What changed in this filing

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Item 1. Financial Statements

2023-05-01 compared with 2022-10-31 · 199 added, 308 removed, 471 unchanged (52% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

ASSETS (Unaudited) (Audited)

2 unchanged sentences

Less accumulated depreciation ( 519,167 ) ( 535,401 )

2,002,470 1,827,578

Mortgage loans receivable at fair value — 43,276

Total real estate investments 1,901,744 1,998,723

12 unchanged sentences

COMMITMENTS AND CONTINGENCIES (NOTE 10)

SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $ 100 par value, 166 units issued and outstanding at September 30, 2022 and December 31, 2021, aggregate liquidation preference of $ 16,560 )

SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $ 100 par value, 166 units issued and outstanding at March 31, 2023 and December 31, 2022, aggregate liquidation preference of $ 16,560 )

$ 16,560 $ 16,560

Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, $ 25 per share liquidation preference, 3,881 shares issued and outstanding at September 30, 2022 and December 31, 2021, aggregate liquidation preference of $ 97,036 )

Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, $ 25 per share liquidation preference, 3,881 shares issued and outstanding at March 31, 2023 and December 31, 2022, aggregate liquidation preference of $ 97,036 )

93,530 93,530

Common Shares of Beneficial Interest (Unlimited authorization, no par value, 15,376 shares issued and outstanding at September 30, 2022 and 15,016 shares issued and outstanding at December 31, 2021)

Common Shares of Beneficial Interest (Unlimited authorization, no par value, 15,032 shares issued and outstanding at March 31, 2023 and 15,020 shares issued and outstanding at December 31, 2022)

1,176,059 1,177,484

10 unchanged sentences

(in thousands, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

REVENUE $ 67,897 $ 60,314

23 unchanged sentences

(in thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net income (loss) $ 52,327 $ ( 10,563 )

10 unchanged sentences

(in thousands, except per share data)

Nine Months Ended September 30, 2021 PREFERRED

Three Months Ended March 31, 2022 PREFERRED

SHARES NUMBER

7 unchanged sentences

Net income (loss) attributable to controlling interests and noncontrolling interests ( 8,589 ) ( 2,134 ) ( 10,723 )

Change in fair value of derivatives 10,121 10,121

Change in fair value of derivatives and amortization of swap settlements 1,885 1,885

Distributions - common shares and Units ($ 0.73 per share and Unit)

6 unchanged sentences

Sale of common shares, net 321 31,684 31,684

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

Redemption of units for common shares 131 ( 2,815 ) 2,815 —

Change in redemption value of Series D preferred units ( 5,025 ) ( 5,025 )

Other — ( 1,150 ) ( 113 ) ( 1,263 )

Balance at September 30, 2021 $ 93,530 14,281 $ 1,092,130 $ ( 454,691 ) $ ( 5,784 ) $ 226,495 $ 951,680

Nine Months Ended September 30, 2022

Balance at December 31, 2021 $ 93,530 15,016 $ 1,157,255 $ ( 474,318 ) $ ( 4,435 ) $ 224,248 $ 996,280

Net income (loss) attributable to controlling interests and noncontrolling interests ( 12,103 ) ( 3,453 ) ( 15,556 )

Change in fair value of derivatives 2,277 2,277

Distributions - common shares and units ($2.19 per share and unit) ( 33,663 ) ( 2,169 ) ( 35,832 )

Distributions – Series C preferred shares ($ 1.2421875 per Series C share)

( 4,821 ) ( 4,821 )

Distributions - Series E preferred units ($ 2.90625 per unit)

( 5,272 ) ( 5,272 )

Share-based compensation, net of forfeitures 25 1,908 1,908

Sale of common shares, net 321 31,499 31,499

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

1 unchanged sentence

Redemption of units for cash ( 2,903 ) ( 2,903 )

Shares repurchased — ( 5 ) ( 359 ) — ( 359 )

Change in redemption value of Series D preferred units 2,919 2,919

1 unchanged sentence

Other — ( 253 ) — ( 253 )

Balance at September 30, 2022 $ 93,530 15,376 $ 1,209,732 $ ( 524,905 ) $ ( 2,158 ) $ 220,087 $ 996,286

See accompanying Notes to Condensed Consolidated Financial Statements.

CENTERSPACE AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (unaudited)

(in thousands, except per share data)

Three Months Ended September 30, 2021 PREFERRED

SHARES NUMBER

SHARES COMMON

SHARES ACCUMULATED

DISTRIBUTIONS

NET INCOME ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

NONCONTROLLING

INTERESTS TOTAL

Balance at June 30, 2021 $ 93,530 14,045 $ 1,033,940 $ ( 433,310 ) $ ( 12,064 ) $ 53,790 $ 735,886

Net income (loss) attributable to controlling interests and noncontrolling interests ( 9,492 ) ( 1,908 ) ( 11,400 )

Change in fair value of derivatives 6,280 6,280

Distributions - common shares and units ($ 0.72 per share and unit)

( 10,282 ) ( 609 ) ( 10,891 )

Distributions – Series C preferred shares ($ 0.4140625 per Series C share)

( 1,607 ) ( 1,607 )

Distributions - Series E preferred units ($ 0.322917 per unit)

( 585 ) ( 585 )

Share-based compensation, net of forfeitures 1 600 600

Sale of common shares, net 199 19,508 19,508

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

Redemption of units for common shares 36 ( 3,233 ) 3,233 —

Change in redemption value of Series D preferred units ( 3,563 ) ( 3,563 )

Other — ( 27 ) ( 34 ) ( 61 )

Balance at September 30, 2021 $ 93,530 14,281 $ 1,092,130 $ ( 454,691 ) $ ( 5,784 ) $ 226,495 $ 951,680

Three Months Ended September 30, 2022

Balance at June 30, 2022 $ 93,530 15,373 $ 1,207,849 $ ( 511,552 ) $ ( 2,362 ) $ 223,153 $ 1,010,618

Balance at March 31, 2022 $ 93,530 15,366 $ 1,203,685 $ ( 495,732 ) $ ( 2,550 ) $ 226,973 $ 1,025,906

Three Months Ended March 31, 2023

Balance at December 31, 2022 $ 93,530 15,020 $ 1,177,484 $ ( 539,422 ) $ ( 2,055 ) $ 220,759 $ 950,296

Net income (loss) attributable to controlling interests and noncontrolling interests 43,571 8,596 52,167

Change in fair value of derivatives 204 204

Amortization of swap settlements 138 138

Distributions - common shares and Units ($ 0.73 per share and unit)

6 unchanged sentences

Redemption of Units for common shares 4 ( 697 ) 697 —

Redemption of units for cash ( 607 ) ( 607 )

Redemption of Series E preferred units for common shares 16 ( 935 ) 935 —

Shares repurchased — ( 19 ) ( 1,022 ) — ( 1,022 )

Change in redemption value of Series D preferred units 2,067 2,067

Shares withheld for taxes ( 161 ) ( 161 )

Other ( 1 ) ( 129 ) ( 24 ) ( 153 )

Balance at September 30, 2022 $ 93,530 15,376 $ 1,209,732 $ ( 524,905 ) $ ( 2,158 ) $ 220,087 $ 996,286

Balance at March 31, 2023 $ 93,530 15,032 $ 1,176,059 $ ( 508,420 ) $ ( 1,917 ) $ 228,553 $ 987,805

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

4 unchanged sentences

Share-based compensation expense 1,519 719

(Gain) loss on interest rate swap termination, amortization, and mark-to-market ( 221 ) 5,343

(Gain) loss on interest rate swap mark-to-market and settlement amortization 138 ( 613 )

Other, net 194 416

4 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from repayment of mortgage loans and notes receivable 353 139

Increase in mortgages and notes receivable — ( 17,498 )

Proceeds from sale of real estate and other investments 141,587 —

4 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES

Net proceeds from mortgages payable — 196,725

Principal payments on mortgages payable ( 20,734 ) ( 2,154 )

1 unchanged sentence

Principal payments on revolving lines of credit ( 6,000 ) ( 43,000 )

Net proceeds from notes payable — 174,544

Principal payments on notes payable ( 100,000 ) —

5 unchanged sentences

Distributions paid to preferred shareholders ( 1,607 ) ( 1,607 )

Distributions paid to preferred unitholders ( 480 ) ( 480 )

Distributions paid to Series D preferred unitholders ( 160 ) ( 160 )

Distributions paid to noncontrolling interests – Operating Partnership and Series E preferred units ( 2,413 ) ( 2,356 )

8 unchanged sentences

Distributions declared but not paid to common shareholders 11,668 11,946

Series E preferred units converted to common shares ( 935 ) —

Retirement of shares withheld for taxes 161 1,274

1 unchanged sentence

Fair value adjustment to debt — 1,224

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

Note receivable exchanged through real estate acquisition — ( 43,276 )

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

Real estate assets acquired through issuance of Series E preferred units — 217,513

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

4 unchanged sentences

(in thousands)

Balance sheet description September 30, 2022 December 31, 2021 September 30, 2021

Balance sheet description March 31, 2023 December 31, 2022 March 31, 2022

Cash and cash equivalents $ 8,939 $ 10,458 $ 13,313

4 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

September 30, 2022

March 31, 2023

NOTE 1 • ORGANIZATION

Centerspace, collectively with its consolidated subsidiaries (“Centerspace,” “the Company,” “we,” “us,” or “our”), is a North Dakota real estate investment trust (“REIT”) focused on the ownership, management, acquisition, redevelopment, and development of apartment communities.

As of September 30, 2022, Centerspace owned interests in 84 apartment communities consisting of 15,064 apartment homes.

As of March 31, 2023, Centerspace owned interests in 75 apartment communities consisting of 13,497 apartment homes.

NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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Actual results could differ from those estimates.

RECENT ACCOUNTING PRONOUNCEMENTS

The following table provides a brief description of recent accounting standards updates (“ASU”).

Standard Description Date of Adoption Effect on the Financial Statements or Other Significant Matters

ASU 2022-06, Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848

This ASU extends the sunset date of Reference Rate Reform (Topic 848):

Facilitation of Reference Rate Reform to December 31, 2024.

This ASU is effective immediately for all companies.

The ASU will not have a material impact on the Condensed Consolidated Financial Statements.

RECLASSIFICATIONS

Certain previously reported amounts in Note 9 have been reclassified to conform to the current financial statement presentation.

These reclassifications had no impact on net income as reported in the Condensed Consolidated Statement of Operations, total assets, liabilities or equity as reported in the Condensed Consolidated Balance Sheets and total shareholder’s equity.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

As of September 30, 2022 and December 31, 2021, restricted cash consisted primarily of deposits for real estate acquisitions and escrows held by lenders for real estate taxes, insurance, and capital additions.

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 and our deposits in a money market mutual fund.

As of March 31, 2023 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 primarily of escrows held by lenders for real estate taxes, insurance, and capital additions.

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 a lessor, Centerspace primarily leases multifamily apartment homes which qualify as operating leases with terms that are generally one year or less.

Rental revenues are recognized in accordance with ASC 842, Leases , using a method that represents a straight-line basis over the term of the lease.

Rental income represents approximately 97.8 % of total revenues and includes gross market rent less adjustments for gain or loss to lease, concessions, vacancy loss, and bad debt.

Other property revenues represent the remaining 2.2 % of total revenues and are primarily driven by other fee income, which is typically recognized when earned, at a point in time.

For the three months ended March 31, 2023 and 2022, rental income represents approximately 98.3 % and 98.1 % of total revenues, respectively, and includes gross market rent less adjustments for gain or loss to lease, concessions, vacancy loss, and bad debt.

For the three months ended March 31, 2023 and 2022, other property revenues represent the remaining 1.7 % and 1.9 % of total revenues, respectively, and are primarily driven by other fee income, which is typically recognized when earned, at a point in time.

Some of the Company’s apartment communities have commercial spaces available for lease.

4 unchanged sentences

The combined components are included in lease income and are accounted for under ASC 842.

The aggregate amount of future scheduled lease income on commercial operating leases, excluding any variable lease income and non-lease components, as of September 30, 2022, was as follows:

The aggregate amount of future scheduled lease income on commercial operating leases, excluding any variable lease income and non-lease components, as of March 31, 2023, was as follows:

(in thousands)

6 unchanged sentences

Centerspace recognizes 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 for the three and nine months ended September 30, 2022 and 2021:

The following table presents the disaggregation of revenue streams for the three months ended March 31, 2023 and 2022:

(in thousands)

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

Revenue Stream Applicable Standard 2023 2022

4 unchanged sentences

In addition to lease income and other property revenue, the Company recognizes 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.

For the nine months ended September 30, 2022 and 2021, we recognized $ 27,000 and $ 26.8 million, respectively, as a gain on the sale of real estate and other assets.

For the three months ended March 31, 2023, we recognized $ 60.2 million as a gain on the sale of real estate and other assets compared to no gain on sale in the same period of the prior year.

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 March 31, 2023, we held more than 10% of the carrying value of our real estate portfolio in each of the following markets:

Minneapolis, Minnesota and Denver, Colorado.

IMPAIRMENT OF LONG-LIVED ASSETS

2 unchanged sentences

If indicators exist, the Company compares 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 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 the anticipated holding period for properties, the estimated fair value of properties, or other factors change based on market conditions or otherwise, the evaluation of impairment charges may be different and such differences could be material to the consolidated financial statements.

1 unchanged sentence

Reducing planned property holding periods may increase the likelihood of recording impairment losses.

During the three and nine months ended September 30, 2022 and 2021, the Company recorded no impairment charges.

MORTGAGE LOANS RECEIVABLE AND NOTES RECEIVABLE

The Company has a tax increment financing note receivable (“TIF”) with a principal balance of $ 6.1 million and $ 6.4 million at September 30, 2022 and December 31, 2021, respectively, which appears within other assets in the Condensed Consolidated Balance Sheets.

During the three months ended March 31, 2023 and 2022, the Company recorded no impairment charges.

NOTES RECEIVABLE

The Company has a tax increment financing note receivable (“TIF”) with a principal balance of $ 5.9 million and $ 6.1 million at March 31, 2023 and December 31, 2022, respectively, which appears within other assets in the Condensed 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.

1 unchanged sentence

The construction and mezzanine loans bore and accrued interest at 4.5 % and 11.5 %, respectively.

The Company exercised its option to purchase the apartment community in exchange for the loans and cash, during the nine months ended September 30, 2022.

As of September 30, 2022, the loans had no remaining balance.

As of December 31, 2021, the Company 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 the Condensed Consolidated Balance Sheets.

The Company exercised its option to purchase the apartment community in exchange for the loans and cash, during the three months ended March 31, 2022.

As of March 31, 2023 and December 31, 2022, the loans had no remaining balance.

ADVERTISING COSTS

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

During the three months ended March 31, 2023 and 2022, total advertising expense was $ 702,000 and $ 676,000 , respectively.

SEVERANCE AND TRANSITION

On March 23, 2023, the Company entered into a Separation and General Release Agreement (the “Separation Agreement”) in connection with the departure of former CEO, Mark Decker, Jr.

During the three months ended March 31, 2023, the Company incurred total severance costs of $ 2.2 million for the cash severance and benefits for Mr.

Decker, $ 737,000 in share-based compensation expense for the acceleration of certain equity awards, and $ 306,000 in other CEO transition related expenses.

Refer to Note 11 for additional information on the share-based compensation expense.

VARIABLE INTEREST ENTITIES

4 unchanged sentences

Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares of beneficial interest (“common shares”) outstanding during the period.

Centerspace has issued restricted stock units (“RSUs”) and incentive stock options (“ISOs”) under the 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 the earnings per share upon exercise of the RSUs or ISOs or upon conversion of the Series D or Series E preferred units (refer to Note 4 for further discussion of the Series D and the Series E preferred units).

Centerspace has issued restricted stock units (“RSUs”) and incentive stock options (“ISOs”) under the 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 the earnings per share upon the vesting of the RSUs or exercise of the ISOs or upon conversion of the Series D or Series E preferred units (refer to Note 4 for further discussion of the Series D and the Series E preferred units).

Other than the issuance of RSUs, ISOs, Series D preferred units, and Series E preferred units, there are no outstanding options, warrants, convertible stock or other contractual obligations requiring issuance of additional shares that would result in dilution of earnings.

1 unchanged sentence

Upon the exercise of Exchange Rights, and in Centerspace’s sole discretion, it may issue common shares in exchange for Units on a one -for-one basis.

For the three months ended September 30, 2022, operating partnership units of 984,000 , Series D preferred units of 228,000 , as converted, Series E preferred units of 2.2 million, time-based RSUs of 7,000 , weighted average stock options of 23,000 , and performance-based RSUs of 30,000 , were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the three months ended September 30, 2021, operating partnership units of 865,000 , Series D preferred units of 228,000 , as converted, Series E preferred units of 705,000 , time-based RSUs of 13,000 , weighted average stock options of 46,000 , and performance-based RSUs of 32,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the nine months ended September 30, 2022, operating partnership units of 980,000 , Series D preferred units of 228,000 , as converted, Series E preferred units of 2.2 million, time-based RSUs of 10,000 , weighted average stock options of 38,000 , and performance-based RSUs of 33,000 , were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the nine months ended September 30, 2021, performance-based RSUs of 32,000 , were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2022 and 2021.

For the three months ended March 31, 2023, performance-based RSUs of 36,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the three months ended March 31, 2022, operating partnership units of 965,000 , Series D preferred units of 228,000 , as converted, Series E preferred units of 2.2 million, as converted, time-based RSUs of 14,000 , weighted average stock options of 52,000 , and performance-based RSUs of 33,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

(in thousands, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net income (loss) attributable to controlling interests $ 43,571 $ ( 8,589 )

14 unchanged sentences

Operating Partnership Units.

The Operating Partnership had 980,000 and 832,000 outstanding Units at September 30, 2022 and December 31, 2021, respectively.

During the nine months ended September 30, 2022, we issued 209,000 Units as partial consideration for the acquisition of three apartment communities.

The Operating Partnership had 967,000 and 971,000 outstanding Units at March 31, 2023 and December 31, 2022, respectively.

During the three months ended March 31, 2022, we issued 209,000 Units as partial consideration for the acquisition of three apartment communities.

Exchange Rights .

Centerspace redeemed Units in exchange for common shares in connection with Unitholders exercising their exchange rights during the three and nine months ended September 30, 2022 and 2021 as detailed in the table below.

Centerspace redeemed Units in exchange for common shares in connection with Unitholders exercising their exchange rights during the three months ended March 31, 2023 and 2022 as detailed in the table below.

(in thousands)

Three Months Ended September 30, Number of Units Net Book Basis

2021 36 $ ( 3,233 )

Nine Months Ended September 30,

Three Months Ended March 31, Number of Units Net Book Basis

2023 4 $ ( 697 )

2022 10 $ ( 388 )

Pursuant to the exercise of exchange rights, the Company redeemed Units for cash during the three and nine months ended September 30, 2022 and 2021 as detailed in the table below.

Pursuant to the exercise of exchange rights, the Company redeemed Units for cash during the three months ended March 31, 2023 and 2022 as detailed in the table below.

(in thousands, except per Unit data)

Three Months Ended September 30, Number of Units Aggregate Cost Average Price Per Unit

2022 7 $ 607 $ 81.18

2021 — $ — $ —

Nine Months Ended September 30,

Three Months Ended March 31, Number of Units Aggregate Cost Average Price Per Unit

2023 — $ — $ —

1 unchanged sentence

Series E Preferred Units (Noncontrolling Interests).

On September 1, 2021, Centerspace 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.

Centerspace had 1.7 million and 1.8 million Series E preferred units outstanding on March 31, 2023 and December 31, 2022, respectively.

Each Series E preferred unit has a par value of $ 100 .

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.

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

The Series E preferred units have an aggregate liquidation preference of $ 174.5 million.

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

(in thousands)

Number of Series E Number of Total

Three Months Ended March 31, Preferred Units Redeemed Common Shares Issued Value

2023 13 16 $ 935

Common Shares and Equity Awards .

Common shares outstanding on September 30, 2022 and December 31, 2021, totaled 15.4 million and 15.0 million, respectively.

There were 199 and 24,496 shares issued upon the vesting of equity awards under the 2015 Incentive Plan during the three and nine months ended September 30, 2022, respectively, with a total grant-date fair value of $ 18,000 and $ 637,000 , respectively.

There were 578 and 26,764 shares issued upon the vesting of equity awards under the 2015 Incentive Plan during the three and nine months ended September 30, 2021, respectively, with a total grant-date fair value of $ 32,000 and $ 946,000 , respectively.

Common shares outstanding on March 31, 2023 and December 31, 2022, totaled 15.0 million.

There were 11,877 and 18,759 shares issued upon the vesting of equity awards under the 2015 Incentive Plan during

the three months ended March 31, 2023 and 2022, respectively, with a total grant-date fair value of $ 1.1 million and $ 1.5 million, respectively.

These shares vested based on performance and service criteria.

Refer to Note 11 for additional details on share-based compensation.

Equity Distribution Agreement.

Centerspace had an equity distribution agreement in connection with an at-the-market offering (“2019 ATM Program”) through which it could offer and sell common shares having an aggregate sales price of up to $ 150.0 million.

In September 2021, the Company replaced the 2019 ATM Program with a new at-the-market offering (“2021 ATM Program”) through which it may offer and sell common shares having an aggregate sales price of up to $ 250.0 million, in amounts and at times determined by management.

Centerspace had an equity distribution agreement in connection with an at-the-market offering (“2021 ATM Program”) through which it may offer and sell common shares having an aggregate sales price of up to $ 250.0 million, in amounts and at times determined by management.

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

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.

The table below provides details on the sale of common shares during the three and nine months ended September 30, 2022 and 2021 under both the 2019 and 2021 ATM Programs.

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

The table below provides details on the sale of common shares during the three months ended March 31, 2023 and 2022 under the 2021 ATM Program.

As of March 31, 2023, common shares having an aggregate offering price of up to $ 126.6 million remained available under the 2021 ATM Program.

(in thousands, except per share amounts)

Three Months Ended September 30, Number of Common Shares Net Consideration (1)

Three Months Ended March 31, Number of Common Shares Net Consideration (1)

Average Net Price Per Share

1 unchanged sentence

2022 321 $ 31,732 $ 98.89

Nine Months Ended September 30,

2022 321 $ 31,732 $ 98.89

2021 1,095 $ 86,127 $ 78.63

(1) Total consideration is net of $ 338 in commissions and issuance costs during the nine months ended September 30, 2022 and $ 299 and $ 1.0 million for the three and nine months ended September 30, 2021, respectively.

(1) Total consideration is net of $ 338,000 in commissions and issuance costs during the three months ended March 31, 2022.

Share Repurchase Program.

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

On March 10, 2022, the Board of Trustees approved a new share repurchase program (the “Share Repurchase Program”), providing for the repurchase of up to an aggregate of $ 50.0 million of the Company’s outstanding common shares.

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

1 unchanged sentence

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 three and nine months ended September 30, 2022.

As of September 30, 2022, the Company had $ 49.6 million remaining authorized for purchase under this program.

Refer to Note 12 for repurchases made subsequent to September 30, 2022.

The table below provides details on the shares repurchased during the three months ended March 31, 2023.

As of March 31, 2023, the Company had $ 19.9 million remaining authorized for purchase under this program.

Refer to Note 12 for repurchases made subsequent to March 31, 2023.

(in thousands, except per share amounts)

Number of Common Shares Total Consideration (1)

Average Net Price Per Share (1)

Three and Nine Months Ended September 30, 2022

Three Months Ended March 31, Number of Common Shares Aggregate Cost (1)

Average Price Per Share (1)

2023 19.464 $ 1,022 $ 52.51

1 unchanged sentence

Series C Preferred Shares.

Series C preferred shares outstanding were 3.9 million shares at September 30, 2022 and December 31, 2021.

Series C preferred shares outstanding were 3.9 million shares at March 31, 2023 and December 31, 2022.

The Series C preferred shares are nonvoting and redeemable for cash at $ 25.00 per share at Centerspace’s option after October 2, 2022.

2 unchanged sentences

Series D Preferred Units (Mezzanine Equity).

Series D preferred units outstanding were 165,600 preferred units at September 30, 2022 and December 31, 2021.

Series D preferred units outstanding were 165,600 preferred units at March 31, 2023 and December 31, 2022.

The Series D preferred units have a par value price 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

issuance price.

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 issuance price.

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

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NOTE 5 • DEBT

The following is a summary of our secured and unsecured debt at September 30, 2022 and December 31, 2021.

The following is a summary of our secured and unsecured debt at March 31, 2023 and December 31, 2022.

(in thousands)

September 30, 2022 December 31, 2021

Carrying Amount Weighted Average Interest Rate Carrying Amount Weighted Average Interest Rate Weighted Average Maturity in Years at September 30, 2022

March 31, 2023 December 31, 2022

Carrying Amount Weighted Average Interest Rate Carrying Amount Weighted Average Interest Rate Weighted Average Maturity in Years at March 31, 2023

Lines of credit (1)

$ 143,469 6.39 % $ 113,500 4.12 % 2.00

Term loans — — 100,000 5.57 % —

Unsecured senior notes (2)(5)

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(3) Represents apartment communities encumbered by mortgages;

15 at September 30, 2022 and 14 at December 31, 2021.

13 at March 31, 2023 and 15 at December 31, 2022.

(4) Excludes deferred financing costs and premiums or discounts.

(5) Interest rate is fixed.

As of September 30, 2022, 53 apartment communities were not encumbered by mortgages and were available to provide credit support for the unsecured borrowings.

As of March 31, 2023, 50 apartment communities were not encumbered by mortgages and were available to provide credit support for the unsecured borrowings.

The Company’s primary unsecured credit facility (“unsecured credit facility”) is a revolving, multi-bank line of credit, with the Bank of Montreal serving as administrative agent.

The line of credit has total commitments and borrowing capacity of $ 250.0 million, based on the value of unencumbered properties.

As of September 30, 2022, the additional borrowing availability was $ 78.5 million beyond the $ 171.5 million drawn.

As of March 31, 2023, the additional borrowing availability was $ 110.5 million beyond the $ 139.5 million drawn.

This unsecured credit facility was amended on September 30, 2021 to extend the maturity date to September 2025 and to provide for an accordion option to increase borrowing capacity up to $ 400.0 million.

The interest rates on the line of credit is based, at the Company’s option, on either 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 the consolidated leverage ratio, as defined under the Third Amended and Restated Credit Agreement.

The terms of the 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.

The unsecured credit facility and unsecured senior notes are subject to customary financial covenants and limitations.

The Company believes that it was in compliance with all such financial covenants and limitations as of September 30, 2022.

The Company believes that it was in compliance with all such financial covenants and limitations as of March 31, 2023.

Centerspace also has a $ 6.0 million operating line of credit.

As of March 31, 2023, the outstanding balance on this line of credit was $ 4.0 million.

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, Centerspace amended and expanded its private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc.

1 unchanged sentence

In September 2021, the Company 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, the Company has issued $ 200.0 million unsecured senior notes with $ 25.0 million remaining available as of September 30, 2022.

Under the private shelf agreement with PGIM, the Company has issued $ 200.0 million unsecured senior notes with $ 25.0 million remaining available as of March 31, 2023.

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

8 unchanged sentences

Series 2021-D $ 15,000 September 17, 2034 2.78 %

In September 2021, Centerspace entered into a $ 198.9 million Fannie Mae Credit Facility Agreement (the “FMCF”) for the acquisition of 16 apartment communities.

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

In November 2022, the Company 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 the consolidated leverage ratio.

The Term Loan had a 364 -day term with an option for an additional 364-day term.

As of March 31, 2023, the term loan was paid in full.

As of December 31, 2022, the term loan had a balance of $ 100.0 million.

Centerspace has a $ 198.9 million Fannie Mae Credit Facility Agreement (the “FMCF”).

The FMCF is secured by mortgages on 12 apartment communities.

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

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

As of March 31, 2023 and December 31, 2022, the FMCF had a balance of $ 198.9 million.

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

As of September 30, 2022, Centerspace owned 15 apartment communities that served as collateral for mortgage loans, in addition to the apartment communities secured by the FMCF.

As of March 31, 2023, Centerspace owned 13 apartment communities that served as collateral for mortgage loans, in addition to the apartment communities secured by the FMCF.

All of these mortgage loans were non-recourse to the Company other than for standard carve-out obligations.

As of September 30, 2022, the Company believes that there were no material defaults or instances of noncompliance in regards to any of these mortgages payable.

Centerspace also has a $ 6.0 million 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 aggregate amount of required future principal payments as of September 30, 2022, was as follows:

As of March 31, 2023, the Company believes that there were no material defaults or instances of noncompliance in regards to any of these mortgages payable.

The aggregate amount of required future principal payments on all debt as of March 31, 2023, was as follows:

(in thousands)

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Changes in the fair value of derivatives designated and that qualified as cash flow hedges were recorded in accumulated other comprehensive income (loss) (“OCI”).

Amounts recorded in accumulated other comprehensive income will be reclassified to interest expense in the periods in which interest payments are incurred on variable rate debt.

Amounts recorded in accumulated other comprehensive income (loss) will be reclassified to interest expense in the periods in which interest payments are incurred on variable rate debt.

During the next twelve months, the Company estimates an additional $ 995,000 will be reclassified as an increase to interest expense.

In February 2022, the Company paid $ 3.2 million to terminate its $ 75.0 million interest rate swap and its $ 70.0 million forward swap.

As of September 30, 2022 the Company had no remaining interest rate swaps.

As of March 31, 2023 and December 31, 2022 the Company had no remaining interest rate swaps.

Derivatives not designated as hedges were not speculative and were used to manage the Company’s 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 to earnings within other income (loss) in the Condensed Consolidated Statement of Operations.

During the nine months ended September 30, 2022 and 2021, the Company recorded a gain of $ 582,000 and $ 60,000 , respectively, related to the interest rate swap not designated in a hedging relationship, prior to its termination.

During the three months ended September 30, 2021, the Company paid $ 3.8 million to terminate its $ 50.0 million interest rate swap and its $ 70.0 million interest rate swap.

The Company accelerated the reclassification of a $ 5.4 million loss from OCI into other income (loss) in the Condensed Consolidated Statement of Operations as a result of the hedged transactions becoming probable not to occur.

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

The Company also had one additional interest rate swap with an effective date of January 31, 2023 and a notional amount of $ 70.0 million which was not designated as a hedge in a qualifying hedging relationship.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 .

(in thousands)

September 30, 2022 December 31, 2021

Balance Sheet Location Fair Value Fair Value

Total derivative instruments designated as hedging instruments - interest rate swaps Accounts Payable and Accrued Expenses $ — $ 4,610

Total derivative instruments not designated as hedging instruments - interest rate swaps Accounts Payable and Accrued Expenses $ — $ 1,097

The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations as of September 30, 2022 and 2021.

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

During the three months ended March 31, 2022, the Company recorded a gain of $ 582,000 , related to the interest rate swap not designated in a hedging relationship, prior to its termination.

The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations as of March 31, 2023 and 2022.

(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

Three months ended September 30, 2022 2021 2022 2021

Total derivatives in cash flow hedging relationships - Interest rate contracts $ — $ ( 70 ) Interest expense $ ( 204 ) $ ( 940 )

Nine months ended September 30,

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

Three months ended March 31, 2023 2022 2023 2022

Total derivatives in cash flow hedging relationships - Interest rate contracts $ — $ 1,581 Interest expense $ ( 138 ) $ ( 304 )

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(in thousands)

Total Level 1 Level 2 Level 3

September 30, 2022

Notes receivable $ 5,865 — — $ 5,865

Balance Sheet Location Total Level 1 Level 2 Level 3

March 31, 2023

Notes receivable Other assets $ 5,661 — — $ 5,661

December 31, 2022

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

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

The fair value of the 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 were based on an expectation of future interest rates (a forward curve) derived from observable market interest rate curves.

The Company also considered both its own nonperformance risk and the counterparty’s nonperformance risk in the fair value measurement (Level 3).

Centerspace utilizes an income approach with Level 3 inputs based on expected future cash flows to value mortgages and notes receivable.

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

Centerspace utilizes an income approach with Level 3 inputs based on expected future cash flows to value the notes receivable.

The inputs include market transactions for similar instruments, management estimates of comparable interest rates (range of 3.75 % to 5.00 %), and instrument specific credit risk (range of 0.5 % to 1.0 %).

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Fair Value Measurement Other Gains (Losses) Interest Income Total Changes in Fair Value Included in Current-Period Earnings

Nine months ended September 30, 2022

Three months ended March 31, 2023

Notes receivable $ 5,661 $ 5 $ 67 $ 72

Nine months ended September 30, 2021

Mortgage loans and notes receivable $ 48,364 $ 11 $ 1,759 $ 1,770

As of September 30, 2022 and December 31, 2021, Centerspace had investments totaling $ 1.4 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.

Three months ended March 31, 2022

Notes receivable $ 6,068 $ 4 $ 460 $ 464

As of March 31, 2023 and December 31, 2022, Centerspace had investments totaling $ 1.5 million and $ 1.6 million, 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 Condensed Consolidated Balance Sheets.

The investments are measured at net asset value (“NAV”) as a practical expedient under ASC 820.

As of September 30, 2022, the Company had total unfunded commitments of $ 1.6 million.

As of March 31, 2023, the Company had total unfunded commitments of $ 1.4 million.

Fair Value Measurements on a Nonrecurring Basis

There were no non-financial assets or liabilities measured at fair value on a nonrecurring basis at September 30, 2022 and December 31, 2021.

There were no non-financial assets or liabilities measured at fair value on a nonrecurring basis at March 31, 2023 and December 31, 2022.

Financial Assets and Liabilities Not Measured at Fair Value

The fair value of unsecured senior notes and mortgages payable are estimated based on the discounted cash flows of the loans using market research and management estimates of comparable interest rates, excluding any prepayment penalties (Level 3).

The estimated fair values of the Company’s financial instruments as of September 30, 2022 and December 31, 2021, respectively, are as follows:

The estimated fair values of the Company’s financial instruments as of March 31, 2023 and December 31, 2022, respectively, are as follows:

(in thousands)

September 30, 2022 December 31, 2021

Carrying Amount Fair Value Carrying Amount Fair Value

March 31, 2023 December 31, 2022

Balance Sheet Location Carrying Amount Fair Value Carrying Amount Fair Value

FINANCIAL ASSETS

Cash and cash equivalents $ 14,957 $ 14,957 $ 31,267 $ 31,267

Restricted cash $ 1,417 $ 1,417 $ 7,358 $ 7,358

Cash and cash equivalents Cash and cash equivalents $ 8,939 $ 8,939 $ 10,458 $ 10,458

Restricted cash Restricted cash $ 48,903 $ 48,903 $ 1,433 $ 1,433

FINANCIAL LIABILITIES

Revolving lines of credit (1)

$ 171,500 $ 171,500 $ 76,000 $ 76,000

Unsecured senior notes $ 300,000 $ 236,540 $ 300,000 $ 308,302

Mortgages payable - Fannie Mae $ 198,850 $ 161,006 $ 198,850 $ 198,850

Mortgages payable - other $ 300,956 $ 275,060 $ 284,934 $ 284,546

(1) Excluding the effect of interest rate swap agreements.

Refer to Note 6 for discussion on the fair value of the interest rate swap agreements.

Revolving lines of credit Revolving lines of credit $ 143,469 $ 143,469 $ 113,500 $ 113,500

Term loans Notes payable $ — $ — $ 100,000 $ 100,000

Unsecured senior notes Notes payable $ 300,000 $ 245,627 $ 300,000 $ 238,446

Mortgages payable - Fannie Mae Mortgages payable $ 198,850 $ 164,227 $ 198,850 $ 161,297

Mortgages payable - other Mortgages payable $ 279,340 $ 258,799 $ 299,427 $ 274,029

NOTE 8 • ACQUISITIONS AND DISPOSITIONS

Centerspace acquired a new apartment community for $ 95.0 million during the three months ended September 30, 2022 compared to acquisitions of $ 359.9 million during the three months ended September 30, 2021.

The acquisitions during the nine months ended September 30, 2022 and 2021 are detailed below.

Nine Months Ended September 30, 2022

Centerspace did not acquire new real estate during the three months ended March 31, 2023 compared to acquisitions of $ 116.9 million during the three months ended March 31, 2022.

The acquisitions during the three months ended March 31, 2022 are detailed below.

Three Months Ended March 31, 2022

Acquired (in thousands)

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Land Building Intangible

Assets Other (4)

191 homes - Martin Blu - Minneapolis, MN

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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 $ 116,874 $ 9,093 $ 22,882 $ 84,899 $ 7,339 $ 106,080 $ 4,672 $ ( 1,217 )

3 unchanged sentences

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

(4) Debt discount on assumed mortgage.

Nine Months Ended September 30, 2021

Acquired (in thousands)

Form of Consideration Investment Allocation

Acquisitions Cash Units (2)

Land Building Intangible

Assets Other (4)

256 homes - Union Pointe - Longmont, CO

January 6, 2021 $ 76,900 $ 76,900 $ — $ — $ 5,727 $ 69,966 $ 1,207 $ —

120 homes - Bayberry Place - Minneapolis, MN

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

251 homes - Burgandy & Hillsboro Court - Minneapolis, MN

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

97 homes - Venue on Knox - Minneapolis, MN

September 1, 2021 18,896 500 11,375 7,021 3,438 14,743 715 —

120 homes - Gatewood - St.

September 1, 2021 7,781 378 3,388 4,015 327 6,858 596 —

84 homes - Grove Ridge - Minneapolis, MN

September 1, 2021 12,060 121 8,579 3,360 1,250 10,271 539 —

119 homes - The Legacy - St.

September 1, 2021 10,560 229 5,714 4,617 412 9,556 592 —

151 homes - New Hope Garden & Village - Minneapolis, MN

September 1, 2021 15,006 1,435 10,812 2,759 1,603 12,578 825 —

330 homes - Palisades - Minneapolis, MN

September 1, 2021 53,354 2,884 30,470 20,000 6,919 46,577 2,211 ( 2,353 )

96 homes - Plymouth Pointe - Minneapolis, MN

September 1, 2021 14,450 370 9,061 5,019 1,042 12,809 599 —

93 homes - Pointe West - St.

September 1, 2021 7,558 91 3,605 3,862 246 6,849 463 —

301 homes - River Pointe - Minneapolis MN

September 1, 2021 38,348 2,249 21,653 14,446 3,346 33,117 1,885 —

70 homes - Southdale Parc - Minneapolis, MN

September 1, 2021 9,670 165 7,907 1,598 1,569 7,740 361 —

62 homes - Portage - Minneapolis, MN

September 1, 2021 9,171 323 5,588 3,260 2,133 6,685 353 —

200 homes - Windsor Gates - Minneapolis, MN

September 1, 2021 22,231 1,122 12,080 9,029 2,140 18,943 1,148 —

136 homes - Wingate - Minneapolis, MN

September 1, 2021 15,784 723 10,246 4,815 1,480 13,530 774 —

178 homes - Woodhaven - Minneapolis, MN

September 1, 2021 25,009 1,682 15,200 8,127 3,940 20,080 989 —

288 homes - Woodland Pointe - Minneapolis, MN

September 1, 2021 47,796 437 29,438 17,921 5,367 40,422 2,007 —

Total Acquisitions $ 436,816 $ 92,599 $ 217,513 $ 126,704 $ 45,580 $ 375,985 $ 17,604 $ ( 2,353 )

(1) Includes $ 36.1 million for additional fair value of Series E preferred units for the September 1, 2021 portfolio acquisition

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

(3) Payoff of debt or assumption of seller's debt upon closing

(4) Intangible assets consist of in-place leases valued at the time of acquisition.

During the three months ended March 31, 2023 and 2022, Centerspace recognized $ 844,000 and $ 8.3 million, respectively, of amortization expense related to these intangibles, included within depreciation and amortization in the Condensed Consolidated Statement of Operations.

(5) Debt discount on assumed mortgage.

During the nine months ended September 30, 2022, Centerspace did not dispose of any real estate.

The dispositions during the nine months ended September 30, 2021 are detailed below.

Nine Months Ended September 30, 2021

During the three months ended March 31, 2023, Centerspace disposed of nine apartment communities, in four exchange transactions for an aggregate sales price of $ 144.3 million.

Centerspace did not dispose of any real estate during the three months ended March 31, 2022.

The dispositions for the three months ended March 31, 2023 are detailed below.

Three Months Ended March 31, 2023

(in thousands)

1 unchanged sentence

Disposed Sale Price Book Value and Sales Cost Gain/(Loss)

76 homes - Crystal Bay-Rochester, MN

May 25, 2021 $ 13,650 $ 10,255 $ 3,395

40 homes - French Creek-Rochester, MN

May 25, 2021 6,700 4,474 2,226

182 homes - Heritage Manor-Rochester, MN

May 25, 2021 14,125 4,892 9,233

140 homes - Olympik Village-Rochester, MN

May 25, 2021 10,725 6,529 4,196

151 homes-Winchester/Village Green-Rochester, MN

May 25, 2021 14,800 7,010 7,790

115 homes - Boulder Court - Eagan, MN

March 8, 2023 $ 14,605 $ 4,970 $ 9,635

498 homes - 2 Nebraska apartment communities

March 14, 2023 $ 48,500 $ 14,975 $ 33,525

892 homes - 5 Minnesota apartment communities

March 15, 2023 $ 74,500 $ 55,053 $ 19,447

62 homes - Portage - Minneapolis, MN

March 15, 2023 $ 6,650 $ 9,098 $ ( 2,448 )

Total Dispositions $ 144,255 $ 84,096 $ 60,159

6 unchanged sentences

Accordingly, the apartment communities are aggregated into a single reportable segment.

“All other” includes non-multifamily components of mixed-use properties and apartment communities the Company has sold.

“All other” includes non-multifamily components of mixed-use properties and apartment communities the Company has disposed or designated as held for sale.

During the three months ended March 31, 2023, nine sold apartment communities were reclassified from the multifamily segment to all other for all periods presented.

The members of the executive management team are the chief operating decision-makers.

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NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income (loss), net income (loss) available for common shareholders, or cash flow from operating activities as a measure of financial performance.

The following tables present NOI for the three and nine months ended September 30, 2022 and 2021, respectively, along with reconciliations to net income in the Condensed Consolidated Financial Statements.

The following tables present NOI for the three months ended March 31, 2023 and 2022, respectively, along with reconciliations to net income in the Condensed Consolidated Financial Statements.

Segment assets are also reconciled to total assets as reported in the Condensed Consolidated Financial Statements.

(in thousands)

Three Months Ended September 30, 2022 Multifamily All Other Total

Revenue $ 64,404 $ 1,034 $ 65,438

Property operating expenses, including real estate taxes 27,009 320 27,329

Net operating income $ 37,395 $ 714 $ 38,109

Property management ( 2,563 )

Casualty gain (loss) ( 276 )

Depreciation and amortization ( 23,720 )

General and administrative expenses ( 4,519 )

Interest expense ( 7,871 )

Interest and other income 70

Net income (loss) $ ( 770 )

(in thousands)

Three Months Ended September 30, 2021 Multifamily All Other Total

Three Months Ended March 31, 2023 Multifamily All Other Total

Revenue $ 62,498 $ 5,399 $ 67,897

5 unchanged sentences

General and administrative expenses ( 7,723 )

Interest expense ( 7,302 )

Interest and other income ( 5,082 )

Net income (loss) $ ( 11,240 )

(in thousands)

Nine Months Ended September 30, 2022 Multifamily All Other Total

Revenue $ 186,002 $ 2,866 $ 188,868

Property operating expenses, including real estate taxes 78,539 879 79,418

Net operating income $ 107,463 $ 1,987 $ 109,450

Property management expenses ( 7,537 )

Casualty gain (loss) ( 1,256 )

Depreciation and amortization ( 79,489 )

General and administrative expenses ( 14,240 )

Gain (loss) on sale of real estate and other investments 60,159

3 unchanged sentences

(in thousands)

Nine Months Ended September 30, 2021 Multifamily All Other Total

Three Months Ended March 31, 2022 Multifamily All Other Total

Revenue $ 54,916 $ 5,398 $ 60,314

1 unchanged sentence

Net operating income $ 31,836 $ 2,605 $ 34,441

Property management expenses ( 6,055 )

Property management ( 2,253 )

Casualty gain (loss) ( 598 )

1 unchanged sentence

General and administrative expenses ( 4,500 )

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

Interest expense ( 7,715 )

2 unchanged sentences

Segment Assets and Accumulated Depreciation

Segment assets are summarized as follows as of September 30, 2022, and December 31, 2021, respectively, along with reconciliations to the Condensed Consolidated Financial Statements:

Segment assets are summarized as follows as of March 31, 2023, and December 31, 2022, respectively, along with reconciliations to the Condensed Consolidated Financial Statements:

(in thousands)

As of September 30, 2022 Multifamily All Other Total

As of March 31, 2023 Multifamily All Other Total

Segment assets

12 unchanged sentences

Total property owned $ 1,898,222 $ 100,501 $ 1,998,723

Mortgage loans receivable 43,276

Cash and cash equivalents 10,458

3 unchanged sentences

NOTE 10 • COMMITMENTS AND CONTINGENCIES

In the ordinary course of operations, Centerspace becomes involved in litigation.

At this time, the Company knows of no material pending or threatened legal proceedings, or other proceedings contemplated by governmental authorities, that would have a material impact on it.

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

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

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

Centerspace is involved in various lawsuits arising in the normal course of business and believes that such matters will not have a material adverse effect on the condensed consolidated financial statements.

Environmental Matters.

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Restrictions on Taxable Dispositions.

Thirty-eight properties, consisting of 6,969 apartment homes, are subject to restrictions on taxable dispositions under agreements entered into with certain of the sellers or contributors of the properties and are effective for varying periods.

Thirty-two properties, consisting of 6,115 apartment homes, are subject to restrictions on taxable dispositions under agreements entered into with certain of the sellers or contributors of the properties and are effective

for varying periods.

Centerspace does not believe that the agreements materially affect the conduct of its business or its decisions whether to dispose of restricted properties during the restriction period because it generally holds these and other properties for investment purposes rather than for sale.

9 unchanged sentences

The terms of the long-term incentive awards granted under the revised program may vary from year to year.

Through March 31, 2023, awards under the 2015 Incentive Plan consisted of restricted and unrestricted common shares, RSUs, and stock options.

We account for forfeitures of restricted and unrestricted common shares, RSUs, and stock options when they occur instead of estimating the forfeitures.

2023 LTIP Awards

8 unchanged sentences

Dividend yield 4.977 %

The TSR performance RSUs are earned based on the Company’s TSR as compared to the FTSE Nareit Apartment Index over a forward looking three-year period.

The maximum number of RSUs eligible to be earned is 26,814 RSUs, which is 200 % of the RSUs granted.

The TSR performance RSUs are earned based on the Company’s TSR as compared to the FTSE Nareit Equity Index over a forward looking three-year period.

The maximum number of performance RSUs eligible to be earned is 40,994 RSUs, which is 200 % of the performance RSUs granted.

Earned awards (if any) will fully vest as of the last day of the measurement period.

1 unchanged sentence

Compensation expense is recognized ratably based on the grant date fair value, as determined using the Monte Carlo valuation model, regardless of whether the market conditions are achieved and the awards ultimately vest.

Therefore, previously recorded compensation expense is not adjusted in

the event that the market conditions are not achieved.

Therefore, previously recorded compensation expense is not adjusted in the event that the market conditions are not achieved.

The Company based the expected volatility on a weighted average of the historical volatility of the Company’s daily closing share price and a select peer average volatility, the risk-free interest rate on the interest rates on U.S.

2 unchanged sentences

The share price at the grant date, January 1, 2023, was $ 58.67 per share.

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 consist of 6,563 time-based RSUs, which vest on May 17, 2023.

These awards are classified as equity awards.

Share-Based Compensation Expense

Share-based compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was $ 709,000 and $ 600,000 for the three months ended September 30, 2022 and 2021, respectively and $ 1.9 million and $ 2.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Share-based compensation expense recognized in the condensed consolidated financial statements for all outstanding share-based awards was $ 1.5 million and $ 719,000 for the three months ended March 31, 2023 and 2022, respectively.

On March 31, 2023, the Company accelerated the vesting of all unvested time-based RSUs and stock options in connection with the Separation Agreement with Mr.

This resulted in the acceleration of share-based compensation expense for those awards resulting in an additional $ 737,000 in expense during the three months ended March 31, 2023.

Any performance-

based RSUs were prorated, in accordance with the award agreement, and will vest at the end of performance period based on actual performance.

The remaining performance-based RSUs were forfeited.

NOTE 12 • SUBSEQUENT EVENTS

Through October 31, 2022, Centerspace repurchased 426,773 common shares for total consideration of $ 28.7 million and an average of $ 67.25 per share.

Through May 1, 2023, Centerspace repurchased 104,503 common shares for total consideration of $ 5.7 million an an average price of $ 54.51 per share.

On April 26, 2023, Centerspace closed on a $ 90.0 million secured note payable with an interest rate of 5.04 % and a term of 12 years.

Subsequent to March 31, 2023, $ 47.8 million of net tax-deferred exchange proceeds were released from restricted cash.

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

What changed 10-Q

Item 1. Financial Statements