What changed in this filing

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Item 1. Financial Statements

2021-05-03 compared with 2020-11-02 · 141 added, 340 removed, 456 unchanged (51% of the section changed)

Financial Statements.

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CENTERSPACE AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except per share data)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Real estate investments

2 unchanged sentences

1,475,393 1,413,308

Unimproved land — 1,376

Mortgage loans receivable 17,986 16,140

Mortgage loans receivable at fair value 30,107 24,661

Total real estate investments 1,505,500 1,437,969

12 unchanged sentences

COMMITMENTS AND CONTINGENCIES (NOTE 10)

SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $ 100 par value, 166 units issued and outstanding at September 30, 2020 and December 31, 2019, aggregate liquidation preference of $ 16,560 )

SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $ 100 par value, 166 units issued and outstanding at March 31, 2021 and December 31, 2020, aggregate liquidation preference of $ 16,560 )

$ 16,560 $ 16,560

Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, $ 25 per share liquidation preference, 3,881 shares issued and outstanding at September 30, 2020, aggregate liquidation preference of $ 97,036 and 4,118 shares issued and outstanding at December 31, 2019, aggregate liquidation preference of $ 102,971 )

Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, $ 25 per share liquidation preference, 3,881 shares issued and outstanding at March 31, 2021 and December 31, 2020, aggregate liquidation preference of $ 97,036 )

93,530 93,530

Common Shares of Beneficial Interest (Unlimited authorization, no par value, 12,976 shares issued and outstanding at September 30, 2020 and 12,098 shares issued and outstanding at December 31, 2019)

Common Shares of Beneficial Interest (Unlimited authorization, no par value, 13,220 shares issued and outstanding at March 31, 2021 and 13,027 shares issued and outstanding at December 31, 2020)

980,453 968,263

2 unchanged sentences

Total shareholders’ equity $ 617,776 $ 618,207

Noncontrolling interests – Operating Partnership ( 1,018 units at September 30, 2020 and 1,058 units at December 31, 2019)

Noncontrolling interests – Operating Partnership ( 950 units at March 31, 2021 and 977 units at December 31, 2020)

53,007 53,930

3 unchanged sentences

See accompanying Notes to Condensed Consolidated Financial Statements.

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CENTERSPACE AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share data)

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

2020 2019 2020 2019

Three Months Ended March 31,

REVENUE $ 46,648 $ 44,406

8 unchanged sentences

Interest expense ( 7,231 ) ( 6,911 )

Loss on extinguishment of debt ( 4 ) ( 1,087 ) ( 21 ) ( 1,496 )

Interest and other income (loss) 431 ( 2,777 )

Income (loss) before gain (loss) on sale of real estate and other investments, and gain (loss) on litigation settlement ( 4,492 ) ( 4,687 ) ( 16,071 ) ( 14,335 )

Gain (loss) on sale of real estate and other investments 25,676 39,105 25,486 39,774

Gain (loss) on litigation settlement — 300 — 6,586

NET INCOME (LOSS) $ ( 5,159 ) $ ( 7,684 )

9 unchanged sentences

See accompanying Notes to Condensed Consolidated Financial Statements.

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CENTERSPACE AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(in thousands)

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

2020 2019 2020 2019

Three Months Ended March 31,

Net income (loss) $ ( 5,159 ) $ ( 7,684 )

7 unchanged sentences

See accompanying Notes to Condensed Consolidated Financial Statements.

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CENTERSPACE AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (unaudited)

(in thousands, except per share data)

Nine Months Ended September 30, 2019 PREFERRED

Three Months Ended March 31, 2020 PREFERRED

SHARES NUMBER

6 unchanged sentences

Balance December 31, 2019 $ 99,456 12,098 $ 917,400 $ ( 390,196 ) $ ( 7,607 ) $ 60,849 $ 679,902

Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests 30,011 1,811 31,822

Change in fair value of derivatives ( 8,937 ) ( 8,937 )

Distributions - common shares and units ($ 2.10 per share and unit)

( 24,527 ) ( 2,673 ) ( 27,200 )

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

( 5,116 ) ( 5,116 )

Share-based compensation, net of forfeitures 11 1,452 1,452

Redemption of units for common shares 8 ( 511 ) 511 —

Redemption of units for cash ( 8,135 ) ( 8,135 )

Shares repurchased ( 329 ) ( 18,023 ) ( 18,023 )

Acquisition of redeemable noncontrolling interests 4,529 4,529

Other ( 7 ) ( 83 ) ( 95 ) ( 178 )

Balance September 30, 2019 $ 99,456 11,625 $ 886,598 $ ( 428,680 ) $ ( 9,793 ) $ 66,082 $ 613,663

Nine Months Ended September 30, 2020

Balance December 31, 2019 $ 99,456 12,098 $ 917,400 $ ( 390,196 ) $ ( 7,607 ) $ 60,849 $ 679,902

Net income (loss) attributable to controlling interests and noncontrolling interests ( 7,007 ) ( 837 ) ( 7,844 )

11 unchanged sentences

Other — ( 50 ) ( 33 ) ( 83 )

Balance September 30, 2020 $ 93,530 12,976 $ 968,436 $ ( 412,577 ) $ ( 17,256 ) $ 54,378 $ 686,511

See accompanying Notes to Condensed Consolidated Financial Statements.

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (unaudited)

(in thousands, except per share data)

Three Months Ended September 30, 2019 PREFERRED

SHARES NUMBER

SHARES COMMON

SHARES ACCUMULATED

DISTRIBUTIONS

NET INCOME ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) NONREDEEMABLE

NONCONTROLLING

INTERESTS TOTAL

Balance June 30, 2019 $ 99,456 11,656 $ 888,541 $ ( 450,433 ) $ ( 7,598 ) $ 64,034 $ 594,000

Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests 31,596 2,962 34,558

Change in fair value of derivatives ( 2,195 ) ( 2,195 )

Distributions - common shares and units ($ 0.70 per share and unit)

( 8,138 ) ( 857 ) ( 8,995 )

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

( 1,705 ) ( 1,705 )

Share-based compensation, net of forfeitures 8 472 472

Redemption of units for common shares — 10 ( 10 ) —

Redemption of units for cash ( 11 ) ( 11 )

Shares repurchased ( 39 ) ( 2,346 ) ( 2,346 )

Other — ( 79 ) ( 36 ) ( 115 )

Balance September 30, 2019 $ 99,456 11,625 $ 886,598 $ ( 428,680 ) $ ( 9,793 ) $ 66,082 $ 613,663

Three Months Ended September 30, 2020

Balance June 30, 2020 $ 93,579 12,827 $ 958,292 $ ( 421,515 ) $ ( 18,139 ) $ 53,290 $ 665,507

Balance March 31, 2020 $ 96,046 12,163 $ 912,653 $ ( 407,150 ) $ ( 17,360 ) $ 55,527 $ 639,716

Three Months Ended March 31, 2021

Balance December 31, 2020 $ 93,530 13,027 $ 968,263 $ ( 427,681 ) $ ( 15,905 ) $ 54,616 $ 672,823

Net income (loss) attributable to controlling interests and noncontrolling interests ( 4,867 ) ( 452 ) ( 5,319 )

8 unchanged sentences

Redemption of units for cash ( 9 ) ( 9 )

Shares repurchased ( 49 ) ( 1 ) ( 50 )

Other — ( 182 ) ( 34 ) ( 216 )

Balance September 30, 2020 $ 93,530 12,976 $ 968,436 $ ( 412,577 ) $ ( 17,256 ) $ 54,378 $ 686,511

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

Balance March 31, 2021 $ 93,530 13,220 $ 980,453 $ ( 443,409 ) $ ( 12,798 ) $ 53,676 $ 671,452

See accompanying Notes to Condensed Consolidated Financial Statements.

CENTERSPACE AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

2 unchanged sentences

Depreciation and amortization, including amortization of capitalized loan costs 20,245 18,424

(Gain) loss on sale of real estate and other investments ( 25,486 ) ( 39,774 )

Realized (gain) loss on marketable securities — 1,227

(Gain) loss on litigation settlement — ( 1,349 )

Unrealized (gain) loss on marketable securities — 2,326

Share-based compensation expense 810 465

6 unchanged sentences

Proceeds from sale of marketable securities — 1,679

Proceeds from repayment of mortgage loans receivable 10,020 —

Increase in mortgages and notes receivable ( 5,445 ) ( 6,956 )

Proceeds from sale of real estate and other investments 43,669 93,804

Payments for acquisitions of real estate assets ( 77,585 ) ( 23,712 )

3 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from mortgages payable — 59,900

Principal payments on mortgages payable ( 3,566 ) ( 1,513 )

4 unchanged sentences

Proceeds from issuance of common shares 11,782 3,352

Repurchase of common shares — ( 18,023 )

Repurchase of Series C preferred shares — ( 3,137 )

Repurchase of partnership units ( 48 ) ( 8,135 )

Redemption of partnership units ( 9 ) ( 14 )

Distributions paid to common shareholders ( 9,119 ) ( 8,469 )

9 unchanged sentences

Accrued capital expenditures $ 2,418 $ 1,286

Operating partnership units converted to shares ( 220 ) ( 930 )

Distributions declared but not paid to common shareholders 9,919 9,245

Gain on litigation settlement — 1,349

Unrealized gain (loss) on marketable securities — ( 2,326 )

Real estate assets acquired through exchange of note receivable — 17,663

Note receivable exchanged through real estate acquisition — ( 17,663 )

Property acquired through issuance of Series D preferred units — 16,560

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest $ 6,787 $ 6,481

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CENTERSPACE AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)

Balance sheet description September 30, 2020 December 31, 2019 September 30, 2019

Balance sheet description March 31, 2021 December 31, 2020 March 31, 2020

Cash and cash equivalents $ 10,816 $ 392 $ 26,338

2 unchanged sentences

See accompanying Notes to Condensed Consolidated Financial Statements.

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CENTERSPACE AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

for the nine months ended September 30, 2020 and 2019

for the three months ended March 31, 2021 and 2020

NOTE 1 • ORGANIZATION

Investors Real Estate Trust, collectively with our consolidated subsidiaries (“IRET,” “we,” “us,” or “our”), is a real estate investment trust (“REIT”) focused on the ownership, management, acquisition, redevelopment, and development of apartment communities.

As of September 30, 2020, we owned interests in 67 apartment communities consisting of 11,910 apartment homes.

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

As of March 31, 2021, we owned interests in 68 apartment communities consisting of 12,168 apartment homes.

NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

We conduct a majority of our business activities through our consolidated operating partnership, IRET Properties, A North Dakota Limited Partnership (the “Operating Partnership”), as well as through a number of other consolidated subsidiary entities.

We conduct a majority of our business activities through our consolidated operating partnership, Centerspace, LP (f/k/a IRET Properties), a North Dakota limited partnership (the “Operating Partnership”), as well as through a number of other consolidated subsidiary entities.

The accompanying condensed consolidated financial statements include our accounts and the accounts of all our subsidiaries in which we maintain a controlling interest, including the Operating Partnership.

5 unchanged sentences

The COVID-19 pandemic has adversely impacted the global economy and financial markets, and multifamily residents and commercial tenants have experienced financial hardship or closures.

The extent to which the COVID-19 pandemic could have an adverse effect on our financial condition, results of operations, and cash flows is uncertain and will depend on future developments.

The COVID-19 pandemic has not had a material adverse impact on our financial condition, results of operations, and cash flows for the nine months ended September 30, 2020;

The COVID-19 pandemic has not had a material adverse impact on our financial condition, results of operations, and cash flows for the three months ended March 31, 2021;

however, we continue to monitor the impact of the COVID-19 pandemic on all aspects of our business and cannot predict the impact it may have on our financial condition, results of operations, and cash flows in the future.

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”).

10 unchanged sentences

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

ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments;

ASU 2018-19, Codification Improvements to Topic 326;

ASU 2019-05, Financial Instruments - Credit Losses - Targeted Transition Relief

These ASUs require entities to estimate a lifetime expected credit loss for most financial assets, such as loans and other financial instruments, and to present the net amount expected to be collected.

In 2018, another ASU was issued to amend ASU 2016-13, which clarifies that it does not apply to operating lease receivables.

In 2019, an additional ASU was issued to provide transition relief in which an entity is allowed to elect the fair value option on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326.

These ASUs are effective for annual reporting periods beginning after December 15, 2019.

Early adoption is permitted.

We elected the fair value option for all of our mortgages and notes receivable at January 1, 2020, as allowed by ASU 2019-05.

As a result, we do not have any receivables or other financial instruments to which we are applying this standard.

ASU 2018-13, Fair Value Measurements (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirement for Fair Value Measurements

This ASU eliminates certain disclosure requirements affecting all levels of measurement, and modifies and adds new disclosure requirements for Level 3 measurements.

This ASU is effective for annual reporting periods beginning after December 15, 2019.

Early adoption is permitted.

The new standard did not have a material impact on our condensed consolidated financial statements but did require additional disclosures.

ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting

10 unchanged sentences

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

As of September 30, 2020, restricted cash consisted primarily of escrows held by lenders for real estate taxes, insurance, and capital additions.

Effective January 1, 2019, we adopted ASUs 2016-02, 2018-10, 2018-11, 2018-20, and 2019-01 related to leases using the modified retrospective approach.

We elected to adopt the package of practical expedients permitted under the transition guidance, which permits us to not reassess prior conclusions about lease identification, classification, and initial direct costs under the new standard, and the practical expedient related to land easements, which allows us to not evaluate existing or expired land easements that were not previously accounted for under ASC 840.

We made an accounting policy election to exclude leases in which we are a lessee with a term of 12 months or less from the balance sheet.

As of March 31, 2021, restricted cash consisted primarily of escrows held by lenders for real estate taxes, insurance, and capital additions.

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

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

Rental income represents approximately 98.4 % of our total revenues and includes gross market

rent less adjustments for concessions, vacancy loss, and bad debt.

Rental income represents approximately 98.2 % of our total revenues and includes gross market rent less adjustments for concessions, vacancy loss, and bad debt.

Other property revenues represent the remaining 1.8 % of our total revenues and are primarily driven by other fee income, which is typically recognized when earned, at a point in time.

3 unchanged sentences

Beginning in April 2020, we offered multifamily residents suffering from financial hardship related to the COVID-19 pandemic the option to apply for a rent deferral.

We elected to account for these accommodations as though enforceable rights and obligations for the accommodation existed without evaluating if such a right or obligation existed under the lease agreement, as allowed by the FASB Q&A released on April 10, 2020 related to lease modification guidance under ASC 842.

We elected to account for these accommodations as enforceable rights and obligations existed without evaluating if such a right or obligation existed under the lease agreement, as allowed by the FASB Q&A released on April 10, 2020 related to lease modification guidance under ASC 842.

The accommodations were recognized as variable lease payments.

As of September 30, 2020, approximately $ 59,000 remained outstanding under the rent deferral agreements offered to multifamily residents.

As of March 31, 2021 and December 31, 2020, approximately $ 57,000 and $ 99,600 remained outstanding under the rent deferral agreements offered to multifamily residents, respectively.

We also abated rent, common area maintenance, and real estate taxes for commercial tenants that experienced government-mandated interruptions or closures of their businesses.

The accommodations were recognized as variable lease payments, as allowed by the FASB Q&A released on April 10, 2020.

D uring the three and nine months ended September 30, 2020, we recognized a reduction in revenue of $ 136,000 and $ 538,000 , respectively, due to the abatement of amounts due from our commercial tenants.

Many of our leases co ntain non-lease components for utility reimbursement from our residents and common area maintenance from our commercial tenants.

During the three months ended March 31, 2021, we recognized a reduction in revenue of $ 47,000 due to the abatement of amounts due from our commercial tenants.

Many of our leases contain non-lease components for utility reimbursement from our residents and common area maintenance from our commercial tenants.

We have elected the practical expedient to combine lease and non-lease components for all asset classes.

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

The aggregate amount of future scheduled lease income on our commercial operating leases, excluding any variable lease income and non-lease components, as of September 30, 2020, was as follows:

The aggregate amount of future scheduled lease income on our commercial operating leases, excluding any variable lease income and non-lease components, as of March 31, 2021, was as follows:

(in thousands)

8 unchanged sentences

A gain or loss is recognized when the criteria for derecognition of an asset are met, including when (1) a contract exists and (2) the buyer obtained control of the nonfinancial asset that was sold.

The following table presents the disaggregation of revenue streams for the three and nine months ended September 30, 2020:

The following table presents the disaggregation of revenue streams for the three months ended March 31, 2021 and 2020:

(in thousands)

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

Three Months Ended March 31,

Revenue Stream Applicable Standard 2021 2020

11 unchanged sentences

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

During the three and nine months ended September 30, 2020 and 2019, we recorded no impairment charges.

During the three months ended March 31, 2021 and 2020, we recorded no impairment charges.

MORTGAGE LOANS RECEIVABLE AND NOTES RECEIVABLE

In August 2017, we sold 13 multifamily communities in exchange for cash and an $ 11.0 million note secured by a mortgage on the assets.

As of September 30, 2020, the note was paid in full.

As of December 31, 2019, the balance of the note was $ 10.0 million, with 12 communities remaining in the pool of assets used to secure the mortgage.

During the nine months ended September 30, 2020 and 2019, we received and recognized approximately $ 279,000 and $ 428,000 of interest income, respectively.

In July 2017, we originated a $ 16.2 million loan in a multifamily development located in New Hope, Minnesota, a Minneapolis suburb.

We funded an additional $ 341,000 upon satisfaction of certain conditions set forth in the loan agreement.

During the nine months ended September 30, 2020, we executed the purchase option for the apartment community (refer to Note 8 for details on acquisition).

This note was paid in full as part of our acquisition of this apartment community.

As of December 31, 2019, the balance of the note was $ 16.6 million.

In March 2020, in connection with our acquisition of Ironwood, an apartment community in New Hope, Minnesota, we acquired a tax increment financing note receivable (“TIF”) with a principal balance of $ 6.6 million at March 31, 2021 and December 31, 2020, which appears within other assets in our condensed consolidated balance sheets.

The note bears an interest rate of 4.5 % with payments due in February and August of each year.

In December 2019, we originated a $ 29.9 million construction loan and a $ 15.3 million mezzanine loan for the development of a multifamily development located in Minneapolis, Minnesota.

1 unchanged sentence

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

As of September 30, 2020 and December 31, 2019, we had funded $ 18.0 million and $ 6.2 million, respectively, of the construction loan, which appears within mortgage loans receivable in our condensed consolidated balance sheets.

As of March 31, 2021, we had funded the full $ 29.9 million of the construction loan and $ 112,000 of the mezzanine loan, which appears within mortgage loans receivable in our condensed consolidated balance sheets.

As of December 31, 2020, we had funded $ 24.7 million of the construction loan.

The loans are secured by mortgages and mature on December 31, 2023, and the agreement provides us with an option to purchase the development.

1 unchanged sentence

We are not the primary beneficiary of the variable interest entity (“VIE”) as we do not have the power to direct the activities which most significantly impact the entity’s economic performance nor do we have significant influence over the entity.

In March 2020, in connection with our acquisition of Ironwood, an apartment community in New Hope, Minnesota, we acquired a tax increment financing note receivable ("TIF") with a principal balance of $ 6.6 million, which appears within other assets in our condensed consolidated balance sheets.

The note bears an interest rate of 4.5 % with payments due in February and August of each year.

VARIABLE INTEREST ENTITIES

2 unchanged sentences

Because our Operating Partnership is a VIE, all of our assets and liabilities are held through a VIE.

During the nine months ended September 30, 2020, we acquired the 47.4 % noncontrolling interests in the real estate partnership that owns 71 France for $ 12.2 million.

During the three months ended March 31, 2020, we acquired the 47.4 % noncontrolling interests in the real estate partnership that owns 71 France for $ 12.2 million.

MARKETABLE SECURITIES

2 unchanged sentences

Any unrealized gains or losses are included in interest and other income on the consolidated statements of operations.

As of September 30, 2020, we had no marketable securities.

As of December 31, 2019, the cost basis of marketable securities was $ 6.9 million, the gross unrealized gain was $ 113,000 , and the carrying value was $ 7.1 million.

During the nine months ended September 30, 2020, we had a realized loss of $ 3.4 million arising from the disposal of such securities.

As of March 31, 2021 and December 31, 2020 we had no marketable securities.

During the three months ended March 31, 2020, we had a realized loss of $ 1.2 million arising from the disposal of such securities which appears in interest and other income (loss) in the Condensed Consolidated Statements of Operations.

NOTE 3 • EARNINGS PER SHARE

4 unchanged sentences

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

Performance-based RSUs of 27,506 and 37,822 for the three months ended September 30, 2020 and 2019, respectively, and 27,506 and 37,822 for the nine months ended September 30, 2020 and 2019, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the nine months ended September 30, 2020, Series D preferred units of 228,000 and time-based RSUs of 13,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the three and nine months ended September 30, 2020, weighted average stock options of 140,554 and 68,292 , respectively, were excluded from the calculation of diluted earnings per share because the assumed proceeds per share plus the average unearned compensation were greater than the average market price of common shares for the periods ended and, therefore were anti-dilutive.

The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the condensed consolidated financial statements for the three and nine months ended September 30, 2020 and 2019:

Performance-based RSUs of 46,218 and 37,822 for the three months ended March 31, 2021 and 2020, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the three months ended March 31, 2021 and 2020, Series D preferred units of 228,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the three months ended March 31, 2020 and 2020, time-based RSUs of 19,000 and 16,000 , respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the three months ended March 31, 2021, weighted average stock options of 43,629 were excluded from the calculation of diluted earnings per share because the assumed proceeds per share plus the average unearned compensation were greater than the average market price of common shares for the periods ended and, therefore were anti-dilutive.

(in thousands, except per share data)

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

2020 2019 2020 2019

Three Months Ended March 31,

Net income (loss) attributable to controlling interests $ ( 4,867 ) $ ( 7,007 )

7 unchanged sentences

Effect of redeemable operating partnership units 957 1,054

Effect of Series D preferred units 228 228 — 181

Effect of dilutive restricted stock units and stock options 10 11 — 6

Denominator for diluted earnings per share 14,035 13,157

3 unchanged sentences

Operating Partnership Units.

The Operating Partnership had 1.0 million and 1.1 million outstanding Units at September 30, 2020 and December 31, 2019, respectively.

Common Shares and Equity Awards .

Common shares outstanding on September 30, 2020 and December 31, 2019, totaled 13.0 million and 12.1 million, respectively.

There were 297 and 20,998 shares issued upon the vesting of equity awards under our 2015 Incentive Plan during the three and nine months ended September 30, 2020, respectively, with a total grant-date fair value of $ 17,000 and $ 1.0 million, respectively.

During the three and nine months ended September 30, 2019, we issued 8,662 and 15,380 shares upon the vesting of equity awards under our 2015 Incentive Plan, respectively, with a total grant-date fair value of $ 473,000 and $ 930,000 , respectively.

These shares vest based on performance and service criteria.

Equity Distribution Agreement.

We have an equity distribution agreement in connection with an at-the-market offering ("2019 ATM Program") through which we may offer and sell common shares having an aggregate sales price of up to $ 150.0 million, in amounts and at times as we determine.

The proceeds from the sale of common shares under the 2019 ATM Program are intended to be used for general purposes, which may include the funding of future acquisitions, construction or mezzanine loans, community renovations, and the repayment of indebtedness.

The table below provides details on the sale of common shares during the three and nine months ended September 30, 2020.

As of September 30, 2020, common shares having an aggregate offering price of up to $ 69.2 million remained available under the 2019 ATM Program.

(in thousands, except per share amounts)

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

Average Price Per Share (1)

2020 145 $ 10,218 $ 70.55

Nine Months Ended September 30,

2020 819 $ 57,528 $ 70.23

(1) Total consideration is net of $ 156,000 and $ 890,000 in commissions during the three and nine months ended September 30, 2020, respectively, and issuance costs.

The Operating Partnership had 950,000 and 977,000 outstanding Units at March 31, 2021 and December 31, 2020, respectively.

Exchange Rights .

Pursuant to the exercise of exchange rights, we redeemed Units for cash during the three and nine months ended September 30, 2020 and 2019 as detailed in the table below.

Pursuant to the exercise of exchange rights, we redeemed Units for cash during the three months ended March 31, 2021 and 2020 as detailed in the table below.

(in thousands, except per Unit amounts)

Three Months Ended September 30, Number of Units Aggregate Cost (1)

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

Average Price Per Unit

1 unchanged sentence

2020 — $ 14 $ 74.45

Nine Months Ended September 30,

2020 1 $ 48 $ 70.10

2019 136 $ 8 $ 59.99

(1) The redemption price is determined using the volume weighted average price for the ten trading days prior to the date a unitholder provides notification of their intent to redeem units.

We also redeemed Units in exchange for common shares in connection with Unitholders exercising their exchange rights during the three and nine months ended September 30, 2020 and 2019 as detailed in the table below.

We also redeemed Units in exchange for common shares in connection with Unitholders exercising their exchange rights during the three months ended March 31, 2021 and 2020 as detailed in the table below.

(in thousands)

Three Months Ended September 30, Number of Units Total Book Value

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

2021 26 $ ( 220 )

Nine Months Ended September 30,

2020 14 $ ( 930 )

Common Shares and Equity Awards .

Common shares outstanding on March 31, 2021 and December 31, 2020, totaled 13.2 million and 13.0 million, respectively.

There were 2,801 shares issued upon the vesting of equity awards under our 2015 Incentive Plan during the three months ended March 31, 2021, with a total grant-date fair value of $ 164,000 .

During the three months ended March 31, 2020, we issued 1,193 shares upon the vesting of equity awards under our 2015 Incentive Plan, with a total grant-date fair value of $ 125,000 .

These shares vest based on performance and service criteria.

Equity Distribution Agreement.

We have an equity distribution agreement in connection with an at-the-market offering (“2019 ATM Program”) through which we may offer and sell common shares having an aggregate sales price of up to $ 150.0 million, in amounts and at times as we determine.

The table below provides details on the sale of common shares during the three months ended March 31, 2021 and 2020.

As of March 31, 2021, common shares having an aggregate offering price of up to $ 55.3 million remained available under the 2019 ATM Program.

(in thousands, except per share amounts)

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

Average Price Per Share

2021 164 $ 11,859 $ 72.19

2020 50 $ 3,402 $ 68.04

(1) Total consideration is net of $ 181,000 and $ 52,000 in commissions during the three months ended March 31, 2021 and 2020, respectively, and issuance costs.

Share Repurchase Program .

On December 5, 2019, our Board of Trustees terminated the existing share repurchase program and authorized a new share repurchase program to repurchase up to $ 50 million of our common or preferred shares over a one-year period.

Under this new repurchase program, we may repurchase common or preferred shares in open-market purchases,

including pursuant to Rule 10b5-1 and Rule 10b-18 plans, as determined by management and in accordance with the requirements of the SEC.

The extent to which we repurchase our shares, and the timing of repurchases, will depend on a variety of factors, including market conditions, regulatory requirements, and other corporate considerations, as determined by the executive management team.

This program may be suspended or discontinued at any time.

As of September 30, 2020, $ 44.4 million remained available under our share repurchase program.

Common shares and Series C Preferred Shares repurchased during the three and nine months ended September 30, 2020 and 2019 are detailed in the table below.

Under this repurchase program, we were able to repurchase common or preferred shares in open-market purchases, including pursuant to Rule 10b5-1 and Rule 10b-18 plans, as determined by management and in accordance with the requirements of the SEC.

This program expired on December 5, 2020.

Series C Preferred Shares repurchased during the three months ended March 31, 2020 are detailed in the table below.

(in thousands, except per share amounts)

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

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

Average Price Per Share (1)

2020 136 $ 3,137 $ 23.00

2019 39 — $ 2,346 $ 59.57

Nine Months Ended September 30,

2020 — 237 $ 5,628 $ 23.75

2019 329 — $ 18,023 $ 54.69

(1) Amount includes commissions.

Series C Preferred Shares.

Series C preferred shares outstanding were 3.9 million and 4.1 million shares at September 30, 2020 and December 31, 2019, respectively.

Series C preferred shares outstanding were 3.9 million shares at March 31, 2021 and December 31, 2020.

The Series C preferred shares are nonvoting and redeemable for cash at $ 25.00 per share at our option after October 2,

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NOTE 5 • DEBT

As of September 30, 2020, we owned 67 apartment communities, of which 22 served as collateral for mortgage loans.

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

As of September 30, 2020, we believe that there are no material defaults or instances of noncompliance in regards to any of these mortgages payable.

As of September 30, 2020, 45 of our apartment communities were not encumbered by mortgages, with 41 of those properties providing credit support for our unsecured borrowings.

As of March 31, 2021, 49 of our apartment communities were not encumbered by mortgages, with 34 of those properties providing credit support for our unsecured borrowings.

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

Our line of credit has total commitments and borrowing capacity of $ 250.0 million, based on the value of properties contained in the unencumbered asset pool (“UAP”).

As of September 30, 2020, the additional borrowing availability was $ 115.0 million beyond the $ 135.0 million drawn, including the balance on our operating line of credit (discussed below).

As of March 31, 2021, the additional borrowing availability was $ 68.5 million beyond the $ 181.5 million drawn, including the balance on our operating line of credit (discussed below).

The unsecured credit facility matures on August 31, 2022, with one twelve-month option to extend the maturity date at our election.

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

We believe that we are in compliance with all such financial covenants and limitations as of September 30, 2020.

We have a private shelf agreement for the issuance of up to $ 150.0 million of unsecured senior promissory notes ("unsecured senior notes").

Under this agreement, we issued $ 75.0 million of Series A notes due September 13, 2029 bearing interest at a

rate of 3.84 % annually and $ 50.0 million of Series B notes due September 30, 2028 bearing interest at a rate of 3.69 % annually.

We believe that we are in compliance with all such financial covenants and limitations as of March 31, 2021.

In January, we amended and expanded our private shelf agreement to increase the aggregate amount available for issuance of unsecured senior promissory notes (“unsecured senior notes”) to $ 225.0 million.

Under this agreement, we issued $ 75.0 million of Series A notes due September 13, 2029 bearing interest at a rate of 3.84 % annually, $ 50.0 million of Series B notes due September 30, 2028 bearing interest at a rate of 3.69 % annually, and $ 50.0 million of Series C notes due June 6, 2030 bearing interest at a rate of 2.70 % annually.

We have $ 50.0 million remaining available under the private shelf agreement.

As of March 31, 2021, we owned 19 apartment communities that served as collateral for mortgage loans.

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

As of March 31, 2021, we believe that there are no material defaults or instances of noncompliance in regards to any of these mortgages payable.

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

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This operating line matures on August 1, 2021, with pricing based on a market spread plus the one-month LIBOR index rate.

The following table summarizes our indebtedness at September 30, 2020:

The following table summarizes our indebtedness:

(in thousands)

September 30, 2020 December 31, 2019 Weighted Average Maturity in Years at September 30, 2020

March 31, 2021 December 31, 2020 Weighted Average Maturity in Years at March 31, 2021

Lines of credit $ 181,544 $ 152,871 1.41

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(1) Included within notes payable on our condensed consolidated balance sheets.

The aggregate amount of required future principal payments on term loans, unsecured senior notes, and mortgages payable as of September 30, 2020, was as follows:

The aggregate amount of required future principal payments on term loans, unsecured senior notes, and mortgages payable as of March 31, 2021, was as follows:

(in thousands)

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The interest rate swap contracts qualify as cash flow hedges.

Under ASU 2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities , the ineffective portion of a hedging instrument is not required to be recognized currently in earnings or disclosed.

Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income (“OCI”) and subsequently reclassified into earnings in the period that the hedged transaction affects earnings.

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During the next twelve months, we estimate an additional $ 4.4 million will be reclassified as an increase to interest expense.

At September 30, 2020 and December 31, 2019 , we had a $ 50.0 million interest rate swap to fix the interest rate on a portion of our primary line of credit.

At September 30, 2020 and December 31, 2019 , we had three interest rate swap contracts in effect with a notional amount of $ 195.0 million and one additional interest rate swap that becomes effective on January 31, 2023, with a notional amount of $ 70.0 million.

The table below presents the fair value of our derivative financial instruments as well as their classification on our Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 .

At March 31, 2021 and December 31, 2020 , we had a $ 50.0 million interest rate swap to fix the interest rate on a portion of our primary line of credit.

At March 31, 2021 and December 31, 2020 , we had three interest rate swap contracts in effect with a notional amount of $ 195.0 million and one additional interest rate swap that becomes effective on January 31, 2023, with a notional amount of $ 70.0 million.

The table below presents the fair value of our derivative financial instruments as well as their classification on our Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 .

(in thousands)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Balance Sheet Location Fair Value Fair Value

Total derivative instruments designated as hedging instruments - interest rate swaps Accounts Payable and Accrued Expenses $ 12,798 $ 15,905

The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations as of September 30, 2020 and 2019.

The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations as of March 31, 2021 and 2020.

(in thousands)

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

Three months ended September 30, 2020 2019 2020 2019

Total derivatives in cash flow hedging relationships - Interest rate contracts $ ( 210 ) $ ( 2,251 ) Interest expense $ ( 1,093 ) $ ( 56 )

Nine months ended September 30,

Three months ended March 31, 2021 2020 2021 2020

Total derivatives in cash flow hedging relationships - Interest rate contracts $ 2,011 $ ( 9,408 ) Interest expense $ ( 1,095 ) $ ( 345 )

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Total Level 1 Level 2 Level 3

September 30, 2020

March 31, 2021

Mortgages and notes receivable $ 36,443 — — $ 36,443

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December 31, 2020

Mortgages and notes receivable 30,994 — — 30,994

Derivative instruments - interest rate swaps $ 15,905 $ — — $ 15,905

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We also consider both our own nonperformance risk and the counterparty’s nonperformance risk in the fair value measurement (Level 3).

Effective January 1, 2020, we elected the fair value option for our mortgage loans receivable and notes receivable, as allowed under ASU 2019-05 which provided transition relief upon adoption of ASU 2016-13, "Financial Instruments - Credit Losses." We utilize an income approach with level 3 inputs based on expected future cash flows to value these instruments.

The inputs include market transactions for similar instruments, management estimates of comparable interest rates (range of 3.75 % to

5.0 %), and instrument specific credit risk (range of 0.5 % to 1.0 %).

We utilize an income approach with level 3 inputs based on expected future cash flows to value these instruments.

The inputs include market transactions for similar instruments, management estimates of comparable interest rates (range of 3.75 % to 10.75 %), and instrument specific credit risk (range of 0.5 % to 1.0 %).

Changes in the fair value of these receivables from period to period are reported in interest and other income on our condensed consolidated statements of operations.

(in thousands)

Fair Value Measurement at September 30, 2020 Other Gains (Losses) Interest

Fair Value Measurement at March 31, Other Gains (Losses) Interest

Income Total Changes in Fair Value Included in Current-Period Earnings

Three months ended September 30,

Three months ended March 31, 2021

Mortgage loans and notes receivable $ 36,443 $ 4 $ 407 $ 411

Nine months ended September 30,

Three months ended March 31, 2020

Mortgage loans and notes receivable $ 26,697 $ 1 $ 527 $ 528

Fair Value Measurements on a Nonrecurring Basis

There were no non-financial assets or liabilities measured at fair value on a nonrecurring basis at September 30, 2020 and December 31, 2019.

There were no non-financial assets or liabilities measured at fair value on a nonrecurring basis at March 31, 2021 and December 31, 2020.

Financial Assets and Liabilities Not Measured at Fair Value

The fair value of mortgages payable are estimated based on the discounted cash flows of the loans using market research and management estimates of comparable interest rates (Level 3).

The estimated fair values of our financial instruments as of September 30, 2020 and December 31, 2019, respectively, are as follows:

The estimated fair values of our financial instruments as of March 31, 2021 and December 31, 2020, respectively, are as follows:

(in thousands)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Carrying Amount Fair Value Carrying Amount Fair Value

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Restricted cash $ 1,610 $ 1,610 $ 6,918 $ 6,918

Mortgage and note receivable (2)

— — $ 32,810 $ 32,810

FINANCIAL LIABILITIES

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

(2) As of January 1, 2020, we elected the fair value option, as allowed under ASU 2019-05.

Fair value for these instruments is discussed within the Fair Value Measurements on a Recurring Basis section above.

NOTE 8 • ACQUISITIONS AND DISPOSITIONS

We acquired $ 144.8 million in new real estate during the three months ended September 30, 2020, compared to $ 125.3 million in the three months ended September 30, 2019.

Our acquisitions during the nine months ended September 30, 2020 and 2019 are detailed below.

Nine Months Ended September 30, 2020

We acquired $ 76.9 million in new real estate during the three months ended March 31, 2021, compared to $ 46.3 million in the three months ended March 31, 2020.

Our acquisitions during the three months ended March 31, 2021 and 2020 are detailed below.

Three Months Ended March 31, 2021

Acquired (in thousands)

Cost Form of Consideration Investment Allocation

Acquisitions Cash Land Building Intangible

256 homes - Union Pointe - Longmont, CO

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

Three Months Ended March 31, 2020

Acquired (in thousands)

Cost Form of Consideration Investment Allocation

Acquisitions Cash Other (1)

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Assets Other (2)

182 homes - Ironwood Apartments - New Hope, MN

182 homes - Ironwood - New Hope, MN

March 5, 2020 $ 46,263 $ 28,600 $ 17,663 $ 2,165 $ 36,869 $ 824 $ 6,405

465 homes - Parkhouse Apartment Homes - Thornton, CO

September 22, 2020 144,750 144,750 — 10,474 132,105 2,171 —

Total Acquisitions $ 191,013 $ 173,350 $ 17,663 $ 12,639 $ 168,974 $ 2,995 $ 6,405

(1) Payoff of note receivable and accrued interest by seller at closing.

(1) Payoff at closing of note receivable and accrued interest due from seller.

(2) Consists of TIF note acquired.

Refer to Note 2 for further discussion.

Nine Months Ended September 30, 2019

Acquired (in thousands)

Cost Form of Consideration Investment Allocation

Acquisitions Cash Units (1)

Land Building Intangible

272 homes - SouthFork Townhomes - Lakeville, MN

February 26, 2019 $ 44,000 $ 27,440 $ 16,560 $ 3,502 $ 39,950 $ 548

96 homes - FreightYard Townhomes and Flats - Minneapolis, MN

September 6, 2019 26,000 26,000 — 1,889 23,615 496

328 homes - Lugano at Cherry Creek - Denver, CO (2)

September 25, 2019 99,250 99,250 — 7,679 89,365 1,781

$ 169,250 $ 152,690 $ 16,560 $ 13,070 $ 152,930 $ 2,825

Minot 3100 10th St SW - Minot, ND May 23, 2019 $ 2,112 $ 2,112 — $ 246 $ 1,866 —

Total Acquisitions $ 171,362 $ 154,802 $ 16,560 $ 13,316 $ 154,796 $ 2,825

(1) Value of Series D preferred units at the acquisition date.

(2) Investment allocation excludes a $ 425,000 acquisition credit related to retail space lease-up.

During the three months ended September 30, 2020, we disposed of four apartment communities and one commercial property for a total sale price of $ 43.0 million.

During the three months ended September 30, 2019, we sold six apartment communities and one parcel of unimproved land for a total sale price of $ 85.0 million.

The following tables detail our dispositions for the nine months ended September 30, 2020 and 2019.

Nine Months Ended September 30, 2020

(in thousands)

Dispositions Date

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

268 homes - Forest Park - Grand Forks, ND

August 18, 2020 $ 19,625 $ 6,884 $ 12,741

90 homes - Landmark - Grand Forks, ND

August 18, 2020 3,725 1,348 2,377

164 homes - Southwind - Grand Forks, ND

August 18, 2020 10,850 4,573 6,277

168 homes - Valley Park - Grand Forks, ND

August 18, 2020 8,300 4,059 4,241

$ 42,500 $ 16,864 $ 25,636

Dakota West August 7, 2020 $ 500 $ 474 $ 26

Unimproved Land

Rapid City Land - Rapid City, SD June 29, 2020 $ 1,300 $ 1,490 $ ( 190 )

Total Dispositions $ 44,300 $ 18,828 $ 25,472

Nine Months Ended September 30, 2019

(in thousands)

Dispositions Date

Disposed Sale Price Book Value

and Sale Cost Gain/(Loss)

21 homes - Pinehurst - Billings, MT

July 26, 2019 $ 1,675 $ 961 $ 714

160 homes - Brookfield Village - Topeka, KS

September 24, 2019 10,350 5,853 4,497

220 homes - Crown Colony - Topeka, KS

September 24, 2019 17,200 7,876 9,324

54 homes - Mariposa - Topeka, KS

September 24, 2019 6,100 4,290 1,810

300 homes - Sherwood - Topeka, KS

September 24, 2019 26,150 11,536 14,614

308 homes - Villa West - Topeka, KS

September 24, 2019 22,950 15,165 7,785

$ 84,425 $ 45,681 $ 38,744

Minot 1400 31st Ave SW - Minot, ND May 23, 2019 $ 6,530 $ 6,048 $ 482

Unimproved Land

Creekside Crossing - Bismarck, ND March 1, 2019 $ 3,049 $ 3,205 $ ( 156 )

Minot 1525 24th Ave SW - Minot, ND April 3, 2019 725 593 132

Weston - Weston, WI July 31, 2019 600 427 173

$ 4,374 $ 4,225 $ 149

Total Dispositions $ 95,329 $ 55,954 $ 39,375

During the three months ended March 31, 2021 and 2020, we had no dispositions.

NOTE 9 • SEGMENT REPORTING

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This team measures the performance of our reportable segment based on net operating income (“NOI”), which we define as total real estate revenues less property operating expenses, including real estate taxes.

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 depreciation, amortization,

financing, property management overhead, casualty losses, and general and administrative expense.

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 depreciation, amortization, financing, property management overhead, 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, net income available for common shareholders, or cash flow from operating activities as a measure of financial performance.

The following tables present NOI for the three and nine months ended September 30, 2020 and 2019, respectively, along with reconciliations to net income in the condensed consolidated financial statements.

The following tables present NOI for the three months ended March 31, 2021 and 2020, respectively, along with reconciliations to net income in the condensed consolidated financial statements.

Segment assets are also reconciled to total assets as reported in the condensed consolidated financial statements.

(in thousands)

Three Months Ended September 30, 2020 Multifamily All Other Total

Three Months Ended March 31, 2021 Multifamily All Other Total

Revenue $ 45,983 $ 665 $ 46,648

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Interest expense ( 7,231 )

Loss on debt extinguishment ( 4 )

Interest and other income 431

Income (loss) before gain (loss) on sale of real estate and other investments ( 4,492 )

Gain (loss) on sale of real estate and other investments 25,676

Net income (loss) $ ( 5,159 )

(in thousands)

Three Months Ended September 30, 2019 Multifamily All Other Total

Three Months Ended March 31, 2020 Multifamily All Other Total

Revenue $ 41,845 $ 2,561 $ 44,406

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Interest expense ( 6,911 )

Loss on debt extinguishment ( 1,087 )

Interest and other income ( 2,777 )

Income (loss) before gain (loss) on sale of real estate and other investments and gain (loss) on litigation settlement ( 4,687 )

Gain (loss) on sale of real estate and other investments 39,105

Gain (loss) on litigation settlement 300

Net income (loss) $ ( 7,684 )

(in thousands)

Nine Months Ended September 30, 2020 Multifamily All Other Total

Revenue $ 126,296 $ 6,158 $ 132,454

Property operating expenses, including real estate taxes 52,403 2,831 55,234

Net operating income $ 73,893 $ 3,327 $ 77,220

Property management expenses ( 4,341 )

Casualty gain (loss) ( 1,331 )

Depreciation and amortization ( 55,311 )

General and administrative expenses ( 9,707 )

Interest expense ( 20,622 )

Loss on debt extinguishment ( 21 )

Interest and other income ( 1,958 )

Income (loss) before gain (loss) on sale of real estate and other investments ( 16,071 )

Gain (loss) on sale of real estate and other investments 25,486

Net income (loss) $ 9,415

(in thousands)

Nine Months Ended September 30, 2019 Multifamily All Other Total

Revenue $ 114,726 $ 25,252 $ 139,978

Property operating expenses, including real estate taxes 47,387 12,075 59,462

Net operating income $ 67,339 $ 13,177 $ 80,516

Property management expenses ( 4,552 )

Casualty gain (loss) ( 911 )

Depreciation and amortization ( 55,299 )

General and administrative expenses ( 10,803 )

Interest expense ( 23,180 )

Loss on debt extinguishment ( 1,496 )

Interest and other income 1,390

Income (loss) before gain (loss) on sale of real estate and other investments and gain (loss) on litigation settlement ( 14,335 )

Gain (loss) on sale of real estate and other investments 39,774

Gain (loss) on litigation settlement 6,586

Net income (loss) $ 32,025

Segment Assets and Accumulated Depreciation

Segment assets are summarized as follows as of September 30, 2020, and December 31, 2019, respectively, along with reconciliations to the condensed consolidated financial statements:

Segment assets are summarized as follows as of March 31, 2021, and December 31, 2020, respectively, along with reconciliations to the condensed consolidated financial statements:

(in thousands)

As of September 30, 2020 Multifamily All Other Total

As of March 31, 2021 Multifamily All Other Total

Segment assets

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Total property owned $ 1,391,389 $ 21,919 $ 1,413,308

Unimproved land 1,376

Mortgage loans receivable 24,661

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Under various federal, state, and local laws, ordinances, and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal of, or remediation of, certain hazardous or toxic substances in, on, around, or under the property.

While we currently have no knowledge of any material violation of environmental laws,

ordinances, or regulations at any of our properties, there can be no assurance that areas of contamination will not be identified at any of our properties or that changes in environmental laws, regulations, or cleanup requirements would not result in material costs to us.

While we currently have no knowledge of any material violation of environmental laws, ordinances, or regulations at any of our properties, there can be no assurance that areas of contamination will not be identified at any of our properties or that changes in environmental laws, regulations, or cleanup requirements would not result in material costs to us.

Restrictions on Taxable Dispositions.

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2021 LTIP Awards

Awards granted to officers on March 13, 2020, consist of an aggregate of 8,806 time-based RSU awards.

All of these awards are classified as equity awards.

The time-based RSU awards vest as to one-third of the shares on each of March 13, 2021, March 13, 2022, and March 13, 2023.

Awards granted to officers on May 21, 2020, consist of an aggregate of 141,000 stock options, which vest as to 25% on each of May 21, 2021, January 1, 2022, January 1, 2023, and January 1, 2024.

Awards granted to employees on January 1, 2021, consist of an aggregate of 6,410 time-based RSU awards, 19,224 performance RSUs based on total shareholder return (“TSR”), and 43,629 stock options.

The time-based awards vest as to one-third of the shares on each of January 1, 2022, January 1, 2023, and January 1, 2024.

The stock options vest as to 25 % on each of January 1, 2022, January 1, 2023, January 1, 2024, and January 1, 2025.

The fair value of stock options was $ 7.383 per share and was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

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Dividend yield 3.963 %

Awards granted to trustees on May 19, 2020, consist of 8,272 time-based RSUs, which vest on May 19, 2021.

These awards are classified as equity awards.

Awards granted to employees on August 12, 2020, consist of 480 time-based RSUs, which vest on August 12, 2021.

These awards are classified as equity awards.

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

The maximum number of RSUs eligible to be earned is 38,448 RSUs, which is 200 % of the RSUs granted.

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

These awards have market conditions in addition to service conditions that must be met for the awards to vest.

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

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

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

treasury bonds with a maturity equal to the remaining performance period of the award, and the expected term on the performance period of the award.

The assumptions used to value the TSR performance RSUs were an expected volatility of 20.63 %, a risk-free interest rate of 0.17 %, and an expected life of 3 years.

The share price at the grant date, January 1, 2021, was $ 70.64 per share.

Share-Based Compensation Expense

Share-based compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was $ 1.5 million and $ 1.5 million for the nine months ended September 30, 2020 and 2019, respectively.

Share-based compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was $ 810,000 and $ 465,000 for the three months ended March 31, 2021 and 2020, respectively.

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

What changed 10-Q

Item 1. Financial Statements