minneapolis, MN 11,660 3,438 14,743 2,514 3,530 17,165 20,695 ( 815 ) 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 )

CENTERSPACE AND SUBSIDIARIES

7 unchanged sentences

Land Improvements Acquisition Land Improvements Total Depreciation or Acquisition Computed

Windsor Gates - Brooklyn Park, MN 14,731 2,140 18,943 1,850 2,204 20,729 22,933 ( 1,065 ) 2021 30 years

Wingate - New Hope, MN 10,459 1,480 13,530 1,018 1,526 14,502 16,028 ( 766 ) 2021 30 years

Woodhaven - Minneapolis, MN 14,408 3,940 20,080 1,223 4,040 21,203 25,243 ( 1,036 ) 2021 30 years

Woodland Pointe - Woodbury, MN 31,675 5,367 40,422 3,932 5,449 44,272 49,721 ( 2,217 ) 2021 30 years

Zest - Minneapolis, MN 7,910 936 10,209 284 946 10,483 11,429 ( 421 ) 2022 30 years

Total Non-Same-Store $ 262,718 $ 65,558 $ 623,230 $ 24,116 $ 66,562 $ 646,342 $ 712,904 $ ( 29,868 )

Total Multifamily $ 498,277 $ 207,794 $ 2,050,346 $ 249,308 $ 225,217 $ 2,282,231 $ 2,507,448 $ ( 527,199 )

Other - Mixed Use

71 France - Edina, MN (2)

— $ — $ 5,879 $ 518 $ — $ 6,397 $ 6,397 $ ( 1,457 ) 2016 30 - 37

Civic Lofts - Denver, CO — — — — — — — — 2021 30 years

Lugano at Cherry Creek - Denver, CO — — 1,600 738 — 2,338 2,338 ( 234 ) 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

Red 20 - Minneapolis, MN — — 2,525 475 — 3,000 3,000 ( 810 ) 2015 30 - 37

Noko Apartments - Minneapolis, MN — — 118 — — 118 118 ( 8 ) 2022 30 years

Oxbo Urban Rentals- St Paul, MN — — 3,472 54 — 3,526 3,526 ( 620 ) 2015 30 years

Plaza Apartments - Minot, ND — 389 5,444 3,467 607 8,693 9,300 ( 4,683 ) 2009 30 - 37

Red 20 Apartments - Minneapolis, MN (2)

— — 2,525 434 — 2,959 2,959 ( 892 ) 2015 30 - 37

Zest - Minneapolis, MN (2)

— — 52 1 — 53 53 ( 10 ) 2022 30 years

Total Other - Mixed Use — $ 389 $ 19,090 $ 5,212 $ 607 $ 24,084 $ 24,691 $ ( 7,904 )

4 unchanged sentences

(1) Amounts in this column are the mortgages payable balance as of December 31, 2022.

These amounts do not include amounts owing under the Company's multi-bank line of credit, term loans, or unsecured senior notes.

These amounts do not include amounts owing under the Company's multi-bank line of credit, term loan, or unsecured senior notes.

(2) Encumbrances are listed with the multifamily property description.

CENTERSPACE AND SUBSIDIARIES

December 31, 2021 and 2020

December 31, 2022

Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

2 unchanged sentences

Year Ended December 31,

2022 2021 2020

Balance at beginning of year $ 2,271,170 $ 1,812,557 $ 1,643,077

10 unchanged sentences

Year Ended December 31,

2022 2021 2020

Balance at beginning of year $ 443,592 $ 399,249 $ 349,122

5 unchanged sentences

Balance at close of year $ 535,401 $ 443,592 $ 399,249

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,

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 unchanged sentence

(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.

(2) The estimated net basis, including held for sale properties, for Federal Income Tax purposes was $ 1.5 billion and $ 1.8 billion at December 31, 2022 and December 31, 2021, respectively.

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

What changed 10-K

Item 9A. Controls and Procedures