What changed in this filing

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Item 1A. Risk Factors

2024-02-20 compared with 2023-02-21 · 97 added, 110 removed, 317 unchanged (40% of the section changed)

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” See “Adverse changes in taxes and other laws may affect our liabilities relating to our properties and operations.”

We depend on residents for revenue, and low occupancy rates or lease terminations could reduce our revenues from rents.

Rental payments account for most of our revenue.

The underlying value of our properties and the ability to make distributions depend on the ability of our residents to generate enough income to pay their rents in a timely manner.

The success of our properties depends on the occupancy levels, rental income and operating expenses of our properties and our business.

Residents’ inability to timely or fully pay their rents may be impacted by their employment prospects and/or other constraints on their personal finances, including debts, purchases and other factors.

These and other changes beyond our control may adversely affect our residents’ ability to make their required lease payments.

If residents default on their leases or fail to renew their leases, we may be unable to re-lease the property for the rent previously received.

Our apartment leases are generally for a term of 12 months or less.

Because these leases generally allow residents to leave at the expiration of the lease term without penalty, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms.

Furthermore, we may be unable to sell a property with low occupancy without incurring a loss.

These events and others could cause us to reduce the amount of distributions we make to shareholders and may also cause the value of our common shares to decline.

Uncertain global macro-economic and political conditions could materially adversely affect our results of operations and financial condition.

Our results of operations are materially affected by economic and political conditions in the United States and internationally, including inflation, deflation, interest rates, recession, availability of capital, and the effects of governmental initiatives to manage economic conditions.

Current or potential residents may delay or decrease spending on housing as their budgets are impacted by economic conditions.

Current or potential residents may delay or decrease spending on housing as their budgets are impacted by economic or political conditions.

The inability of current and potential residents to pay market rents may adversely affect our earnings and cash flows.

In addition, deterioration of conditions in worldwide credit markets could limit our ability to obtain financing to fund our operations and capital expenditures.

The current invasion of Ukraine by Russia has escalated tensions among the United States, the North Atlantic Treaty Organization (“NATO”) and Russia.

The United States and other NATO member states, as well as non-member states, have announced new sanctions against Russia and certain Russian banks, enterprises and individuals.

These and any future additional sanctions and any resulting conflict between Russia, the United States and NATO countries could have an adverse impact on our current operations because they could cause declining conditions in worldwide credit and capital markets and the economy in general.

Further, such invasion, ongoing military conflict, resulting sanctions and related countermeasures by NATO states, the United States and other countries could to lead to market disruptions, including significant volatility in the credit and capital markets, which could have an adverse impact on our operations and financial performance.

The ongoing pandemic of COVID-19 and the potential future outbreak of other highly infectious or contagious diseases may materially and adversely impact and disrupt our business, income, cash flow, results of operations, financial condition, liquidity, prospects and ability to service our debt obligations, and our ability to pay dividends and other distributions to our equityholders.

The COVID-19 pandemic has and may continue to impact our financial condition, results of operations, and cash flows as well as adversely affect our residents and commercial tenants, the real estate market, and the global economy and financial markets generally.

The continued effects of COVID-19 will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures.

Moreover, many of the other risks identified in this Report may be heightened because of the adverse impacts of COVID-19.

The ongoing COVID-19 pandemic and continuing restrictions intended to prevent and mitigate its spread could have additional adverse effects on our business, including with regards to:

• our employees, residents, and commercial tenants, third party vendors and suppliers, and apartment communities, as well as our cash flow, business, financial condition, and results of operations;

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

• government actions or regulations arising out of the COVID-19 pandemic that limit economic and consumer activity or affect the operation of our properties;

• rental conditions in our markets, including occupancy levels and rental rates, changes in tax and housing laws, or other factors, including the impact of the COVID-19-related governmental rules and regulations relating to rental rates, evictions, and other rental conditions;

• changes in operating costs related to complying with COVID-19 restrictions or otherwise responding to the COVID-19 pandemic.

The current conflicts in Russia and Ukraine, as well as Israel and Gaza, resulting sanctions and related countermeasures by the United States and other countries could to lead to market disruptions, including significant volatility in the credit and capital markets and the economy in general, which could have an adverse impact on our operations and financial performance.

The COVID-19 pandemic affected our business in the past, and the potential future outbreak of other highly infectious or contagious diseases may materially and adversely impact and disrupt our business, income, cash flow, results of operations, financial condition, liquidity, prospects and ability to service our debt obligations, and our ability to pay dividends and other distributions to our equityholders.

The COVID-19 pandemic had, and any future pandemic may have, an impact on our financial condition, results of operations, and cash flows as well as adversely affect our residents and commercial tenants, the real estate market, and the global economy and financial markets generally.

The effects of any such outbreak are highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the epidemic, pandemic, or other outbreak, the actions taken to contain it or mitigate its impact, and the direct and indirect economic effects of the outbreak and containment measures.

Global outbreaks of infectious diseases may also exacerbate certain of the other risks described in this “Risk Factors” section.

Our financial performance is subject to risks associated with the real estate industry and ownership of apartment communities.

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• acquisitions and divestitures could divert our attention from our existing properties and could cause us to lose key employees or be unable to attract highly qualified new employees;

or cause us to become more dependent on third parties in new markets due to our inability to directly and efficiently manage and otherwise monitor new properties in new markets;

• unfamiliarity with the dynamics and prevailing market conditions or local government or permitting procedures of any new geographic markets could adversely affect our ability to successfully expand into or operate within those markets or cause us to become more dependent on third parties in new markets due to our inability to directly and efficiently manage and otherwise monitor new properties in new markets;

• we may make assumptions regarding the expected future performance of acquired properties, including expected occupancy, rental rates, and cash flows, that prove to be inaccurate;

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We also may abandon opportunities to enter new markets that we have begun to explore for any reason and may, as a result, fail to recover expenses already incurred.

We are dependent on a concentration of our investments in a single asset class, making our results of operations more vulnerable to a downturn or slowdown in the sector or other economic factors .

We depend on a concentration of our investments in a single asset class, making our results of operations more vulnerable to a downturn or slowdown in the sector or other economic factors .

Substantially all of our investments are concentrated in the multifamily sector.

As a result, we are subject to risks inherent in investments in a single type of property.

As a result, we are subject to risks inherent in investments in a single asset class.

A downturn or slowdown in the demand for multifamily housing may have more pronounced effects on our business and results of operations or on the value of our assets than if we had continued to be more diversified in our investments into more than one asset class.

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We may continue to be obligated to repay mortgage indebtedness or other obligations related to an affected apartment community.

To the extent that we experience any significant changes in the climate in areas where our apartment communities are located, we may experience extreme weather conditions and prolonged changes in precipitation and temperature, all of which could result in physical damage to, and/or a decrease in demand for, our apartment communities located in these areas.

To the extent that climate change causes an increase in catastrophic weather events, such as severe storms, fires, or floods, our properties may be susceptible to an increased risk of weather-related damage.

In addition, we may experience extreme weather conditions and prolonged changes in precipitation and temperature, all of which could result in physical damage to, and/or a decrease in demand for, our apartment communities located in these areas.

If the impact of any such climate change were to be material, or occur for a lengthy period of time, our business may be adversely affected.

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We carry comprehensive liability, fire, cyber, extended coverage, and other insurance with respect to our properties at levels that we believe to be adequate and comparable to coverage customarily obtained by owners of similar properties.

However, the coverage limits of our current or future policies may be insufficient to cover the full cost of repair or replacement of all potential losses, or our level of coverage may not continue to be available in the future or, if available, may be available only at unacceptable cost or with unacceptable terms.

However, the coverage limits of our current or future policies may be insufficient to cover the full cost of repair or replacement of all potential losses, or our level of coverage may not

continue to be available in the future or, if available, may be available only at unacceptable cost or with unacceptable terms.

We also do not maintain coverage for certain catastrophic events like hurricanes and earthquakes because the cost of such insurance is deemed by management to be higher than the risk of loss due to the location of our properties.

In most cases, we have to renew our insurance policies on an annual basis and negotiate acceptable terms for coverage, exposing us to the volatility of the

insurance markets, including the possibility of rate increases.

In most cases, we have to renew our insurance policies on an annual basis and negotiate acceptable terms for coverage, exposing us to the volatility of the insurance markets, including the possibility of rate increases.

In addition, a reduction of the number of insurance providers or the unwillingness of existing insurance providers to write insurance for multifamily properties may reduce the potential availability and/or cost for obtaining insurance on our properties.

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Changes in federal or state laws and regulations relating to climate change could result in increased costs to our business, including capital expenditures to improve the energy efficiency of our existing communities or new development communities without a corresponding increase in revenue.

Among other things, “green” building codes may seek to reduce emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency and waste management.

Among other things, “green” building codes may seek to reduce emissions and other environmental impacts through the imposition of standards for design, construction materials, water and energy usage and efficiency and waste management.

The imposition of such requirements in the future, including the imposition of new energy efficiency standards or requirements relating to resistance to inclement weather, could increase the costs of maintaining or improving our properties without a corresponding increase in revenue, thereby having an adverse effect on our financial condition or results of operation.

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Our apartment communities compete directly with other multifamily apartment communities, single-family homes, condominiums, and other short-term rentals.

Short-term leases could expose us to the effects of declining market rents .

Our apartment leases are generally for a term of 12 months or less.

Because real estate investments are relatively illiquid and various other factors limit our ability to dispose of assets, we may not be able to sell properties when appropriate.

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” The Inflation Reduction Act of 2022 may also increase our tax burden.

See “ The excise tax included in the Inflation Reduction Act of 2022 may hinder our ability to repurchase common shares or decrease the value of our securities following a business combination .”

See “ Legislative or regulatory actions affecting REITs could have an adverse effect on us or our shareholders .”

We may be unable to retain or attract qualified management.

We are dependent upon our senior officers for essentially all aspects of our business operations.

We depend on our senior officers for essentially all aspects of our business operations.

Our senior officers have experience in the real estate industry, and the loss of them would likely have a significant adverse effect on our operations and could adversely impact our relationships with lenders and industry personnel.

We do not have employment contracts with any of our senior officers.

Except for our Chief Executive Officer and Chief Financial Officer, we do not have employment contracts with any of our senior officers.

As a result, any senior officer may terminate his or her relationship with us at any time, without providing advance notice.

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The loss of key personnel at these apartment communities, or the inability or cost of replacing such personnel at such communities, could have an adverse impact on our business and results of operations.

We face risks associated with security breaches through cyber-attacks, cyber intrusions, or otherwise, which could pose a risk to our systems, networks, and services .

We face risks associated with cyber-attacks, cyber intrusions, or otherwise, which could pose a risk to our systems, networks, and services .

We face risks associated with security breaches or disruptions, whether through cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to emails, or persons inside our organization.

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We also rely extensively on computer systems to process transactions and manage our business.

While we and our service providers employ a variety of data security measures to protect confidential information on our systems and periodically review and improve our data security measures, we cannot provide assurance that we or our service providers will be able to prevent unauthorized access to this personal information, that our efforts to maintain the security and integrity of the information that we and our service providers collect will be effective, or that attempted security breaches or disruptions would not be successful or damaging.

Even the most well-protected information, networks, systems, and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target.

In some cases, these breaches are designed not to be detected and, in fact, may not be detected.

In some cases, these breaches are designed to be undetected and, in fact, may not be detected.

Accordingly, we and our service providers may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, thereby making it impossible to entirely mitigate this risk.

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The costs of mitigating cybersecurity risks are significant and are likely to increase in the future.

These costs include, but are not limited to, retaining services of cybersecurity providers, compliance costs arising out of existing and future cybersecurity, data protection, privacy laws, regulations, and related reporting obligations, and costs related to maintaining data backups and other damage-mitigation services.

These costs include, but are not limited to, retaining services of cybersecurity experts, compliance costs arising out of existing and future cybersecurity, data protection, privacy laws, regulations, and related reporting obligations, and costs related to maintaining data backups and other damage-mitigation services.

We previously suffered a ransomware attack on our information technology systems.

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However, notwithstanding every measure we take to address cybersecurity matters, and although we have not experienced any material losses relating to any cyber-attack, we cannot assure you that we will not suffer losses related to cyber-attacks in the future.

Security breaches could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

Information security risks with respect to data privacy have generally increased in recent years due to the rise in new technologies and the increased sophistication and activities of perpetrators of cyber-attacks.

In the ordinary course

of our business we acquire and store sensitive, private data, including intellectual property, our proprietary business information and personally identifiable information of our prospective and current residents, our employees and third-party service providers in our offices and on our networks and website and on third-party provider networks.

We may share some of this information with service providers who assist us with certain aspects of our business.

The secure processing and maintenance of this information is critical to our operations and business and growth strategies.

Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.

Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption to our operations and the services we provide to customers or damage our reputation.

In addition, a security breach could require that we expend significant additional resources to repair and/or enhance our information security systems.

Furthermore, we could experience material harm to our financial condition, cash flows and the market price of our common shares, misappropriation of assets, compromise or corruption of confidential information collected in the course of conducting our business, liability for stolen information or assets, increased cybersecurity protection and insurance costs, regulatory enforcement, litigation and damage to our stakeholder relationships.

We may be responsible for potential liabilities under environmental laws.

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The continuing evolution of social media will present us with new and ongoing challenges and risks.

Litigation risks could affect our business .

As a publicly traded owner, manager, and developer of apartment communities, we may incur liability based on various conditions at our properties and the buildings thereon.

In the past, we have been, and in the future may become, involved in legal proceedings, including consumer, employment, tort, or commercial litigation, any of which if decided adversely to us or settled by us and not adequately covered by insurance, could result in liability that could be material to our results of operations.

Risks related to properties under development, redevelopment, or newly developed properties may adversely affect our financial performance.

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Assumptions used to estimate annual and residual cash flow and the estimated holding period of these assets require the judgment of management.

If we cannot recover the carrying value of our real estate assets, our results of operations could suffer.

Complying with laws benefiting disabled persons or other safety regulations and requirements may affect our costs and investment strategies.

Federal, state, and local laws and regulations designed to improve disabled persons’ access to and use of buildings, including the Americans with Disabilities Act of 1990, may require modifications to, or restrict renovations of, existing buildings that may require unexpected expenditures.

These laws and regulations may require that structural features be added to buildings under construction.

These laws and other safety regulations may require that structural features be added to buildings under construction.

Legislation or regulations that may be adopted in the future may impose further burdens or restrictions on us with respect to improved access to, and use of these buildings by, disabled persons.

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Even when we have a controlling interest, certain major decisions may require partner approval, such as the sale, acquisition, or financing of a property.

Potential changes to the financial condition of Fannie Mae and Freddie Mac and in government support for apartment communities may adversely affect our business .

Historically, we have depended on the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) to provide financing for certain apartment communities.

Although Fannie Mae and Freddie Mac have a mandate to support multifamily housing through their financing activities, government proposals relating to the future of agency mortgage finance in the U.S.

could involve the phase-out of Fannie Mae and Freddie Mac.

Any phase-out of Fannie Mae and Freddie Mac, change in their mandate, or reduction in government support for apartment communities generally could result in adverse changes to interest rates, capital availability, development of additional apartment communities, and the value of these communities.

Employee theft or fraud could result in loss.

Certain employees have access to, or signature authority with respect to, our bank accounts or assets, which exposes us to the risk of fraud or theft.

Certain employees also have access to key information technology (“IT”) infrastructure and to resident and other information that may be commercially valuable.

If any employee were to compromise our IT systems, or misappropriate resident or other information, we could incur losses, including potentially significant financial or reputational harm.

We may not have insurance that covers any losses in full or covers losses from particular criminal acts.

Risks Related to Our Indebtedness and Financings

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Restrictive covenants in our debt agreements may limit our operating and financial flexibility, and our inability to comply with these covenants could have significant implications .

Our indebtedness, which at December 31, 2022 totaled outstanding borrowings of approximately $1.0 billion, contains a number of significant restrictions and covenants.

Our indebtedness, which at December 31, 2023 totaled outstanding borrowings of approximately $920.0 million, contains a number of significant restrictions and covenants.

These restrictions and covenants include financial covenants relating to fixed charge coverage ratios, maximum secured debt, maintenance of unencumbered asset value, and total debt to total asset value, among others and certain non-financial covenants.

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An event of default under the terms of our indebtedness would permit the lenders to accelerate indebtedness under effected agreements, which would include agreements that contain cross-acceleration provisions with respect to other indebtedness.

Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in a property or group of properties subject to mortgage debt.

As of December 31, 2023, 14 of our properties were encumbered by mortgages.

Incurring mortgage and other secured debt obligations increases our risk of property losses because defaults on indebtedness secured by property may result in foreclosure actions initiated by lenders and ultimately our loss of the property securing any loans for which we are in default.

Any foreclosure on a mortgaged property or group of properties could adversely affect the overall value of our portfolio of properties.

For tax purposes, a foreclosure of any of our properties that is subject to a nonrecourse mortgage loan would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage.

If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds, which could hurt our ability to meet the distribution requirements applicable to REITs under the Code.

Rising interest rates may affect our cost of capital and financing activities.

We have incurred, and may in the future incur, additional indebtedness that bears interest at a variable rate.

We also have an Unsecured Credit Facility that bears interest at variable rates based on amounts drawn.

An increase in interest rates would increase our interest expense and increase the cost of refinancing existing debt and issuing new debt, which would adversely affect our cash flow and ability to make distributions to our shareholders.

In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times that may not permit realization of the maximum return on such investments.

The effect of prolonged interest rate increases could adversely impact our ability to make acquisitions and develop properties.

The potential for rising interest rates could limit our ability to refinance portions of our fixed-rate indebtedness when it matures and would increase our interest costs.

We also have an unsecured credit facility and term loan that bears interest at variable rates based on amounts drawn.

As a result, any increase in interest rates could increase our interest expense on our variable rate debt, increase our interest rates when refinancing fixed-rate debt, increase the cost of issuing new debt, and reduce the cash available for distribution to shareholders.

As a result, any increase in interest rates could reduce the cash available for distribution to shareholders.

Financial and real estate market disruptions could adversely affect the multifamily property sector’s ability to obtain financing from Fannie Mae and Freddie Mac, which could adversely impact us.

The Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) are major sources of financing for the multifamily sector, and both have historically experienced losses due to credit-related expenses, securities impairments and fair value losses.

government regulations (i) heighten Fannie Mae’s and Freddie Mac’s underwriting standards, (ii) adversely affect interest rates, or (iii) reduce the amount of capital they can make available to the multifamily sector, we could lose, in part or completely, a vital resource for multifamily financing.

Any potential reduction in loans, guarantees and credit-

enhancement arrangements from Fannie Mae and Freddie Mac could jeopardize the effectiveness of the multifamily sector’s available financing and decrease the amount of available liquidity and credit that could be used to acquire and diversify our portfolio of multifamily assets.

In addition, any phase-out of Fannie Mae and Freddie Mac, change in their mandates, or reduction in government support for apartment communities generally could result in adverse changes to interest rates, capital availability, development of additional apartment communities, and the value of these communities.

All of the foregoing could materially adversely affect our financial condition, results of operations and ability to make distributions to our investors.

We hold a portion of our cash and cash equivalents in deposit accounts that could be adversely affected if the financial institutions holding such deposits fail.

We maintain our cash and cash equivalents at insured financial institutions.

The combined account balances at each institution periodically exceed the FDIC insurance coverage of $250,000, and, as a result, there is a concentration of credit risk related to amounts in excess of FDIC insurance coverage.

We do not have any bank accounts, loans to or from, or any other amounts due to or from any recently failed financial institution, nor have we experienced any losses to date on our cash and cash equivalents held in bank accounts.

However, there is no assurance that financial institutions in which we hold our cash and cash equivalents will not fail, in which case we may be subject to a risk of loss or delay in accessing all or a portion of our funds exceeding the FDIC insurance coverage, which could adversely impact our short-term liquidity, ability to operate our business, and financial performance.

Interest rate hedging arrangements may result in losses.

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In order to minimize any counterparty credit risk, we enter into hedging arrangements only with investment grade financial institutions.

Changes to LIBOR could affect our financing covenants .

London Interbank Offered Rate (“LIBOR”) has been used as a primary benchmark for short-term interest rates, including under certain of our credit facilities.

Financial Conduct Authority (FCA), which regulates LIBOR, ceased providing the one-week and two-month U.S.

dollar LIBOR settings and all non-U.S.

dollar LIBOR settings as of January 1, 2022.

The ICE Benchmark Administration, in its capacity as administrator of

USD LIBOR, has announced it plans to cease providing the remaining U.S.

dollar LIBOR settings immediately after June 30, 2023.

It is unclear whether LIBOR will continue to be published after such dates.

The Alternative References Rates Committee, a steering committee comprised of large U.S.

financial institutions, has proposed replacing USD LIBOR with a new index calculated by short-term repurchase agreements - Secured Overnight Financing Rate (SOFR).

The market transition away from LIBOR and toward SOFR or another alternate reference rate has been and is expected to continue to be complicated and to include the development of term and credit adjustments to accommodate differences between LIBOR and SOFR or any other alternate reference rate as well as adjustments to other market conventions.

During the market transition away from the remaining LIBOR settings, LIBOR may experience increased volatility, and the overnight Treasury repurchase market underlying SOFR may also experience disruptions from time to time, which may result in unexpected fluctuations in SOFR.

Although the full impact of such reforms and actions, together with any transition away from LIBOR and toward SOFR, including the potential or actual discontinuance of LIBOR publication, remains unclear, these changes may have a material adverse impact on the availability of financing.

There can be no assurance that SOFR or another new global standard will be agreed upon or that any new rate will be reflective of the original interest rate and credit risk included within LIBOR, any of which could have a significant adverse effect on our financing costs as well as our business and results of operations.

Risks Related to Our Shares

Our stock price may fluctuate significantly.

The market price and trading volume of our common shares are subject to fluctuation due to general market conditions, the risks discussed in this report, and several other factors, including the following:

• regional, national, and global economic and business conditions;

• actual or anticipated changes in our quarterly operating results or dividends;

• changes in our estimates of funds from operations, core funds from operations, or earnings;

• investor interest in our property portfolio;

• the market perception and performance of REITs in general and apartment REITs in particular;

• the market perception or trading volume of REITs relative to other investment opportunities;

• the market perception of our financial condition, performance, distributions, and growth potential;

• general stock and bond market conditions, including potential increases in interest rates that could lead investors to seek higher annual yields from dividends;

• shifts in our investor base to a higher concentration of passive investors, including exchange-traded funds and index funds, that could have an adverse effect on our ability to communicate with our shareholders;

• our ability to access capital markets, which could impact our cost of capital;

• a change in our credit rating or analyst ratings;

• changes in minimum dividend requirements;

• terrorism or other factors that adversely impact the markets in which our stock trades;

• changes in tax laws or government regulations that could affect the attractiveness of our stock.

Rising interest rates could have an adverse effect on our share price.

Interest rates rose significantly in 2022 and may continue to rise.

This increase, and any future increase, could cause holders of our common shares and other investors to seek higher dividends on our shares or higher yields through other investments, which could adversely affect the market price of our shares.

Low trading volume on the NYSE may prevent the timely sale or resale of our shares.

Although our common shares are listed on the NYSE, the daily trading volume of our shares may be lower than the trading volume for other companies.

As a result of lower trading volume, an owner of our common shares may encounter difficulty in selling our shares in a timely manner and may incur a substantial loss.

Corporate social responsibility, specifically related to ESG, may impose additional costs and expose us to new risks.

Environmental, social and governance (“ESG”) matters have become increasingly important to investors and other stakeholders.

Certain organizations that provide corporate risk and corporate governance advisory services to investors have developed scores and ratings to evaluate companies based upon ESG metrics.

ESG evaluations are highly important to many investors and stakeholders.

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In addition, investors, particularly institutional investors, may use ESG or sustainability scores issued by proxy advisory firms or other third parties to benchmark companies against their peers.

Although we make ESG disclosures and undertakes sustainability and diversity initiatives, there can be no assurance that we will score highly on ESG matters in the future.

Furthermore, our residents and employees, as well as prospective residents and employees, may use sustainability scores in deciding whether to rent from or work with us.

On the other hand, investor backlash, political pressure, and legal threats over ESG efforts have occurred.

Although we make ESG disclosures and undertake sustainability and diversity initiatives, there can be no assurance that we will score highly on ESG matters in the future or satisfy all stakeholders.

The criteria by which companies are rated may change, which could cause us to perform differently or worse than we have in the past.

We may face reputational

damage in the event our corporate responsibility procedures or standards do not meet the standards set by various constituencies.

The focus and activism related to ESG and related matters may constrain our business operations or increase expenses.

In addition, we may face reputational damage in the event our corporate responsibility procedures or standards do not meet the standards set by various constituencies, including our residents.

The occurrence of any of the foregoing could have an adverse effect on our reputation, the price of our stock and our business, financial condition and results of operations, including increased capital expenditures and operating expenses.

Failure to generate sufficient revenue or other liquidity needs could limit cash flow available for distributions to our shareholders.

A decrease in rental revenue, an increase in funding to support our acquisition and development needs, or other unmet liquidity needs could have an adverse effect on our ability to pay distributions to our shareholders or the Operating Partnership’s unitholders.

Payment of distributions on our common shares is not guaranteed.

Our Board of Trustees must approve any stock distributions and may elect at any time, or from time to time, and for an indefinite duration, to reduce or not pay the distributions payable on our common shares.

Our Board may reduce distributions for a variety of reasons, including but not limited to the following:

• operating and financial results cannot support the current distribution payment;

• operating and financial results that may not support the current distribution payment;

• unanticipated costs, capital requirements, or cash requirements;

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• other factors the Board of Trustees may consider relevant.

We are a holding company with limited operations and, as such, we will rely on funds received from our Operating Partnership to pay liabilities, and the interests of our shareholders will be structurally subordinated to all liabilities and obligations of our Operating Partnership and its subsidiaries.

We are a holding company and conduct substantially all of our operations through our Operating Partnership.

We do not have, apart from an interest in our Operating Partnership, any significant independent operations.

As a result, we rely on distributions from our Operating Partnership to pay any dividends we might declare on our common shares.

We also rely on distributions from our Operating Partnership to meet our obligations, including any tax liability on taxable income allocated to us from our Operating Partnership.

In addition, because we are a holding company, claims of shareholders are structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of our Operating Partnership and its subsidiaries.

Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our Operating Partnership and its subsidiaries will be available to satisfy the claims of our shareholders only after all of our and our Operating Partnership’s and its subsidiaries’ liabilities and obligations have been paid in full.

Our future growth depends, in part, on our ability to raise additional equity capital, which could have the effect of diluting the interests of our common shareholders.

Our future growth depends upon, among other things, our ability to raise equity capital and issue limited partnership units of Centerspace, LP.

Our future growth depends upon, among other things, our ability to raise equity capital and issue limited partnership Units of our Operating Partnership.

Sales of substantial amounts of our common or preferred shares in the public market, or the perception that such sales or issuances might occur, may dilute the interests of the current common shareholders and could adversely affect the market price of our common shares.

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Without the approval of our common shareholders, our Board of Trustees may establish additional classes or series of our shares of beneficial interest, and such classes or series may have dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences, or other rights and preferences that are superior to the rights of the holders of our common shares.

In that regard, in September 2020, we filed a shelf registration statement with the SEC that enables us to sell an undetermined number of equity and debt securities as defined in the prospectus, including under the 2021 ATM Program.

We have a shelf registration statement that enables us to sell an undetermined number of equity and debt securities as defined in the prospectus, including under the 2021 ATM Program.

Future sales of common shares, preferred shares, or convertible debt securities may dilute current shareholders and could have an adverse impact on the market price of our common shares.

Any material weaknesses identified in our internal control over financial reporting could adversely affect our stock price.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting.

If we were to identify one or more material weaknesses in our internal control over financial reporting, we could lose investor confidence in our financial reporting and results of operations, which in turn could have an adverse effect on our stock price.

Certain provisions of our Declaration of Trust may limit a change in control and deter a takeover.

4 unchanged sentences

If the transaction is not void, then the shares in violation of the foregoing conditions will automatically be exchanged for an equal number of excess shares, and these excess shares will be transferred to an excess share trustee for the exclusive benefit of the charitable beneficiaries named by our Board of Trustees.

The Trust’s Declaration of Trust also provides a limit on a Person owning in excess of the ownership limit of 9.8%, in number or value, of the Trust’s outstanding shares, although the Board of

Trustees retains the ability to make exceptions to this ownership threshold.

The Trust’s Declaration of Trust also provides a limit on a Person owning in excess of the ownership limit of 9.8%, in number or value, of the Trust’s outstanding shares, although the Board of Trustees retains the ability to make exceptions to this ownership threshold.

These limitations may have the effect of preventing a change in control or takeover of us by a third party, even if the change in control or takeover would be in the best interests of our shareholders.

5 unchanged sentences

The determination that we qualify as a REIT requires an ongoing analysis of various factual matters and circumstances, some of which may not be within our control.

For example, in order to qualify as a REIT, at least 95% of our gross income in any year must come from certain passive sources that are itemized in the REIT tax laws, and we are prohibited from owning specified amounts of debt or equity securities of some issuers.

amounts of debt or equity securities of some issuers.

Thus, to the extent revenues from non-qualifying sources, such as income from third-party management services, represent more than 5% of our gross income in any taxable year, we will not satisfy the 95% income test and may fail to qualify as a REIT, unless certain relief provisions contained in the Code apply.

19 unchanged sentences

shareholders that are individuals, trusts, or estates are generally not eligible for the reduced tax rate applicable to qualified dividends received from non-REIT corporations.

For taxable year beginning before January 1, 2026, non-corporate taxpayers may deduct up to 20% of certain pass-through business income, including “qualified

REIT dividends” (generally, dividends received by a REIT shareholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations, resulting in an effective maximum U.S.

For taxable year beginning before January 1, 2026, non-corporate taxpayers may deduct up to 20% of certain pass-through business income, including “qualified REIT dividends” (generally, dividends received by a REIT shareholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations, resulting in an effective maximum U.S.

federal income tax rate of 29.6% on such income.

6 unchanged sentences

If a transaction intended to qualify as a Section 1031 exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax-deferred basis.

If we are unable to meet the technical requirements of a desired Section 1031 exchange, we may be required to make a special dividend payment to our shareholders if we are unable to mitigate the taxable gains realized.

If we are unable to meet the technical requirements of a desired Section 1031 exchange, we may be required to make a special dividend payment to

our shareholders if we are unable to mitigate the taxable gains realized.

The failure to reinvest proceeds from sales of properties into tax-deferred exchanges could necessitate payments to unitholders with tax protection agreements.

We have tax protection agreements in place on thirty-seven properties.

We have tax protection agreements in place on twenty-eight properties.

If these properties are sold in a taxable transaction, we must make the unitholders associated with these particular properties whole through the payment of their related tax.

17 unchanged sentences

We have entered into agreements with certain contributors of our properties that contain limitations on our ability to dispose of certain properties in taxable transactions.

The restrictions on taxable dispositions are effective for varying periods.

The limitations on taxable dispositions are effective for varying periods.

Such agreements may require that we make a payment to the contributor in the event that we dispose of a covered property in a taxable sale during the restriction period.

8 unchanged sentences

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”).

The IRA includes numerous tax provisions that impact corporations, including

the implementation of a corporate alternative minimum tax as well as a 1% federal excise tax on certain stock repurchases and economically similar transactions.

The IRA includes numerous tax provisions that impact corporations, including the implementation of a corporate alternative minimum tax as well as a 1% federal excise tax on certain stock repurchases and economically similar transactions.

REITs are excluded from the definition of an “applicable corporation” and therefore are not subject to the corporate alternative minimum tax.

13 unchanged sentences

federal income tax law, regulation or administrative and judicial interpretation.

Unresolved Staff Comments

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

What changed 10-K

Item 1A. Risk Factors