What changed in this filing

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Item 1A. Risk Factors

2025-02-18 compared with 2024-02-20 · 182 added, 148 removed, 266 unchanged (55% of the section changed)

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Risks Related to Our Properties and Operations

Inflation and price volatility in the global economy could negatively impact our business and results of operations.

General inflation in the United States has risen to levels not experienced in recent decades, including rising energy prices, prices for consumer goods, interest rates, wages, and currency volatility.

These increases and any fiscal or other policy interventions by the U.S.

government in reaction to such events could negatively impact our business by increasing our operating costs and our borrowing costs as well as decreasing the capital available to our residents and prospective residents who wish to rent in our communities.

Although we believe that we could increase rent to combat inflation, the cost to operate and maintain communities could increase faster or at a rate greater than our ability to increase rents, which could adversely affect our results of operations.

We may also be limited by law in our ability to increase rents.

See “Multifamily residential properties may be subject to rent stabilization regulations, now or in the future, which limit our ability to raise rents above specified maximum amounts and could give rise to claims by residents that their rents exceed such specified maximum amounts.

” 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.

We depend on residents for rental payments, which accounts for most of our revenue, and low occupancy rates or lease terminations could reduce our revenues from rents.

The value of our properties and our ability to make distributions depend on the ability of our residents to generate enough income to pay their rents on time.

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.

Residents’ inability to timely or fully pay their rents may be impacted by their employment prospects and 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.

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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.

The short-term nature of these leases generally serves to reduce our risk to adverse effects of inflation, as our leases allow for adjustments in the rental rate at the time of renewal, which may enable us to seek increases.

However, 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 increase rents, whether due to market conditions or applicable law, at a rate consistent with inflation.

In addition, 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.

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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 or political conditions.

The current conflicts in Ukraine and the Middle East, resulting sanctions and related countermeasures by the United States and other countries, could lead to market disruptions, including significant volatility in the credit and capital markets and the economy in general, which could weaken our operations and financial performance.

Any development or escalation of these conflicts, or any new conflicts, including those resulting from the policies of the U.S.

Presidential Administration, could significantly affect worldwide political stability and cause turmoil in the capital markets and generally in the global financial system.

Additionally, geopolitical and macroeconomic consequences of these events cannot be predicted but could severely impact the world economy.

There is also substantial uncertainty surrounding tariffs and international trade relations, and it is difficult for us to predict future trade measures and the impact they will have on our business and operations.

In early 2025, the new Administration imposed and threatened additional tariffs on imports from various countries.

In response, some of these countries imposed and threatened additional tariffs on imports from the U.S.

How long current tariffs will remain in place, and whether the new Administration will enact the threatened tariffs or impose entirely new ones is uncertain.

The new tariffs, along with any additional tariffs or trade restrictions that may be implemented by the U.S.

or retaliatory trade measures or tariffs implemented by other countries, could result in reduced economic activity, increased costs in operating our business, reduced spending on housing, limits on trade with the U.S.

or other potentially adverse economic outcomes.

The occurrence of any of these could cause current or potential residents to 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 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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• vacancies, changes in rental rates, and the periodic need to repair, renovate, and redevelop our apartment communities;

• increases in operating costs, including real estate taxes, state and local taxes, insurance expenses, utilities, and security costs, many of which are not reduced significantly when circumstances cause a reduction in revenues from a property;

• increases in compensation costs due to the tight labor market in many of the markets in which we operate;

• increases in operating costs, including real estate taxes, state and local taxes, insurance premiums and other expenses, utilities, and security costs, many of which remain constant when circumstances reduce revenues from a property;

• increases in compensation costs due to the tight labor market in many markets in which we operate;

• our ability to provide adequate maintenance for our apartment communities;

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Our property acquisition activities may not produce the cash flows expected and could subject us to various risks that could adversely affect our operating results.

We have acquired and intend to continue to pursue the acquisition of apartment communities, but the success of our acquisition activities is subject to numerous risks, including the following:

We have acquired and intend to continue to pursue the acquisition of apartment communities, but the success of our acquisition activities is subject to many risks, including the following:

• acquisition agreements are subject to customary closing conditions, including completion of due diligence investigations, and we may be unable to complete an acquisition after making a non-refundable deposit and incurring other acquisition-related costs;

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• we may be subject to unknown liabilities from acquired properties, with either no or limited recourse against prior owners or other third parties;

• we may be unable to quickly and efficiently integrate new acquisitions into our existing operations.

• we may be unable to efficiently integrate new acquisitions into our existing operations.

We may be unable to acquire or develop properties and expand our operations into new or existing markets successfully.

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Acquiring or developing new properties and expanding into new markets introduces several risks, including, but not limited to, the following:

• we may not be successful in identifying suitable properties or other assets that meet our acquisition or development criteria or in consummating acquisitions or developments on satisfactory terms, or at all;

• we may be unable to maintain consistent standards, controls, policies, and procedures, or realize the anticipated benefits of the acquisitions within the anticipated time frame, or at all;

• we may be unable to identify suitable properties or other assets that meet our acquisition or development criteria or in consummating acquisitions or developments on satisfactory terms, or at all;

• we may be unable to maintain consistent standards, controls, policies, and procedures, or realize the anticipated benefits of the acquisitions within our expected time frame, or at all;

• 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;

• 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;

• 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 because of our inability to directly and efficiently manage and otherwise monitor new properties in new markets;

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

• we may improperly estimate the costs of repositioning or redeveloping an acquired property.

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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.

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

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.

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 were more diversified in our investments into more than one asset class.

Our operations are concentrated in certain regions of the United States, and we are subject to general economic conditions in the regions in which we operate.

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In particular, our performance is influenced by job growth, wage growth, and unemployment rates in the areas in which we operate.

To the extent the economic conditions, job growth, wage growth, and unemployment in any of these markets deteriorate or any of these areas experience natural disasters or more pronounced effects of climate change, the value of our portfolio, our results of operations, and our ability to make payments on our debt and to make distributions could be adversely affected.

If economic conditions, job growth, wage growth, and unemployment in any of these markets deteriorate or any of these areas experience natural disasters or more pronounced effects of climate change, the value of our portfolio, our results of operations, and our ability to make payments on our debt and to make distributions could be adversely affected.

Our business depends on our ability to continue to provide high quality housing and consistent operation of our apartment communities, the failure of which could adversely affect our business and results of operations.

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We may be required to undertake significant capital expenditures to renovate or reconfigure our communities in order to attract new residents and retain existing residents.

The delayed delivery, material reduction, or prolonged interruption in any of these services may cause our residents to terminate their leases, may result in the reduction of rents and/or may result in an increase in our costs.

The delayed delivery, material reduction, or prolonged interruption in any of these services may cause our residents to terminate their leases, may lead to the reduction of rents, and may increase our costs.

In addition, we may fail to provide quality housing and continuous access to amenities as a result of other factors, including mechanical failure, power failure, inclement weather, physical or electronic security breaches, vandalism or acts of terrorism, or other similar events.

Any of these issues could cause our residents to terminate or fail to renew their leases, could expose us to additional costs or liability claims, and could damage our reputation, any of which could impact our ability to provide quality housing and consistent operation of our apartment communities, which in turn could materially affect our business and results of operations.

Inflation and price volatility in the global economy could hurt our business and results of operations.

During the past several years, inflation in the United States rose to levels not experienced in recent decades, including rising energy prices, prices for consumer goods, interest rates, wages, and currency volatility.

These increases and any fiscal or other policy interventions by the U.S.

government in reaction to such events could harm our business by increasing our operating costs and our borrowing costs, as well as decreasing the capital available to our residents and prospective residents who wish to rent in our communities.

We may also be limited by law in our ability to increase rents.

See “Multifamily residential properties may be subject to rent stabilization regulations and other restrictions which limit our ability to raise rents above specified maximum amounts and could give rise to claims by residents that their rents exceed such specified maximum amounts.

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

Catastrophic weather, natural events, and climate change could adversely affect our business .

Some of our apartment communities are located in areas that may experience catastrophic weather and other natural events from time to time, including snow or ice storms, flooding, tornadoes, or other severe or inclement weather.

These adverse and natural events could cause damage or losses that may be greater than insured levels.

In the event of a loss in excess of insured limits, we could lose all or a portion of our investment in an affected property as well as future revenue from that apartment community.

These natural events could cause damage or losses that may be greater than insured levels.

If a loss occurs in excess of insured limits, we could lose all or a portion of our investment in an affected property as well as future revenue from that apartment community.

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

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.

If 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 cause physical damage to, and a decrease in demand for, our apartment communities located in these areas.

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

Our current or future insurance may not protect us against possible losses.

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.

We carry comprehensive liability, fire, cyber, extended coverage, and other insurance covering our properties and our business at levels that we believe to be adequate and comparable to coverage customarily obtained by others in our industry.

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 remain 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 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.

In most cases, we have to renew our insurance policies annually 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 cost for obtaining insurance on our properties.

Any material increases in insurance rates or decrease in available coverage in the future could adversely affect our results of operations.

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.

Changes in federal or state laws and regulations relating to climate change could increase our costs, 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 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.

The impact of climate change also may increase the cost of, or make unavailable, property insurance or other hazard insurance on terms we find acceptable or necessary to adequately protect our properties.

Multifamily residential properties may be subject to rent stabilization regulations, now or in the future, which limit our ability to raise rents above specified maximum amounts and could give rise to claims by residents that their rents exceed such specified maximum amounts.

Rent control or rent stabilization laws and other regulatory restrictions may limit our ability to increase rents and pass through new or increased operating costs to our residents.

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 adversely impacting our financial condition or results of operations.

The effect of climate change also may increase the cost of, or make unavailable, property insurance or other hazard insurance on terms we find acceptable or necessary to adequately protect our properties.

Multifamily residential properties may be subject to rent stabilization regulations and other restritctions which limit our ability to raise rents above specified maximum amounts and could give rise to claims by residents that their rents exceed such specified maximum amounts.

Rent control or rent stabilization laws and other regulatory restrictions may limit our ability to increase rents and otherwise charge residents fees and pass through new or increased operating costs to our residents.

There has been a recent increase in municipalities and other local governments, including those in which we own properties, considering or being urged by advocacy groups to consider rent control or rent stabilization laws and regulations or take other actions which could limit our ability to raise rents based solely on market conditions.

These initiatives and any other future enactments of rent control or rent stabilization laws or other laws regulating multifamily housing, as well as any lawsuits against us arising from such rent control or other laws, may reduce rental revenues or increase operating costs.

Such laws and regulations limit our ability to charge market rents, increase rents, evict residents or recover increases in our operating expenses and could reduce the value of our multifamily properties or make it more difficult for us to dispose of properties in certain circumstances.

Expenses associated with our investment in these multifamily properties, such as debt service, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in rental income from the community.

Furthermore, such regulations may negatively impact our ability to attract higher-paying residents to such multifamily properties.

Competition may negatively impact our earnings.

In addition, the multifamily housing industry has faced increased scrutiny over fees charged to residents.

In January 2025, the Federal Trade Commission filed a lawsuit against the nation’s largest landlord for deceiving consumers about rent prices by charging “numerous mandatory fees” in addition to monthly rent.

These restrictions, initiatives, government enforcement actions and any other future enactments of rent control or rent stabilization laws or other laws regulating multifamily housing, as well as any lawsuits against us arising from such rent control or other laws, may reduce rental revenues or increase operating costs.

Such laws and regulations would limit our ability to charge market rents and fees, increase rents, evict residents, or recover increases in our operating expenses and could reduce the value of our multifamily properties or make it more difficult for us to dispose of properties in certain circumstances.

Furthermore, such regulations may impair our ability to attract higher-paying residents to such multifamily properties.

We may face opposition from governmental authorities or third parties alleging that our activities are anti-competitive.

The residential real estate industry has recently faced increased scrutiny from regulators claiming that certain market tools employed by property owners to evaluate market rents leads to anti-competitive behavior.

In January 2025, the U.S.

Justice Department and the Attorneys General for several states filed complaints against six of the nation’s largest landlords alleging that those landlords committed antitrust violations by participating in algorithmic pricing schemes that harmed renters.

Although we were not a party to the lawsuit, we cannot assure you that we will not face a similar inquiry.

If we were to face such a lawsuit or investigation, we may have to spend a significant amount of time and expense to respond and could be required to pay penalties or settle such claims.

In addition, we may be forced to abandon certain tools we use to evaluate rental markets, forego certain acquisitions, or dispose of one or more of our properties.

Any increased oversight and regulation or new laws could increase our compliance expenses, restrict or curtail certain of our operating activities, and increase the risk of third-party litigation.

Any of the foregoing could have an adverse impact on our results of operations.

Competition could limit our ability to acquire attractive investment opportunities and could increase the costs of those opportunities, which may adversely affect our profitability and impede our growth.

We compete with many kinds of institutions, including other REITs, private partnerships, individuals, pension funds, and banks in attracting residents and finding investment opportunities.

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

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.

We may have limited ability to change our portfolio of properties quickly in response to our strategic plan and changes in economic or other conditions, and the prohibitions under the federal income tax laws on REITs holding property for sale and related regulations may affect our ability to sell properties.

Under certain circumstances, the Code imposes penalties on a REIT that sells property held for less than two years and limits the number of properties it can sell in a given year.

This competition could increase prices for properties of the type we may pursue.

As a result, we may be unable to acquire attractive apartment communities at desirable prices, or at all, which could adversely affect our profitability and impede our growth.

Because real estate investments are relatively illiquid and various other factors limit our ability to dispose of assets, we may be unable to sell properties when appropriate.

We may have limited ability to change our portfolio of properties quickly in response to our strategic plan and changes in economic or other conditions, the prohibitions under the federal income tax laws on REITs holding property for sale, and related regulations may affect our ability to sell properties.

In some cases, the Code imposes penalties on a REIT that sells property held for less than two years and limits the number of properties it can sell in a given year.

Our ability to dispose of assets also may be limited by constraints on our ability to use disposition proceeds to make acquisitions on financially attractive terms.

Some of our properties were acquired using limited partnership Units of Centerspace, LP, our operating partnership, and are subject to certain tax-protection agreements that restrict our ability to sell these properties in transactions that would create current taxable income to the former owners.

Some of our properties were acquired using limited partnership Units of

Centerspace, LP, our operating partnership, and are subject to certain tax-protection agreements that restrict our ability to sell these properties in transactions that would create current taxable income to the former owners.

As a result, we are motivated to structure the sale of these assets as tax-free exchanges, the requirements of which are technical and may be difficult to achieve.

Inability to manage growth effectively may adversely affect our operating results.

We have experienced significant growth at various times in the past and may do so in the future, principally through the acquisition of additional real estate properties.

We have experienced significant growth at various times in the past and may do so in the future, mainly through the acquisition of additional real estate properties.

Effective management of rapid growth presents challenges, including:

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• the ability to consistently achieve targeted returns on individual properties.

We may not be able to maintain similar rates of growth in the future or manage our growth effectively.

We may be unable to maintain similar rates of growth in the future or manage our growth effectively.

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

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Future enactment of rent control or rent stabilization laws or other laws regulating apartment communities may reduce rental revenues or increase operating costs.

See “ Multifamily residential properties may be subject to rent stabilization regulations, now or in the future, which limit our ability to raise rents above specified maximum amounts and could give rise to claims by residents that their rents exceed such specified maximum amounts.

See “ Multifamily residential properties may be subject to rent stabilization regulations and other restrictions which limit our ability to raise rents above specified maximum amounts and could give rise to claims by residents that their rents exceed such specified maximum amounts.

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

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If we fail to effectively manage a transition to new personnel, or if we fail to attract and retain qualified and experienced personnel on acceptable terms, it could adversely affect our business.

We may not be able to attract and retain qualified employees .

Strong economic growth in recent years has created a tight labor market in many of the markets in which we operate, and we are dependent on employees at our apartment communities to provide attractive homes for our residents.

Further, inflation may necessitate increasing employee wages and salaries in order to retain our employees.

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 may be unable to attract and retain qualified employees .

Strong economic growth in recent years has created a tight labor market in many markets in which we operate, and we depend on employees at our apartment communities to provide attractive homes for our residents.

Further, inflation may necessitate increasing employee wages and salaries to retain our employees.

The loss of key personnel at these apartment communities, or the inability or cost of replacing such personnel at such communities, could hurt our business and results of operations.

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

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The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions around the world have increased.

In the normal course of business, we and our service providers (including service providers engaged in providing web hosting, property management, leasing, accounting and/or payroll software/services) collect and retain certain personal information provided by our residents, employees, and vendors.

In the normal course of business, we and our service providers (including service providers engaged in providing web hosting, property management, leasing, accounting and payroll software/services) collect and retain certain personal information provided by our residents, employees, and vendors.

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

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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.

The risk of a breach or security failure, particularly through cyber-attacks or cyber-intrusion, has generally increased due to the rise in new technologies and the increased sophistication and activities of the perpetrators of attempted attacks and intrusions.

The risk of a breach or security failure, particularly through cyber-attacks or cyber-intrusion, has generally increased because of the rise in new technologies and the increased sophistication and activities of the perpetrators of attempted attacks and intrusions.

A security breach or other significant disruption involving computer networks and related systems could cause substantial costs and other negative effects, including litigation, remediation costs, costs to deploy additional protection strategies, compromising of confidential information, and reputational damage adversely affecting investor confidence.

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 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.

These costs include, but are not limited to, retaining services of cybersecurity experts, maintaining insurance, 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.

The incident did not have a material impact on our business, operations, or financial results.

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.

However, despite 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.

Information security risks for data privacy have generally increased in recent years because of 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, our unitholders 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.

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.

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.

Any such access, disclosure, or other loss of information could lead to 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 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.

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The presence of these substances, or the failure to properly remediate any property containing these substances, may adversely affect our ability to sell or rent the affected property or to borrow funds using the property as collateral.

In arranging for the disposal or treatment of hazardous or toxic substances, we also may be liable for the costs of removal of, or remediation of, these substances at that disposal or treatment facility, whether or not we own or operate the facility.

In connection with our current or former ownership (direct or indirect), operation, management, development, and/or control of real properties, we may be potentially liable for removal or remediation costs with respect to hazardous or toxic substances at those properties, as well as certain other costs, including governmental fines and claims for injuries to persons and property.

Although we are not aware of any such claims associated with our existing properties that would have a significant adverse effect on our business, potential future costs and damage claims may be substantial and could exceed any insurance coverage we may have for such events or such coverage may not exist.

In arranging for the disposal or treatment of hazardous or toxic substances, we also may be liable for the costs of removal or remediation of these substances at that disposal or treatment facility, whether or not we own or operate the facility.

In connection with our current or former ownership (direct or indirect), operation, management, development, and control of real properties, we may be potentially liable for removal or remediation costs for hazardous or toxic substances at those properties, as well as certain other costs, including governmental fines and claims for injuries to persons and property.

Although we are unaware of any such claims associated with our existing properties that would have a significant adverse effect on our business, potential future costs, and damage claims may be substantial and could exceed any insurance coverage we may have for such events or such coverage may not exist.

The presence of such substances, or the failure to properly remediate any such impacts, may adversely affect our ability to borrow against, develop, sell, or rent the affected property.

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and undertake special precautions if asbestos would be disturbed during renovation or demolition of a building.

Indoor air quality issues may also necessitate special investigation and remediation.

Indoor air quality issues may also require special investigation and remediation.

These air quality issues can result from inadequate ventilation, chemical contaminants from indoor or outdoor sources, or biological contaminants such as molds, pollen, viruses, and bacteria.

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It is generally our policy to obtain a Phase I environmental study on each property that we seek to acquire.

A Phase I environmental study generally includes a visual inspection of the property and the surrounding areas, an examination of current and historical uses of the property and the surrounding areas, and a review of relevant state and federal documents but does not involve invasive techniques such as soil and ground water sampling.

A Phase I environmental study generally includes a visual inspection of the property and the surrounding areas, an examination of current

and historical uses of the property and the surrounding areas, and a review of relevant state and federal documents but does not involve invasive techniques such as soil and ground water sampling.

If the Phase I indicates any possible environmental problems, our policy is to order a Phase II study, which involves testing the soil and ground water for actual hazardous substances.

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We currently do not carry insurance for environmental liabilities.

Any environmental liability we encounter could hurt our results of operations and financial condition.

Expanding social media usage could present new risks.

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Similarly, disclosure of any non-public sensitive information relating to our business or our residents or prospective residents could damage our reputation, our business, or our results of operations.

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

The continuing evolution of social media will present us with new and ongoing challenges and risks, the effects of which we cannot predict.

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

We may be unable to obtain, or may suffer delays in obtaining, necessary zoning, land-use, building, occupancy, and other required governmental permits and authorizations, which could lead to increased costs or abandonment of projects.

We may not be able to obtain financing on favorable terms, or at all, and we may not be able to complete lease-up of a property on schedule.

We may be unable to obtain financing on favorable terms, or at all, and we may be unable to complete lease-up of a property on schedule.

The resulting time required for development, redevelopment, and lease-up means that we may have to wait years for significant cash returns.

Complying with zoning and permitting law may affect our acquisition, redevelopment, and development costs.

We face risks associated with zoning and permitting of our communities, the majority of which are governed by municipal, county, and state regulations.

We may be liable for costs associated with bringing communities into compliance and additionally may face costs or delays when seeking approvals for redevelopment or development projects within our portfolio.

We face risks associated with zoning and permitting of our communities, most of which are governed by municipal, county, and state regulations.

We may be liable for costs associated with bringing communities into compliance and may face costs or delays when seeking approvals for redevelopment or development projects within our portfolio.

Some regulations related to zoning or permitting allow governmental entities to discontinue operations if violations are left uncured, which would significantly impact our business.

We are not aware of any non-compliance at our communities that would have a significant adverse effect on our business.

Future cash flows may not be sufficient to ensure recoverability of the carrying value of our real estate assets.

Although we are not aware of any non-compliance at our communities, any failure to comply could have a significant adverse effect on our business.

Future cash flows may be insufficient to ensure recoverability of the carrying value of our real estate assets.

We periodically evaluate the recoverability of the carrying value of our real estate assets under United States generally accepted accounting principles (“GAAP”).

Factors considered in evaluating impairment of our real estate assets held for investment include recurring net operating losses and other significant adverse changes in general market conditions that are considered permanent in nature.

Generally, a real estate asset held for investment is not considered impaired if the estimated undiscounted future cash flows of the asset over its estimated holding period are in excess of the asset’s net book value at the balance sheet date.

Generally, a real estate asset held for investment is not considered impaired if the estimated undiscounted future cash flows of the asset over its estimated holding period exceed the asset’s net book value at the balance sheet date.

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

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

These laws and other safety regulations may require us to add structural features 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.

Noncompliance could result in the imposition of fines by government authorities or the award of damages to private litigants.

Noncompliance could cause the imposition of fines by government authorities or the award of damages to private litigants.

The costs of complying with these laws and regulations may be substantial, and limits or restrictions on construction, or the completion of required renovations, may limit the implementation of our investment strategy or reduce overall returns on our investments.

Risks related to joint ventures may adversely affect our financial performance and results of operations.

We have entered into, and may continue in the future to enter into, partnerships or joint ventures with other persons or entities.

We have entered into, and may continue to enter into, partnerships or joint ventures with other persons or entities.

Joint venture investments involve risks that may not be present with other methods of ownership, based on the financial condition and business interests of our partners, which are beyond our control and which may conflict with our interests.

In some instances, we and/or our partner may have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have initiated such a transaction.

Our ability to acquire our partner’s interest may be limited if we do not have sufficient cash, available borrowing capacity, or other capital resources.

In such event, we may be forced to sell our interest in the joint venture when we would otherwise prefer to retain it.

Joint ventures may require us to share decision-making authority with our partners, which could limit our ability to control the properties in the joint ventures.

Sometimes, we and our partner have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have initiated such a transaction.

Our ability to acquire our partner’s interest may be limited if we lack sufficient cash, available borrowing capacity, or other capital resources.

In such event, we may have to sell our interest in the joint venture when we would otherwise prefer to retain it.

Joint ventures may

require us to share decision-making authority with our partners, which could limit our ability to control the properties in the joint ventures.

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

These risks may hinder our ability to operate in accordance with our strategic plan, which could harm our results of operations.

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 an adverse effect our residents and commercial tenants, the real estate market, and the global economy and financial markets generally.

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

Risks Related to Our Indebtedness and Financings

Our inability to renew, repay, or refinance our debt may result in losses.

We incur a significant amount of debt in the ordinary course of our business and in connection with acquisitions of real properties.

Because we have a limited ability to retain earnings as a result of the REIT distribution requirements, we will generally be required to refinance debt that matures with additional debt or equity.

Our inability to renew, repay, or refinance our debt may prompt losses.

We incur considerable debt in the ordinary course of our business and in connection with acquisitions of real properties.

Because we have a limited ability to retain earnings as a result of the REIT distribution requirements, we will generally have to refinance debt that matures with new debt or equity.

We are subject to the normal risks associated with debt financing, including the risks that:

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• the terms of any renewal or refinancing are at terms less favorable than the terms of our current indebtedness.

These risks increase when credit markets are tight and interest rates are high, as they are currently.

These risks increase when credit markets are tight and interest rates are high.

In general, when the credit markets are tight, we may encounter resistance from lenders when we seek financing or refinancing for properties or proposed acquisitions, and the terms of such financing or refinancing are likely to be less favorable to us than the terms of our current indebtedness.

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We cannot guarantee that any refinancing of debt with other debt will be possible on terms that are favorable or acceptable to us.

If we cannot refinance, extend, or pay principal payments due at maturity with the proceeds of other capital transactions, our cash flows may not be sufficient in all years to repay debt as it matures.

If we are unable to refinance our indebtedness on acceptable terms, or at all, we may be forced to dispose of one or more properties on disadvantageous terms, which may result in losses.

If we cannot refinance, extend, or pay principal payments due at maturity with the proceeds of other capital transactions, our cash flows may not be sufficient in every year to repay debt as it matures.

If we cannot refinance our indebtedness on acceptable terms, or at all, we may be forced to dispose of one or more properties on disadvantageous terms, which may lead to losses.

These losses could have a significant adverse effect on our business, our ability to make distributions to our shareholders, and our ability to pay amounts due on our debt.

If a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments or refinance the debt at maturity, the mortgagor could foreclose upon the property, appoint a receiver, and receive an assignment of rents and leases or pursue other remedies, including taking ownership of the property, all with a consequent loss of revenues and asset value.

If a property is mortgaged to secure payment of indebtedness and we cannot meet mortgage payments or refinance the debt at maturity, the mortgagor could foreclose upon the property, appoint a receiver, and receive an assignment of rents and leases or pursue other remedies, including taking ownership of the property, all with a consequent loss of revenues and asset value.

Foreclosures also could affect our ability to obtain new debt and could create taxable income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements of the Code and impeding our ability to obtain financing for our other properties.

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, 2023 totaled outstanding borrowings of approximately $920.0 million, contains a number of significant restrictions and covenants.

Our indebtedness, which at December 31, 2024 totaled outstanding borrowings of approximately $966.6 million, contains 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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As of December 31, 2024, 26 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.

Incurring mortgage and other secured debt obligations increases our risk of property losses because defaults on

indebtedness secured by property may prompt 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.

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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.

Conditions in the capital and credit markets, including higher interest rates, may adversely affect our access to various sources of capital or financing and the cost of capital, which could affect our business activities and earnings.

In periods when the capital and credit markets experience significant volatility, the amounts, sources, and cost of capital available to us may be adversely affected.

If sufficient sources of external financing are unavailable to us on cost effective terms, we could be forced to limit our acquisition, development, and redevelopment activities or take other actions to fund our business activities and repay our debt, such as selling assets.

If we are able and choose to access capital at a higher cost than we have experienced in recent years (reflected in higher interest rates for debt financing or a lower stock price for equity financing), our earnings per share and cash flow could be adversely affected.

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

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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.

In addition, if we need to repay existing debt during periods of rising interest rates, we could have 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.

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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.

The Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) are major sources of financing for the multifamily housing 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.

Any potential reduction in loans, guarantees and credit enhancement arrangements from Fannie Mae and Freddie Mac could jeopardize the effectiveness of the multifamily housing 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.

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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.

The combined account balances at each institution periodically exceed the FDIC insurance coverage of $250,000.

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.

Interest rate hedging arrangements may lead to losses.

From time to time, we use interest rate swaps and other hedging instruments to manage our interest rate risks.

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If a hedging arrangement is not indexed to the same rate as the indebtedness that is hedged, we may be exposed to losses to the extent that the rate governing the indebtedness and the rate governing the hedging arrangement change independently of each other, and nonperformance by the other party to the hedging arrangement also may subject us to increased credit risks.

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

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

These arrangements may lead to losses, which could hurt our financial condition.

Risks Related to Our Shares

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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.

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

ESG evaluations are vital to many investors and stakeholders.

Many investors use ESG factors to guide their investment decisions.

Many investment funds focus on positive ESG business practices and sustainability scores when making investments and may consider a company’s sustainability efforts and/or score when making an investment decision.

Many investment funds focus on positive ESG business practices and sustainability scores when making investments and may consider a company’s sustainability efforts and score when making an investment decision.

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.

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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.

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

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.

In addition, we may face reputational damage if 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 weaken our reputation, the price of our stock and our business, financial condition, and results of operations, including increased capital expenditures and operating expenses.

Payment of distributions on our common shares is not guaranteed.

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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:

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

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

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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 our Operating Partnership.

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

Our future growth depends on, among other things, our ability to raise equity capital, including through our ATM Program, 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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This limits our ability to retain cash or earnings to fund future growth and makes us more dependent on raising funds through other means, which may include raising additional equity capital.

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

We may issue additional classes or series of our shares of beneficial interest with rights and preferences that are superior to the rights and preferences 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.

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.

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

In order to maintain our qualification as a REIT, among other things, our Declaration of Trust provides that any transaction that would result in our disqualification as a REIT under Section 856 of the Code will be void, including any transaction that would result in the following:

• less than 100 Persons owning our shares;

We have a shelf registration statement that enables us to sell an undetermined number of equity and other securities listed in the prospectus.

Future sales of preferred shares or other securities may adversely affect the rights on common shareholders and have an adverse impact on the market price of our common shares.

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

To maintain our qualification as a REIT, among other things, our Declaration of Trust provides that any transaction that would result in our disqualification as a REIT under Section 856 of the Code will be void, including any transaction that would result in the following:

• fewer than 100 Persons owning our shares;

• our being “closely held” within the meaning of Section 856(h) of the Code;

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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.

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.

The Trust’s Declaration of Trust also forbids a Person from 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.

This ownership limit as well as other restrictions on ownership and transfer of our stock in our charter may discourage a tender offer or other transactions or a change in management or of control or result in transferring shares acquired in excess of the restrictions to a charitable trust.

Risks Related to Tax Matters

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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.

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.

Even if relief provisions apply, however, a tax would be imposed with respect to excess net income.

For example, 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.

Thus, when 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 in the Code apply.

Even if relief provisions apply, however, a tax would be imposed on excess net income.

We are also required to make distributions to the holders of our securities of at least 90% of our REIT taxable income, determined before a deduction for dividends paid and excluding any net capital gain.

To the extent that we satisfy the 90% test but distribute less than 100% of our REIT taxable income, we will be subject to corporate income tax on such undistributed income and could be subject to an additional 4% excise tax.

If we satisfy the 90% test but distribute less than 100% of our REIT taxable income, we will be subject to corporate income tax on such undistributed income and could be subject to an additional 4% excise tax.

Because we need to meet these tests to maintain our qualification as a REIT, it could cause us to have to forgo certain business opportunities and potentially require us to liquidate otherwise attractive investments.

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If we were to fail to qualify as a REIT, we would be subject to federal income tax on our taxable income at regular corporate rates, could be subject to increased state and local taxes and, unless entitled to relief under applicable statutory provisions, would be disqualified from treatment as a REIT for the four taxable years following the year during which we lost our qualification, which would likely have a significant adverse effect on us, our ability to make distributions to our shareholders, and our ability to pay amounts due on our debt.

This treatment would reduce funds available for investment or distributions to the holders of our securities due to the additional tax liability to us for the year or years involved, and we would no longer be able to deduct, and would not be required to make, distributions to our shareholders.

To the extent that distributions to the holders of our securities had been made in anticipation of qualifying as a REIT, we may need short-term debt or long-term debt or proceeds from asset sales or sales of common shares to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments.

The inability of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status.

Failure of our operating partnership to qualify as a partnership would result in corporate taxation and significantly reduce the amount of cash available for distribution.

This treatment would reduce funds available for investment or distributions to the holders of our securities due to the added tax liability to us for the year or years involved, and we would no longer be able to deduct, and would not need to make, distributions to our shareholders.

If distributions to the holders of our securities had been

made in anticipation of qualifying as a REIT, we may need short-term debt or long-term debt or proceeds from asset sales or sales of common shares to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments.

The inability of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short and long-term debt or sell equity securities to fund distributions required to maintain our REIT status.

Failure of our operating partnership to qualify as a partnership would lead to corporate taxation and significantly reduce the amount of cash available for distribution.

We believe that Centerspace, LP, our operating partnership, qualifies as a partnership for federal income tax purposes.

However, we can provide no assurance that the IRS will not challenge its status as a partnership for federal income tax purposes or that a court would not sustain such a challenge.

If the IRS were to be successful in treating Centerspace, LP as an entity taxable as a corporation (such as a publicly traded partnership taxable as a corporation), we would cease to qualify as a REIT because the value of our ownership interest in Centerspace, LP would exceed 5% of our assets and because we would be considered to hold more than 10% of the voting securities and value of the outstanding securities of another corporation.

If the IRS were to treat Centerspace, LP as an entity taxable as a corporation (such as a publicly traded partnership taxable as a corporation), we would no longer qualify as a REIT because the value of our ownership interest in Centerspace, LP would exceed 5% of our assets and because we would be considered to hold more than 10% of the voting securities and value of the outstanding securities of another corporation.

The imposition of a corporate tax on Centerspace, LP would significantly reduce the amount of cash available for distribution.

Dividends payable by REITs may be taxed at higher rates than dividends of non-REIT corporations, which could reduce the net cash received by our shareholders and may be detrimental to our ability to raise additional funds through any future sale of our stock.

Dividends payable by REITs may be taxed at higher rates than dividends of non-REIT corporations, which could reduce the net cash received by our shareholders and may harm our ability to raise additional funds through any future sale of our stock.

Dividends paid by REITs to U.S.

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This may cause investors to view REIT investments as less attractive than investments in non-REIT corporations, which in turn may adversely affect the value of stock in REITs, including our stock.

Investors should consult with their tax advisers regarding the U.S.

Investors should consult with their tax advisers about the U.S.

tax consequences of an investment in our stock or Units.

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From time to time, we dispose of properties in transactions intended to qualify as “like-kind exchanges” under Section 1031 of the Code.

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 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 be unable to dispose of properties on a tax-deferred basis.

If we cannot meet the technical requirements of a desired Section 1031 exchange, we may have to make a special dividend payment to our shareholders if we cannot 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.

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We dispose of properties in transactions intended to qualify as “like-kind exchanges” under Section 1031 of the Code whenever possible.

If we are not able to satisfy all of the technical requirements of Section 1031, or if Section 1031 is repealed, selling a property with a tax protection agreement could trigger a material obligation to make the associated unitholders whole.

If we cannot satisfy all of the technical requirements of Section 1031, or if Section 1031 is repealed, selling a property with a tax protection agreement could trigger a material obligation to make the associated unitholders whole.

Complying with REIT requirements may force us to forgo otherwise attractive opportunities or liquidate otherwise attractive investments.

To qualify and maintain our status as a REIT, we must satisfy certain requirements with respect to the character of our assets.

If we fail to comply with these requirements at the end of any quarter, we must correct such failure within 30 days after the end of the quarter (by, possibly, selling assets notwithstanding their prospects as an investment) to avoid losing our REIT status.

If we violate these requirements at the end of any quarter, we must correct such failure within 30 days after the quarter (by, possibly, selling assets despite their prospects as an investment) to avoid losing our REIT status.

This could include potentially selling otherwise attractive assets or liquidating or foregoing otherwise attractive investments.

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The tax imposed on REITs engaging in prohibited transactions and our agreements entered into with certain contributors of our properties may limit our ability to engage in transactions that would be treated as sales for federal income tax purposes.

The federal income tax provisions applicable to REITs provide that any gain realized by a REIT on the sale of property held as inventory or other property held primarily for sale to customers in the ordinary course of business is treated as income from a “prohibited transaction” that is subject to a 100% penalty tax.

Under current law, unless a sale of real property qualifies for a safe harbor, the question of whether the sale of a property constitutes the sale of property held primarily for sale to customers is generally a question of the facts and circumstances regarding a particular transaction.

The federal income tax provisions applicable to REITs provide that any gain realized by a REIT on the sale of property held as

inventory or other property held primarily for sale to customers in the ordinary course of business is treated as income from a “prohibited transaction” that is subject to a 100% penalty tax.

Under current law, unless a sale of real property qualifies for a safe harbor, whether the sale of a property constitutes the sale of property held primarily for sale to customers is generally a question of the facts and circumstances regarding a particular transaction.

We may make sales that do not satisfy the requirements of the safe harbors, or the IRS may successfully assert that one or more of our sales are prohibited transactions and, as a result, we may be required to pay a penalty tax.

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While the TRS structure would allow the economic benefits of ownership to flow to us, a TRS is subject to tax on its income at the federal and state level.

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.

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

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.

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

Our ownership of TRSs is limited, and our transactions with TRSs will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.

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Changes to tax laws or regulations may adversely impact our shareholders and our business and financial results.

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

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

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.

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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