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Item 7. Management’s Discussion and Analysis

2025-02-18 compared with 2024-02-20 · 119 added, 102 removed, 311 unchanged (42% of the section changed)

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We strive to maximize resident satisfaction and retention by investing in high-quality assets in desirable locations and developing and training team members to create vibrant apartment communities through resident-centered operations.

We believe that delivering superior resident experiences will drive consistent profitability for our shareholders.

We believe that delivering superior resident experiences will drive consistent profitability for our business and shareholders.

We have paid quarterly distributions every quarter since our first distribution in 1971.

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For the year ended December 31, 2024, our highlights included the following:

• Net Income was $2.32 per basic and diluted share for the year ended December 31, 2023, compared to Net Loss of $1.35 per basic and diluted share for the year ended December 31, 2022;

• Net Loss was $1.27 per diluted share for the year ended December 31, 2024, compared to Net Income of $2.32 per diluted share for the year ended December 31, 2023;

• Core funds from operations (“CFFO”) per diluted share, a non-GAAP measure, increased 2.1% (refer to reconciliations of Funds from Operations and Core Funds from Operations beginning on page 32 for additional detail) to $4.88 from $4.78;

• Operating income increased to $84.5 million for the year ended December 31, 2023 compared to $13.9 million for the prior year;

• Same-store year-over-year net operating income growth of 9.0% driven by same-store revenue growth of 7.2% (refer to Reconciliation of Operating Income (Loss) to Net Operating Income on page 27 for additional detail).

• Operating income decreased to $20.5 million for the year ended December 31, 2024 compared to $84.5 million for the prior year;

• Same-store year-over-year net operating income growth of 3.7% driven by same-store revenue growth of 3.3% (refer to Reconciliation of Operating Income (Loss) to Net Operating Income beginning on page 29 for additional detail).

Acquisitions and Dispositions .

During the year ended December 31, 2024, we completed the following transactions in furtherance of our strategic plan:

• Disposed of 13 non-core apartment communities for an aggregate sales price of $226.8 million and a realized gain on sale of $71.2 million;

• Acquired Lake Vista Apartment Homes, a 303 home apartment community in Loveland, Colorado for an aggregate purchase price of $94.5 million.

• Disposed of two non-core apartment communities for an aggregate sales price of $19.0 million;

• Acquired The Lydian, a 129 home apartment community in Denver, Colorado for an aggregate purchase price of $54 million.

The acquisition was financed through the assumption of mortgage debt, issuance of common operating partnership units, and cash.

Financing Transactions.

During the year ended December 31, 2024, we completed the following financing transactions:

• Repurchased 216,000 common shares for total consideration of $11.5 million and an average of $53.44 per share.

• Issued approximately 1.6 million common shares for net consideration of $112.6 million and an average price of $71.66 per share under our ATM Program, compared to 87,722 shares repurchased at an average price of $53.62 per share, excluding commissions.

We used the issuance proceeds to redeem all of the outstanding Series C preferred shares for $97.0 million.

We intend to continue our focus on maximizing the financial performance of the communities in our existing portfolio.

To accomplish this, we have introduced initiatives to expand our operating margin by enhancing the resident experience, making value-add investments, and implementing technology solutions and expense controls.

We will actively manage our existing portfolio and strategically pursue acquisitions of multifamily communities and selective dispositions as opportunities arise and market conditions allow.

We will explore potential new markets and acquisition opportunities as market conditions allow.

We plan to actively manage our existing portfolio, explore potential new markets, and strategically pursue acquisitions of apartment communities and selective dispositions as opportunities arise and market conditions allow.

We seek to manage a strong balance sheet that should provide us with flexibility to pursue both internal and external growth.

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Refer to the reconciliation of Operating Income to Net Operating Income below.

We believe that NOI is an important supplemental measure of operating performance for real estate because it provides a measure of operations that is unaffected by sales of real estate and other investments, impairment, depreciation, amortization, financing costs, property management expenses, casualty losses, and general and administrative expense.

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

Throughout this Report, we have provided certain information on a same-store and non-same-store basis.

Same-store apartment communities are owned or in service for substantially all of the periods being compared and, in the case of development properties, have achieved a target level of physical occupancy of 90%.

Same-store apartment communities are owned or stabilized for substantially all of the periods being compared and, in the case of newly-acquired or constructed communities, have achieved a target level of physical occupancy of 90%, or re-positioned communities when they have achieved stabilized operations.

We define re-positioned communities as having significant development and construction activity on existing buildings pursuant to an authorized plan, which has an impact on current operating results, occupancy and the ability to lease space with the intended result of improved community cash flow and competitive position through extensive unit and amenity upgrades.

We categorize a re-positioned community as same-store when the development and construction activity has been completed, and operations have stabilized.

This is typically reaching an overall occupancy of 90%.

Not all communities undergoing value add are considered a re-positioned community.

Non-same store communities are communities not owned or stabilized as of the beginning of the previous year, including re-positioned communities, and excluding communities held for sale and the non-multifamily components of mixed-use properties.

On the first day of each calendar year, we determine the composition of our same-store pool for that year as well as adjust the previous year, which allows us to evaluate the performance of existing apartment communities and their contribution to net income.

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Management uses this measure to assess whether or not it has been successful in increasing NOI, raising average rental revenue, renewing the leases of existing residents, controlling operating costs, and making prudent capital improvements.

The discussion below focuses on the main factors affecting real estate revenue and real estate expenses from same-store apartment communities because changes from one year to another in real estate revenue and expenses from non-same-store communities are generally due to the addition of those properties to our real estate portfolio, and accordingly provide less useful information for evaluating the ongoing operational performance of our real estate portfolio.

For the comparison of the twelve months ended December 31, 2023 and 2022, 66 apartment communities were classified as same-store and six apartment communities were non-same-store.

The discussion below focuses on the main factors affecting real estate revenue and real estate expenses from same-store apartment communities because changes from one year to another in real estate revenue and expenses from non-same-store communities are generally due to the addition of those communities to our real estate portfolio, and accordingly provide less useful information for evaluating the ongoing operational performance of our real estate portfolio.

For the comparison of the years ended December 31, 2024 and 2023, 69 apartment communities were classified as same-store and two apartment communities were non-same-store.

See Item 2 - Properties for the list of communities classified as same-store and non-same-store.

Sold communities are included in “Dispositions” for the periods prior to the sale, which also includes non-multifamily properties and the non-multifamily components of mixed-use properties.

Sold communities are included in “Dispositions,” for all periods presented, while “Other properties” includes non-multifamily properties and the non-multifamily components of mixed-use properties.

During the years ended December 31, 2024 and 2023, we disposed of two and thirteen apartment communities, respectively, consisting of 205 and 2,279 apartment homes, respectively.

Reconciliation of Operating Income to Net Operating Income (non-GAAP)

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Depreciation and amortization 106,450 101,678 4,772 4.7 %

Impairment 5,218 — 5,218 N/A

Impairment of real estate investments — 5,218 (5,218) (100.0) %

General and administrative expenses 17,802 20,080 (2,278) (11.3) %

Gain on sale of real estate and other investments (71,244) (41) (71,203) *

Loss on litigation settlement 3,864 — 3,864 N/A

(Gain) loss on sale of real estate and other investments 577 (71,244) 71,821 *

Loss on litigation settlement — 3,864 (3,864) (100.0) %

Net operating income $ 157,739 $ 155,497 $ 2,242 1.4 %

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7,993 1,526 6,467 *

Other properties (1)

2,589 2,600 (11) (0.4) %

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2,584 448 2,136 *

Other properties (1)

968 797 171 21.5 %

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5,409 1,078 4,331 *

Other properties (1)

1,621 1,803 (182) (10.1) %

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Depreciation and amortization (106,450) (101,678) 4,772 4.7 %

Impairment of real estate investments (5,218) — 5,218 N/A

Impairment of real estate investments — (5,218) (5,218) (100.0) %

General and administrative expenses (17,802) (20,080) (2,278) (11.3) %

Gain on sale of real estate and other investments 71,244 41 71,203 *

Loss on litigation settlement (3,864) — 3,864 N/A

Gain (loss) on sale of real estate and other investments (577) 71,244 (71,821) 100.8 %

Loss on litigation settlement — (3,864) (3,864) (100.0) %

Interest expense (37,280) (36,429) 851 2.3 %

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NET INCOME (LOSS) $ (14,192) $ 49,231 $ (63,423) 128.8 %

Dividends to preferred unitholders (640) (640) — —

Dividends to Series D preferred unitholders (640) (640) — —

Net (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units 3,635 (7,141) 10,776 (150.9) %

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Dividends to preferred shareholders (4,821) (6,428) 1,607 (25.0) %

Redemption of preferred shares (3,511) — (3,511) N/A

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $ (19,660) $ 34,897 $ (54,557) 156.3 %

(1) This is a component of Net operating income and a non-GAAP financial measure.

Non-GAAP financial measures should not be considered an alternative to net income (loss), net income (loss) available for common shareholders, or cash flow from operating activities as a measure of financial performance.

(2) Net operating income is a non-GAAP financial measure, as defined above in Results of Operations, Non-GAAP Financial Measures.

Refer to the Reconciliation of Operating Income to Net Operating Income on page 27.

(1) This is a non-GAAP financial measure which is a component of NOI (non-GAAP), as defined above.

Refer to the Reconciliation of Operating Income to Net Operating Income above.

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(1) Weighted average occupancy is defined as the percentage resulting from dividing actual rental revenue by scheduled rental revenue.

Scheduled rental revenue represents the value of all homes, with occupied homes valued at contractual rental rates pursuant to leases and vacant homes valued at estimated market rents.

When calculating actual rents for occupied homes and market rents for vacant homes, delinquencies and concessions are not taken into account.

Scheduled rental revenue represents the value of all apartment homes, with occupied homes valued at contractual rental rates pursuant to leases and vacant apartment homes valued at estimated market rents.

When calculating actual rents for occupied apartment homes and market rents for vacant homes, delinquencies and concessions are not taken into account.

Market rates are determined using the currently offered effective rates on new leases at the community and are used as the starting point in determination of the market rates of vacant apartment homes.

We believe that weighted average occupancy is a meaningful measure of occupancy because it considers the value of each vacant unit at its estimated market rate.

Weighted average occupancy may not completely reflect short-term trends in physical occupancy, and our calculation of weighted average occupancy may not be comparable to that disclosed by other real estate companies.

Weighted average occupancy may not

completely reflect short-term trends in physical occupancy, and our calculation of weighted average occupancy may not be comparable to that disclosed by other REITs and other real estate companies.

Number of Homes 2024 2023

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Non-same-store 432 303

Dispositions — 205

Total 13,012 13,088

Same-store analysis.

Revenue from same-store communities increased by 7.2% or $15.4 million in the year ended December 31, 2023, compared to the same period in the prior year.

Revenue from same-store communities increased by 3.3%, or $7.9 million, in the year ended December 31, 2024, compared to the year ended December 31, 2023.

Approximately 2.9% of the increase was due to higher average monthly revenue per occupied home and 0.3% from an increase in occupancy as weighted average occupancy increased from 94.9% to 95.2% for the years ended December 31, 2023 and 2024, respectively.

Property operating expenses at same-store communities increased by 2.7% or $2.6 million in the year ended December 31, 2024, compared to the same period in the prior year.

At same-store communities, controllable expenses (which exclude insurance and real estate taxes), increased by $1.5 million, primarily due to $2.1 million in compensation costs, offset by decreased utilities and turnover costs.

Non-controllable expenses at same-store communities increased by $2.6 million primarily due to insurance premiums and deductibles on claims and real estate taxes.

At same-store communities, controllable expenses (which exclude insurance and real estate taxes), increased by $2.1 million, primarily due to increased repairs and maintenance, technology costs related to smart home technology, and compensation costs, offset by decreased utilities and turnover costs.

Non-controllable expenses at same-store communities increased by $438,000 primarily due to insurance premiums and deductibles on claims offset by a decrease in real estate taxes resulting from successful real estate tax appeals.

Same-store NOI increased by $5.3 million to $150.5 million for the year ended December 31, 2024 compared to $145.2 million in the same period in the prior year.

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Net operating income from non-same-store communities increased by $4.3 million.

The increase in revenue, property operating expenses, and NOI from non-same-store communities is primarily due to the addition of apartment communities in the latter part of 2022 and 2023.

The increase in revenue, property operating expenses, and NOI from non-same-store communities is primarily due to the addition of apartment communities during the fourth quarter of 2023 and 2024.

Other and dispositions analysis.

Revenue from other, which encompasses our commercial and mixed use activity, increased by 5.5% or $135,000 while revenue from dispositions decreased by $17.5 million.

Property operating expenses from other decreased by 15.2% or $143,000 while property operating expenses from disposition decreased by $9.1 million due to sold properties.

We disposed of 13 apartment communities and associated commercial space during the year ended December 31, 2023.

Revenue from other, which encompasses our commercial and mixed use activity, decreased by 0.4% or $11,000 while revenue from dispositions decreased by $14.7 million.

Property operating expenses from other increased by 21.5% or $171,000 while property operating expenses from dispositions decreased by $7.5 million due to sold properties.

We disposed of two apartment communities during the year ended December 31, 2024 and 13 apartment communities and associated commercial space during the year ended December 31, 2023.

Property management expense.

Property management expense, consisting of property management overhead and property management fees paid to third parties decreased by 2.4% to $9.1 million in the year ended December 31, 2024, compared to $9.4 million in the year ended December 31, 2023.

The decrease was primarily due to decreased costs for technology initiatives and compensation costs combined with fewer properties due to dispositions.

The decrease was primarily due to decreased headcount with fewer properties due to dispositions and a decrease in third party management fees.

Casualty loss.

Casualty loss increased to $3.3 million in the year ended December 31, 2024, compared to $2.1 million in the year ended December 31, 2023.

The increase was primarily due to increased insurance claims activity over the prior year period.

The increase was primarily due to increased insurance claims activity throughout 2024 compared to the prior year period.

Refer to Involuntary Conversion of Assets in Note 2 of the Notes to the Consolidated Financial Statements in the report for more details.

Depreciation and amortization.

Depreciation and amortization decreased by 3.4% to $101.7 million in the year ended December 31, 2023, compared to $105.3 million in the year ended December 31, 2022, attributable to a decrease of $5.6 million from dispositions and $378,000 from other properties, offset by increases at same-store communities and non-same-store communities driven by the addition of an apartment community in the fourth quarter of the current year and value add and acquisition capital projects.

Depreciation and amortization increased by 4.7% to $106.5 million in the year ended December 31, 2024, compared to $101.7 million in the year ended December 31, 2023, attributable to an increase of $5.6 million from same-store communities and $3.8 million from non-same-store communities driven by the addition of an apartment community in the fourth quarter of both 2024 and 2023 along with value add and acquisition capital projects, offset by a decrease of $5.1 million from dispositions.

Impairment of real estate investments.

Impairment of real estate investments increased to $5.2 million in the year ended December 31, 2023, compared to no impairment in the prior year.

There was no impairment of real estate investments in the year ended December 31, 2024, compared to $5.2 million in 2023.

These impairments were the result of two apartment communities that were written down to estimated fair value based on the receipt and acceptance of market offers to purchase the apartment communities.

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General and administrative expenses.

General and administrative expenses increased by 14.6% to $20.1 million in the year ended December 31, 2023, compared to $17.5 million in the year ended December 31, 2022, primarily attributable to $3.2 million in executive severance and transition costs related to the CEO departure, $910,000 in incentive related compensation, and $406,000 in legal fees related to the loss on litigation settlement, offset by $1.3 million in abandoned pursuit costs and $873,000 in technology implementation costs that did not occur in the current year.

Gain on sale of real estate and other investments.

In the years ended December 31, 2023 and 2022, we recorded gains on sale of real estate and other investments of $71.2 million and $41,000, respectively.

The increase was due to the sale of 13

apartment communities and associated commercial space during the current year that did not occur in the prior year.

General and administrative expenses decreased by 11.3% to $17.8 million in the year ended December 31, 2024, compared to $20.1 million in the year ended December 31, 2023, primarily attributable to $3.2 million in executive severance and transition costs related to the CEO departure in 2023 and lower legal fees due to a litigation settlement from 2023 both of which did not occur in 2024, offset by $1.2 million in increased incentive related compensation.

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

In the years ended December 31, 2024 and 2023, we recorded a loss on the sale of real estate and other investments of $577,000 and a gain on the sale of real estate and other investments of $71.2 million, respectively.

The decrease was due to the sale of two apartment communities for a loss in 2024 compared to the sale of 13 apartment communities for a gain and associated commercial space during 2023.

Refer to Note 9 in the Notes to the Consolidated Financial Statements.

Loss on Litigation Settlement.

Loss on litigation settlement was $3.9 million for the year ended December 31, 2023 due to a trial judgment against Centerspace for property damage and monetary losses to a neighboring property.

There was no loss on litigation settlement for the year ended December 31, 2024 compared to $3.9 million in the year ended December 31, 2023 due to a trial judgment against Centerspace for property damage and monetary losses to a neighboring property.

Refer to Litigation Settlement in Note 2 of the Notes to the Consolidated Financial Statements.

Operating income.

Operating income increased by 509.3% to $84.5 million in the year ended December 31, 2023, compared to $13.9 million in the year ended December 31, 2022.

Operating income decreased by 75.8% to $20.5 million in the year ended December 31, 2024, compared to $84.5 million in the year ended December 31, 2023.

Interest expense.

Interest expense increased 11.2% to $36.4 million in the year ended December 31, 2023, compared to $32.8 million in the year ended December 31, 2022, primarily due to higher interest rates.

Interest expense increased 2.3% to $37.3 million in the year ended December 31, 2024, compared to $36.4 million in the year ended December 31, 2023, primarily due to the assumption of mortgages upon acquisition of The Lydian in the fourth quarter of 2024 and Lake Vista in the fourth quarter of 2023, offset by lower interest on lines of credit in 2024 and a higher rate term loan that was paid off early in 2023.

Interest and other income.

Interest and other income was $1.2 million in the years ended December 31, 2023 and 2022.

Interest and other income increased to $2.6 million in the year ended December 31, 2024, compared to $1.2 million in the same period of the prior year, primarily due to interest income on two real estate related notes receivable, offset by a decrease from interest received on escrow funds in 2023 that did not occur in 2024.

One of the notes receivable originated in December 2023 and the other was acquired during the fourth quarter of 2024 in connection with the acquisition of The Lydian.

Net income (loss) available to common shareholders.

Net income (loss) available to common shareholders increased to net income of $34.9 million compared to a net loss of $20.5 million in the prior year.

Net income (loss) available to common shareholders decreased to a net loss of $19.7 million compared to a net income of $34.9 million in 2023.

Funds from Operations and Core Funds From Operations

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Core FFO is a non-GAAP and non-standardized financial measure that may be calculated differently by other REITs and that should not be considered a substitute for operating results determined in accordance with GAAP.

Net income available to common shareholders for the year ended December 31, 2023 increased to $34.9 million compared to a net loss of $20.5 million for the year ended December 31, 2022.

FFO applicable to common shares and Units for the year ended December 31, 2023, decreased to $77.3 million compared to $79.9 million for the year ended December 31, 2022, a change of 3.3%, primarily due to $3.2 million in severance and transition expenses related to the departure of Mark Decker, former CEO, increased interest expense, loss on litigation settlement, and decreased NOI from dispositions, offset by increased NOI from same-store and non-same-store communities and $2.2 million in abandoned pursuit costs and technology implementation costs from the prior year that did not occur in the year ended December 31, 2023.

For a comparison of FFO applicable to common shares and Units for the years ended December 31, 2022 and 2021, refer to our Annual Report on Form 10-K filed with the SEC on February 21, 2023.

Net loss available to common shareholders for the year ended December 31, 2024 decreased to $19.7 million compared to a net income of $34.9 million for the year ended December 31, 2023.

FFO applicable to common shares and Units for the year ended December 31, 2024, increased to $83.3 million compared to $77.3 million for the year ended December 31, 2023, a change of 7.8%, primarily due to $3.2 million in severance and transition expenses related to the departure of our former CEO in 2023 and a $3.9 million loss on litigation settlement in 2023, both of which did not occur in 2024, along with increased NOI from same-store and non-same-store communities in the in the year ended December 31, 2024, offset by the redemption of our Series C preferred shares during 2024 and increased casualty loss claim and decreased NOI from dispositions.

Reconciliation of Net Income (Loss) Available to Common Shareholders to Funds from Operations and Core Funds From Operations

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Less depreciation – partially owned entities (98) (80)

Impairment of real estate 5,218 —

Gain on sale of real estate (71,240) (41)

Impairment of real estate investments — 5,218

(Gain) loss on sale of real estate 577 (71,240)

FFO applicable to common shares and Units $ 83,307 $ 77,292

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Non-cash casualty loss $ 2,432 $ 1,350

Loss on extinguishment of debt — 5

Technology implementation costs (1)

Interest rate swap amortization and mark-to-market 936 (100)

Interest rate swap amortization 712 936

Amortization of assumed debt 1,206 (212)

Pursuit costs 5 1,302

Severance and transition related costs — 3,170

Loss on litigation settlement and associated trial costs (1)

Redemption of preferred shares 3,511 —

Other miscellaneous items (2)

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FFO applicable to common shares and Units $ 83,307 $ 77,292

Dividends to preferred unitholders 640 640

Dividends to Series D preferred unitholders 640 640

FFO applicable to common shares and Units - diluted $ 83,947 $ 77,932

Core FFO applicable to common shares and Units $ 90,679 $ 86,674

Dividends to preferred unitholders 640 640

Dividends to Series D preferred unitholders 640 640

Core FFO applicable to common shares and Units - diluted $ 91,319 $ 87,314

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Weighted average shares and Units - diluted 18,694 18,271

(1) Costs are related to a two-year implementation.

(1) Consists of $37,000 in associated trial costs related to the litigation matter for the year ended December 31, 2024.

Consists of $3.9 million loss on litigation settlement for a trial judgment entered against the Company and $406,000 in associated trial costs related to the litigation matter during the year ended December 31, 2023.

(3) Consists of (gain) loss on investments.

(2) Consists of (gain) loss on investments and one-time professional fees.

Liquidity and Capital Resources

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Other sources include availability under our unsecured lines of credit, proceeds from property dispositions, including restricted cash related to net tax deferred proceeds, offerings of preferred and common shares under our shelf registration statement, including offerings of common shares under our ATM program, and long-term unsecured debt and secured mortgages.

Our primary liquidity demands are normally-recurring operating and overhead expenses, debt service and repayments, capital improvements to our communities, distributions to the holders of our preferred shares, common shares, Series D preferred units, Series E preferred units, and Units, value-add redevelopment, common and preferred share buybacks, Unit redemptions, and acquisitions of additional communities.

Our primary liquidity demands are normally-recurring operating and overhead expenses, debt service and repayments, capital improvements to our communities, distributions to the holders of our preferred shares, common shares, Series D and Series E preferred units, and Units, value-add redevelopment, common and preferred share buybacks and Unit redemptions, funding of mezzanine loans or real estate related notes, and acquisitions of additional communities.

We have historically met our short-term liquidity requirements through net cash flows provided by our operating activities and, from time to time, through draws on our lines of credit.

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As of December 31, 2023, we had total liquidity of approximately $234.6 million, which included $226.0 million available on our lines of credit based on the value of unencumbered properties and $8.6 million of cash and cash equivalents.

As of December 31, 2023, we had a multibank, revolving line of credit with total commitments and borrowing capacity of $250.0 million, based on the value of unencumbered properties.

As of December 31, 2024, we had a multibank, revolving line of credit with total commitments and borrowing capacity of $250.0 million, based on the value of unencumbered properties, (the “Unsecured Credit Facility”).

As of December 31, 2024, the additional borrowing availability was $206.0 million beyond the $44.0 million drawn.

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The line of credit is utilized to refinance existing indebtedness, to finance property acquisitions, to finance capital expenditures, and for general corporate purposes.

This credit facility matures in September 2025, with an option to extend maturity for up to two additional six-month periods and has an accordion option to increase borrowing capacity up to $400.0 million.

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

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

Prior to the amendment, interest rates on the line of credit were also based on the consolidated leverage ratio, applying the same margin ranges to LIBOR.

We also have a $6.0 million unsecured operating line of credit.

As of December 31, 2023 and 2022, there was no outstanding balance on this line of credit.

This operating line of credit is designed to enhance treasury management activities and more effectively manage cash balances.

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

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

(collectively, "PGIM") under which we have issued $200.0 million in unsecured senior promissory notes (“unsecured senior notes”).

We also have a separate note purchase agreement for the issuance of $125.0 million senior unsecured promissory notes, of which $25.0 million was issued under the private shelf agreement with PGIM.

On July 26, 2024, the Unsecured Credit Facility was amended to extend maturity and to modify the leverage-based margin ratios applicable to borrowings.

As amended, this credit facility

matures in July 2028, with an option to extend maturity for up to two additional six-month periods and has an accordion option to increase borrowing capacity up to $400.0 million.

As amended, the interest rates on the line of credit are based on the consolidated leverage ratio, at our option, on either the lender’s base rate plus a margin, ranging from 20-80 basis points, or the daily or term Secured Overnight Financing Rate (“SOFR”), plus a margin that ranges from 120-180 basis points, with the consolidated leverage ratio described under the Third Amended and Restated Credit Agreement, as amended.

In September 2024, we entered into an operating line of credit agreement with US Bank, N.A.

which has a borrowing capacity of up to $10.0 million and pricing based on SOFR.

This operating line of credit terminates in September 2025 and is designed to enhance treasury management activities and more effectively manage cash balances.

As of December 31, 2024, there was $3.4 million outstanding on this line of credit.

We previously had a $6.0 million operating line of credit with Wells Fargo Bank, N.A.

with pricing based on SOFR that matured on August 31, 2024.

As of December 31, 2023, there was no outstanding balance on this line of credit.

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

(collectively, "PGIM") under which we have issued $175.0 million in unsecured senior promissory notes (“Unsecured Shelf Notes”).

On October 28, 2024, the shelf agreement was amended to extend the period of time during which we may borrow money to October 2027 and to increase the borrowing capacity to $300.0 million.

We also had a separate private note purchase agreement with PGIM and certain other lenders for the issuance of $125.0 million of senior unsecured promissory notes (“Unsecured Club Notes”, and, collectively with the Unsecured Shelf Notes, the “unsecured senior notes”), of which all $125.0 million was issued in September 2021.

The following table shows the notes issued under both agreements as of December 31, 2024 and 2023.

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

In November 2022, we entered into a $100.0 million term loan agreement (“Term Loan”) with PNC Bank, National Association as administrative agent.

The interest rate on the Term Loan was based on SOFR, plus a margin that ranged from 120 to 175 basis points based on our consolidated leverage ratio.

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

As of December 31, 2023, the Term Loan was paid in full.

As of December 31, 2022, the Term Loan had a balance of $100.0 million.

We have a $198.9 million Fannie Mae Credit Facility Agreement (“FMCF”).

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

Mortgage loan indebtedness, excluding the FMCF, was $391.1 million on and $299.4 million on December 31, 2023, and 2022, respectively on 14 and 15 apartment communities, respectively.

Mortgage loan indebtedness, excluding net debt premiums and discounts and the FMCF, was $420.4 million and $392.3 million on December 31, 2024, and 2023, respectively on 15 and 14 apartment communities, respectively.

As of December 31, 2024, the weighted average rate of interest on our mortgage debt was 4.02%, compared to 4.05% on December 31, 2023.

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Refer to Item 7A in this Report for additional information on our market and interest rate risk.

We have an at-the-market offering program (“2021 ATM program”) through which we may offer and sell common shares having an aggregate sales price of up to $250.0 million, in amounts and at times that we determine.

The proceeds from the sale of common shares under the 2021 ATM program are intended to be used for general corporate purposes, which may include the funding of acquisitions, construction or mezzanine loans, community renovations, and the repayment of indebtedness.

During the year ended December 31, 2023, we did not issue any common shares under the 2021 ATM program.

During the year ended December 31, 2022, we issued 321,000 common shares under the 2021 ATM program at an average price of $98.89 per share, net of commissions.

During the year ended December 31, 2022, total consideration, net of commissions and issuance costs, was approximately $31.4 million.

As of December 31, 2023, common shares having an aggregate offering price of up to $126.6

million remained available under the 2021 ATM program.

Refer to Note 4 of our Consolidated Financial Statements contained in this Report.

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

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

The repurchases have no time limit and may be suspended or discontinued completely at any time.

On August 30, 2024, we delivered notice to holders of our Series C preferred shares that we intended to redeem all 3.9 million Series C preferred shares at a redemption price equal to $25 per share plus any accrued but unpaid distributions per share up to and including the redemption date of September 30, 2024.

On September 30, 2024, we completed the redemption of the Series C preferred shares for an aggregate redemption price of $97.0 million, excluding distributions, and such shares are no longer deemed outstanding as of such date and were delisted from trading on the NYSE.

We amended our equity distribution agreement in connection with the at-the-market offering (“ATM Program”) through which we may offer and sell common shares in amounts and at times determined by management.

The amendment increased the maximum aggregate offering price of common shares available for offer and sale thereunder from $250.0 million to $500.0

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

The proceeds from the sale of common shares under the ATM Program may be used for general corporate purposes, including the funding of acquisitions, construction or mezzanine loans, community renovations, and the repayment of indebtedness.

As of December 31, 2024, common shares having an aggregate offering price of up to $262.9 million remained available under the ATM program.

Further information can be found in Note 4 of our Consolidated Financial Statements contained in this Report.

The table below provides details on the sale of common shares under the ATM Program during the years ended December 31, 2024 and 2023.

(in thousands, except per share amounts)

Number of Common Shares Total Consideration (1)

Average Price Per Share (1)

Year ended December 31, 2024 (2)

1,587 $ 112,613 $ 71.66

Year ended December 31, 2023 — $ — $ —

(1) Total consideration is net of $1.1 million in commissions for the year ended December 31, 2024.

(2) Includes 869,000 shares sold on a forward basis for $62.7 million which were physically settled during the year ended December 31, 2024.

We have a share repurchase program (the “Share Repurchase Program”), providing for the repurchase of up to an aggregate of $50.0 million of our outstanding common shares.

The specific timing and amount of repurchases will vary based on available capital resources or other financial and operational performance, market conditions, securities law limitations, and other factors.

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

As of December 31, 2023 and 2022, we had 3.9 million Series C preferred shares outstanding.

Changes in Cash, Cash Equivalents, and Restricted Cash

As of December 31, 2023, we had cash and cash equivalents of $8.6 million and restricted cash consisting of $639,000 of escrows held by lenders for real estate taxes, insurance, and capital additions.

As of December 31, 2024, we had cash and cash equivalents of $12.0 million and restricted cash consisting of $1.1 million of escrows held by lenders for real estate taxes, insurance, and capital additions.

The following discussion relates to changes in consolidated cash, cash equivalents, and restricted cash which are presented in our Consolidated Statements of Cash Flows in Item 15 of this report.

In addition to cash flows from operations, during the year ended December 31, 2024, we generated capital from various activities, including:

• Receiving $223.3 million in net proceeds from the sale of 13 apartment communities and associated commercial space;

• Receiving $90.0 million in proceeds from a new mortgage on our Parkhouse community.

• Receiving $18.3 million in net proceeds from the sale of two apartment communities;

• Receiving $17.4 million on our line of credit, net of repayments;

• Issuing approximately 1.6 million common shares for consideration of $112.1 million, net of commissions and issuance costs;

• Receiving $1.9 million in insurance proceeds, primarily due to one large casualty event that was settled.

During the year ended December 31, 2024, we used capital for various activities, including:

• Acquiring an apartment community in Loveland, Colorado for $42.2 million in cash, including transaction costs, with the remainder of the purchase price in assumption of mortgage debt;

• Repaying $83.5 million on our line of credit, net of proceeds;

• Redeeming all of our Series C preferred shares for $97.0 million;

• Funding $13.6 million on a mezzanine loan for the development of an apartment community;

• Repaying approximately $10.9 million of mortgage principal;

• Repaying $100.0 million on notes payable;

• Repurchasing of 216,000 common shares for $11.5 million, net of issuance costs;

• Repurchasing of 87,722 common shares for $4.7 million, net of fees and expenses;

• Paying distributions on common shares, Series E preferred units, Units, and Series C preferred shares of $59.7 million;

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Our primary contractual obligations relate to borrowings under our lines of credit, unsecured senior notes, and mortgages payable.

The primary line of credit had a $30.0 million balance outstanding at December 31, 2023 and matures in September 2025.

Our primary line of credit had a $44.0 million balance outstanding at December 31, 2024 and matures in July 2028.

Our operating line of credit had a $3.4 million balance outstanding at December 31, 2024 and matures in September 2025.

Our unsecured senior notes had an aggregate balance of $300.0 million at December 31, 2024 with varying maturities from September 2028 through September 2034.

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Depreciation is computed on a straight-line basis over the estimated useful lives of the assets.

We use a 10-37 year estimated life for buildings and improvements and a 5-10 year estimated life for furniture, fixtures, and equipment.

We use a 10-37 year estimated

life for buildings and improvements and a 5-10 year estimated life for furniture, fixtures, and equipment.

Maintenance and repairs are charged to operations as incurred.

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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 7. Management’s Discussion and Analysis