What changed in this filing

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Item 1. Financial Statements

2023-07-31 compared with 2023-05-01 · 282 added, 149 removed, 521 unchanged (45% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

March 31, 2023 December 31, 2022

ASSETS (Unaudited) (Audited)

June 30, 2023 December 31, 2022

ASSETS (Unaudited)

Real estate investments

15 unchanged sentences

COMMITMENTS AND CONTINGENCIES (NOTE 10)

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 )

SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $ 100 par value, 166 units issued and outstanding at June 30, 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 March 31, 2023 and December 31, 2022, 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 June 30, 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, 15,032 shares issued and outstanding at March 31, 2023 and 15,020 shares issued and outstanding at December 31, 2022)

Common Shares of Beneficial Interest (Unlimited authorization, no par value, 14,949 shares issued and outstanding at June 30, 2023 and 15,020 shares issued and outstanding at December 31, 2022)

1,169,501 1,177,484

Accumulated distributions in excess of net income ( 522,796 ) ( 539,422 )

Accumulated other comprehensive income (loss) ( 1,917 ) ( 2,055 )

Accumulated other comprehensive loss ( 1,758 ) ( 2,055 )

Total shareholders’ equity $ 738,477 $ 729,537

7 unchanged sentences

(in thousands, except per share data)

Three Months Ended March 31,

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

2023 2022 2023 2022

REVENUE $ 64,776 $ 63,116 $ 132,673 $ 123,430

2 unchanged sentences

Property management expense 2,247 2,721 4,815 4,974

Casualty (gain) loss 252 598

Casualty loss

53 382 305 980

Depreciation and amortization 24,371 24,768 50,364 55,769

2 unchanged sentences

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

( 67 ) 27 60,092 27

Loss on litigation settlement ( 2,864 ) — ( 2,864 ) —

Operating income (loss)

5,966 3,835 68,563 ( 76 )

Interest expense ( 8,641 ) ( 7,561 ) ( 18,960 ) ( 15,276 )

Interest and other income (loss)

295 ( 17 ) 344 1,046

NET INCOME (LOSS)

$ ( 2,380 ) $ ( 3,743 ) $ 49,947 $ ( 14,306 )

Dividends to Series D preferred unitholders ( 160 ) ( 160 ) ( 320 ) ( 320 )

Net (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units

Net (income) loss attributable to noncontrolling interests – consolidated real estate entities ( 30 ) ( 23 )

712 950 ( 7,854 ) 3,107

Net income attributable to noncontrolling interests – consolidated real estate entities

( 35 ) ( 38 ) ( 65 ) ( 61 )

Net income (loss) attributable to controlling interests

( 1,863 ) ( 2,991 ) 41,708 ( 11,580 )

Dividends to preferred shareholders ( 1,607 ) ( 1,607 ) ( 3,214 ) ( 3,214 )

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS

$ ( 3,470 ) $ ( 4,598 ) $ 38,494 $ ( 14,794 )

NET INCOME (LOSS) PER COMMON SHARE – BASIC

$ ( 0.23 ) $ ( 0.30 ) $ 2.57 $ ( 0.97 )

NET INCOME (LOSS) PER COMMON SHARE – DILUTED

$ ( 0.23 ) $ ( 0.30 ) $ 2.55 $ ( 0.97 )

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

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

2023 2022 2023 2022

Net income (loss)

Other comprehensive income (loss):

Unrealized gain (loss) from derivative instrument — 1,581

(Gain) loss on derivative instrument reclassified into earnings 138 304

$ ( 2,380 ) $ ( 3,743 ) $ 49,947 $ ( 14,306 )

Other comprehensive income:

Unrealized gain from derivative instrument

Loss on derivative instrument reclassified into earnings

159 188 297 492

Total comprehensive income (loss)

$ ( 2,221 ) $ ( 3,555 ) $ 50,244 $ ( 12,233 )

Net comprehensive (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units

Net (income) loss attributable to noncontrolling interests – consolidated real estate entities ( 30 ) ( 23 )

739 984 ( 7,804 ) 3,463

Net income attributable to noncontrolling interests – consolidated real estate entities

( 35 ) ( 38 ) ( 65 ) ( 61 )

Comprehensive income (loss) attributable to controlling interests

$ ( 1,517 ) $ ( 2,609 ) $ 42,375 $ ( 8,831 )

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands, except per share data)

Three Months Ended March 31, 2022 PREFERRED

Six Months Ended June 30, 2022 PREFERRED

SHARES NUMBER

2 unchanged sentences

DISTRIBUTIONS

NET INCOME ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

NET INCOME (LOSS) ACCUMULATED OTHER COMPREHENSIVE LOSS

NONCONTROLLING

1 unchanged sentence

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 ( 8,589 ) ( 2,134 ) ( 10,723 )

Net (loss) attributable to controlling interests and noncontrolling interests

( 11,580 ) ( 3,046 ) ( 14,626 )

Change in fair value of derivatives and amortization of swap settlements 2,073 2,073

13 unchanged sentences

Other ( 253 ) ( 84 ) ( 337 )

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

Six Months Ended June 30, 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

Net income attributable to controlling interests and noncontrolling interests

41,708 7,919 49,627

Amortization of swap settlements 297 297

11 unchanged sentences

Other ( 1 ) ( 54 ) ( 86 ) ( 140 )

Balance at June 30, 2023 $ 93,530 14,949 $ 1,169,501 $ ( 522,796 ) $ ( 1,758 ) $ 226,931 $ 965,408

See accompanying Notes to Condensed Consolidated Financial Statements.

(in thousands, except per share data)

Three Months Ended June 30, 2022 PREFERRED

SHARES NUMBER

SHARES COMMON

SHARES ACCUMULATED

DISTRIBUTIONS

NET INCOME (LOSS) ACCUMULATED OTHER COMPREHENSIVE LOSS

NONCONTROLLING

INTERESTS TOTAL

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

Net (loss) attributable to controlling interests and noncontrolling interests

( 2,991 ) ( 912 ) ( 3,903 )

Change in fair value of derivatives and amortization of swap settlements 188 188

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

( 11,222 ) ( 726 ) ( 11,948 )

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

( 1,607 ) ( 1,607 )

Distributions - Series E preferred units ($ 0.96875 per unit)

( 1,758 ) ( 1,758 )

Share-based compensation, net of forfeitures 6 480 480

Redemption of Units for common shares 1 13 ( 13 ) —

Redemption of Units for cash ( 327 ) ( 327 )

Change in redemption value of Series D preferred units 3,785 3,785

Other ( 114 ) ( 84 ) ( 198 )

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

Three Months Ended June 30, 2023

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

Net (loss) attributable to controlling interests and noncontrolling interests

( 1,863 ) ( 677 ) ( 2,540 )

Amortization of swap settlements 159 159

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

( 10,906 ) ( 702 ) ( 11,608 )

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

( 1,607 ) ( 1,607 )

Distributions - Series E preferred units ($ 0.96875 per unit)

( 1,690 ) ( 1,690 )

Share-based compensation, net of forfeitures 7 590 590

Redemption of units for common shares 6 ( 324 ) 324 —

Redemption of Series E preferred units for common shares 9 ( 1,185 ) 1,185 —

Shares repurchased ( 105 ) ( 5,696 ) ( 5,696 )

Other 57 ( 62 ) ( 5 )

Balance at June 30, 2023 $ 93,530 14,949 $ 1,169,501 $ ( 522,796 ) $ ( 1,758 ) $ 226,931 $ 965,408

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used by) operating activities:

$ 49,947 $ ( 14,306 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization, including amortization of capitalized loan costs 51,295 56,124

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

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

Loss on litigation settlement 2,864 —

Share-based compensation expense 2,109 1,199

4 unchanged sentences

Accounts payable and accrued expenses ( 3,752 ) ( 13,207 )

Net cash provided by (used by) operating activities $ 21,804 $ 11,598

Net cash provided by operating activities

$ 45,561 $ 34,491

CASH FLOWS FROM INVESTING ACTIVITIES

4 unchanged sentences

Net cash provided by (used by) investing activities

$ 117,246 $ ( 23,547 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from mortgages payable 90,000 —

Principal payments on mortgages payable ( 22,796 ) ( 25,911 )

11 unchanged sentences

Other financing activities ( 140 ) ( 337 )

Net cash provided by (used by) financing activities $ ( 107,037 ) $ ( 21,770 )

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 45,951 ( 22,903 )

Net cash used by financing activities

$ ( 164,387 ) $ ( 34,499 )

NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

( 1,580 ) ( 23,555 )

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD 11,891 38,625

6 unchanged sentences

Retirement of shares withheld for taxes 179 1,273

Involuntary conversion of assets ( 1,060 ) —

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

9 unchanged sentences

(in thousands)

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

Balance sheet description June 30, 2023 December 31, 2022 June 30, 2022

Cash and cash equivalents $ 9,745 $ 10,458 $ 13,156

4 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

March 31, 2023

June 30, 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 March 31, 2023, Centerspace owned interests in 75 apartment communities consisting of 13,497 apartment homes.

As of June 30, 2023, Centerspace owned interests in 75 apartment communities consisting of 13,497 apartment homes.

NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

16 unchanged sentences

RECENT ACCOUNTING PRONOUNCEMENTS

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

The following table provides a brief description of Financial Accounting Standards Board (“FASB”) recent accounting standards updates (“ASU”).

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

4 unchanged sentences

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

1 unchanged sentence

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.

As of June 30, 2023 and 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.

Although recent bank failures have increased the risk of loss in such accounts, 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.

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.

Rental revenues are recognized in accordance with FASB Accounting Standards Codification (“ASC”) ASC 842, Leases , using a method that represents a straight-line basis over the term of the lease.

For the three months ended June 30, 2023 and 2022, rental income represented approximately 98.3 % and 97.7 % of total revenues, respectively, and included gross market rent less adjustments for gain or loss to lease, concessions, vacancy loss, and bad debt.

For the three months ended June 30, 2023 and 2022, other property revenues represented the remaining 1.7 % and 2.3 % of total revenues, respectively, and were primarily driven by other fee income, which is typically recognized when earned, at a point in time.

For the six months ended June 30, 2023 and 2022, rental income represented approximately 98.3 % and 97.9 % of total revenues, respectively.

For the six months ended June 30, 2023 and 2022, other property revenues represented the remaining 1.7 % and 2.1 % of total revenues, respectively.

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 March 31, 2023, 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 June 30, 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 months ended March 31, 2023 and 2022:

The following table presents the disaggregation of revenue streams for the three and six months ended June 30, 2023 and 2022:

(in thousands)

Three Months Ended March 31,

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

Revenue Stream Applicable Standard 2023 2022 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 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.

For the six months ended June 30, 2023, we recognized $ 60.1 million as a gain on the sale of real estate and other investments.

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:

As of June 30, 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.

7 unchanged sentences

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

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

During the three and six months ended June 30, 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 Company has a tax increment financing note receivable (“TIF”) with a principal balance of $ 5.9 million and $ 6.1 million at June 30, 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 three months ended March 31, 2022.

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

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

As of June 30, 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.

During the three months ended June 30, 2023 and 2022, total advertising expense was $ 744,000 and $ 894,000 , respectively.

During the six months ended June 30, 2023 and 2022, total advertising expense was $ 1.4 million and $ 1.6 million, 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.

During the six months ended June 30, 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.

INVOLUNTARY CONVERSION OF ASSETS

In April 2023, a portion of an apartment community was destroyed by fire.

The Company recorded a write-down of the apartment community asset, in accordance with ASC 610-30 on involuntary conversion of non-monetary assets, totaling $ 1.0 million with an offsetting insurance receivable recorded within other assets on the Condensed Consolidated Balance Sheets.

The estimated insurance claim is $ 1.3 million and the remaining $ 300,000 will be recognized when received.

LITIGATION SETTLEMENT

During the three months ended, June 30, 2023, the Company recorded a loss on litigation settlement of $ 2.9 million due to a trial judgment entered against Centerspace on May 8, 2023 for property damage, resulting in monetary losses.

Centerspace was the named defendant in a lawsuit where the owner of a neighboring property claimed a retaining wall at one of the Company’s properties was causing water damage to the neighboring property.

The Company cannot, with any level of certainty, predict or estimate if there will be additional costs incurred as a result of the lawsuit.

VARIABLE INTEREST ENTITIES

8 unchanged sentences

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 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.

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 months ended March 31, 2023 and 2022.

For the three months ended June 30, 2023, operating partnership units of 965,000 , Series D preferred units of 228,000 , as converted, Series E preferred units of 2.1 million, as converted, time-based RSUs and stock options of 24,000 , and performance-based RSUs of 26,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the three months ended June 30, 2022, operating partnership units of 995,000 , Series D preferred units of 228,000 , as converted, Series E preferred units of 2.2 million, as converted, time-based RSUs of 9,000 , weighted average stock options of 39,000 , and performance-based RSUs of 30,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the six months ended June 30, 2023, performance-based RSUs of 26,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the six months ended June 30, 2022, operating partnership units of 978,000 , Series D preferred units of 228,000 , as converted, Series E preferred units of 2.2 million, as converted, time-based RSUs of 11,000 , weighted average stock options of 46,000 , and performance-based RSUs of 30,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

(in thousands, except per share data)

Three Months Ended March 31,

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

2023 2022 2023 2022

Net income (loss) attributable to controlling interests

$ ( 1,863 ) $ ( 2,991 ) $ 41,708 $ ( 11,580 )

Dividends to preferred shareholders ( 1,607 ) ( 1,607 ) ( 3,214 ) ( 3,214 )

Numerator for basic earnings (loss) per share – net income available to common shareholders 41,964 ( 10,196 )

Numerator for basic earnings (loss) per share – net income (loss) available to common shareholders

( 3,470 ) ( 4,598 ) 38,494 ( 14,794 )

Noncontrolling interests – Operating Partnership and Series E preferred units ( 712 ) ( 950 ) 7,854 ( 3,107 )

1 unchanged sentence

Numerator for diluted earnings (loss) per share

$ ( 4,022 ) $ ( 5,388 ) $ 46,668 $ ( 17,581 )

Denominator for basic earnings per share weighted average shares 14,949 15,369 14,987 15,233

5 unchanged sentences

NET INCOME (LOSS) PER COMMON SHARE – BASIC

$ ( 0.23 ) $ ( 0.30 ) $ 2.57 $ ( 0.97 )

NET INCOME (LOSS) PER COMMON SHARE – DILUTED

$ ( 0.23 ) $ ( 0.30 ) $ 2.55 $ ( 0.97 )

NOTE 4 • EQUITY AND MEZZANINE EQUITY

Operating Partnership Units.

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.

The Operating Partnership had 961,000 and 971,000 outstanding Units at June 30, 2023 and December 31, 2022, respectively.

During the six months ended June 30, 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 months ended March 31, 2023 and 2022 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 and six months ended June 30, 2023 and 2022 as detailed in the table below.

(in thousands)

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

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

2022 1 $ ( 13 )

Six Months Ended June 30,

2023 10 $ 1,021

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.

2022 11 $ 375

Pursuant to the exercise of exchange rights, the Company redeemed Units for cash during the three and six months ended June 30, 2023 and 2022 as detailed in the table below.

(in thousands, except per Unit data)

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

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

2023 1 $ 10 $ 56.58

2022 4 $ 327 $ 92.03

Six Months Ended June 30,

2023 1 $ 10 $ 56.58

2022 35 $ 3,230 $ 93.03

Series E Preferred Units (Noncontrolling Interests).

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

Centerspace had 1.7 million and 1.8 million Series E preferred units outstanding on June 30, 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 $ 173.8 million.

2 unchanged sentences

Number of Series E Number of Total

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

Three Months Ended June 30, Preferred Units Redeemed Common Shares Issued Value

2023 7 9 $ 1,185

Six Months Ended June 30,

2023 20 25 $ 2,120

Common Shares and Equity Awards .

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.

Common shares outstanding on June 30, 2023 and December 31, 2022, totaled 14.9 million and 15.0 million, respectively.

There were 7,073 and 18,950 shares issued upon the vesting of equity awards under the 2015 Incentive Plan during the three and six months ended June 30, 2023, respectively, with a total grant-date fair value of $ 778,000 and $ 1.7 million, respectively.

There were 5,538 and 24,297 shares issued upon the vesting of equity awards under the 2015 Incentive Plan during the three and six months ended June 30, 2022, respectively, with a total grant-date fair value of $ 397,000 and $ 619,000 , respectively.

These shares vested based on performance and service criteria.

1 unchanged sentence

Equity Distribution Agreement.

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.

Centerspace has 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 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.

The table below provides details on the sale of common shares during the six months ended June 30, 2023 and 2022 under the 2021 ATM Program.

There were no sales of common shares under the 2021 ATM Program during the three months ended June 30, 2023 and 2022.

As of June 30, 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 March 31, Number of Common Shares Net Consideration (1)

Six Months Ended June 30, Number of Common Shares Net Consideration (1)

Average Net Price Per Share

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2022 321 $ 31,732 $ 98.89

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

(1) Consideration is net of $ 338 in commissions and issuance costs during the six months ended June 30, 2022.

Share Repurchase Program.

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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 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.

The table below provides details on the shares repurchased during the three and six months ended June 30, 2023.

As of June 30, 2023, the Company had $ 14.2 million remaining authorized for purchase under this program.

(in thousands, except per share amounts)

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

Three Months Ended June 30, Number of Common Shares Aggregate Cost (1)

Average Price Per Share (1)

2023 105 $ 5,696 $ 54.51

Six Months Ended June 30,

2023 124 $ 6,718 $ 54.19

(1) Amount includes commissions.

Series C Preferred Shares.

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

Series C preferred shares outstanding were 3.9 million shares at June 30, 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.

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Series D Preferred Units (Mezzanine Equity).

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

Series D preferred units outstanding were 165,600 preferred units at June 30, 2023 and December 31, 2022.

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

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NOTE 5 • DEBT

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

The following is a summary of our secured and unsecured debt at June 30, 2023 and December 31, 2022.

(in thousands)

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

June 30, 2023 December 31, 2022

Carrying Amount Weighted Average Interest Rate Carrying Amount Weighted Average Interest Rate Weighted Average Maturity in Years at June 30, 2023

Lines of credit (1)

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(3) Represents apartment communities encumbered by mortgages;

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

14 at June 30, 2023 and 15 at December 31, 2022.

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

(5) Interest rate is fixed.

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.

As of June 30, 2023, 49 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” or “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 March 31, 2023, the additional borrowing availability was $ 110.5 million beyond the $ 139.5 million drawn.

As of June 30, 2023, the additional borrowing availability was $ 232.0 million beyond the $ 18.0 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.

On May 31, 2023, the unsecured credit facility was further amended to replace the London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) as the benchmark alternative reference rate under the Facility.

Loans under the Facility outstanding as of the effective date of the Amendment that accrue interest at a rate determined by reference to LIBOR will continue to accrue interest at a rate determined by reference to LIBOR for the interest period applicable to such loans.

The line of credit has an interest rate equal to daily SOFR plus a margin of 135 basis points and a spread adjustment of 10 basis points.

The interest rates on the line of credit are based, at the Company’s option, on either the lender’s base rate plus a margin, ranging from 25 - 80 basis points, or daily or term SOFR, plus a margin that ranges from 125 - 180 basis points based on the consolidated leverage ratio, as defined under the First Amendment to Third Amended and Restated Credit Agreement.

Prior to the amendment, interest rates on the line of credit were based, at the Company’s option, on either the lender’s base rate plus a margin, ranging from 25 - 80 basis points, or 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 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 March 31, 2023.

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

As of June 30, 2023, the outstanding balance on this line of credit was $ 989,000 .

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.

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

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 March 31, 2023.

This operating line matures on September 30, 2024, with pricing based on SOFR.

Centerspace has a private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc.

(collectively, “PGIM”) with an aggregate amount of $ 225.0 million of unsecured senior promissory notes

(“unsecured senior notes”) available for issuance.

The Company also has a separate 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 June 30, 2023.

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

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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 interest rate on the Term Loan was based on SOFR, plus a margin that ranged 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 June 30, 2023, the term loan was paid in full.

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

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

As of June 30, 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 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.

As of June 30, 2023, Centerspace owned 14 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 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:

As of June 30, 2023, the Company believes that there were no material defaults or instances of noncompliance in regards to any of these mortgages payable.

On April 26, 2023, Centerspace closed on a $ 90.0 million secured note payable, which is included in the mortgages payable discussion above, with an interest rate of 5.04 % and a term of 12 years.

The aggregate amount of required future principal payments on all debt as of June 30, 2023, was as follows:

(in thousands)

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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.

During the next twelve months, the Company estimates an additional $ 1.0 million 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 March 31, 2023 and December 31, 2022 the Company had no remaining interest rate swaps.

As of June 30, 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 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.

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

During the six months ended June 30, 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 June 30, 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 (Loss)

Three months ended March 31, 2023 2022 2023 2022

Three months ended June 30, 2023 2022 2023 2022

Total derivatives in cash flow hedging relationships - Interest rate contracts $ — $ — Interest expense $ ( 159 ) $ ( 188 )

Six months ended June 30,

Total derivatives in cash flow hedging relationships - Interest rate contracts $ — $ 1,581 Interest expense $ ( 297 ) $ ( 492 )

NOTE 7 • 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.

Cash and cash equivalents, restricted cash, other assets, 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.

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Balance Sheet Location Total Level 1 Level 2 Level 3

March 31, 2023

June 30, 2023

Notes receivable Other assets $ 5,666 — — $ 5,666

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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 %).

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 of 0.5 %.

Changes in the fair value of these receivables from period to period are reported in interest and other income on the Condensed Consolidated Statements of Operations.

(in thousands)

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

Three months ended March 31, 2023

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

Six months ended June 30, 2023

Notes receivable $ 5,666 $ 10 $ 133 $ 143

Three months ended March 31, 2022

Six months ended June 30, 2022

Notes receivable $ 6,072 $ 7 $ 142 $ 149

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.

As of June 30, 2023 and December 31, 2022, Centerspace had investments totaling $ 1.7 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 March 31, 2023, the Company had total unfunded commitments of $ 1.4 million.

As of June 30, 2023, the Company had total unfunded commitments of $ 1.2 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 March 31, 2023 and December 31, 2022.

There were no non-financial assets or liabilities measured at fair value on a nonrecurring basis at June 30, 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 March 31, 2023 and December 31, 2022, respectively, are as follows:

The estimated fair values of the Company’s financial instruments as of June 30, 2023 and December 31, 2022, respectively, are as follows:

(in thousands)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Balance Sheet Location Carrying Amount Fair Value Carrying Amount Fair Value

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NOTE 8 • ACQUISITIONS AND DISPOSITIONS

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

Centerspace did not acquire new real estate during the three months ended June 30, 2023 and 2022.

Centerspace did not acquire new real estate during the six months ended June 30, 2023 compared to acquisitions of $ 116.9 million during the six months ended June 30, 2022.

The acquisitions during the six months ended June 30, 2022 are detailed below.

Six Months Ended June 30, 2022

Acquired (in thousands)

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(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.

During the six months ended June 30, 2023 and 2022, Centerspace recognized $ 893,000 and $ 10.6 million, respectively, of amortization expense related to intangibles, included within depreciation and amortization in the Condensed Consolidated Statement of Operations.

(5) Debt discount on assumed mortgage.

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

Centerspace did not dispose of any real estate during the three months ended June 30, 2023 and 2022.

During the six months ended June 30, 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 six months ended June 30, 2022.

The dispositions for the six months ended June 30, 2023 are detailed below.

Six Months Ended June 30, 2023

(in thousands)

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“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.

During the six months ended June 30, 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 months ended March 31, 2023 and 2022, respectively, along with reconciliations to net income in the Condensed Consolidated Financial Statements.

The following tables present NOI for the three and six months ended June 30, 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 March 31, 2023 Multifamily All Other Total

Three Months Ended June 30, 2023 Multifamily All Other Total

Revenue $ 63,733 $ 1,043 $ 64,776

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Property management ( 2,247 )

Casualty gain (loss) ( 252 )

Casualty loss

Depreciation and amortization ( 24,371 )

General and administrative expenses ( 4,162 )

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

Loss on sale of real estate and other investments

Loss on litigation settlement

Interest expense ( 8,641 )

Interest and other income 295

Net income (loss) $ 52,327

(in thousands)

Three Months Ended March 31, 2022 Multifamily All Other Total

Three Months Ended June 30, 2022 Multifamily All Other Total

Revenue $ 57,436 $ 5,680 $ 63,116

2 unchanged sentences

Property management ( 2,721 )

Casualty gain (loss) ( 598 )

Casualty loss

Depreciation and amortization ( 24,768 )

General and administrative expenses ( 5,221 )

Gain on sale of real estate and other investments

Interest expense ( 7,561 )

Interest and other loss

(in thousands)

Six Months Ended June 30, 2023 Multifamily All Other Total

Revenue $ 126,230 $ 6,443 $ 132,673

Property operating expenses, including real estate taxes 50,633 3,336 53,969

Net operating income $ 75,597 $ 3,107 $ 78,704

Property management ( 4,815 )

Casualty loss

Depreciation and amortization ( 50,364 )

General and administrative expenses ( 11,885 )

Gain on sale of real estate and other investments

Loss on litigation settlement

Interest expense ( 18,960 )

Interest and other income 344

Net income (loss) $ ( 10,563 )

(in thousands)

Six Months Ended June 30, 2022 Multifamily All Other Total

Revenue $ 112,352 $ 11,078 $ 123,430

Property operating expenses, including real estate taxes 46,478 5,611 52,089

Net operating income $ 65,874 $ 5,467 $ 71,341

Property management ( 4,974 )

Casualty loss

Depreciation and amortization ( 55,769 )

General and administrative expenses ( 9,721 )

Gain on sale of real estate and other investments

Interest expense ( 15,276 )

Interest and other income 1,046

Segment Assets and Accumulated Depreciation

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:

Segment assets are summarized as follows as of June 30, 2023, and December 31, 2022, respectively, along with reconciliations to the Condensed Consolidated Financial Statements:

(in thousands)

As of March 31, 2023 Multifamily All Other Total

As of June 30, 2023 Multifamily All Other Total

Segment assets

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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.

The Company recorded a loss on litigation settlement of $ 2.9 million due to a trial judgment against Centerspace for property damage and monetary losses.

The Company cannot, with any level of certainty, predict or estimate if there will be additional costs incurred as a result of the lawsuit.

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.

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Restrictions on Taxable Dispositions.

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.

Twenty-eight properties, consisting of 4,935 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.

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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.

Through June 30, 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.

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Dividend yield 4.977 %

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 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.

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

On March 31, 2023, in connection with her appointment to President and Chief Executive Officer, Anne Olson received a one-time stock award of 5,492 RSUs, which will vest in full on March 31, 2026.

On March 31, 2023, in connection with the change in executive management, Bhairav Patel, CFO, received a one-time stock award of 2,746 RSUs.

One-third of the RSUs will vest on March 31, 2025 and the remaining two-thirds will vest on March 31, 2026.

Awards granted to trustees on May 16, 2023 consist of 9,200 time-based RSUs, which vest on May 16, 2024.

These awards are classified as equity awards.

Share-Based Compensation Expense

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.

Share-based compensation expense recognized in the condensed consolidated financial statements for all outstanding share-based awards was $ 590,000 and $ 480,000 for the three months ended June 30, 2023 and 2022, respectively, and $ 2.1 million and $ 1.2 million for the six months ended June 30, 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.

This resulted in the acceleration of share-based compensation expense for those awards resulting in an additional $ 737,000 in expense during the six months ended June 30, 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 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.

Decker exercised stock options, prior to their expiration on June 30, 2023, in a cashless exercise with a net 425 shares issued.

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