CENTERSPACE 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk refers to the risk of loss from adverse changes in market prices and interest rates. Our future revenue, cash flows, and fair values of certain financial instruments are dependent upon prevailing market prices and interest rates. Our exposure to market risk is primarily related to fluctuations in the general level of interest rates on our current and future fixed and variable rate debt obligations. Our operating results are, therefore, affected by changes in interest rates, including LIBOR and SOFR. We have used interest rate swaps to offset the impact of interest rate fluctuations on our variable-rate debt. During the year ended December 31, 2022, we terminated our remaining interest rate swaps, which consisted of a swap with a notional of $75.0 million and a forward swap with a notional of $70.0 million. We do not enter into derivative instruments for trading or speculative purposes. As of December 31, 2022, we had $213.5 million of variable-rate borrowings under our lines of credit and term loan. We estimate that a change in 30-day LIBOR or SOFR of 100 basis points with constant risk spreads would result in a $2.1 million reduction to our net income (loss) on an annual basis. We estimate that a decrease in a 30-day LIBOR or SOFR of 100 basis points would increase our net income (loss) by a similar amount. Mortgage loan indebtedness, excluding the FMCF, increased by $14.5 million as of December 31, 2022, compared to December 31, 2021, primarily due to assumption of mortgage debt with acquisitions. As of December 31, 2022 and 2021, 100.0% of our $299.4 million of mortgage debt was at fixed rates of interest, with staggered maturities. As of December 31, 2022, the weighted average rate of interest on our mortgage debt was 3.85%, compared to 3.81% on December 31, 2021. Even 36 Table of Contents though our goal is to maintain a fairly low exposure to interest rate risk, we may become vulnerable to significant fluctuations in interest rates on any future repricing or refinancing of our fixed or variable rate debt or future debt. We cannot predict with certainty the effect of adverse changes in interest rates on our debt and, therefore, our market risk. The following table provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. Average variable rates are based on rates in effect at the reporting date. Future Principal Payments (in thousands, except percentages) Fair Debt 2023 2024 2025 2026 2027 Thereafter Total Value Fixed Rate $ 45,988 $ 5,012 $ 33,850 $ 50,088 $ 47,088 $ 616,251 $ 798,277 $ 673,772 Average Interest Rate (1) 3.83 % 3.81 % 3.81 % 3.83 % 3.85 % 3.19 % 3.31 % Variable Rate $ 100,000 $ — 113,500 $ — $ — — $ 213,500 $ 213,500 Average Interest Rate (1) 5.57 % — 4.12 % — — — 4.8 % (1) Interest rate is annualized. Item 8. Financial Statements and Supplementary Data Our consolidated financial statements and related notes, together with the Report of the Independent Registered Public Accounting Firm, are set forth beginning on page F-1 of this Report and are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.