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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 001-35624
CENTERSPACE
(Exact name of Registrant as specified in its charter)

North Dakota |  | 45-0311232
(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)
3100 10th Street SW | Post Office Box 1988 |
Minot | ND | 58702-1988
(Address of principal executive offices) | (Zip code)

701-837-4738
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Common Shares of Beneficial Interest, no par value | CSR | New York Stock Exchange
Series C Cumulative Redeemable Preferred Shares | CSR-PRC | New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☑ Yes ☐ No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ☐ Yes ☑ No
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No
Indicate by checkmark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). ☑ Yes ☐ No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☑ | Accelerated filer | ☐ | Emerging growth company | ☐
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |  |

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No
The aggregate market value of the Registrant’s outstanding common shares of beneficial interest held by non-affiliates of the Registrant as of June 30, 2021 was 1,098,455,584 based on the last reported sale price on the New York Stock Exchange on June 30, 2021. For purposes of this calculation, the Registrant has assumed that its trustees and executive officers are affiliates.
The number of common shares of beneficial interest outstanding as of February 21, 2022, was 15,041,487.
References in this Report to the “Company,” “Centerspace,” “we,” “us,” or “our” include consolidated subsidiaries, unless the context indicates otherwise.
Documents Incorporated by Reference: Portions of Centerspace's definitive Proxy Statement for its 2021 Annual Meeting of Shareholders will be incorporated by reference into Part III (Items 10, 11, 12, 13 and 14) hereof.

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CENTERSPACE
INDEX

|  | PAGE
PART I |  |
Item 1. | Business | 3
Item 1A. | Risk Factors | 8
Item 1B. | Unresolved Staff Comments | 19
Item 2. | Properties | 20
Item 3. | Legal Proceedings | 23
Item 4. | Mine Safety Disclosures | 23
PART II |  |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 24
Item 6. | Reserved | 25
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | 38
Item 8. | Financial Statements and Supplementary Data | 40
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 39
Item 9A. | Controls and Procedures | 40
Item 9B. | Other Information | 40
PART III |  |
Item 10. | Trustees, Executive Officers and Corporate Governance | 40
Item 11. | Executive Compensation | 40
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 40
Item 13. | Certain Relationships and Related Transactions, and Trustee Independence | 40
Item 14. | Principal Accountant Fees and Services | 40
PART IV |  |
Item 15. | Exhibits, Financial Statement Schedules | 41
Exhibit Index | 42
Signatures | 45
Reports of Independent Registered Public Accounting Firm and Financial Statements | F-2

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Special Note Regarding Forward-Looking Statements
Certain statements included in this Report and the documents incorporated into this document by reference are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include statements about our plans and objectives, including our future financial condition, anticipated capital expenditures, anticipated distributions, and our belief that we have the liquidity and capital resources necessary to meet our known obligations and to make additional real estate acquisitions and capital improvements when appropriate to enhance long-term growth. Forward-looking statements are typically identified by the use of terms such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “assumes,” “may,” “projects,” “outlook,” “future,” and variations of those words and similar expressions. These forward-looking statements involve known and unknown risks, uncertainties, and other factors, including risks associated with the ongoing COVID-19 pandemic, that may cause the actual results, performance, or achievements to be materially different from the results of operations, financial conditions, or plans expressed or implied by the forward-looking statements. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be achieved. Any statements contained herein that are not statements of historical fact should be deemed forward-looking statements. As a result, reliance should not be placed on these forward-looking statements, as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance.
The following factors, among others, could cause our future results to differ materially from those expressed in the forward-looking statements:
•the COVID-19 pandemic and its ongoing effects on our employees, residents, and commercial tenants, third party vendors and suppliers, and apartment communities, as well as our cash flow, business, financial condition, and results of operations;
•deteriorating economic conditions and rising unemployment rates in the markets where we own apartment communities or in which we may invest in the future;
•rental conditions in our markets, including occupancy levels and rental rates, our potential inability to renew residents or obtain new residents upon expiration of existing leases, changes in tax and housing laws, or other factors, including the impact of the COVID-19-related governmental rules and regulations relating to rental rates, evictions, and other rental conditions;
•changes in operating costs, including real estate taxes, utilities, insurance costs, and expenses related to complying with COVID-19 restrictions or otherwise responding to the COVID-19 pandemic;
•timely access to materials required to renovate apartment communities;
•adverse changes in our markets, including future demand for apartment homes in our markets, barriers of entry into new markets, limitations on our ability to increase rental rates, our ability to identify and consummate attractive acquisitions and dispositions on favorable terms, our ability to reinvest sales proceeds successfully, and our inability to accommodate any significant decline in market value of real estate serving as collateral for our mortgage obligations;
•reliance on a single asset class (multifamily) and certain geographic areas (Midwest and Mountain West regions) of the U.S.;
•inability to expand our operations into new or existing markets successfully;
•failure of new acquisitions to achieve anticipated results or be efficiently integrated;
•inability to complete lease-up of our projects on schedule and on budget;
•inability to sell our non-core properties on terms that are acceptable;
•failure to reinvest proceeds from sales of properties into tax-deferred exchanges, which could necessitate special dividend and tax protection payments;
•inability to fund capital expenditures out of cash flow;
•inability to pay, or need to reduce, dividends on our common shares;
•inability to raise additional equity capital;
•financing risks, including our potential inability to meet existing covenants in our existing credit facilities or to obtain new debt or equity financing on favorable terms, or at all;
•level and volatility of interest or capitalization rates or capital market conditions;
•loss contingencies and the availability and cost of casualty insurance for losses;
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•inability to continue to satisfy complex tax rules in order to maintain our status as a REIT for federal income tax purposes, inability of the Operating Partnership to satisfy the rules to maintain its status as a partnership for tax purposes, and the risk of changes in laws affecting REITs;
•inability to attract and retain qualified personnel;
•cyber liability or potential liability for breaches of our privacy or information security systems;
•inability to address catastrophic weather, natural events, and climate change;
•inability to comply with laws and regulations applicable to our business and any related investigations or litigation; and
•other risks identified in this Report, in our other SEC reports, or in other documents that we publicly disseminate.
Readers should carefully review our financial statements and the notes thereto, as well as the section entitled “Risk Factors” in Item 1A of this Report and the other documents we file from time to time with the Securities and Exchange Commission (“SEC”).
In light of these uncertainties, the events anticipated by our forward-looking statements might not occur. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause our actual results to differ materially from those contemplated in any forward-looking statements included in this Report should not be construed as exhaustive.
PART I
Item 1. Business
OVERVIEW
Centerspace (“we,” “us,” “our,” “Centerspace,” or the “Company”), formerly known as Investors Real Estate Trust, is a real estate investment trust (“REIT”) organized under the laws of North Dakota, that is focused on the ownership, management, acquisition, development, and redevelopment of apartment communities. Our current emphasis is on making operational enhancements that will improve our residents’ experience, redeveloping some of our existing apartment communities to meet current market demands, and acquiring new apartment communities in target markets, including the Minneapolis/St. Paul and Denver metropolitan areas.
We focus on investing in markets characterized by stable and growing economic conditions, strong employment, and an attractive quality of life that we believe, in combination, lead to higher demand for our apartment homes and retention of our residents. As of December 31, 2021, we owned interests in 79 apartment communities, containing 14,441 homes and having a total real estate investment amount, net of accumulated depreciation, of $1.8 billion. Our corporate headquarters is located in Minot, North Dakota. We also have a corporate office in Minneapolis, Minnesota.
Website and Available Information
Our internet address is www.centerspacehomes.com. We make available, free of charge, through the “SEC filings” tab under the Investors section of our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Transition Report on Form 10-KT, and amendments to such reports, and proxy statements for our Annual Meetings of Shareholders, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such reports are filed with or furnished to the SEC. These reports are also available at www.sec.gov. We also make press releases, investor presentations, and certain supplemental information available on our website. Current copies of our Code of Conduct; Code of Ethics for Senior Financial Officers; and Charters for the Audit, Compensation, and Nominating and Governance Committees of our Board of Trustees are also available on our website under the “Corporate Governance” tab under the Investors section of our website. Copies of these documents are also available free of charge to shareholders upon request addressed to the Secretary at Centerspace, P.O. Box 1988, Minot, North Dakota 58702-1988. Information on our website does not constitute part of this Report.
STRUCTURE
We were organized under the laws of North Dakota on July 31, 1970, and have operated as a REIT under Sections 856-858 of the Internal Revenue Code of 1986, as amended (the “Code”), since our formation. On February 1, 1997, we were restructured as an Umbrella Partnership Real Estate Investment Trust (“UPREIT”), and we conduct our daily business operations primarily through our operating partnership, Centerspace, LP, formerly known as IRET Properties (the “Operating Partnership”). The
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sole general partner of Centerspace, LP is Centerspace, Inc., formerly known as IRET, Inc., a North Dakota corporation and our wholly owned subsidiary. All of our assets and liabilities have been contributed to Centerspace, LP, through Centerspace, Inc., in exchange for the sole general partnership interest in Centerspace, LP. Centerspace, LP holds substantially all of the assets of the Company. Centerspace, LP conducts the operations of the business and is structured as a partnership with no publicly traded equity. Contributions of properties to the Company can be structured as tax-deferred transactions through the issuance of limited partnership units (“Units”), which is one of the reasons the Company is structured in this manner. As of December 31, 2021, Centerspace, Inc. owned a 83.3% interest in Centerspace, LP. The remaining interest in Centerspace, LP is held by individual limited partners.
BUSINESS STRATEGIES
Our business is focused on our mission - to provide a great home - for our residents, our team members and our investors. We fulfill this mission by providing renters well-located options in various price ranges. While fulfilling our mission, we are seeking consistent earnings growth through exceptional operations, disciplined capital allocation, and market knowledge and efficiencies. Our operations and investment strategies are the foundation for fulfilling our mission and furthering our vision of being a premier provider of apartment homes in vibrant communities by focusing on integrity and serving others.
Operations Strategy
We manage our apartment communities with a focus on providing an exceptional resident experience and maximizing our property financial results. Our initiatives to optimize our operations include:
•Providing an exceptional customer experience to enhance resident satisfaction and retention;
•Attracting, developing, and retaining diverse talent to enable a culture of engagement;
•Scaling our business to enhance efficiencies;
•Leveraging technology and systems; and
•Demonstrating an organizational commitment to ESG.
Investment Strategy
Our business objective under our current strategic plan is to employ an investment strategy that encompasses:
•Seeking opportunities to increase distributable cash flow;
•Managing our balance sheet to maintain flexibility and enhance growth opportunities; and
•Investing in high-quality and efficient rental communities.
FINANCING AND DISTRIBUTIONS
To fund our investment and capital activities, we rely on a combination of issuance of common shares, preferred shares, Units in exchange for property, and borrowed funds. We regularly issue dividends to our shareholders. Each of these is described below.
At-the-Market Offering
In September 2021, we entered into an equity distribution agreement in connection with a new at-the-market offering program (the “2021 ATM Program”), replacing our prior at-the-market offering program (the “2019 ATM Program”). Under the 2021 ATM Program, we may offer and sell common shares having an aggregate sales price of up to $250.0 million, in amounts and at times determined by management. Under the 2021 ATM Program, we may enter into separate forward sale agreements. 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 future acquisitions, construction and mezzanine loans, community renovations, and the repayment of indebtedness. During the year ended December 31, 2021, we issued 1.8 million common shares under both the 2019 ATM Program and 2021 ATM Program at an average price of $86.13 per share, net of commissions. Total consideration, net of commissions and issuance costs, was approximately $156.4 million. As of December 31, 2021, we had common shares having an aggregate offering price of up to $158.7 million remaining available under the 2021 ATM Program.
Issuance of Senior Securities
On October 2, 2017, we issued 4,118,460 shares of 6.625% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series C preferred shares”). As of December 31, 2021, 3,881,453 shares remained outstanding. Depending on
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future interest rates and market conditions, we may issue additional preferred shares or other senior securities which would have dividend and liquidation preference over our common shares. The Series C preferred shares are redeemable, at our option, on October 2, 2022.
Bank Financing and Other Debt
As of December 31, 2021, we owned 48 apartment communities that were not encumbered by mortgages and which were available to provide 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 unencumbered properties. As of December 31, 2021, the additional borrowing availability was $173.5 million beyond the $76.0 million drawn, priced at an interest rate of 2.74%, including the impact of our interest rate swap. This credit facility was amended on September 30, 2021 to extend the maturity date to September 2025 and provide for an accordion option to increase borrowing capacity up to $400.0 million.
Prior to the amendment, the unsecured credit facility also had unsecured term loans of $70.0 million and $75.0 million. During the year ended December 31, 2021, these term loans were paid in full.
In January 2021, we amended and expanded our private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc. (collectively, PGIM) to increase the aggregate amount available for the issuance of unsecured senior promissory notes (“unsecured senior notes”) to $225.0 million. We also issued $50.0 million of unsecured senior notes in connection with the amendment. Under this agreement, we issued $200.0 million unsecured senior notes with $25.0 million remaining available as of December 31, 2021. In September 2021, we entered into a note purchase agreement for the issuance of $125.0 million senior unsecured promissory notes, of which $25.0 million was under the private shelf agreement with PGIM. The following table shows the notes issued under both agreements.

| (in thousands) |  |
| Amount | Maturity Date | Interest Rate
Series A | $ | 75,000 |  | September 13, 2029 | 3.84 | %
Series B | $ | 50,000 |  | September 30, 2028 | 3.69 | %
Series C | $ | 50,000 |  | June 6, 2030 | 2.70 | %
Series 2021-A | $ | 35,000 |  | September 17, 2030 | 2.50 | %
Series 2021-B | $ | 50,000 |  | September 17, 2031 | 2.62 | %
Series 2021-C | $ | 25,000 |  | September 17, 2032 | 2.68 | %
Series 2021-D | $ | 15,000 |  | September 17, 2034 | 2.78 | %

In September 2021, we entered into a $198.9 million Fannie Mae Credit Facility Agreement (“FMCF”) for financing the acquisition of 16 apartment communities. The FMCF is currently secured by mortgages on those apartment communities. The notes are interest-only, have varying maturity dates of 7, 10, and 12 years, at a blended weighted average interest rate of 2.78%. As of December 31, 2021, the FMCF had a balance of $198.9 million.
As of December 31, 2021, we owned 15 apartment communities that served as collateral for mortgage loans, in addition to the apartment communities secured by the FMCF. All of these mortgages payable were non-recourse to us other than for standard carve-out obligations.
We also have a $6.0 million operating line of credit, which is designed to enhance treasury management activities and more effectively manage cash balances. As of December 31, 2021, our ratio of total indebtedness to total gross real estate investments was 37.2%.
Issuance of Securities in Exchange for Property
Our organizational structure allows us to issue shares and Units of Centerspace, LP in exchange for real estate. The Units generally are redeemable, at our option for cash or common shares on a one-for-one basis. Generally, Units receive the same per unit cash distributions as the per share dividends paid on common shares.
Our Declaration of Trust, as amended (our “Declaration of Trust”), does not contain any restrictions on our ability to offer limited partnership units of Centerspace, LP in exchange for property. As a result, any decision to do so is vested solely in our Board of Trustees.
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On September 1, 2021, we issued 1.8 million Series E preferred units with a par value of $100 per Series E preferred unit as partial consideration for the acquisition of 17 apartment communities. The Series E preferred unit holders receive a preferred distribution at the rate of 3.875% per year. Each Series E preferred unit is convertible, at the holder’s option, into 1.2048 Units, representing a conversion exchange rate of $83 per unit. The Series E preferred units have an aggregate liquidation preference of $181.4 million. The holders of the Series E preferred units do not have voting rights and are required to hold the units for one year before they may elect to convert.
On February 26, 2019, we issued 165,600 Series D preferred units as partial consideration for the acquisition of SouthFork Townhomes. The Series D preferred unit holders receive a preferred distribution at the rate of 3.862% per year. The Series D preferred units have a put option which allows the holder to redeem any or all of the Series D preferred units for cash equal to the issue price. Each Series D preferred unit is convertible, at the holder’s option, into 1.37931 Units, representing a conversion exchange rate of $72.50 per unit. The holders of the Series D preferred units do not have any voting rights.
Distributions to Shareholders
The Code requires a REIT to distribute 90% of its net taxable income, excluding net capital gains, to its shareholders, and a separate requirement to distribute 100% net capital gains or pay a corporate level tax in lieu thereof. We have distributed, and intend to continue to distribute, enough of our taxable income to satisfy these requirements. Our general practice has been to target cash distributions to our common shareholders and the holders of limited partnership units of approximately 65% to 90% of our funds from operations and to use the remaining funds for capital improvements or the reduction of debt. Distributions to our common shareholders and unitholders in the years ended December 31, 2021 and 2020 totaled approximately 80% and 81%, respectively, on a per share and unit basis of our funds from operations.
For additional information on our sources of liquidity and funds from operations, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources.”
HUMAN CAPITAL
We strive to be a great place to work and offer competitive benefits and training programs to our team members. Our objective is to attract and reward individuals with the talent and skills to help support our business objectives and make our communities home for our residents. Our total rewards program includes competitive compensation, paid leave, paid holidays, volunteer time, health and dental benefits, discounted rental rates on our apartments, employee assistance program, life insurance, 401(k) plan, and more.
As of December 31, 2021, we had 462 employees (394 full-time and 68 part-time) across multiple states. Training is important, and we facilitate that through a learning management system which allows us to provide custom training as well as utilize a library of multifamily focused courses specializing in customer service, sales, leadership, diversity, and fair housing.
We take great pride in our pay for performance strategy where team members are aligned with overall company performance as well as specific performance metrics based on roles. Our annual performance management process invites team members to complete a self-review along with their manager's assessment. The results of these assessments are a component of the merit increase and pay for performance strategy.
We are committed to providing a workplace that is safe and free from any form of discrimination or harassment and embraces inclusiveness. As part of our Environmental, Social, and Governance (ESG) initiatives, we publish an annual ESG report detailing our efforts related to furthering our mission - through providing corporate sponsorship in the communities which we serve, offering paid time off for team members to volunteer, training and compensation programs, and our commitment to diversity, equity, and inclusion. As of December 31, 2021:
•The average tenure of our team members is 4.3 years;
•52% of our total team members, 55% of our senior management, and 43% of our Board of Trustees are female;
•We have over 200 custom courses on our learning management system;
•Over 12,000 training courses were completed by team members;
•Our online reputation management scores increased from 3.46 out of 5 stars to 3.48 out of 5 stars; and
•479 volunteer hours were completed by team members.
INSURANCE
We purchase general liability and property insurance coverage for each of our properties. We also purchase limited terrorism, environmental, and flood insurance as well as other types of insurance coverage related to a variety of risks and exposures.
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There are certain types of losses that may not be covered or could exceed coverage limits. Due to changing market conditions, our insurance policies are also subject to increasing deductibles and coverage limits. Based on market conditions, we may change or potentially eliminate insurance coverages or face higher deductibles or other costs. Although we believe that we have adequate insurance coverage on our properties, we may incur losses, which could be material, due to uninsured risks, deductibles and/or losses in excess of coverage limits, any of which could have a material adverse effect on our business.
COMPETITION
There are numerous housing alternatives that compete with our apartment communities in attracting residents. Our apartment communities compete directly with other apartment communities, condominiums, and single-family homes in the areas in which our properties are located. If the demand for our apartment communities is reduced or competitors develop or acquire competing housing, rental and occupancy rates may decrease, which could have a material adverse effect on our business. Additionally, we compete with other real estate investors, including REITs, to acquire properties. This competition affects our ability to acquire properties we want to add to our portfolio and the cost of those acquisitions.
GOVERNMENT REGULATION
See the discussion under the caption “Risks Related to Our Properties and Operations -- We may be responsible for potential liabilities under environmental laws” in Item 1A, Risk Factors, for information concerning the potential effects of environmental matters on our business, “Complying with laws benefiting disabled persons or other safety regulations and requirements may affect our costs and investment strategies” in Item 1A, Risk Factors, for information concerning the potential effects of compliance with disabled persons and other safety regulations on our business, “Changes in federal or state laws and regulations relating to climate change could result in increased costs to our business, including capital expenditures to improve the energy efficiency of our existing communities or new development communities without a corresponding increase in revenue” in Item 1A, Risk Factors, for information concerning the potential effects of climate change regulation on our business, “Complying with zoning and permitting law may affect our acquisition, redevelopment, and development costs” in Item 1A. Risk Factors, for information concerning the potential costs associated with zoning and permitting regulations, and “The current pandemic of COVID-19 and the potential future outbreak of other highly infectious or contagious diseases may materially and adversely impact and disrupt our business, income, cash flow, results of operations, financial condition, liquidity, prospects and ability to service our debt obligations, and our ability to pay dividends and other distributions to our equityholders” in Item 1A Risk Factors, for information concerning the potential effects of regulations related to the COVID-19 pandemic, which discussions thereunder are incorporated by reference into this Item 1.
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Item 1A. Risk Factors
We face certain risks related to our ownership of apartment communities and operation of our business. Set forth below are the risks that we believe are material to our shareholders and unitholders. You should carefully consider the following risks in evaluating our properties, business, and operations. Our business, financial condition, cash flows, results of operations, value of our real estate assets and/or the value of an investment in our stock or units are subject to various risks and uncertainties, including those set forth below, any of which could cause our actual operating results to vary materially from our recent results or from our anticipated future results.
Risks Related to Our Properties and Operations
The current pandemic of COVID-19 and the potential future outbreak of other highly infectious or contagious diseases may materially and adversely impact and disrupt our business, income, cash flow, results of operations, financial condition, liquidity, prospects and ability to service our debt obligations, and our ability to pay dividends and other distributions to our equityholders. The COVID-19 pandemic has and may continue to impact our financial condition, results of operations, and cash flows as well as adversely affect our residents and commercial tenants, the real estate market, and the global economy and financial markets generally. The continued effects of COVID-19 will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures. Moreover, many of the other risks identified in this Report may be heightened because of the adverse impacts of COVID-19.
The ongoing COVID-19 pandemic and continuing restrictions intended to prevent and mitigate its spread could have
additional adverse effects on our business, including with regards to:
•our employees, residents, and commercial tenants, third party vendors and suppliers, and apartment communities, as well as our cash flow, business, financial condition, and results of operations;
•deteriorating economic conditions and rising unemployment rates in the markets where we own apartment communities or in which we may invest in the future;
•government actions or regulations arising out of the COVID-19 pandemic that limit economic and consumer activity or affect the operation of our properties;
•rental conditions in our markets, including occupancy levels and rental rates, changes in tax and housing laws, or other factors, including the impact of the COVID-19-related governmental rules and regulations relating to rental rates, evictions, and other rental conditions; and
•changes in operating costs related to complying with COVID-19 restrictions or otherwise responding to the COVID-19 pandemic.
Our financial performance is subject to risks associated with the real estate industry and ownership of apartment communities. Our financial performance risks include, but are not limited to, the following:
•downturns in national, regional, and local economic conditions (particularly increases in unemployment);
•competition from other apartment communities;
•local real estate market conditions, including an oversupply of apartments or other housing, or a reduction in demand for apartment communities;
•the attractiveness of our apartment communities to residents as well as residents’ perceptions of the safety, convenience, and attractiveness of our apartment communities and the areas in which they are located;
•changes in interest rates and availability of attractive financing that might make other housing options, like home ownership, more attractive;
•our ability to collect rents from our residents;
•vacancies, changes in rental rates, and the periodic need to repair, renovate, and redevelop our apartment communities;
•increases in operating costs, including real estate taxes, state and local taxes, insurance expenses, utilities, and security costs, many of which are not reduced significantly when circumstances cause a reduction in revenues from a property;
•increases in compensation costs due to the tight labor market in many of the markets in which we operate;
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•our ability to provide adequate maintenance for our apartment communities;
•our ability to provide adequate insurance on our apartment communities; and
•changes in tax laws and other government regulations that could affect the value of REITs generally or our business in particular.
Our property acquisition activities may not produce the cash flows expected and could subject us to various risks that could adversely affect our operating results. We have acquired and intend to continue to pursue the acquisition of apartment communities, but the success of our acquisition activities is subject to numerous risks, including the following:
•acquisition agreements are subject to customary closing conditions, including completion of due diligence investigations, and we may be unable to complete an acquisition after making a non-refundable deposit and incurring other acquisition-related costs;
•actual results may differ from expected occupancy, rental rates, and operating expenses of acquired apartment communities, or from those of our existing apartment communities;
•we may be unable to obtain financing for acquisitions on favorable terms, or at all;
•competition for these properties could cause us to pay higher prices or prevent us from purchasing a desired property at all;
•we may be subject to unknown liabilities from acquired properties, with either no or limited recourse against prior owners or other third parties; and
•we may be unable to quickly and efficiently integrate new acquisitions into our existing operations.
We may be unable to acquire or develop properties and expand our operations into new or existing markets successfully. We intend to explore acquisitions or developments of properties in new and existing geographic markets. Acquiring or developing new properties and expanding into new markets introduces several risks, including but not limited to the following:
•we may not be successful in identifying suitable properties or other assets that meet our acquisition or development criteria or in consummating acquisitions or developments on satisfactory terms, or at all;
•we may be unable to maintain consistent standards, controls, policies, and procedures, or realize the anticipated benefits of the acquisitions within the anticipated time frame, or at all;
•acquisitions and divestitures could divert our attention from our existing properties and could cause us to lose key employees or be unable to attract highly qualified new employees;
•unfamiliarity with the dynamics and prevailing market conditions or local government or permitting procedures of any new geographic markets could adversely affect our ability to successfully expand into or operate within those markets or cause us to become more dependent on third parties in new markets due to our inability to directly and efficiently manage and otherwise monitor new properties in new markets;
•we may make assumptions regarding the expected future performance of acquired properties, including expected occupancy, rental rates, and cash flows, that prove to be inaccurate; and
•we may improperly estimate the costs of repositioning or redeveloping an acquired property.
We also may abandon opportunities to enter new markets that we have begun to explore for any reason and may, as a result, fail to recover expenses already incurred.
Our current or future insurance may not protect us against possible losses. We carry comprehensive liability, fire, cyber, extended coverage, and other insurance with respect to our properties at levels that we believe to be adequate and comparable to coverage customarily obtained by owners of similar properties. However, the coverage limits of our current or future policies may be insufficient to cover the full cost of repair or replacement of all potential losses, or our level of coverage may not continue to be available in the future or, if available, may be available only at unacceptable cost or with unacceptable terms. We also do not maintain coverage for certain catastrophic events like hurricanes and earthquakes because the cost of such insurance is deemed by management to be higher than the risk of loss due to the location of our properties. In most cases, we have to renew our insurance policies on an annual basis and negotiate acceptable terms for coverage, exposing us to the volatility of the insurance markets, including the possibility of rate increases. In addition, a reduction of the number of insurance providers or the unwillingness of existing insurance providers to write insurance for multifamily properties may reduce the potential availability and/or cost for obtaining insurance on our properties. Any material increases in insurance rates or decrease in available coverage in the future could adversely affect our results of operations.
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Catastrophic weather, natural events, and climate change could adversely affect our business. Some of our apartment communities are located in areas that may experience catastrophic weather and other natural events from time to time, including snow or ice storms, flooding, tornadoes, or other severe or inclement weather. These adverse and natural events could cause damage or losses that may be greater than insured levels. In the event of a loss in excess of insured limits, we could lose all or a portion of our investment in an affected property as well as additional revenue from that apartment community. We may continue to be obligated to repay mortgage indebtedness or other obligations related to an affected apartment community.
To the extent that we experience any significant changes in the climate in areas where our apartment communities are located, we may experience extreme weather conditions and prolonged changes in precipitation and temperature, all of which could result in physical damage to, and/or a decrease in demand for, our apartment communities located in these areas. If the impact of any such climate change were to be material, or occur for a lengthy period of time, our business may be adversely affected.
Changes in federal or state laws and regulations relating to climate change could result in increased costs to our business, including capital expenditures to improve the energy efficiency of our existing communities or new development communities without a corresponding increase in revenue. Among other things, “green” building codes may seek to reduce emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency and waste management. The imposition of such requirements in the future, including the imposition of new energy efficiency standards or requirements relating to resistance to inclement weather, could increase the costs of maintaining or improving our properties without a corresponding increase in revenue, thereby having an adverse effect on our financial condition or results of operation. The impact of climate change also may increase the cost of, or make unavailable, property insurance or other hazard insurance on terms we find acceptable or necessary to adequately protect our properties.
We are dependent on a concentration of our investments in a single asset class, making our results of operations more vulnerable to a downturn or slowdown in the sector or other economic factors. Since April 30, 2018, substantially all of our investments have been concentrated in the multifamily sector. As a result, we will be subject to risks inherent in investments in a single type of property. A downturn or slowdown in the demand for multifamily housing may have more pronounced effects on our business and results of operations or on the value of our assets than if we had continued to be more diversified in our investments into more than one asset class.
Our operations are concentrated in certain regions of the United States, and we are subject to general economic conditions in the regions in which we operate. Our overall operations are concentrated in the Midwest and Mountain West regions of the United States. Our performance could be adversely affected by economic conditions in, and other factors relating to, these geographic areas, including supply and demand for apartments in these areas, zoning and other regulatory conditions, and competition from other communities and alternative forms of housing. In particular, our performance is influenced by job growth and unemployment rates in the areas in which we operate. To the extent the economic conditions, job growth and unemployment in any of these markets deteriorate or any of these areas experience natural disasters or more pronounced effects of climate change, the value of our portfolio, our results of operations, and our ability to make payments on our debt and to make distributions could be adversely affected.
Our business depends on our ability to continue to provide high quality housing and consistent operation of our apartment communities, the failure of which could adversely affect our business and results of operations. Our business depends on providing our residents with quality housing and reliable services (including utilities), along with the consistent operation of our communities and their associated amenities, including covered parking, swimming pools, clubhouses with fitness facilities, playground areas, and other similar features. We may be required to undertake significant capital expenditures to renovate or reconfigure our communities in order to attract new residents and retain existing residents. The delayed delivery, material reduction, or prolonged interruption in any of these services may cause our residents to terminate their leases, may result in the reduction of rents and/or may result in an increase in our costs. In addition, we may fail to provide quality housing and continuous access to amenities as a result of other factors, including mechanical failure, power failure, inclement weather, physical or electronic security breaches, vandalism or acts of terrorism, or other similar events. Any of these issues could cause our residents to terminate or fail to renew their leases, could expose us to additional costs or liability claims, and could damage our reputation, any of which could impact our ability to provide quality housing and consistent operation of our apartment communities, which in turn could materially affect our business and results of operations.
Competition may negatively impact our earnings. We compete with many kinds of institutions, including other REITs, private partnerships, individuals, pension funds, and banks in attracting residents and finding investment opportunities. Many of these institutions are active in the markets in which we invest and have greater financial and other resources than we do, including access to capital on more favorable terms. Our apartment communities compete directly with other multifamily apartment communities, single-family homes, condominiums, and other short-term rentals.
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Short-term leases could expose us to the effects of declining market rents. Our apartment leases are generally for a term of 12 months or less. Because these leases generally allow residents to leave at the expiration of the lease term without penalty, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms.
Because real estate investments are relatively illiquid and various other factors limit our ability to dispose of assets, we may not be able to sell properties when appropriate. We may have limited ability to change our portfolio of properties quickly in response to our strategic plan and changes in economic or other conditions, and the prohibitions under the federal income tax laws on REITs holding property for sale and related regulations may affect our ability to sell properties. Under certain circumstances, the Code imposes penalties on a REIT that sells property held for less than two years and limits the number of properties it can sell in a given year. Our ability to dispose of assets also may be limited by constraints on our ability to use disposition proceeds to make acquisitions on financially attractive terms. Some of our properties were acquired using limited partnership units of Centerspace, LP, our operating partnership, and are subject to certain tax-protection agreements that restrict our ability to sell these properties in transactions that would create current taxable income to the former owners. As a result, we are motivated to structure the sale of these assets as tax-free exchanges, the requirements of which are technical and may be difficult to achieve.
Inability to manage growth effectively may adversely affect our operating results. We have experienced significant growth at various times in the past and may do so in the future, principally through the acquisition of additional real estate properties. Effective management of rapid growth presents challenges, including:
•the need to expand our management team and staff;
•the need to enhance internal operating systems and controls; and
•the ability to consistently achieve targeted returns on individual properties.
We may not be able to maintain similar rates of growth in the future or manage our growth effectively.
Adverse changes in taxes and other laws may affect our liabilities relating to our properties and operations. Increases in real estate taxes, including recent property tax increases in several of the markets in which we operate, and service and transfer taxes may adversely affect our cash available for distributions and our ability to pay amounts due on our debt. Similarly, changes in laws that increase the potential liability for environmental conditions or that affect development, construction, and safety requirements may result in significant unanticipated costs. Future enactment of rent control or rent stabilization laws or other laws regulating apartment communities may reduce rental revenues or increase operating costs.
We may be unable to retain or attract qualified management. We are dependent upon our senior officers for essentially all aspects of our business operations. Our senior officers have experience in the real estate industry, and the loss of them would likely have a material adverse effect on our operations and could adversely impact our relationships with lenders and industry personnel. We do not have employment contracts with any of our senior officers. As a result, any senior officer may terminate his or her relationship with us at any time, without providing advance notice. If we fail to effectively manage a transition to new personnel, or if we fail to attract and retain qualified and experienced personnel on acceptable terms, it could adversely affect our business.
We may not be able to attract and retain qualified employees. Strong economic growth in recent years has created a tight labor market in many of the markets in which we operate, and we are dependent on employees at our apartment communities to provide attractive homes for our residents. The loss of key personnel at these apartment communities, or the inability or cost of replacing such personnel at such communities, could have an adverse impact on our business and results of operations.
We face risks associated with security breaches through cyber-attacks, cyber intrusions, or otherwise, which could pose a risk to our systems, networks, and services. We face risks associated with security breaches or disruptions, whether through cyber-attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to emails, or persons inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions around the world have increased. In the normal course of business, we and our service providers (including service providers engaged in providing web hosting, property management, leasing, accounting and/or payroll software/services) collect and retain certain personal information provided by our residents, employees, and vendors. We also rely extensively on computer systems to process transactions and manage our business. While we and our service providers employ a variety of data security measures to protect confidential information on our systems and periodically review and improve our data security measures, we cannot provide assurance that we or our service providers will be able to prevent unauthorized access to this personal information, that our efforts to maintain the security and integrity of the information that we and our service providers collect will be effective, or that attempted security breaches or disruptions would not be successful
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or damaging. Even the most well-protected information, networks, systems, and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target. In some cases, these breaches are designed not to be detected and, in fact, may not be detected. Accordingly, we and our service providers may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, thereby making it impossible to entirely mitigate this risk. The risk of a breach or security failure, particularly through cyber-attacks or cyber-intrusion, has generally increased due to the rise in new technologies and the increased sophistication and activities of the perpetrators of attempted attacks and intrusions. A security breach or other significant disruption involving computer networks and related systems could cause substantial costs and other negative effects, including litigation, remediation costs, costs to deploy additional protection strategies, compromising of confidential information, and reputational damage adversely affecting investor confidence.
In November 2021, we suffered a ransomware attack on our information technology systems. Promptly upon detection of the attack, we launched an investigation and notified law enforcement, legal counsel and engaged other incident response experts. We recovered all of our critical operational data, and the incident did not have a material impact on our business, operations or financial results. We implemented additional and enhanced measures to reinforce the security of our information technology systems for any cyber-attack we may face in the future. However, notwithstanding every measure taken to address cybersecurity matters, and although we have not experienced any material losses relating to this incident, we cannot assure you that we will not suffer additional losses related to similar cyber-attacks in the future.
We may be responsible for potential liabilities under environmental laws. Under various federal, state, and local laws, ordinances and regulations, we, as a current or previous owner or operator of real estate, may be liable for the costs of removal or remediation of hazardous or toxic substances in, on, around, or under that property. These laws may impose liability without regard to whether we knew of, or were responsible for, the presence of the hazardous or toxic substances. The presence of these substances, or the failure to properly remediate any property containing these substances, may adversely affect our ability to sell or rent the affected property or to borrow funds using the property as collateral. In arranging for the disposal or treatment of hazardous or toxic substances, we also may be liable for the costs of removal of, or remediation of, these substances at that disposal or treatment facility, whether or not we own or operate the facility. In connection with our current or former ownership (direct or indirect), operation, management, development, and/or control of real properties, we may be potentially liable for removal or remediation costs with respect to hazardous or toxic substances at those properties, as well as certain other costs, including governmental fines and claims for injuries to persons and property. Although we are not aware of any such claims associated with our existing properties that would have a material adverse effect on our business, potential future costs and damage claims may be substantial and could exceed any insurance coverage we may have for such events or such coverage may not exist. The presence of such substances, or the failure to properly remediate any such impacts, may adversely affect our ability to borrow against, develop, sell, or rent the affected property. Some environmental laws create or allow a government agency to impose a lien on the impacted property in favor of the government for damages and costs it incurs as a result of responding to hazardous or toxic substances.
Environmental laws also govern the presence, maintenance, and removal of asbestos, and require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos; notify and train those who may come into contact with asbestos; and undertake special precautions if asbestos would be disturbed during renovation or demolition of a building. Indoor air quality issues may also necessitate special investigation and remediation. These air quality issues can result from inadequate ventilation, chemical contaminants from indoor or outdoor sources, or biological contaminants such as molds, pollen, viruses and bacteria. Asbestos or air quality remediation programs could be costly, necessitate the temporary relocation of some or all of the property’s residents, or require rehabilitation of an affected property.
It is generally our policy to obtain a Phase I environmental study on each property that we seek to acquire. A Phase I environmental study generally includes a visual inspection of the property and the surrounding areas, an examination of current and historical uses of the property and the surrounding areas, and a review of relevant state and federal documents but does not involve invasive techniques such as soil and ground water sampling. If the Phase I indicates any possible environmental problems, our policy is to order a Phase II study, which involves testing the soil and ground water for actual hazardous substances. However, Phase I and Phase II environmental studies, or any other environmental studies undertaken with respect to any of our current or future properties, may not reveal the full extent of potential environmental liabilities. We currently do not carry insurance for environmental liabilities.
Expanding social media usage could present new risks. The use of social media could cause us to suffer broad reputational damage. Negative posts or comments about us through social media, whether by residents or prospective residents, could damage our reputation or that of our apartment communities, whether or not such claims or posts are valid, which in turn could adversely affect our business and results of operations. Similarly, disclosure of any non-public sensitive information relating to
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our business or our residents or prospective residents could damage our reputation, our business, or our results of operations. The continuing evolution of social media will present us with new and ongoing challenges and risks.
Litigation risks could affect our business. As a publicly traded owner, manager, and developer of apartment communities, we may incur liability based on various conditions at our properties and the buildings thereon. In the past, we have been, and in the future may become, involved in legal proceedings, including consumer, employment, tort, or commercial litigation, any of which if decided adversely to us or settled by us and not adequately covered by insurance, could result in liability that could be material to our results of operations.
Risks related to properties under development, redevelopment, or newly developed properties may adversely affect our financial performance. We may be unable to obtain, or may suffer delays in obtaining, necessary zoning, land-use, building, occupancy, and other required governmental permits and authorizations, which could lead to increased costs or abandonment of projects. We may not be able to obtain financing on favorable terms, or at all, and we may not be able to complete lease-up of a property on schedule. The resulting time required for development, redevelopment, and lease-up means that we may have to wait years for significant cash returns.
Complying with zoning and permitting law may affect our acquisition, redevelopment, and development costs. We face risks associated with zoning and permitting of our communities, the majority of which are governed by municipal, county, and state regulations. We may be liable for costs associated with bringing communities into compliance and additionally may face costs or delays when seeking approvals for redevelopment or development projects within our portfolio.Some regulations related to zoning or permitting allow governmental entities to discontinue operations if violations are left uncured, which would significantly impact our business. We are not aware of any non-compliance at our communities that would have a material adverse effect on our business.
Future cash flows may not be sufficient to ensure recoverability of the carrying value of our real estate assets. We periodically evaluate the recoverability of the carrying value of our real estate assets under United States generally accepted accounting principles (“GAAP”). Factors considered in evaluating impairment of our real estate assets held for investment include recurring net operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Generally, a real estate asset held for investment is not considered impaired if the estimated undiscounted future cash flows of the asset over its estimated holding period are in excess of the asset’s net book value at the balance sheet date. Assumptions used to estimate annual and residual cash flow and the estimated holding period of these assets require the judgment of management.
Complying with laws benefiting disabled persons or other safety regulations and requirements may affect our costs and investment strategies. Federal, state, and local laws and regulations designed to improve disabled persons’ access to and use of buildings, including the Americans with Disabilities Act of 1990, may require modifications to, or restrict renovations of, existing buildings that may require unexpected expenditures. These laws and regulations may require that structural features be added to buildings under construction. Legislation or regulations that may be adopted in the future may impose further burdens or restrictions on us with respect to improved access to, and use of these buildings by, disabled persons. Noncompliance could result in the imposition of fines by government authorities or the award of damages to private litigants. The costs of complying with these laws and regulations may be substantial, and limits or restrictions on construction, or the completion of required renovations, may limit the implementation of our investment strategy or reduce overall returns on our investments.
Risks related to joint ventures may adversely affect our financial performance and results of operations. We have entered into, and may continue in the future to enter into, partnerships or joint ventures with other persons or entities. Joint venture investments involve risks that may not be present with other methods of ownership, based on the financial condition and business interests of our partners, which are beyond our control and which may conflict with our interests.
In some instances, we and/or our partner may have the right to trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have initiated such a transaction. Our ability to acquire our partner’s interest may be limited if we do not have sufficient cash, available borrowing capacity, or other capital resources. In such event, we may be forced to sell our interest in the joint venture when we would otherwise prefer to retain it. Joint ventures may require us to share decision-making authority with our partners, which could limit our ability to control the properties in the joint ventures. Even when we have a controlling interest, certain major decisions may require partner approval, such as the sale, acquisition, or financing of a property.
A war, terrorism attack, other geopolitical crisis, or widespread outbreak of an illness or other health issue, such as the COVID-19 pandemic, could negatively affect various aspects of our business, including our workforce and supply chains, and could make it more difficult and expensive to meet our obligations to our residents. Our operations are susceptible to national or international events, including acts or threats of war or terrorism, political instability, natural disasters, and health
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epidemics or pandemics. In late February 2022, Russian-led military forces illegally invaded Ukraine, and prolonged conflict and disruption in the region is likely. In response to this invasion, the United States, the United Kingdom, the European Union and other countries and organizations initiated a range of formal and informal sanctions against Russia, Belarus and certain Russian and Belarussian officials, individuals, industries and businesses. The war in Ukraine, the sanctions and any future expansion of or reaction to either of them are likely to have wide-ranging and unpredictable effects on the world economy and financial markets, which could materially and adversely affect our business and results of operations.
We could also be adversely affected by a widespread outbreak of an illness or other health issue, such as the COVID-19 pandemic. The COVID-19 pandemic has resulted in travel bans, quarantines, and work restrictions that prohibit many employees from going to work. As a result of pandemics, including COVID-19, businesses can be shut down, supply chains can be interrupted, slowed, or rendered inoperable, and individuals can become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions. Governmental mandates may require dramatic changes at our apartment communities or could impact the availability of goods or services from many of our suppliers for extended or indefinite periods of time.
Potential changes to the financial condition of Fannie Mae and Freddie Mac and in government support for apartment communities may adversely affect our business. Historically, we have depended on the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) to provide financing for certain apartment communities. Although Fannie Mae and Freddie Mac have a mandate to support multifamily housing through their financing activities, government proposals relating to the future of agency mortgage finance in the U.S. could involve the phase-out of Fannie Mae and Freddie Mac. Although we believe that Fannie Mae and Freddie Mac will continue to provide liquidity to the multifamily sector, any phase-out of Fannie Mae and Freddie Mac, change in their mandate, or reduction in government support for apartment communities generally could result in adverse changes to interest rates, capital availability, development of additional apartment communities, and the value of these communities.
Employee theft or fraud could result in loss. Certain employees have access to, or signature authority with respect to, our bank accounts or assets, which exposes us to the risk of fraud or theft. Certain employees also have access to key information technology (“IT”) infrastructure and to resident and other information that may be commercially valuable. If any employee were to compromise our IT systems, or misappropriate resident or other information, we could incur losses, including potentially significant financial or reputational harm. We may not have insurance that covers any losses in full or covers losses from particular criminal acts.
Risks Related to Our Indebtedness and Financings
Our inability to renew, repay, or refinance our debt may result in losses. We incur a significant amount of debt in the ordinary course of our business and in connection with acquisitions of real properties. Because we have a limited ability to retain earnings as a result of the REIT distribution requirements, we will generally be required to refinance debt that matures with additional debt or equity. We are subject to the normal risks associated with debt financing, including the risks that:
•our cash flow will be insufficient to meet required payments of principal and interest, particularly if net operating income is reduced significantly due to the effects of the COVID-19 pandemic;
•we will not be able to renew, refinance, or repay our indebtedness when due; and
•the terms of any renewal or refinancing are at terms less favorable than the terms of our current indebtedness.
These risks increase when credit markets are tight, as they may be during the COVID-19 pandemic. In general, when the credit markets are tight, we may encounter resistance from lenders when we seek financing or refinancing for properties or proposed acquisitions, and the terms of such financing or refinancing are likely to be less favorable to us than the terms of our current indebtedness.
We anticipate that we will need to refinance a significant portion of our outstanding debt as it matures. We cannot guarantee that any refinancing of debt with other debt will be possible on terms that are favorable or acceptable to us. If we cannot refinance, extend, or pay principal payments due at maturity with the proceeds of other capital transactions, our cash flows may not be sufficient in all years to repay debt as it matures. If we are unable to refinance our indebtedness on acceptable terms, or at all, we may be forced to dispose of one or more properties on disadvantageous terms, which may result in losses. These losses could have a material adverse effect on our business, our ability to make distributions to our shareholders, and our ability to pay amounts due on our debt. If a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments or refinance the debt at maturity, the mortgagor could foreclose upon the property, appoint a receiver, and receive an assignment of rents and leases or pursue other remedies, including taking ownership of the property, all with a consequent loss of revenues and asset value. Foreclosures also could affect our ability to obtain new debt and could create
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taxable income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements of the Code and impeding our ability to obtain financing for our other properties.
Restrictive covenants in our debt agreements may limit our operating and financial flexibility, and our inability to comply with these covenants could have significant implications. Our indebtedness, which at December 31, 2021 totaled outstanding borrowings of approximately $859.8 million, contains a number of significant restrictions and covenants. These restrictions and covenants include financial covenants relating to fixed charge coverage ratios, maximum secured debt, maintenance of unencumbered asset value, and total debt to total asset value, among others and certain non-financial covenants. These may limit our ability to make future investments and dispositions, add incremental secured and recourse debt, and add overall leverage. Our ability to comply with these covenants will depend on our future performance, which may be affected by events beyond our control. Our failure to comply with these covenants would be an event of default. An event of default under the terms of our indebtedness would permit the lenders to accelerate indebtedness under effected agreements, which would include agreements that contain cross-acceleration provisions with respect to other indebtedness.
Rising interest rates may affect our cost of capital and financing activities. The potential for rising interest rates could limit our ability to refinance portions of our fixed-rate indebtedness when it matures and would increase our interest costs. We also have an unsecured credit facility that bears interest at variable rates based on amounts drawn. As a result, any increase in interest rates could increase our interest expense on our variable rate debt, increase our interest rates when refinancing fixed-rate debt, increase the cost of issuing new debt, and reduce the cash available for distribution to shareholders.
Interest rate hedging arrangements may result in losses. From time to time, we use interest rate swaps and other hedging instruments to manage our interest rate risks. Although these arrangements may partially protect us against rising interest rates, they also may reduce the benefits to us if interest rates decline. If a hedging arrangement is not indexed to the same rate as the indebtedness that is hedged, we may be exposed to losses to the extent that the rate governing the indebtedness and the rate governing the hedging arrangement change independently of each other, and nonperformance by the other party to the hedging arrangement also may subject us to increased credit risks. In order to minimize any counterparty credit risk, we enter into hedging arrangements only with investment grade financial institutions.
Changes to LIBOR could affect our financing covenants. LIBOR has been used as a primary benchmark for short-term interest rates, including under our credit facility. The U.K. Financial Conduct Authority (FCA), which regulates LIBOR, ceased providing the one-week and two-month U.S. dollar LIBOR settings and all non-U.S. dollar LIBOR settings as of January 1, 2022. The ICE Benchmark Administration, in its capacity as administrator of USD LIBOR, has announced it plans to cease providing the remaining U.S. dollar LIBOR settings immediately after June 30, 2023. Although the FCA does not expect these remaining LIBOR settings to become unrepresentative before the cessation date, it is unknown whether any banks will continue to voluntarily submit rates for the calculation of LIBOR, or whether LIBOR will continue to be published by its administrator based on these submissions, or on any other basis, after such dates. A joint statement by key regulatory authorities called on banks to cease entering into new contracts that use USD LIBOR as a reference rate by no later than December 31, 2021.
The Alternative References Rates Committee, a steering committee comprised of large U.S. financial institutions, has proposed replacing USD LIBOR with a new index calculated by short-term repurchase agreements - Secured Overnight Financing Rate (SOFR). The market transition away from LIBOR and toward SOFR or another alternate reference rate has been and is expected to continue to be complicated and to include the development of term and credit adjustments to accommodate differences between LIBOR and SOFR or any other alternate reference rate as well as adjustments to other market conventions. During the market transition away from the remaining LIBOR settings, LIBOR may experience increased volatility, and the overnight Treasury repurchase market underlying SOFR may also experience disruptions from time to time, which may result in unexpected fluctuations in SOFR. While market activity in SOFR-linked financial instruments has continued to develop, the progress has been uneven and there can be no guarantee that SOFR will become widely accepted and used across market segments and financial products in a timely manner or that any other alternative reference rate will be developed. Although the full impact of such reforms and actions, together with any transition away from LIBOR and toward , including the potential or actual discontinuance of LIBOR publication, remains unclear, these changes may have a material adverse impact on the availability of financing. In addition, as it relates to future and derivatives contracts, ISDA master agreements between counterparties may need to be amended or replaced, including derivative contracts in which we are invested. There can be no assurance that SOFR or another new global standard will be agreed upon or that any new rate will be reflective of the original interest rate and credit risk included within LIBOR, any of which could have a material adverse effect on our financing costs as well as our business and results of operations.
Risks Related to Our Shares
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Our stock price may fluctuate significantly. The market price and trading volume of our common shares are subject to fluctuation due to general market conditions, the risks discussed in this report, and several other factors, including the following:
•regional, national, and global economic and business conditions;
•actual or anticipated changes in our quarterly operating results or dividends;
•changes in our estimates of funds from operations or earnings;
•investor interest in our property portfolio;
•the market perception and performance of REITs in general and apartment REITs in particular;
•the market perception or trading volume of REITs relative to other investment opportunities;
•the market perception of our financial condition, performance, distributions, and growth potential;
•general stock and bond market conditions, including potential increases in interest rates that could lead investors to seek higher annual yields from dividends;
•shifts in our investor base to a higher concentration of passive investors, including exchange-traded funds and index funds, that could have an adverse effect on our ability to communicate with our shareholders;
•our ability to access capital markets, which could impact our cost of capital;
•a change in our credit rating or analyst ratings;
•changes in minimum dividend requirements;
•terrorism or other factors that adversely impact the markets in which our stock trades; and
•changes in tax laws or government regulations that could affect the attractiveness of our stock.
Rising interest rates could have an adverse effect on our share price. If interest rates increase, this could cause holders of our common shares and other investors to seek higher dividends on our shares or higher yields through other investments, which could adversely affect the market price of our shares.
Low trading volume on the NYSE may prevent the timely sale or resale of our shares. Although our common shares are listed on the NYSE, the daily trading volume of our shares may be lower than the trading volume for other companies. As a result of lower trading volume, an owner of our common shares may encounter difficulty in selling our shares in a timely manner and may incur a substantial loss.
Failure to generate sufficient revenue or other liquidity needs could limit cash flow available for distributions to our shareholders. A decrease in rental revenue, an increase in funding to support our acquisition and development needs, or other unmet liquidity needs could have an adverse effect on our ability to pay distributions to our shareholders or the Operating Partnership’s unitholders.
Payment of distributions on our common shares is not guaranteed. Our Board of Trustees must approve any stock distributions and may elect at any time, or from time to time, and for an indefinite duration, to reduce or not pay the distributions payable on our common shares. Our Board may reduce distributions for a variety of reasons, including but not limited to the following:
•operating and financial results cannot support the current distribution payment;
•unanticipated costs, capital requirements, or cash requirements;
•annual distribution requirements under the REIT provisions of the Code;
•a conclusion that the payment of distributions would cause us to breach the terms of certain agreements or contracts, such as financial ratio covenants in our debt financing documents; or
•other factors the Board of Trustees may consider relevant.
Our future growth depends, in part, on our ability to raise additional equity capital, which will have the effect of diluting the interests of our common shareholders. Our future growth depends upon, among other things, our ability to raise equity capital and issue limited partnership units of Centerspace, LP. Sales of substantial amounts of our common or preferred shares in the public market, or the perception that such sales or issuances might occur, may dilute the interests of the current common shareholders and could adversely affect the market price of our common shares. In addition, as a REIT, we are required to make distributions to holders of our equity securities of at least 90% of our REIT taxable income, determined before a deduction for
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dividends paid and excluding any net capital gain. This limits our ability to retain cash or earnings to fund future growth and makes us more dependent on raising funds through other means, which may include raising additional equity capital.
We may issue additional classes or series of our shares of beneficial interest with rights and preferences that are superior to the rights and preferences of our common shares. Our Declaration of Trust provides for an unlimited number of shares of beneficial interest. Without the approval of our common shareholders, our Board of Trustees may establish additional classes or series of our shares of beneficial interest, and such classes or series may have dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences, or other rights and preferences that are superior to the rights of the holders of our common shares. In that regard, in September 2020, we filed a shelf registration statement with the SEC that enables us to sell an undetermined number of equity and debt securities as defined in the prospectus, including under the 2021 ATM Program. Future sales of common shares, preferred shares, or convertible debt securities may dilute current shareholders and could have an adverse impact on the market price of our common shares.
Any material weaknesses identified in our internal control over financial reporting could adversely affect our stock price. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting. If we were to identify one or more material weaknesses in our internal control over financial reporting, we could lose investor confidence in our financial reporting and results of operations, which in turn could have an adverse effect on our stock price.
Certain provisions of our Declaration of Trust may limit a change in control and deter a takeover. In order to maintain our qualification as a REIT, among other things, our Declaration of Trust provides that any transaction that would result in our disqualification as a REIT under Section 856 of the Code will be void, including any transaction that would result in the following:
•less than 100 Persons owning our shares;
•our being “closely held” within the meaning of Section 856(h) of the Code; or
•50% or more of the fair market value of our shares being held by Persons other than “United States persons,” for federal income tax purposes.
If the transaction is not void, then the shares in violation of the foregoing conditions will automatically be exchanged for an equal number of excess shares, and these excess shares will be transferred to an excess share trustee for the exclusive benefit of the charitable beneficiaries named by our Board of Trustees. The Trust’s Declaration of Trust also provides a limit on a Person owning in excess of the ownership limit of 9.8%, in number or value, of the Trust’s outstanding shares, although the Board of Trustees retains the ability to make exceptions to this ownership threshold. These limitations may have the effect of preventing a change in control or takeover of us by a third party, even if the change in control or takeover would be in the best interests of our shareholders.
Risks Related to Tax Matters
We may incur tax liabilities if we were to fail to qualify as a REIT, which could force us to borrow funds during unfavorable market conditions. We have elected to be taxed as a REIT under the Code. Qualification as a REIT involves the application of highly technical and complex Code provisions, including income, asset, and distribution tests, for which there are only limited judicial or administrative interpretations. Even a technical or inadvertent mistake could endanger our REIT status. The determination that we qualify as a REIT requires an ongoing analysis of various factual matters and circumstances, some of which may not be within our control. For example, in order to qualify as a REIT, at least 95% of our gross income in any year must come from certain passive sources that are itemized in the REIT tax laws, and we are prohibited from owning specified amounts of debt or equity securities of some issuers. Thus, to the extent revenues from non-qualifying sources, such as income from third-party management services, represent more than 5% of our gross income in any taxable year, we will not satisfy the 95% income test and may fail to qualify as a REIT, unless certain relief provisions contained in the Code apply. Even if relief provisions apply, however, a tax would be imposed with respect to excess net income. We are also required to make distributions to the holders of our securities of at least 90% of our REIT taxable income, determined before a deduction for dividends paid and excluding any net capital gain. To the extent that we satisfy the 90% test but distribute less than 100% of our REIT taxable income, we will be subject to corporate income tax on such undistributed income and could be subject to an additional 4% excise tax. Because we need to meet these tests to maintain our qualification as a REIT, it could cause us to have to forgo certain business opportunities and potentially require us to liquidate otherwise attractive investments. The fact that we hold substantially all of our assets (except for qualified REIT subsidiaries) through Centerspace, LP, our operating partnership, and its subsidiaries, and our ongoing reliance on factual determinations, such as determinations related to the valuation of our assets, further complicates the application of the REIT requirements for us. If Centerspace, LP or one or more of our
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subsidiaries is determined to be taxable as a corporation, we may fail to qualify as a REIT. Either our failure to qualify as a REIT, for any reason, or the imposition of taxes on excess net income from non-qualifying sources, could adversely affect our business and our ability to make distributions to our shareholders and pay amounts due on our debt. New legislation, regulations, administrative interpretations or court decisions could change the tax laws with respect to our qualification as a REIT or the federal income tax consequences of our qualification.
If we were to fail to qualify as a REIT, we would be subject to federal income tax on our taxable income at regular corporate rates, could be subject to increased state and local taxes and, unless entitled to relief under applicable statutory provisions, would be disqualified from treatment as a REIT for the four taxable years following the year during which we lost our qualification, which would likely have a material adverse effect on us, our ability to make distributions to our shareholders, and our ability to pay amounts due on our debt. This treatment would reduce funds available for investment or distributions to the holders of our securities due to the additional tax liability to us for the year or years involved, and we would no longer be able to deduct, and would not be required to make, distributions to our shareholders. To the extent that distributions to the holders of our securities had been made in anticipation of qualifying as a REIT, we may need short-term debt or long-term debt or proceeds from asset sales or sales of common shares to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments. The inability of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status.
Failure of our operating partnership to qualify as a partnership would result in corporate taxation and significantly reduce the amount of cash available for distribution. We believe that Centerspace, LP, our operating partnership, qualifies as a partnership for federal income tax purposes. However, we can provide no assurance that the IRS will not challenge its status as a partnership for federal income tax purposes or that a court would not sustain such a challenge. If the IRS were to be successful in treating Centerspace, LP as an entity taxable as a corporation (such as a publicly traded partnership taxable as a corporation), we would cease to qualify as a REIT because the value of our ownership interest in Centerspace, LP would exceed 5% of our assets and because we would be considered to hold more than 10% of the voting securities and value of the outstanding securities of another corporation. The imposition of a corporate tax on Centerspace, LP would significantly reduce the amount of cash available for distribution.
Legislative or regulatory actions affecting REITs could have an adverse effect on us or our shareholders. Changes to tax laws or regulations may adversely impact our shareholders and our business and financial results. The REIT rules are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department, which may result in revisions to regulations and interpretations as well as statutory changes.
At any time, the U.S. federal income tax laws governing REITs or the administrative and judicial interpretations of those laws may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative and judicial interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative or judicial interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively. Several recent proposals have been made that would make substantial changes to the U.S. federal income tax laws generally. We cannot predict whether any of these proposed changes will become law, or the long-term effect of any future law changes on REITs and their shareholders generally. We and our shareholders could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative and judicial interpretation.
Dividends payable by REITs may be taxed at higher rates than dividends of non-REIT corporations, which could reduce the net cash received by our shareholders and may be detrimental to our ability to raise additional funds through any future sale of our stock. Dividends paid by REITs to U.S. shareholders that are individuals, trusts, or estates are generally not eligible for the reduced tax rate applicable to qualified dividends received from non-REIT corporations. For taxable year beginning before January 1, 2026, non-corporate taxpayers may deduct up to 20% of certain pass-through business income, including “qualified REIT dividends” (generally, dividends received by a REIT shareholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations, resulting in an effective maximum U.S. federal income tax rate of 29.6% on such income. Although this deduction reduces the effective tax rate applicable to certain dividends paid by REITs, such tax rate is still higher than the tax rate applicable to regular corporate qualified dividends. This may cause investors to view REIT investments as less attractive than investments in non-REIT corporations, which in turn may adversely affect the value of stock in REITs, including our stock. Investors should consult with their tax advisers regarding the U.S. tax consequences of an investment in our stock or Units.
We may face risks in connection with Section 1031 exchanges. From time to time, we dispose of properties in transactions intended to qualify as “like-kind exchanges” under Section 1031 of the Code. If a transaction intended to qualify as a Section 1031 exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such
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transactions are amended or repealed, we may not be able to dispose of properties on a tax-deferred basis. If we are unable to meet the technical requirements of a desired Section 1031 exchange, we may be required to make a special dividend payment to our shareholders if we are unable to mitigate the taxable gains realized. The failure to reinvest proceeds from sales of properties into tax-deferred exchanges could necessitate payments to unitholders with tax protection agreements.
We have tax protection agreements in place on thirty-four properties. If these properties are sold in a taxable transaction, we must make the unitholders associated with these particular properties whole through the payment of their related tax. We dispose of properties in transactions intended to qualify as “like-kind exchanges” under Section 1031 of the Code whenever possible. If we are not able to satisfy all of the technical requirements of Section 1031, or if Section 1031 is repealed, selling a property with a tax protection agreement could trigger a material obligation to make the associated unitholders whole.
Complying with REIT requirements may force us to forgo otherwise attractive opportunities or liquidate otherwise attractive investments. To qualify and maintain our status as a REIT, we must satisfy certain requirements with respect to the character of our assets. If we fail to comply with these requirements at the end of any quarter, we must correct such failure within 30 days after the end of the quarter (by, possibly, selling assets notwithstanding their prospects as an investment) to avoid losing our REIT status. This could include potentially selling otherwise attractive assets or liquidating or foregoing otherwise attractive investments. These actions could reduce our income and amounts available for distribution to our shareholders.
Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows. Even if we qualify as a REIT under the U.S. tax code, we may be subject to certain federal, state, and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property, and transfer taxes, such as mortgage recording taxes. Any of these taxes would decrease cash available for distribution to our shareholders.
The tax imposed on REITs engaging in prohibited transactions and our agreements entered into with certain contributors of our properties may limit our ability to engage in transactions that would be treated as sales for federal income tax purposes. The federal income tax provisions applicable to REITs provide that any gain realized by a REIT on the sale of property held as inventory or other property held primarily for sale to customers in the ordinary course of business is treated as income from a “prohibited transaction” that is subject to a 100% penalty tax. Under current law, unless a sale of real property qualifies for a safe harbor, the question of whether the sale of a property constitutes the sale of property held primarily for sale to customers is generally a question of the facts and circumstances regarding a particular transaction. We may make sales that do not satisfy the requirements of the safe harbors, or the IRS may successfully assert that one or more of our sales are prohibited transactions and, as a result, we may be required to pay a penalty tax. To avert this penalty tax, we may hold some of our assets through a taxable REIT subsidiary (“TRS”). While the TRS structure would allow the economic benefits of ownership to flow to us, a TRS is subject to tax on its income at the federal and state level. We have entered into agreements with certain contributors of our properties that contain limitations on our ability to dispose of certain properties in taxable transactions. The restrictions on taxable dispositions are effective for varying periods. Such agreements may require that we make a payment to the contributor in the event that we dispose of a covered property in a taxable sale during the restriction period.
Our ownership of TRSs is limited, and our transactions with TRSs will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms. A REIT may own up to 100% of the stock of one or more TRSs. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. Our TRS is subject to applicable federal, state, and local income tax on any taxable income. TRS rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. We scrutinize transactions with our TRS to ensure that they are entered into on arm's-length terms to avoid incurring the 100% excise tax described above.
Item 1B. Unresolved Staff Comments
None.
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Item 2. Properties
Communities
We are organized as a REIT under Sections 856-858 of the Code and are structured as an UPREIT, which allows us to accept the contribution of real estate to our Operating Partnership in exchange for Units. Our business is focused on the ownership, management, acquisition, redevelopment, and development of apartment communities, which we own and operate through our Operating Partnership. We are a fully integrated owner-operator of apartment communities.
Certain Lending Requirements
In certain instances, in connection with the financing of investment properties, the lender may require, as a condition of the loan, that the properties be owned by a “single asset entity.” Accordingly, we have organized a number of wholly owned subsidiary entities for the purpose of holding title in an entity that complies with such lending conditions. All financial statements of these subsidiaries are consolidated into our financial statements.
Management and Leasing of Our Real Estate Assets
We conduct our corporate operations from offices in Minot, North Dakota and Minneapolis, Minnesota. The day-to-day management of our properties is generally carried out by our own employees. When properties acquired have effective pre-existing property management in place or when particular properties are, in our judgment, not attractive candidates for self-management, we may utilize third-party professional management companies for day-to-day management. However, all decisions relating to purchase, sale, insurance coverage, major capital improvements, annual operating budgets, and major renovations are made exclusively by our employees and implemented by the third-party management companies. Generally, our third-party management contracts are for terms of one year or less and provide for compensation ranging from 2.5% to 5.0% of gross rent collections and, typically, we may terminate these contracts upon 60 days or less notice for cause or upon the property manager’s failure to meet certain specified financial performance goals.
Summary of Communities Owned as of December 31, 2021
The following table presents information regarding our 79 apartment communities held for investment, as of December 31, 2021. We provide certain information on a same-store and non-same-store basis. Same-store 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%. 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. “Other” includes non-multifamily properties and non-multifamily components of mixed use properties. We own the following interests in real estate either through our wholly-owned subsidiaries or by ownership of a controlling interest in an entity owning the real estate. We account for these interests on a consolidated basis. Additional information is included in Schedule III to our financial statements included in this Report.

|  |  | (in thousands) |
|  |  | Investment | Physical
|  | Number of | (initial cost plus | Occupancy
|  | Apartment | improvements less | as of
Community Name and Location |  | Homes | impairment) | December 31, 2021
SAME-STORE |  |  |  |
71 France - Edina, MN (1) |  | 241 |  | $ | 67,108 |  | 92.1 | %
Alps Park - Rapid City, SD |  | 71 |  | 6,529 |  | 100.0 | %
Arcata - Golden Valley, MN |  | 165 |  | 33,537 |  | 95.2 | %
Ashland - Grand Forks, ND |  | 83 |  | 8,674 |  | 92.8 | %
Avalon Cove - Rochester, MN |  | 187 |  | 36,515 |  | 96.8 | %
Boulder Court - Eagan, MN |  | 115 |  | 9,689 |  | 92.2 | %
Canyon Lake - Rapid City, SD |  | 109 |  | 6,548 |  | 96.3 | %
Cardinal Point - Grand Forks, ND |  | 251 |  | 35,400 |  | 95.6 | %
Castlerock - Billings, MT |  | 165 |  | 7,857 |  | 90.3 | %
Chateau - Minot, ND |  | 104 |  | 21,544 |  | 91.3 | %
Cimarron Hills - Omaha, NE (1) |  | 234 |  | 14,978 |  | 93.2 | %
Commons and Landing at Southgate - Minot, ND |  | 341 |  | 55,905 |  | 94.4 | %
Connelly on Eleven - Burnsville, MN |  | 240 |  | 29,926 |  | 93.3 | %
Cottonwood - Bismarck, ND |  | 268 |  | 24,227 |  | 94.4 | %

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|  |  | (in thousands) |
|  |  | Investment | Physical
|  | Number of | (initial cost plus | Occupancy
|  | Apartment | improvements less | as of
Community Name and Location |  | Homes | impairment) | December 31, 2021
Country Meadows - Billings, MT |  | 133 |  | 9,923 |  | 97.0 | %
Cypress Court - St. Cloud, MN (1) (3) |  | 196 |  | 21,007 |  | 96.4 | %
Deer Ridge - Jamestown, ND |  | 163 |  | 25,188 |  | 92.6 | %
Donovan - Lincoln, NE (1) |  | 232 |  | 22,197 |  | 96.6 | %
Dylan - Denver, CO |  | 274 |  | 90,508 |  | 96.0 | %
Evergreen - Isanti, MN |  | 72 |  | 7,281 |  | 93.1 | %
FreightYard Townhomes & Flats - Minneapolis, MN |  | 96 |  | 26,801 |  | 90.6 | %
Gardens - Grand Forks, ND |  | 74 |  | 9,361 |  | 91.9 | %
Grand Gateway - St. Cloud, MN |  | 116 |  | 10,052 |  | 92.2 | %
GrandeVille Shores - Rochester, MN (1) |  | 365 |  | 79,401 |  | 93.4 | %
Greenfield - Omaha, NE |  | 96 |  | 7,707 |  | 96.9 | %
Homestead Garden - Rapid City, SD |  | 152 |  | 16,013 |  | 94.7 | %
Lakeside Village - Lincoln, NE (1) |  | 208 |  | 20,421 |  | 96.6 | %
Legacy - Grand Forks, ND |  | 360 |  | 34,047 |  | 95.3 | %
Legacy Heights - Bismarck, ND |  | 119 |  | 15,239 |  | 98.3 | %
Lugano at Cherry Creek - Denver, CO |  | 328 |  | 96,762 |  | 95.4 | %
Meadows - Jamestown, ND |  | 81 |  | 7,184 |  | 87.7 | %
Monticello Crossings - Monticello, MN |  | 202 |  | 32,519 |  | 96.5 | %
Monticello Village - Monticello, MN |  | 60 |  | 5,457 |  | 98.3 | %
Northridge - Bismarck, ND |  | 68 |  | 8,695 |  | 97.1 | %
Olympic Village - Billings, MT |  | 274 |  | 15,652 |  | 90.9 | %
Oxbo - St Paul, MN |  | 191 |  | 57,658 |  | 92.7 | %
Park Meadows - Waite Park, MN |  | 360 |  | 20,218 |  | 96.1 | %
Park Place - Plymouth, MN |  | 499 |  | 104,977 |  | 92.6 | %
Plaza - Minot, ND |  | 71 |  | 16,769 |  | 94.4 | %
Pointe West - Rapid City, SD |  | 90 |  | 5,987 |  | 95.6 | %
Ponds at Heritage Place - Sartell, MN |  | 58 |  | 5,499 |  | 100.0 | %
Quarry Ridge - Rochester, MN (1) |  | 313 |  | 37,501 |  | 92.3 | %
Red 20 - Minneapolis, MN (1) |  | 130 |  | 26,537 |  | 94.6 | %
Regency Park Estates - St. Cloud, MN (1) |  | 149 |  | 17,055 |  | 87.9 | %
Rimrock West - Billings, MT |  | 78 |  | 5,863 |  | 92.3 | %
River Ridge - Bismarck, ND |  | 146 |  | 26,400 |  | 97.3 | %
Rocky Meadows - Billings, MT |  | 97 |  | 8,014 |  | 97.9 | %
Rum River - Isanti, MN |  | 72 |  | 6,181 |  | 93.1 | %
Silver Springs - Rapid City, SD |  | 52 |  | 4,299 |  | 98.1 | %
South Pointe - Minot, ND |  | 196 |  | 15,912 |  | 90.8 | %
SouthFork Townhomes - Lakeville, MN (1) |  | 272 |  | 52,281 |  | 90.4 | %
Southpoint - Grand Forks, ND |  | 96 |  | 10,753 |  | 89.6 | %
Sunset Trail - Rochester, MN |  | 146 |  | 16,579 |  | 96.6 | %
Thomasbrook - Lincoln, NE (1) |  | 264 |  | 16,380 |  | 95.8 | %
West Stonehill - Waite Park, MN (1) |  | 313 |  | 22,039 |  | 92.3 | %
Westend - Denver, CO |  | 390 |  | 128,640 |  | 93.6 | %
Whispering Ridge - Omaha, NE (1) |  | 336 |  | 31,278 |  | 94.0 | %
Woodridge - Rochester, MN |  | 110 |  | 11,778 |  | 90.9 | %
TOTAL SAME-STORE |  | 10,672 |  | $ | 1,568,450 |  | 94.0 | %
NON-SAME-STORE |  |  |  |
Bayberry Place - Minneapolis, MN (2) |  | 120 |  | $ | 16,458 |  | 93.3 | %
Burgandy & Hillsboro Court - Minneapolis, MN (2) |  | 250 |  | 35,160 |  | 96.8 | %
Civic Lofts - Denver, CO |  | 176 |  | 61,399 |  | 93.2 | %
Gatewood - St. Cloud, MN (2) |  | 120 |  | 7,533 |  | 93.3 | %
Grove Ridge - Minneapolis, MN (2) |  | 84 |  | 11,926 |  | 95.2 | %
Ironwood - Minneapolis, MN |  | 182 |  | 39,277 |  | 94.5 | %
New Hope Garden & Village - Minneapolis, MN (2) |  | 150 |  | 14,661 |  | 99.3 | %

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|  |  | (in thousands) |
|  |  | Investment | Physical
|  | Number of | (initial cost plus | Occupancy
|  | Apartment | improvements less | as of
Community Name and Location |  | Homes | impairment) | December 31, 2021
Palisades - Minneapolis, MN (1) |  | 330 |  | 53,882 |  | 93.0 | %
Parkhouse - Thornton, CO |  | 465 |  | 143,566 |  | 94.1 | %
Plymouth Pointe - Minneapolis, MN (2) |  | 96 |  | 14,378 |  | 96.9 | %
Pointe West - St. Cloud, MN (2) |  | 93 |  | 7,533 |  | 98.9 | %
Portage - Minneapolis, MN (2) |  | 62 |  | 9,233 |  | 93.5 | %
River Pointe - Minneapolis, MN (2) |  | 300 |  | 37,415 |  | 96.3 | %
Southdale Parc - Minneapolis, MN (2) |  | 69 |  | 9,611 |  | 97.1 | %
The Legacy - St. Cloud, MN (2) |  | 119 |  | 10,396 |  | 97.5 | %
Union Pointe - Longmont, CO |  | 256 |  | 76,029 |  | 92.6 | %
Venue on Knox - Minneapolis, MN (2) |  | 97 |  | 18,729 |  | 91.8 | %
Windsor Gates - Minneapolis, MN (2) |  | 200 |  | 21,821 |  | 94.5 | %
Wingate - Minneapolis, MN (2) |  | 136 |  | 15,513 |  | 94.9 | %
Woodhaven - Minneapolis, MN (2) |  | 176 |  | 24,647 |  | 93.2 | %
Woodland Pointe - Minneapolis, MN (2) |  | 288 |  | 46,632 |  | 90.3 | %
TOTAL NON-SAME-STORE |  | 3,769 |  | $ | 675,799 |  | 95.1 | %
TOTAL MULTIFAMILY |  | 14,441 |  | $ | 2,244,249 |  |

|  |  | (in thousands) |
|  |  | Investment | Physical
|  | Net Rentable | (initial cost plus | Occupancy
|  | Square | improvements less | as of
Property Name and Location |  | Footage | impairment) | December 31, 2021
OTHER - MIXED USE COMMERCIAL |  |  |  |
71 France - Edina, MN (1) |  | 20,955 |  | $ | 6,746 |  | 82.0 | %
Civic Lofts - Denver, CO |  | 1,600 |  | — |  | 100.0 | %
Lugano at Cherry Creek - Denver, CO |  | 13,295 |  | 2,257 |  | 47.8 | %
Oxbo - St Paul, MN |  | 11,477 |  | 3,526 |  | 100.0 | %
Plaza - Minot, ND |  | 50,610 |  | 9,280 |  | 100.0 | %
Red 20 - Minneapolis, MN (1) |  | 9,155 |  | 3,000 |  | 81.4 | %
TOTAL OTHER - MIXED USE COMMERCIAL |  | 107,092 |  | $ | 24,809 |  |
OTHER - COMMERCIAL |  |  |  |
3100 10th St SW - Minot, ND(4) |  | 9,690 |  | $ | 2,112 |  | — |
TOTAL OTHER - COMMERCIAL |  | 9,690 |  | $ | 2,112 |  |
TOTAL SQUARE FOOTAGE - OTHER |  | 116,782 |  |  |
TOTAL GROSS REAL ESTATE INVESTMENTS, EXCLUDING MORTGAGE NOTES RECEIVABLE |  |  | $ | 2,271,170 |  |

(1)Encumbered by mortgage debt.
(2)Encumbered by mortgage in our Fannie Mae Credit Facility.
(3)Owned by a joint venture entity and consolidated in our financial statements. We have an approximately 86.1% ownership in Cypress Court.
(4)This is our Minot corporate office building.
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Properties by State
The following table presents, as of December 31, 2021, the total amount of property owned, net of accumulated depreciation, by state:

|  |  |  | (in thousands) |
State |  |  |  | Total | % of Total
Minnesota |  |  |  | $ | 941,366 |  | 51.5 | %
Colorado |  |  |  | 557,133 |  | 30.5 | %
North Dakota |  |  |  | 212,518 |  | 11.6 | %
Nebraska |  |  |  | 71,323 |  | 3.9 | %
South Dakota |  |  |  | 25,142 |  | 1.4 | %
Montana |  |  |  | 20,096 |  | 1.1 | %
Total |  |  |  | $ | 1,827,578 |  | 100.0 | %

Item 3. Legal Proceedings
In the ordinary course of our operations, we become involved in litigation. At this time, we know of no material pending or threatened legal proceedings, or other proceedings contemplated by governmental authorities, that would have a material impact upon us.
Item 4. Mine Safety Disclosures
Not Applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities
Market Information
Our Common Shares of Beneficial Interest, no par value, are traded on the New York Stock Exchange under the symbol “CSR”.
Shareholders
As of February 21, 2022, there were approximately 2,567 common shareholders of record.
Unregistered Sales of Shares
Under the terms of Centerspace, LP’s Agreement of Limited Partnership, limited partners have the right to require Centerspace, LP to redeem their limited partnership units any time following the first anniversary of the date they acquired such Units (“Exchange Right”). When a limited partner exercises the Exchange Right, we have the right, in our sole discretion, to redeem such Units by either making a cash payment or exchanging the Units for our common shares, on a one-for-one basis. The Exchange Right is subject to certain conditions and limitations, including that the limited partner may not exercise the Exchange Right more than two times during a calendar year and the limited partner may not exercise for less than 100 Units, or, if such limited partner holds less than 100 Units, for less than all of the Units held by such limited partner. Centerspace, LP and some limited partners have contractually agreed to a holding period of greater than one year, a greater number of redemptions during a calendar year, or other modifications to their Exchange Right.
During three months ended December 31, 2021, we issued an aggregate of 4,533 unregistered common shares to limited partners of Centerspace, LP upon exercise of their Exchange Rights for an equal number of Units. All such issuances of our common shares were exempt from registration as private placements under Section 4(a)(2) of the Securities Act, including Regulation D promulgated thereunder. We have registered the resale of such common shares under the Securities Act.
Issuer Purchases of Equity Securities

|  |  |  |  | Maximum Dollar
|  |  |  | Total Number of Shares | Amount of Shares That
|  | Total Number of | Average Price | Purchased as Part of | May Yet Be Purchased
|  | Shares and Units | Paid per | Publicly Announced | Under the Plans or
Period |  | Purchased(1) | Share and Unit(2) | Plans or Programs | Programs(3)
October 1 - 31, 2021 |  | — |  | $ | — |  | — |  | $ | — |
November 1 - 30, 2021 |  | — |  | — |  | — |  | — |
December 1 - 31, 2021 |  | — |  | — |  | — |  | — |
Total |  | — |  | $ | — |  | — |  |

(1)Includes Units redeemed for cash pursuant to the exercise of exchange rights.
(2)Amount includes commissions paid.
Comparative Stock Performance
The information contained in this Comparative Stock Performance section shall not be deemed to be “soliciting material” or “filed” or “incorporated by reference” into our future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act or the Exchange Act.
Set forth below is a graph that compares, for the five years commencing December 31, 2016 and ending December 31, 2021, the cumulative total returns for our common shares with the comparable cumulative total return of three indices, the Standard & Poor’s 500 Index (“S&P 500”), the FTSE Nareit Equity REITs Index, and the FTSE Nareit Equity Apartments Index, the latter of which is an index prepared by the FTSE Group for the National Association of Real Estate Investment Trusts, which includes all tax-qualified equity REITs listed on the NYSE and the NASDAQ Market. The performance graph assumes that, at the close of trading on December 31, 2016, $100 was invested in our common shares and in each of the indices. The comparison assumes the reinvestment of all distributions.
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| Period Ending
Index | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021
Centerspace | 100.00 |  | 83.52 |  | 76.11 |  | 117.40 |  | 119.46 |  | 193.85 |
S&P 500 Index | 100.00 |  | 121.83 |  | 116.49 |  | 153.17 |  | 181.35 |  | 233.41 |
FTSE Nareit Equity REITs | 100.00 |  | 105.23 |  | 100.36 |  | 126.45 |  | 116.34 |  | 166.64 |
FTSE Nareit Equity Apartments Index | 100.00 |  | 103.72 |  | 107.56 |  | 135.87 |  | 115.02 |  | 188.19 |

Source: S&P Global Market Intelligence
Item 6. Reserved
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes appearing elsewhere in this report. Historical results and trends which might appear in the consolidated financial statements should not be interpreted as being indicative of future operations.
We are presenting our results of operations for the years ended December 31, 2021 and 2020. For additional comparison of results of operations for the years ended December 31, 2020 and December 31, 2019, please refer to our Annual Report on Form 10-K filed with the SEC on February 22, 2021.
This and other sections of this Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future.
Executive Summary
We own, manage, acquire, redevelop, and develop apartment communities. We primarily focus on investing in markets characterized by stable and growing economic conditions, strong employment, and an attractive quality of life that we believe, in combination, lead to higher demand for our apartment homes and retention of our residents. As of December 31, 2021, we owned interests in 79 apartment communities consisting of 14,441 homes as detailed in Item 2 - Properties. Property owned, as presented in the consolidated balance sheets, was $2.3 billion at December 31, 2021, compared to $1.8 billion at December 31, 2020.
Renting apartment homes is our primary source of revenue, and our business objective is to provide great homes. 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 have paid quarterly distributions every quarter since our first distribution in 1971.
COVID-19 Developments
The COVID-19 pandemic has had an impact on our business since March 2020, when it spread to many of the markets in which we own properties. Our first priority continues to be the health and well-being of our residents, team members, and the communities we serve. We enhanced cleaning protocols at our communities and offices, implemented physical distancing in community common spaces, and instituted remote work guidelines for our team members, all in accordance with state and local guidelines. We provided rent deferrals to residents and rent abatement to commercial tenants who were financially impacted by the COVID-19 pandemic.
Certain states and cities, including some of those in which our apartment communities are located, have reacted to the COVID-19 pandemic by instituting quarantines, restrictions on travel, shelter-in-place or stay-at-home directives, restrictions on types of businesses that may continue to operate, and restrictions on the types of construction projects that may continue. The availability of vaccines has led many states and cities to lift restrictions; however, due to new variants of the virus, we cannot predict whether restrictions will be reinstated or if additional restrictions will be imposed in the future. We implemented a plan to safely re-open common spaces in our communities while adhering to state and local guidelines, but we recognize that an increase in COVID-19 cases in these markets could cause us to close common spaces or take other preventive measures.
We cannot predict the continued impact of the pandemic, including the impact of the proposed U.S. vaccine mandate, and the degree to which our business and results of operations may be affected, particularly given the extended duration of the pandemic.
Financial Impact of the COVID-19 Pandemic
Many companies, especially in urban areas, have extended directives for employees to work from home during the COVID-19 pandemic. These extended directives have resulted in decreased traffic to businesses and, in some cases, closures of businesses in urban areas, which has resulted in lower demand and lower rent increases for our urban based apartment communities. The COVID-19 pandemic and these directives have affected our operations but did not have a material impact on our financial condition, operating results, or cash flows for the twelve months ended December 31, 2021.
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The ongoing COVID-19 pandemic may have adverse financial and economic impacts that include, but are not limited to, the following:
•cause our residents or commercial tenants to defer or stop rental payments, and abandon or fail to renew leases, which would reduce our primary source of net operating income and cash flows;
•cause the capital markets generally to become restricted or unavailable, thereby limiting our access to any needed debt or equity capital financing;
•impact the business of, or cause the loss of, certain critical third-party suppliers or other service providers;
•restrict our ability to continue to pay dividends on a quarterly basis at the current rate;
•impair the value of our tangible or intangible assets;
•require us to record loss contingencies and incur additional expenses related to our COVID-19 response; or
•cause the U.S. economy to suffer an extended economic slowdown, which could lead to a prolonged recession or even economic depression, which in turn would affect the demand for our apartment communities and could have an adverse impact on our business and operating results.
Despite our response to the COVID-19 pandemic, the ultimate impact of the COVID-19 pandemic on our rental revenue in future years cannot be determined at present. The situation surrounding the COVID-19 pandemic remains fluid, and we are actively managing our response in collaboration with residents, commercial tenants, government officials, and business partners and assessing potential impacts to our financial position and operating results, as well as potential adverse impacts on our business. Our management remains committed to ensuring the safety of our team members, residents, and communities, and to maintaining the financial stability of our business enterprise for the duration of the COVID-19 pandemic.
Significant Transactions and Events for the Year Ended December 31, 2021
Highlights. For the year ended December 31, 2021, our highlights included the following:
•Net Loss was $0.47 per diluted share for the year ended December 31, 2021, compared to Net Loss of $0.15 per diluted share for the year ended December 31, 2020;
•Same-store year-over-year revenue growth of 4.8%, driven by 5.1% growth in rental revenue, offset by a decrease of 0.3% in occupancy; and
•Same-store net operating income growth of 4.8%.
Acquisitions and Dispositions. During the year ended December 31, 2021, we completed the following transactions in furtherance of our strategic plan:
•Closed on a strategic portfolio acquisition in Minneapolis and St. Cloud, Minnesota for an aggregate acquisition cost of $359.9 million. The portfolio is comprised of 14 apartment communities in Minneapolis and three apartment communities in St. Cloud with a total of 2,696 apartment homes. In connection with this transaction, we issued 1.8 million Series E preferred units with a par value of $100 per unit. The Series E preferred units pay a 3.875% dividend rate and are convertible, at the holder’s option, into Units at an exchange rate of 1.2048 Units per Series E preferred unit, representing a conversion price of $83.00 per Unit. The acquired assets were subject to $126.5 million in mortgage liabilities, of which $20.0 million was assumed at a rate of 4.31% with the remaining amount financed through a $198.9 million Fannie Mae credit facility agreement. The FMCF includes tranches in 7, 10, and 12-year increments with a weighted average interest rate of 2.78%;
•Acquired Civic Lofts, a 176-home apartment community located in Denver, Colorado for $63.0 million;
•Acquired Union Pointe, a 256-home apartment community located in Longmont, Colorado for $76.9 million; and
•Disposed of five apartment communities in Rochester, Minnesota and a commercial property for an aggregate sale price of $62.3 million.
Financing Transactions. During the year ended December 31, 2021, we completed the following financing transactions:
•Issued 1.8 million common shares at an average price of $86.13 per share for total consideration, net of commissions and issuance costs, of approximately $156.4 million;
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•Amended and expanded our Note Purchase Private Shelf Agreement to increase the aggregate amount under the agreement from $150.0 million to $225.0 million and issued $50.0 million of 2.7% unsecured Series C Notes due June 6, 2030;
•Issued $125.0 million of unsecured notes with a weighted average interest rate of 2.6% and weighted average maturity of 10.5 years; and
•Paid $3.8 million to terminate two interest rate swaps in connection with the pay down of our term loans.
Outlook
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 in our target markets of Minneapolis, Minnesota and Denver, Colorado as opportunities arise and market conditions allow. We will explore potential new markets and acquisition opportunities, including in Nashville, Tennessee, as market conditions allow. Our continued management of a strong balance sheet should provide us with flexibility to pursue both internal and external growth.
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RESULTS OF OPERATIONS
Reconciliation of Operating Income (Loss) to Net Operating Income
The following table provides a reconciliation of operating income to net operating income (“NOI”), which is defined below.

|  | (in thousands, except percentages)
|  | Year Ended December 31,
|  | 2021 | 2020 | $ Change | % Change
Operating income (loss) |  | $ | 29,892 |  | $ | 33,843 |  | $ | (3,951) |  | (11.7) | %
Adjustments: |  |  |  |  |
Property management expenses |  | 8,752 |  | 5,801 |  | 2,951 |  | 50.9 | %
Casualty loss |  | 344 |  | 1,662 |  | (1,318) |  | (79.3) | %
Depreciation and amortization |  | 92,165 |  | 75,593 |  | 16,572 |  | 21.9 | %
General and administrative expenses |  | 16,213 |  | 13,440 |  | 2,773 |  | 20.6 | %
(Gain) loss on sale of real estate and other investments |  | (27,518) |  | (25,503) |  | (2,015) |  | 7.9 | %
Net operating income |  | $ | 119,848 |  | $ | 104,836 |  | $ | 15,012 |  | 14.3 | %

Consolidated Results of Operations
The following consolidated results of operations cover the years ended December 31, 2021 and 2020.

|  | (in thousands)
|  | Year Ended December 31,
|  | 2021 | 2020 | $ Change | % Change
Revenue |  |  |  |  |
Same-store |  | $ | 166,326 |  | $ | 158,702 |  | $ | 7,624 |  | 4.8 | %
Non-same-store |  | 29,298 |  | 5,424 |  | 23,874 |  | 440.2 | %
Other |  | 2,831 |  | 2,147 |  | 684 |  | 31.9 | %
Dispositions |  | 3,250 |  | 11,721 |  | (8,471) |  | (72.3) | %
Total |  | 201,705 |  | 177,994 |  | 23,711 |  | 13.3 | %
Property operating expenses, including real estate taxes |  |  |  |  |
Same-store |  | 67,306 |  | 64,204 |  | 3,102 |  | 4.8 | %
Non-same-store |  | 11,790 |  | 2,152 |  | 9,638 |  | 447.9 | %
Other |  | 1,120 |  | 1,008 |  | 112 |  | 11.1 | %
Dispositions |  | 1,641 |  | 5,794 |  | (4,153) |  | (71.7) | %
Total |  | 81,857 |  | 73,158 |  | 8,699 |  | 11.9 | %
Net operating income |  |  |  |  |
Same-store |  | 99,020 |  | 94,498 |  | 4,522 |  | 4.8 | %
Non-same-store |  | 17,508 |  | 3,272 |  | 14,236 |  | 435.1 | %
Other |  | 1,711 |  | 1,139 |  | 572 |  | 50.2 | %
Dispositions |  | 1,609 |  | 5,927 |  | (4,318) |  | (72.9) | %
Total |  | $ | 119,848 |  | $ | 104,836 |  | $ | 15,012 |  | 14.3 | %
Property management expense |  | (8,752) |  | (5,801) |  | 2,951 |  | 50.9 | %
Casualty loss |  | (344) |  | (1,662) |  | (1,318) |  | (79.3) | %
Depreciation and amortization |  | (92,165) |  | (75,593) |  | 16,572 |  | 21.9 | %
General and administrative expenses |  | (16,213) |  | (13,440) |  | 2,773 |  | 20.6 | %
Gain (loss) on sale of real estate and other investments |  | 27,518 |  | 25,503 |  | (2,015) |  | 7.9 | %
Interest expense |  | (29,078) |  | (27,525) |  | 1,553 |  | 5.6 | %
Loss on extinguishment of debt |  | (535) |  | (23) |  | 512 |  | 2,226.1 | %
Interest and other income (loss) |  | (2,380) |  | (1,552) |  | (828) |  | 53.4 | %
NET INCOME (LOSS) |  | $ | (2,101) |  | $ | 4,743 |  | $ | (6,844) |  | (144.3) | %
Dividends to preferred unitholders |  | (640) |  | (640) |  | — |  | — |
Net (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units |  | 2,806 |  | 212 |  | 2,594 |  | 1,223.6 | %
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities |  | (94) |  | 126 |  | (220) |  | (174.6) | %
Net income (loss) attributable to controlling interests |  | (29) |  | 4,441 |  | (4,470) |  | (100.7) | %
Dividends to preferred shareholders |  | (6,428) |  | (6,528) |  | 100 |  | (1.5) | %
Redemption of preferred shares |  | — |  | 297 |  | (297) |  | 100.0 | %
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS |  | $ | (6,457) |  | $ | (1,790) |  | $ | (4,667) |  | 260.7 | %

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|  | Year Ended December 31,
Weighted Average Occupancy (1) |  | 2021 | 2020
Same-store |  | 94.4 | % | 94.7 | %
Non-same-store |  | 94.2 | % | 93.8 | %
Total |  | 94.3 | % | 94.7 | %

(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. The currently offered effective rates on new leases at the community are used as the starting point in determination of the market rates of vacant 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.

|  | December 31,
Number of Homes |  | 2021 | 2020
Same-store |  | 10,672 |  | 10,672 |
Non-same-store |  | 3,769 |  | 647 |
Total |  | 14,441 |  | 11,319 |

Net operating income. NOI is a non-GAAP financial measure which we define as total real estate revenues less property operating expenses, including real estate taxes, which is reconciled to operating income (loss) in the table above. 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.
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%. 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. Management believes that measuring performance on a same-store basis is useful to investors because it enables evaluation of how our communities are performing year-over-year. Management uses this measure to assess whether or not it has been successful in increasing NOI, 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 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, 2021 and 2020, 59 apartment communities were classified as same-store and twenty-one 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 “Other” for the periods prior to the sale, which also includes non-multifamily properties and the non-multifamily components of mixed-use properties.
Revenue. Total revenue increased by 13.3% to $201.7 million for the year ended December 31, 2021 compared to $178.0 million in the year ended December 31, 2020. Revenue from 21 non-same-store apartment communities and other properties increased by $23.9 million and $684,000, respectively, offset by a decrease of $8.5 million from dispositions. Revenue from same-store communities increased by 4.8% or $7.6 million in the year ended December 31, 2021, compared to the same period in the prior year. Approximately 5.1% of the increase was due to higher average rental revenue, offset by a 0.3% decrease in occupancy as weighted average occupancy decreased from 94.7% to 94.4% for the years ended December 31, 2020 and 2021, respectively.
Property operating expenses, including real estate taxes. Total property operating expenses, including real estate taxes, increased by 11.9% to $81.9 million in the year ended December 31, 2021 compare d to $73.2 million in the year ended December 31, 2020. Property operating expenses from non-same-store apartment communities increased by $9.6 million, offset by a decrease of $4.2 million from sold properties. Property operating expenses at same-store communities increased by 4.8% or $3.1 million in the year ended December 31, 2021, 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
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increases in utilities, compensation costs, turnover and maintenance, and marketing costs of $689,000, $284,000, $278,000, and $239,000, respectively. Non-controllable expenses at same-store communities increased by $1.7 million primarily due to insurance costs. Insurance and real estate taxes comprised $1.1 million and $632,000 of the increase, respectively.
Net operating income. NOI increased by 14.3% to $119.8 million in the year ended December 31, 2021 compared to $104.8 million in the year ended December 31, 2020. Net operating income from same-store and non-same-store communities increased by $4.5 million and $14.2 million, respectively, offset by a decrease of $4.3 million from dispositions.
Property management expense. Property management expense, consisting of property management overhead and property management fees paid to third parties increased by 50.9% to $8.8 million in the year ended December 31, 2021, compared to $5.8 million in the year ended December 31, 2020. The increase was primarily due to $1.2 million in non recurring technology initiatives as well as $1.2 million in compensation costs due to the filling of open positions and additional staffing related to the acquisition of 17 communities during the year.
Casualty gain (loss). Casualty loss decreased by 79.3% to $344,000 in the year ended December 31, 2021, compared to $1.7 million in the year ended December 31, 2020. The decrease was primarily due to weather-related losses that occurred in the prior year which did not occur in the current year.
Depreciation and amortization. Depreciation and amortization increased by 21.9% to $92.2 million in the year ended December 31, 2021, compared to $75.6 million in the year ended December 31, 2020, attributable to an increase of $21.6 million from non-same-store properties, offset by decreases of $2.3 million and $2.7 million at same-store communities and sold properties, respectively.
General and administrative expenses. General and administrative expenses increased by 20.6% to $16.2 million in the year ended December 31, 2021, compared to $13.4 million in the year ended December 31, 2020, primarily attributable to increases of $1.3 million in incentive-based compensation costs related to company performance and share-based compensation arrangements due to the timing and form of grants and $808,000 in non-recurring technology initiatives.
Gain (loss) on sale of real estate and other investments. In the years ended December 31, 2021 and 2020, we recorded gains on sale of real estate and other investments in continuing operations of $27.5 million and $25.5 million, respectively.
Operating income. Operating income decreased by 11.7% to $29.9 million in the year ended December 31, 2021, compared to $33.8 million in the year ended December 31, 2020.
Interest expense. Interest expense increased 5.6% to $29.1 million in the year ended December 31, 2021, compared to $27.5 million in the year ended December 31, 2020, primarily due to maintaining a larger average daily balance on the line of credit compared to the same period of the prior year and the addition of new unsecured senior notes and the Fannie Mae credit facility, offset by a lower weighted average interest rate.
Loss on extinguishment of debt. Loss on extinguishment of debt increased to $535,000 in the year ended December 31, 2021, compared to $23,000 in the year ended December 31, 2020, primarily due to prepayment penalties associated with the disposal of assets and the write-off of unamortized loan costs.
Interest and other income (loss). Interest and other income (loss) decreased to $2.4 million loss in the year ended December 31, 2021, compared to a loss of $1.6 million in the prior year. The decrease was primarily due to a $5.4 million loss related to the termination of interest rate swaps, compared to a $3.4 million loss from marketable securities in the prior year.
Funds from Operations and Core Funds From Operations
We believe that Funds from Operations (“FFO”), which is a non-GAAP standard supplemental measure for equity real estate investment trusts, is helpful to investors in understanding our operating performance, primarily because its calculation does not assume the value of real estate assets diminishes predictably over time, as implied by the historical cost convention of GAAP and the recording of depreciation.
We use the definition of FFO adopted by the National Association of Real Estate Investment Trusts, Inc. (“Nareit”). Nareit defines FFO as net income or loss calculated in accordance with GAAP, excluding:
•depreciation and amortization related to real estate;
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•gains and losses from the sale of certain real estate assets; and
•impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
The exclusion in Nareit’s definition of FFO of impairment write-downs and gains and losses from the sale of real estate assets helps to identify the operating results of the long-term assets that form the base of our investments, and assists management and investors in comparing those operating results between periods.
Due to limitations of the Nareit FFO definition, we have made certain interpretations in applying the definition. We believe all such interpretations not specifically provided for in the Nareit definition are consistent with the definition. Nareit's FFO White Paper 2018 Restatement clarified that impairment write-downs of land related to a REIT’s main business are excluded from FFO and a REIT has the option to exclude impairment write-downs of assets that are incidental to the main business.
While FFO is widely used by us as a primary performance metric, not all real estate companies use the same definition of FFO or calculate FFO the same way. Accordingly, FFO presented here is not necessarily comparable to FFO presented by other real estate companies. FFO should not be considered as an alternative to net income or any other GAAP measurement of performance, but rather should be considered as an additional, supplemental measure. FFO also does not represent cash generated from operating activities in accordance with GAAP, nor is it indicative of funds available to fund all cash needs, including the ability to service indebtedness or make distributions to shareholders.
Core Funds from Operations ("Core FFO"), a non-GAAP measure, is FFO adjusted for non-routine items or items not considered core to business operations. By further adjusting for items that are not considered part of core business operations, the company believes that Core FFO provides investors with additional information to compare core operating and financial performance between periods. Core FFO should not be considered as an alternative to net income or as any other GAAP measurement of performance, but rather should be considered an additional supplemental measure. Core FFO also does not represent cash generated from operating activities in accordance with GAAP, nor is it indicative of funds available to fund all cash needs, including the ability to service indebtedness or make distributions to shareholders. 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 loss available to common shareholders for the year ended December 31, 2021 decreased to $6.5 million compared to a net loss of $1.8 million for the year ended December 31, 2020. FFO applicable to common shares and Units for the year ended December 31, 2021, increased to $54.9 million compared to $47.4 million for the year ended December 31, 2020, a change of 16.0%, primarily due to increased NOI from same-store and non-same-store communities as well as lower casualty losses and a prior year loss of $3.4 million on marketable securities that did not occur in the current year. These increases were offset by decreased NOI from sold properties, increases in interest expense, property management and general and administrative expenses, and a $5.4 million loss related to termination of interest rate swaps. For a comparison of FFO applicable to common shares and Units for the years ended December 31, 2020 and 2019, refer to our Annual Report on Form 10-K filed with the SEC on February 22, 2021.
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Reconciliation of Net Income Available to Common Shareholders to Funds from Operations and Core Funds From Operations

| (in thousands, except per share and unit amounts)
| Year Ended December 31,
| 2021 | 2020
Net income (loss) available to common shareholders | $ | (6,457) |  |  | $ | (1,790) |
Adjustments: |  |  |
Noncontrolling interests – Operating Partnership | (2,806) |  |  | (212) |
Depreciation and amortization | 92,165 |  |  | 75,593 |
Less depreciation – non real estate | (366) |  |  | (353) |
Less depreciation – partially owned entities | (93) |  |  | (379) |
(Gain) loss on sale of real estate | (27,518) |  |  | (25,503) |
FFO applicable to common shares and Units | $ | 54,925 |  |  | $ | 47,356 |
Adjustments to Core FFO: |  |  |
Casualty loss (recovery) | $ | — |  |  | $ | 749 |
Loss on extinguishment of debt | 535 |  |  | 23 |
Rebranding costs | — |  |  | 402 |
Technology implementation costs | 2,020 |  |  | — |
(Gain) loss on marketable securities | — |  |  | 3,378 |
(Discount) premium on redemption of preferred shares | — |  |  | (297) |
Commercial lease termination proceeds | (450) |  |  | — |
Acquisition related costs | 230 |  |  | — |
Interest rate swap termination, amortization, and mark-to-market | 4,942 |  |  | — |
Amortization of assumed debt | (53) |  |  | — |
Other miscellaneous items | (64) |  |  | — |
Core FFO applicable to common shares and Units | $ | 62,085 |  |  | $ | 51,611 |
FFO applicable to common shares and Units | $ | 54,925 |  |  | $ | 47,356 |
Dividends to preferred unitholders | 640 |  |  | 640 |
FFO applicable to common shares and Units - diluted | $ | 55,565 |  |  | $ | 47,996 |
Core FFO applicable to common shares and Units | $ | 62,085 |  |  | $ | 51,611 |
Dividends to preferred unitholders | 640 |  |  | 640 |
Core FFO applicable to common shares and Units - diluted | $ | 62,725 |  |  | $ | 52,251 |
Per Share Data |  |  |
Earnings (loss) per common share - diluted | $ | (0.47) |  |  | $ | (0.15) |
FFO per share and Unit - diluted | $ | 3.54 |  |  | $ | 3.47 |
Core FFO per share and Unit - diluted | $ | 3.99 |  |  | $ | 3.78 |
Weighted average shares and Units - diluted | 15,704 |  |  | 13,835 |

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Liquidity and Capital Resources
Overview
We strive to maintain a strong balance sheet and preserve financial flexibility, which we believe should enhance our ability to capitalize on appropriate investment opportunities as they may arise. We intend to continue to focus on core fundamentals, which include generating positive cash flows from operation, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs.
Our primary sources of liquidity are cash and cash equivalents on hand and cash flows generated from operations. 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 2021 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 acquisition 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. We believe our ability to generate cash from property operating activities and draws on our lines of credit to be adequate to meet all expected operating requirements and to make distributions to our shareholders in accordance with the REIT provisions of the Code. Budgeted expenditures for ongoing maintenance and capital improvements and renovations to our real estate portfolio are also generally expected to be funded from existing cash on hand, cash flow generated from property operations, draws on our lines of credit and/or new borrowings, and we believe we will have sufficient liquidity to meet our commitments over the next twelve months.
To maintain our qualification as a REIT, we must pay dividends to our shareholders aggregating annually at least 90% of our REIT taxable income, excluding net capital gains. Under a separate requirement, we must distribute 100% of net capital gains or pay a corporate level tax in lieu thereof. While we have historically satisfied this distribution requirement by making cash distributions to our shareholders, we may choose to satisfy this requirement by making distributions of other property, including, in limited circumstances, our own common shares. As a result of this distribution requirement, our Operating Partnership cannot rely on retained earnings to fund ongoing operations. We pay dividends from cash available for distribution. Until it is distributed, cash available for distribution is typically invested in investment grade securities or is used to reduce balances outstanding under our line of credit. In the event of deterioration in property operating results, we may need to consider additional cash preservation alternatives, including reducing development activities, capital improvements, and renovations. For the year ended December 31, 2021, we declared cash distributions of $42.7 million to common shareholders and unitholders of Centerspace, LP, as compared to net cash provided by operating activities of $84.0 million and FFO of $54.9 million.
Factors that could increase or decrease our future liquidity include, but are not limited to, changes in interest rates or sources of financing, general volatility in capital and credit markets, changes in minimum REIT dividend requirements, and our ability to access the capital markets on favorable terms, or at all. As a result of the foregoing conditions or general economic conditions in our markets that affect our ability to attract and retain residents, we may not generate sufficient cash flow from operations. If we are unable to obtain capital from other sources, we may not be able to pay the distribution required to maintain our status as a REIT, make required principal and interest payments, make strategic acquisitions or make necessary routine capital improvements or undertake value add renovation opportunities with respect to our existing portfolio of operating assets.
As of December 31, 2021, we had total liquidity of approximately $204.8 million, which included $173.5 million available on our line of credit based on the value of unencumbered properties and $31.3 million of cash and cash equivalents. As of December 31, 2020, we had total liquidity of approximately $97.5 million, which included $97.1 million available on our line of credit based on the value of properties contained in our unencumbered asset pool (“UAP”) and $392,000 of cash and cash equivalents.
Potential Impact of COVID-19-Related Effects on Continuing Debt Availability
Although we are in compliance with our covenants under all of our debt facilities and currently expect to continue to remain in compliance with these covenants, there can be no assurance that we will remain in compliance with those covenants or be able to access these funds depending on the length of the COVID-19 pandemic and the breadth of its impact on the U.S. economy
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generally and the credit markets in particular. Under the terms of our credit facility, we may be unable to obtain advances under our credit facility if:
•we are unable to make certain representations and warranties, including a certification that, since September 30, 2021, there has been no adverse change in our business, financial condition, operations, performance or properties, taken as a whole, which would reasonably be expected to have a material adverse effect;
•changes in our consolidated property NOI or capitalization rates applicable to the properties in our borrowing base reduce or eliminate availability under our credit facility; or
•changes in the nature and composition (including occupancy rate) of the properties in our borrowing base cause these properties to become ineligible to be part of our borrowing base, and if we are not able to replace such properties with other qualifying properties, such ineligibility could reduce or eliminate the availability under our credit facility.
Even if we remain in compliance with the foregoing representations, warranties, and covenants, we may be unable to access the full amount available under our credit facilities if our lenders fail to fund their commitments.
As of the date of this filing, we have not experienced any restrictions or limitations on the availability of credit in our markets or with our lenders, although there can be no assurance that we will continue to be able to access the credit markets generally or our credit facility in the future.
Debt
As of December 31, 2021, 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, 2021, the additional borrowing availability was $173.5 million beyond the $76.0 million drawn. As of December 31, 2020, the line of credit borrowing capacity was $250.0 million based on the value of our unencumbered asset pool (“UAP”), of which $152.9 million was drawn on the line. The line of credit bears interest either at the lender’s base rate plus a margin ranging from 25 to 80 basis points, or LIBOR, plus a margin ranging from 125 to 180 basis points based on our consolidated leverage. 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 and has an accordion option to increase borrowing capacity up to $400.0 million.
In January 2021, we amended and expanded our private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc. (collectively, "PGIM") to increase the aggregate amount available for issuance of unsecured promissory notes to $225.0 million. We also issued $50.0 million of unsecured senior notes in connection with the amendment. Under this agreement, we issued $200.0 million unsecured senior notes with $25.0 million remaining available, as of December 31, 2021. In September 2021, we entered into a note purchase agreement for the issuance of $125.0 million senior unsecured promissory notes, of which $25.0 million was under the private shelf agreement with PGIM. The following table shows the notes issued under both agreements.

| (in thousands) |  |
| Amount | Maturity Date | Interest Rate
Series A | $ | 75,000 |  | September 13, 2029 | 3.84 | %
Series B | $ | 50,000 |  | September 30, 2028 | 3.69 | %
Series C | $ | 50,000 |  | June 6, 2030 | 2.70 | %
Series 2021-A | $ | 35,000 |  | September 17, 2030 | 2.50 | %
Series 2021-B | $ | 50,000 |  | September 17, 2031 | 2.62 | %
Series 2021-C | $ | 25,000 |  | September 17, 2032 | 2.68 | %
Series 2021-D | $ | 15,000 |  | September 17, 2034 | 2.78 | %

In September 2021, we entered into a $198.9 million Fannie Mae Credit Facility Agreement (“FMCF”) for financing the acquisition of 16 apartment communities. The FMCF is currently secured by mortgages on those apartment communities. The notes are interest-only, have varying maturity dates of 7, 10, and 12 years, and a blended weighted average interest rate of 2.78%. As of December 31, 2021, the FMCF had a balance of $198.9 million. The FMCF is included within mortgages payable on the Consolidated Balance Sheets.
Mortgage loan indebtedness, excluding the FMCF, was $284.9 million on December 31, 2021 and $298.4 million on December 31, 2020. As of December 31, 2021, the weighted average rate of interest on our mortgage debt was 3.81%, compared to 3.93% on December 31, 2020. Refer to Note 6 of our consolidated financial statements contained in this Report for the principal payments due on our mortgage indebtedness and other tabular information.
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We also have a $6.0 million unsecured operating 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 November 29, 2022, with pricing based on a market spread plus the one-month LIBOR index rate.
All of our term debt is at fixed rates of interest, with staggered maturities. This reduces the exposure to changes in interest rates, which minimizes the effect of interest rate fluctuations on our results of operations and cash flows.
Equity
We had an equity distribution agreement in connection with the 2019 ATM Program through which we could offer and sell common shares having an aggregate gross sales price of up to $150.0 million. Under the 2019 ATM Program, we sold shares having an aggregate sales price of $149.9 million. We replaced the 2019 ATM Program with the 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 and the repayment of indebtedness. During the year ended December 31, 2021, we issued 1.8 million common shares under the 2019 and 2021 ATM Programs at an average price of $86.13 per share, net of commissions. Total consideration, net of commissions and issuance costs, was approximately $156.4 million. As of December 31, 2021, common shares having an aggregate offering price of up to $158.7 million remained available under the 2021 ATM Program.
On September 1, 2021, we issued 1.8 million Series E preferred units with a par value of $100 per Series E preferred unit as partial consideration for the acquisition of 17 apartment communities. The Series E preferred unit holders receive a preferred distribution at the rate of 3.875% per year. Each Series E preferred unit is convertible, at the holder’s option, into 1.2048 Units, representing a conversion exchange rate of $83 per unit. The Series E preferred units have an aggregate liquidation preference of $181.4 million. The holders of the Series E preferred units do not have voting rights and are required to hold the units for one year before they may elect to convert.
As of December 31, 2021 and 2020, we had 3.9 million Series C preferred shares outstanding.
Changes in Cash, Cash Equivalents, and Restricted Cash
As of December 31, 2021, we had cash and cash equivalents of $31.3 million and restricted cash consisting of $2.4 million of escrows held by lenders for real estate taxes, insurance, and capital additions and $5.0 million in deposits for real estate acquisitions. As of December 31, 2020, we had cash and cash equivalents of $392,000 and restricted cash consisting of $1.9 million of escrows held by lenders for real estate taxes, insurance, and capital additions and $5.0 million in net tax-deferred exchange proceeds remaining from a portion of our dispositions.
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, 2021, we generated capital from various activities, including:
•Receipt of $174.5 million, net of fees, from the issuance of unsecured senior notes;
•Receipt of $61.3 million, net of transaction costs, from the sale of five apartment communities in Rochester, Minnesota and a commercial property;
•Receipt of $196.7 million, net of fees, from the Fannie Mae credit facility which was used to pay off debt as partial consideration for the September 1,2021 portfolio acquisition; and
•Receipt of $156.0 million, net of fees, from the issuance of 1.8 million common shares under our 2019 and 2021 ATM Programs.
During the year ended December 31, 2021, we used capital for various activities, including:
•Acquisition of Union Pointe, a 256-home apartment community located in Longmont, Colorado, for an aggregate purchase price of $76.9 million;
•Acquisition of a portfolio of 17 apartment communities located in Minneapolis, Minnesota and St. Cloud, Minnesota, for $15.7 million in cash, the paydown of $106.7 million in existing mortgages, and the remainder through the issuance of Series E preferred units;
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•Funding mezzanine and construction loans of $18.6 million;
•Repaying approximately $36.3 million of mortgage principal;
•Paying off $145.0 million in term loans;
•Paying $3.8 million for the termination of interest rate swaps;
•Paying $76.9 million on our lines of credit;
•Paying distributions on common shares, Series E preferred units, and Units of $43.4 million; and
•Funding capital improvements for apartment communities of approximately $35.9 million.
Contractual Obligations and Other Commitments
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 $76.0 million balance outstanding at December 31, 2021 and matures in September 2025. Our unsecured senior notes have an aggregate balance of $300.0 million at December 31, 2021 with varying maturities from September 2028 through September 2034.

|  | (in thousands)
|  |  |  | Less than |  |  |  |  |  | More than
|  | Total |  | 1 Year |  | 1-3 Years |  | 3-5 Years |  | 5 Years
Mortgages payable (principal and interest) |  | $ | 590,992 |  |  | $ | 43,056 |  |  | $ | 77,269 |  |  | $ | 105,374 |  |  | $ | 365,293 |
Lines of credit (principal and interest)(1) |  | $ | 84,665 |  |  | $ | 2,164 |  |  | $ | 4,584 |  |  | 77,917 |  |  | — |
Total |  | $ | 675,657 |  |  | $ | 45,220 |  |  | $ | 81,853 |  |  | $ | 183,291 |  |  | $ | 365,293 |

(1)The future interest payments on the lines of credit were estimated using the outstanding principal balance and interest rate in effect as of December 31, 2021.
We fund capital expenditures, primarily to maintain or renovate our apartment communities. The amounts of these expenditures can vary from year to year depending on the age of the apartment community, timing of planned improvements, and lease turnover.
As of December 31, 2021, we had no significant off-balance-sheet arrangements.
Inflation
Our apartment leases generally have terms of one year or less, which means that, in an inflationary environment, we would have the ability to increase rents upon the commencement of new leases or renewal of existing leases to manage the impact of inflation on our business. However, the cost to operate and maintain communities could increase at a rate greater than our ability to increase rents, which could adversely affect our results of operations. Extreme escalation of costs could have a negative impact on our residents and their ability to absorb rent increases. We also continue to monitor pressures surrounding supply chain challenges. A worsening of the current environment could contribute to delays in obtaining construction materials for maintenance or value add projects and result in higher than anticipated costs, which could prevent us from obtaining expected returns on value add projects.
Critical Accounting Estimates
Set forth below is a summary of the accounting estimates that management believes are critical to the preparation of the consolidated financial statements included in this Report.
Real Estate. Real estate is carried at cost, net of accumulated depreciation, less an adjustment for impairment, if any. Depreciation requires an estimate by management of the useful life of each asset as well as an allocation of the costs associated with a property to its various components. As described further below, the process of allocating property costs to its components involves a considerable amount of subjective judgments to be made by management. If we do not allocate these costs appropriately or incorrectly estimate the useful lives of our real estate, depreciation expense may be misstated. 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. Maintenance and repairs are charged to operations as incurred. Renovations and improvements that improve and/or extend the useful life of the asset are capitalized over their estimated useful life, generally five to twenty years.
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Acquisition of Investments in Real Estate. Upon acquisitions of real estate, we assess the fair value of acquired tangible assets (including land, buildings and personal property), which is determined by valuing the property as if it were vacant, and consider whether there were significant intangible assets acquired (for example, above-and below-market leases, the value of acquired in-place leases and resident relationships) and assumed liabilities, and allocate the purchase price based on these assessments. The as-if-vacant value is allocated to land, buildings, and personal property based on our determination of the relative fair value of these assets. Techniques used to estimate fair value include discounted cash flow analysis and reference to recent sales of comparable properties. Estimates of future cash flows are based on a number of factors, including the historical operating results, known trends, and market/economic conditions that may affect the property. Land value is assigned based on the purchase price if land is acquired separately or based on a relative fair value allocation if acquired in a portfolio acquisition.
Other intangible assets acquired include amounts for in-place lease values that are based upon our evaluation of the specific characteristics of the leases. Factors considered in the fair value analysis include an estimate of carrying costs and foregone rental income during hypothetical expected lease-up periods, consideration of current market conditions, and costs to execute similar leases. We also consider information about each property obtained during our pre-acquisition due diligence, marketing and leasing activities in estimating the relative fair value of the tangible and intangible assets acquired.
Impairment. We periodically evaluate our long-lived assets, including our investments in real estate, for impairment indicators. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each property, and legal and environmental concerns. If indicators exist, we compare the expected future undiscounted cash flows for the property against the carrying amount of that property. If the sum of the estimated undiscounted cash flows is less than the carrying amount, an impairment loss is recorded for the difference between the estimated fair value and the carrying amount. If our anticipated holding period for properties, the estimated fair value of properties, or other factors change based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.
Recent Accounting Pronouncements
For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our operations, please refer to Note 2 to our consolidated financial statements appearing elsewhere in this Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk is primarily related to fluctuations in the general level of interest rates on our current and future fixed and variable rate debt obligations. We have used interest rate swaps to offset the impact of interest rate fluctuations on our variable-rate debt. During the year ended December 31, 2021, we prepaid two variable rate term loans and terminated two of our four interest rate swaps. As of December 31, 2021, we had a swap with a notional of $75.0 million on the line of credit and which has an average pay rate of 2.81% and a forward swap with a notional of $70.0 million. The aggregate fair value of our interest rate swaps is a liability of $5.7 million, as of December 31, 2021. We do not enter into derivative instruments for trading or speculative purposes. The interest rate swaps expose us to credit risk in the event of non-performance by the counterparty under the terms of the agreement.
We have a private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc. (collectively, PGIM) for the issuance of up to $225.0 million of unsecured senior promissory notes (“unsecured senior notes”). We also issued $50.0 million of unsecured senior notes in connection with the amendment. Under this agreement, we issued $200.0 million unsecured senior notes with $25.0 million remaining available as of December 31, 2021. In September 2021, we entered into a note purchase agreement for the issuance of $125.0 million senior unsecured promissory notes, of which $25.0 million was under the private shelf agreement with PGIM. The following table shows the notes issued under both agreements. The table below shows the notes issued under both agreements.
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| (in thousands) |  |
| Amount | Maturity Date | Interest Rate
Series A | $ | 75,000 |  | September 13, 2029 | 3.84 | %
Series B | $ | 50,000 |  | September 30, 2028 | 3.69 | %
Series C | $ | 50,000 |  | June 6, 2030 | 2.70 | %
Series 2021-A | $ | 35,000 |  | September 17, 2030 | 2.50 | %
Series 2021-B | $ | 50,000 |  | September 17, 2031 | 2.62 | %
Series 2021-C | $ | 25,000 |  | September 17, 2032 | 2.68 | %
Series 2021-D | $ | 15,000 |  | September 17, 2034 | 2.78 | %

During the year ended December 31, 2021, we entered into a $198.9 million Fannie Mae Credit Facility Agreement (“FMCF”) for the financing of 16 apartment communities acquired. The FMCF is currently secured by mortgages on those apartment communities. The notes are interest-only, have varying maturity dates of 7, 10, and 12 years, and a blended weighted average interest rate of 2.78%. As of December 31, 2021, the FMCF had a balance of $198.9 million.
As of December 31, 2021, we had no variable-rate mortgage debt outstanding and $76.0 million of variable-rate borrowings under our line of credit, of which $75.0 million is fixed through interest rate swaps. We estimate that a change in 30-day LIBOR of 100 basis points with constant risk spreads would not have a significant impact on our net income due to our interest rate swap on our line of credit.
Mortgage loan indebtedness, excluding the FMCF, decreased by $13.5 million as of December 31, 2021, compared to December 31, 2020, primarily due to loan maturities and prepayments. As of December 31, 2021 and 2020, 100.0% of our $284.9 million of mortgage debt was at fixed rates of interest, with staggered maturities. As of December 31, 2021, the weighted average rate of interest on our mortgage debt was 3.81%, compared to 3.93% on December 31, 2020. Even though our goal is to maintain a fairly low exposure to interest rate risk, we may become vulnerable to significant fluctuations in interest rates on any future repricing or refinancing of our fixed or variable rate debt or future debt.
The following table provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. Average variable rates are based on rates in effect at the reporting date.

|  | Future Principal Payments (in thousands, except percentages)
|  |  |  |  |  |  |  |  | Fair
Debt |  | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | Value
Fixed Rate |  | $ | 27,113 |  | $ | 45,067 |  | $ | 4,054 |  | $ | 32,850 |  | $ | 49,047 |  | $ | 625,653 |  | $ | 783,784 |  | $ | 791,698 |
Average Interest Rate(1) |  | 3.85 | % | 3.83 | % | 3.80 | % | 3.80 | % | 3.84 | % | 3.15 | % | 3.25 | % |
Variable Rate(2) |  | $ | — |  | $ | — |  | — |  | $ | 76,000 |  | $ | — |  | — |  | $ | 76,000 |  | $ | 76,000 |
Average Interest Rate(1) |  | — |  | — |  | — |  | 2.74 | % | — |  | — |  | 2.74 | % |

(1)Interest rate is annualized and includes the effect of our interest rate swaps.
(2)Includes our line of credit, of which $75.0 million is synthetically fixed with an interest rate swap.
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements and related notes, together with the Report of the Independent Registered Public Accounting Firm, are set forth beginning on page F-1 of this Report and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
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Item 9A. Controls and Procedures
Disclosure Controls and Procedures: As of December 31, 2021, the end of the period covered by this Report, our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting: There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of the year to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2021. Our internal control over financial reporting is a process designed under the supervision of our principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with GAAP.
As of December 31, 2021, management conducted an assessment of the effectiveness of our internal control over financial reporting, based on the framework established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management has determined that our internal control over financial reporting as of December 31, 2021, was effective.
Our internal control over financial reporting includes policies and procedures that:
•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions, acquisitions and dispositions of assets;
•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and the trustees; and
•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions or deterioration in the degree of compliance with the policies or procedures.
Our internal control over financial reporting as of December 31, 2021 has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in their report on page F-4 of our consolidated financial statements contained in our Annual Report on Form 10-K, which expresses an unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2021.
Item 9B. Other Information
None.
PART III
Item 10. Trustees, Executive Officers and Corporate Governance
The information required by this Item regarding Trustees is incorporated by reference to the information under “Election of Trustees,” “Information About Our Executive Officers,” “Code of Conduct and Code of Ethics for Senior Financial Officers,”
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and “Board Committees” in our definitive proxy statement for our 2022 Annual Meeting of Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Report.
Item 11. Executive Compensation
The information required by this Item is incorporated by reference to the information under “Trustee Compensation,” “Compensation Discussion and Analysis” and “Executive Officer Compensation Tables” in our definitive proxy statement for our 2022 Annual Meeting of Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Report.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
The information required by this Item is incorporated by reference to the information under “Securities Authorized for Issuance Under Equity Compensation Plans” and “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement for our 2022 Annual Meeting of Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Report.
Item 13. Certain Relationships and Related Transactions, and Trustee Independence
The information required by this Item is incorporated by reference to the information under “Relationships and Related Party Transactions” and “Corporate Governance and Board Matters” in our definitive proxy statement for our 2022 Annual Meeting of Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Report.
Item 14. Principal Accounting Fees and Services
The information required by this Item is incorporated by reference to the information under “Accounting and Audit Committee Matters” in our definitive proxy statement for our 2022 Annual Meeting of Shareholders to be filed with the SEC no later than 120 days after the end of the year covered by this Report.
PART IV
Item 15. Exhibits, Financial Statement Schedules
The following documents are filed as part of this report:
1. Financial Statements
See the “Table of Contents” to our consolidated financial statements on page F-1 of this Report.
2. Financial Statement Schedules
See the “Table of Contents” to our consolidated financial statements on page F-1 of this Report.
The following financial statement schedules should be read in conjunction with the financial statements referenced in Part II, Item 8 of this Report: Schedule III Real Estate and Accumulated Depreciation
3. Exhibits
See the Exhibit Index set forth in part (b) below.
The Exhibit Index below lists the exhibits to this Report. We will furnish a printed copy of any exhibit listed below to any security holder who requests it upon payment of a fee of 15 cents per page. All Exhibits are either contained in this Report or are incorporated by reference as indicated below.
Item 16. 10-K Summary
None.
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EXHIBIT INDEX

EXHIBIT NO. |  | DESCRIPTION
1.1 |  | Equity Distribution Agreement dated November 7, 2019 between the Company and BMO Capital Markets Corp., BTIG, LLC, Jefferies LLC, Raymond James & Associates, Inc. and Robert W. Baird & Co. Incorporated (incorporated herein by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the Commission on November 7, 2019).
1.2 |  | Equity Distribution Agreement dated September 10, 2021 between the Company and BMO Capital Markets Corp., BTIG, LLC, Jefferies LLC, Raymond James & Associates, Inc., BofA Securities, Inc., UBS Securities LLC, Piper Sandler & Co., and certain of their affiliates (incorporated herein by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 10, 2021.
3.1. |  | Articles of Amendment and Third Restated Declaration of Trust of Investors Real Estate Trust adopted on September 23, 2003, as amended on September 18, 2007 (incorporated herein by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed with the Commission on June 30, 2014).
3.2 |  | Seventh Restated Trustee’s Regulations (Bylaws) of Investors Real Estate Trust, adopted on April 27, 2020 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 1, 2020).
3.3 |  | Articles Supplementary to the Company’s Articles of Amendment and Third Restated Declaration of Trust designating the Company’s 6.625% Series C Cumulative Redeemable Preferred Shares, no par value per share (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form 8-A filed with the SEC on September 28, 2017).
4.1 |  | Note Purchase and Private Shelf Agreement, dated as of September 13, 2019, by and among IRET Properties, a North Dakota Limited Partnership, as the Issuer, Investors Real Estate Trust, as the Parent, IRET, Inc., as the General Partner, certain subsidiaries of the Parent, PGIM, Inc., an affiliate of Prudential Financial, Inc., certain affiliates of PGIM, Inc., and the Purchasers of the Series A Notes (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 17, 2019).
4.2 |  | Form of Series A Senior Note under the Note Agreement (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 17, 2019).
4.3 |  | Form of Series B Notes under the Note Agreement (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K dated October 1, 2019).
4.4 |  | Form of Guaranty Agreement under the Note Agreement (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the Commission on September 17, 2019).
4.5 |  | Description of Securities (incorporated by reference to Exhibit 4.5 to the Company's Annual Report on Form 10-K filed with the Commission on February 19, 2020).
4.6 |  | Amendment to Note Purchase and Private Shelf Agreement, dated as of September 13, 2019, by and among Centerspace, LP, a North Dakota Limited Partnership, as the Issuer, Investors Real Estate, as the Parent, Centerspace, Inc., as the General Partner, certain subsidiaries of the Parent, PGIM Inc., an affiliate of Prudential Financial, Inc., certain affiliates of PGIM, Inc., and the Purchasers of the Series A Notes (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the Commission on January 7, 2021).
4.7 |  | Form of Series C Notes under Note Agreement (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed with the Commission on January 7, 2021).
4.8 |  | Confirmation of Guarantee Agreement, dated as of January 6, 2021, by an among Centerspace, Inc., Investors Real Estate Trust, IRET - Grand Gateway Apartments, LLC, IRET - Homestead Gardens II, LLC, IRET - River Ridge Apartments, LLC, IRET - Valley Park Manor, LLC, and the Holders of Notes thereto (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the Commission on January 7, 2021).
4.9 |  | Note Purchase Agreement, dated September 17, 2021, by and among Centerspace, Centerspace, LP, Centerspace, Inc., Allianz Life Insurance Company of North America, Nationwide Life and Annuity Insurance Company, Nationwide Life Insurance Company, Prudential Annuities Life Assurance Corporation, The Prudential Insurance Company of America, The Prudential Life Insurance Company, Ltd., and Nassau Life Insurance Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).
4.10 |  | Form of Series 2021-A Senior Note (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).
4.11 |  | Form of Series 2021-B Senior Note (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).
4.12 |  | Form of Series 2021-C Senior Note (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).

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EXHIBIT NO. |  | DESCRIPTION
4.13 |  | Form of Series 2021-D Senior Note (incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).
4.14 |  | Guarantee Agreement, dated September 17, 2021 of Centerspace, LP Note (incorporated by reference to Exhibit 4.6 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).
4.15 |  | Amendment No. 2 to Note Purchase and Private Shelf Agreement, dated September 17, 2021, and related Exhibit B attached thereto, by and among Centerspace, Centerspace, LP, Centerspace, Inc., PGIM, Inc., an affiliate of Prudential Financial, Inc. and certain affiliates of PGIM, Inc. Note (incorporated by reference to Exhibit 4.7 to the Company’s Current Report on Form 8-K filed with the Commission on September 20, 2021).
10.1** |  | 2015 Incentive Plan dated June 23, 2015 (incorporated herein by reference to Appendix A to the Company’s Proxy Statement on Schedule 14A filed with the Commission on August 3, 2015).
10.2** |  | Amendment to 2015 Incentive Plan dated April 19, 2016 (incorporated herein by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K filed with the Commission on June 29, 2016).
10.3** |  | Amendment to 2015 Incentive Plan dated March 13, 2020 (incorporated herein by reference to Appendix B to the Company's Proxy Statement on Schedule 14A filed with the Commission on April 6, 2020).
10.4** |  | Form of Trustee Stock Award Agreement under the 2015 Incentive Plan dated June 22, 2016 (incorporated herein by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K filed with the Commission on June 29, 2016).
10.5** |  | Form of Performance Stock Award Agreement under the 2015 Incentive Plan dated June 22, 2016 (incorporated herein by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K filed with the Commission on June 29, 2016).
10.6** |  | Form of Stock Award Agreement under the 2015 Incentive Plan dated June 22, 2016 (incorporated herein by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K filed with the Commission on June 29, 2016).
10.7** |  | Form of Stock Award Agreement (one-year measurement period) under the 2015 Incentive Plan dated September 16, 2015 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2015).
10.8** |  | Form of Stock Award Agreement (two-year measurement period) under the 2015 Incentive Plan dated September 16, 2015 (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2015).
10.9** |  | Form of Stock Award Agreement (three-year measurement period) under the 2015 Incentive Plan dated September 16, 2015 (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2015).
10.10** |  | Form of Change in Control Severance Agreement (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 7, 2015).
10.11** |  | Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 21, 2015).
10.12 |  | Second Amended and Restated Credit Agreement and related Annex I attached thereto, dated as of August 31, 2018, by and among IRET Properties, a North Dakota Limited Partnership, as the Borrower, the Guarantors party thereto, the several financial institutions party thereto, as Lenders, and the Bank of Montreal, as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on September 6, 2018).
10.13 |  | First Amendment to Second Amended and Restated Credit Agreement and related Annex I attached thereto, by and among IRET Properties, a North Dakota Limited Partnership, as the Borrower, the Guarantors party thereto, the several financial institutions party thereto, as Lenders, and the Bank of Montreal, as Administrative Agent (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on From 10-K filed with the Commission on February 19, 2020).
10.14 |  | Second Amendment to Second Amended and Restated Credit Agreement and related Annex I attached thereto, by and among IRET Properties, a North Dakota Limited Partnership, as the Borrower, the Guarantors party thereto, the several financial institutions party thereto, as Lenders, and the Bank of Montreal, as Administrative Agent (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on September 17, 2019).
10.15 |  | Amended and Restated Agreement of Limited Partnership of IRET Properties, A North Dakota Limited Partnership (as amended and restated through February 27, 2019) (incorporated by reference to Exhibit 10.30 to the Company's Transition Report on Form 10-K filed with the Commission on February 27, 2019).

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EXHIBIT NO. |  | DESCRIPTION
10.16 |  | Third Amendment to the Amended and Restated Agreement of Limited Partnership of IRET Properties, A North Dakota Limited Partnership (incorporated herein by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed on October 2, 2017).
10.17 |  | Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of IRET Properties, A North Dakota Limited Partnership, dated as of February 26, 2019 (incorporated by reference to Exhibit 10.32 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on February 27, 2019).
10.18 |  | Form of Contribution Agreement, dated as of June 3, 2021, by and between Seller and Centerspace, (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 3, 2021).
10.19 |  | Form of Tax Protection Agreement, by and among Seller, Centerspace, and Centerspace, LP (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on June 3, 2021).
10.20 |  | Amendment to Limited Partnership Agreement of the Partnership, dated September 1, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 2, 2021).
10.21 |  | Master Credit Facility, dated as of September 1, 2021, among certain wholly-owned subsidiaries of Centerspace and Walker & Dunlop, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on September 2, 2021).
10.22 |  | Assumption Agreement and Amendment to Loan Documents, dated as of September 1, 2021, among CSR - Palisades, LLC, Minnesota Life Insurance Company and Palisades Limited Partnership (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on September 2, 2021).
10.23 |  | Third Amended and Restated Credit Agreement, dated as of September 30, 2021, among Centerspace, LP, the Guarantors from time to time party thereto, the Lenders from time to time party thereto, KeyBank, National Association and PNC Bank, National Association, as Syndicated Agents, and Bank of Montreal, as Administrative Agent Note (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 30, 2021).
21.1† |  | Subsidiaries of Centerspace
23.1† |  | Consent of Independent Registered Public Accounting Firm
24.1† |  | Power of Attorney (included on the signature page to this Annual Report on Form 10-K and incorporated by reference herein).
31.1† |  | Section 302 Certification of President and Chief Executive Officer
31.2† |  | Section 302 Certification of Chief Financial Officer
32.1† |  | Section 906 Certification of the President and Chief Executive Officer
32.2† |  | Section 906 Certification of the Chief Financial Officer
101† |  | The following materials from our Annual Report on Form 10-K for the twelve-months ended December 31, 2021 formatted in Inline eXtensible Business Reporting Language ("iXBRL"): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Equity, (iv) the Consolidated Statements of Cash Flows, (v) notes to these consolidated financial statements, and (vi) the Cover Page to our Annual Report on From 10-K.
104 |  | Cover Page Interactive Data File (formatted as Inline iXBRL and contained in Exhibit 101)

† Filed herewith
** Indicates management compensatory plan, contract or arrangement.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 28, 2022 | Centerspace
| By: | /s/ Mark O. Decker, Jr.
|  | Mark O. Decker, Jr.
|  | President & Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature |  | Title |  | Date
/s/ John A. Schissel |  |  |  |
John A. Schissel |  | Trustee & Chairman |  | February 28, 2022
/s/ Mark O. Decker, Jr. |  |  |  |
Mark O. Decker, Jr. |  | President & Chief Executive Officer (Principal Executive Officer); Trustee |  | February 28, 2022
/s/ Bhairav Patel |  |  |  |
Bhairav Patel |  | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |  | February 28, 2022
/s/ Michael T. Dance |  |  |  |
Michael T. Dance |  | Trustee |  | February 28, 2022
/s/ Emily Nagle Green |  |  |  |
Emily Nagle Green |  | Trustee |  | February 28, 2022
/s/ Linda J. Hall |  |  |  |
Linda J. Hall |  | Trustee |  | February 28, 2022
/s/ Jeffrey P. Caira |  |  |  |
Jeffrey P. Caira |  | Trustee |  | February 28, 2022
/s/ Mary J. Twinem |  |  |  |
Mary J. Twinem |  | Trustee |  | February 28, 2022
/s/ Rodney Jones-Tyson |  |  |  |
Rodney Jones-Tyson |  | Trustee |  | February 28, 2022

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CENTERSPACE AND SUBSIDIARIES
TABLE OF CONTENTS

|  | PAGE
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID Number 248) | F-2
CONSOLIDATED FINANCIAL STATEMENTS |
| Consolidated Balance Sheets | F-5
| Consolidated Statements of Operations | F-6
| Consolidated Statements of Comprehensive Income | F-7
| Consolidated Statements of Equity | F-8
| Consolidated Statements of Cash Flows | F-9
| Notes to Consolidated Financial Statements | F-11
ADDITIONAL INFORMATION |
| Schedule III - Real Estate and Accumulated Depreciation | F-31

Schedules other than those listed above are omitted since they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes thereon.
F-1

Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Trustees and Shareholders
Centerspace
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Centerspace (a North Dakota real estate investment trust) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for the three years in the period ended December 31, 2021, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 28, 2022 expressed an unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.
Accounting for Series E preferred units issued.
As described in Note 4 to the financial statements, in September 2021, the Company issued 1.8 million Series E preferred units with a par value of $100 per Series E preferred unit as partial consideration for the acquisition of 17 apartment communities. The Series E preferred unit holders receive a preferred distribution at the rate of 3.875% per year. Each Series E preferred unit is convertible, at the holder’s option, into 1.2048 Units, representing a conversion exchange rate of $83.00 per unit. The Series E preferred units have an aggregate liquidation preference of $181.4 million. The holders of the Series E preferred units do not have voting rights and are required to hold the units for one year before they may elect to convert. The Company recorded the Series E preferred units as a noncontrolling interest within permanent equity on the consolidated balance sheet at fair value. We have identified the accounting for the Series E preferred units as a critical audit matter.
The principal consideration for our determination that accounting for the Series E preferred units is a critical audit matter is it involved a high degree of judgment in assessing management’s conclusions that the Series E preferred units are a noncontrolling interest within permanent equity.
Our audit procedures related to the accounting for the Series E preferred units included the following, among others.
•We tested the design and operating effectiveness of management’s internal controls over their accounting of the Series E preferred units, including controls over the evaluation and application of the appropriate accounting principles.
•We inspected the contribution agreements, Series E preferred unit agreement, and operating partnership agreement to identify and understand the rights of the unit holders and provisions relevant to management’s conclusions.
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•We evaluated relevant provisions within these agreements to determine whether management’s conclusions were consistent with the relevant accounting guidance, specifically whether the Series E preferred units were a noncontrolling interest within permanent equity.
•We consulted our firm’s subject matter expert regarding the appropriateness of management’s conclusions on the accounting for the Series E preferred units.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2013.
Minneapolis, Minnesota
February 28, 2022
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Trustees and Shareholders
Centerspace
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Centerspace (a North Dakota real estate investment trust) and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2021, and our report dated February 28, 2022 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
February 28, 2022
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CENTERSPACE AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|  | (in thousands, except per share data)
|  | December 31, 2021 | December 31, 2020 |
ASSETS |  |  |  |
Real estate investments |  |  |  |
Property owned |  | $ | 2,271,170 |  | $ | 1,812,557 |  |
Less accumulated depreciation |  | (443,592) |  | (399,249) |  |
|  | 1,827,578 |  | 1,413,308 |  |
Mortgage loans receivable |  | 43,276 |  | 24,661 |  |
Total real estate investments |  | 1,870,854 |  | 1,437,969 |  |
Cash and cash equivalents |  | 31,267 |  | 392 |  |
Restricted cash |  | 7,358 |  | 6,918 |  |
Other assets |  | 30,582 |  | 18,904 |  |
TOTAL ASSETS |  | $ | 1,940,061 |  | $ | 1,464,183 |  |
LIABILITIES, MEZZANINE EQUITY, AND EQUITY |  |  |  |
LIABILITIES |  |  |  |
Accounts payable and accrued expenses |  | $ | 62,403 |  | $ | 55,609 |  |
Revolving lines of credit |  | 76,000 |  | 152,871 |  |
Notes payable, net of unamortized loan costs of $656 and $754, respectively |  | 299,344 |  | 269,246 |  |
Mortgages payable, net of unamortized loan costs of $3,187 and $1,371, respectively |  | 480,703 |  | 297,074 |  |
TOTAL LIABILITIES |  | $ | 918,450 |  | $ | 774,800 |  |
COMMITMENTS AND CONTINGENCIES (NOTE 12) |  |  |  |
SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $100 par value, 166 units issued and outstanding at December 31, 2021 and 2020, aggregate liquidation preference of $16,560) |  | $ | 25,331 |  | $ | 16,560 |  |
EQUITY |  |  |  |
Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 3,881 shares issued and outstanding at December 31, 2021 and 2020, aggregate liquidation preference of $97,036) |  | 93,530 |  | 93,530 |  |
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 15,016 shares issued and outstanding at December 31, 2021 and 13,027 shares issued and outstanding at December 31, 2020) |  | 1,157,255 |  | 968,263 |  |
Accumulated distributions in excess of net income |  | (474,318) |  | (427,681) |  |
Accumulated other comprehensive income (loss) |  | (4,435) |  | (15,905) |  |
Total shareholders’ equity |  | $ | 772,032 |  | $ | 618,207 |  |
Noncontrolling interests – Operating Partnership and Series E preferred units |  | 223,600 |  | 53,930 |  |
Noncontrolling interests – consolidated real estate entities |  | 648 |  | 686 |  |
TOTAL EQUITY |  | $ | 996,280 |  | $ | 672,823 |  |
TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY |  | $ | 1,940,061 |  | $ | 1,464,183 |  |

See Notes to Consolidated Financial Statements.
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CENTERSPACE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

|  | (in thousands, except per share data)
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
REVENUE |  | $ | 201,705 |  |  | $ | 177,994 |  |  | $ | 185,755 |
EXPENSES |  |  |  |  |  |
Property operating expenses, excluding real estate taxes |  | 57,753 |  |  | 51,625 |  |  | 57,249 |
Real estate taxes |  | 24,104 |  |  | 21,533 |  |  | 21,066 |
Property management expense |  | 8,752 |  |  | 5,801 |  |  | 6,186 |
Casualty loss |  | 344 |  |  | 1,662 |  |  | 1,116 |
Depreciation and amortization |  | 92,165 |  |  | 75,593 |  |  | 74,271 |
General and administrative expenses |  | 16,213 |  |  | 13,440 |  |  | 14,450 |
TOTAL EXPENSES |  | 199,331 |  |  | 169,654 |  |  | 174,338 |
Gain (loss) on sale of real estate and other investments |  | 27,518 |  |  | 25,503 |  |  | 97,624 |
Operating income (loss) |  | 29,892 |  |  | 33,843 |  |  | 109,041 |
Interest expense |  | (29,078) |  |  | (27,525) |  |  | (30,537) |
Loss on extinguishment of debt |  | (535) |  |  | (23) |  |  | (2,360) |
Interest and other income (loss) |  | (2,380) |  |  | (1,552) |  |  | 2,092 |
Gain (loss) on litigation settlement |  | — |  |  | — |  |  | 6,586 |
NET INCOME (LOSS) |  | (2,101) |  |  | 4,743 |  |  | 84,822 |
Dividends to preferred unitholders |  | (640) |  |  | (640) |  |  | (537) |
Net (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units |  | 2,806 |  |  | 212 |  |  | (6,752) |
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities |  | (94) |  |  | 126 |  |  | 1,136 |
Net income (loss) attributable to controlling interests |  | (29) |  |  | 4,441 |  |  | 78,669 |
Dividends to preferred shareholders |  | (6,428) |  |  | (6,528) |  |  | (6,821) |
Redemption of preferred shares |  | — |  |  | 297 |  |  | — |
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS |  | $ | (6,457) |  |  | $ | (1,790) |  |  | $ | 71,848 |
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC |  | $ | (0.47) |  |  | $ | (0.15) |  |  | $ | 6.06 |
NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED |  | $ | (0.47) |  |  | $ | (0.15) |  |  | $ | 6.00 |
Weighted average shares - basic |  | 13,803 |  | 12,564 |  | 11,744
Weighted average shares - dilutive |  | 15,704 |  | 13,594 |  | 13,182

See Notes to Consolidated Financial Statements.
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CENTERSPACE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

|  | (in thousands)
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
NET INCOME (LOSS) |  | $ | (2,101) |  |  | $ | 4,743 |  |  | $ | 84,822 |
Other comprehensive income: |  |  |  |  |  |
Unrealized gain (loss) from derivative instrument |  | 2,383 |  |  | (11,068) |  |  | (7,040) |
(Gain) loss on derivative instrument reclassified into earnings |  | 9,087 |  |  | 2,770 |  |  | 289 |
Total comprehensive income (loss) |  | $ | 9,369 |  |  | $ | (3,555) |  |  | $ | 78,071 |
Net comprehensive (income) loss attributable to noncontrolling interests – Operating Partnership and Series E preferred units |  | 4,407 |  |  | 882 |  |  | (6,058) |
Net comprehensive (income) loss attributable to noncontrolling interests – consolidated real estate entities |  | (94) |  |  | 126 |  |  | 1,136 |
Comprehensive income (loss) attributable to controlling interests |  | $ | 13,682 |  |  | $ | (2,547) |  |  | $ | 73,149 |

See Notes to Consolidated Financial Statements.
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CENTERSPACE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY

|  | (in thousands, except per share amounts)
|  |  | NUMBER |  | ACCUMULATED | ACCUMULATED |  |
|  |  | OF |  | DISTRIBUTIONS | OTHER | NONREDEEMABLE |
|  | PREFERRED | COMMON | COMMON | IN EXCESS OF | COMPREHENSIVE | NONCONTROLLING | TOTAL
|  | SHARES | SHARES | SHARES | NET INCOME | INCOME | INTERESTS | EQUITY
Balance at December 31, 2018 |  | $ | 99,456 |  | 11,942 |  | $ | 899,234 |  | $ | (429,048) |  | $ | (856) |  | $ | 74,663 |  | $ | 643,449 |
Net income (loss) attributable to controlling interest and noncontrolling interests |  |  |  |  | 78,669 |  |  | 5,790 |  | 84,459 |
Change in fair value of derivatives |  |  |  |  |  | (6,751) |  |  | (6,751) |
Distributions – common shares and Units ($2.80 per share and Unit) |  |  |  |  | (32,996) |  |  | (3,414) |  | (36,410) |
Distributions – Series C preferred shares ($1.65625 per Series C share) |  |  |  |  | (6,821) |  |  |  | (6,821) |
Share-based compensation, net of forfeitures |  |  | 11 |  | 1,905 |  |  |  |  | 1,905 |
Sale of common shares, net |  |  | 308 |  | 22,019 |  |  |  |  | 22,019 |
Redemption of Units for common shares |  |  | 173 |  | 7,823 |  |  |  | (7,823) |  | — |
Redemption of Units for cash |  |  |  |  |  |  | (8,147) |  | (8,147) |
Shares repurchased |  |  | (329) |  | (18,023) |  |  |  |  | (18,023) |
Acquisition of redeemable noncontrolling interests |  |  |  | 4,529 |  |  |  |  | 4,529 |
Other |  |  | (7) |  | (87) |  |  |  | (220) |  | (307) |
Balance at 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 |  |  |  |  | 4,441 |  |  | (338) |  | 4,103 |
Change in fair value of derivatives |  |  |  |  |  | (8,298) |  |  | (8,298) |
Distributions – common shares and Units ($2.80 per share and Unit) |  |  |  |  | (35,695) |  |  | (2,842) |  | (38,537) |
Distributions – Series C preferred shares ($1.65625 per Series C share) |  |  |  |  | (6,528) |  |  |  | (6,528) |
Share-based compensation, net of forfeitures |  |  | 20 |  | 2,106 |  |  |  |  | 2,106 |
Sale of common shares, net |  |  | 829 |  | 58,852 |  |  |  |  | 58,852 |
Redemption of Units for common shares |  |  | 81 |  | (1,750) |  |  |  | 1,750 |  | — |
Shares repurchased |  | (5,926) |  |  |  | 297 |  |  |  | (5,629) |
Acquisition of nonredeemable noncontrolling interests – consolidated real estate entities |  |  |  | (7,584) |  |  |  | (4,637) |  | (12,221) |
Other |  |  | (1) |  | (761) |  |  |  | (166) |  | (927) |
Balance at 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 |  |  |  |  | (29) |  |  | (2,712) |  | (2,741) |
Change in fair value of derivatives |  |  |  |  |  | 11,470 |  |  | 11,470 |
Distributions – common shares and Units ($2.84 per share and Unit) |  |  |  |  | (40,180) |  |  | (2,489) |  | (42,669) |
Distributions – Series C preferred shares ($1.65625 per Series C share) |  |  |  |  | (6,428) |  |  |  | (6,428) |
Distributions – Series E preferred units ($1.301667 per unit) |  |  |  |  |  |  | (2,343) |  | (2,343) |
Share-based compensation, net of forfeitures |  |  | 28 |  | 2,689 |  |  |  |  | 2,689 |
Sale of common shares, net |  |  | 1,817 |  | 156,038 |  |  |  |  | 156,038 |
Issuance of Series E preferred units |  |  |  | 44,905 |  |  |  | 172,608 |  | 217,513 |
Redemption of Units for common shares |  |  | 144 |  | (4,714) |  |  |  | 4,714 |  | — |
Change in value of Series D preferred units |  |  | — |  | (8,771) |  |  |  |  | (8,771) |
Other |  |  | — |  | (1,155) |  |  |  | (146) |  | (1,301) |
Balance at December 31, 2021 |  | $ | 93,530 |  | 15,016 |  | $ | 1,157,255 |  | $ | (474,318) |  | $ | (4,435) |  | $ | 224,248 |  | $ | 996,280 |

See Notes to Consolidated Financial Statements.
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CENTERSPACE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

|  | (in thousands)
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |
Net income (loss) |  | $ | (2,101) |  |  | $ | 4,743 |  |  | $ | 84,822 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |  |  |  |
Depreciation and amortization |  | 93,110 |  |  | 76,596 |  |  | 75,408 |
(Gain) loss on sale of real estate, land, and other investments |  | (27,518) |  |  | (25,503) |  |  | (97,624) |
Realized (gain) loss on marketable securities |  | — |  |  | 3,378 |  |  | — |
(Gain) loss on extinguishment of debt and discontinued operations |  | 535 |  |  | 23 |  |  | 2,360 |
(Gain) loss on litigation settlement |  | — |  |  | — |  |  | (1,349) |
Share-based compensation expense |  | 2,687 |  |  | 2,106 |  |  | 1,905 |
(Gain) loss on interest rate swap termination, amortization, and mark-to-market |  | 4,931 |  |  | — |  |  | — |
Bad debt expense |  | 2,304 |  |  | 2,332 |  |  | 1,050 |
Other, net |  | (268) |  |  | 1,310 |  |  | 46 |
Changes in other assets and liabilities: |  |  |  |  |  |
Other assets |  | (5,402) |  |  | (4,818) |  |  | 1,076 |
Accounts payable and accrued expenses |  | 15,750 |  |  | 1,061 |  |  | 1,930 |
Net cash provided (used) by operating activities |  | $ | 84,028 |  |  | $ | 61,228 |  |  | $ | 69,624 |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |  |
Proceeds from repayment of mortgage loans receivable |  | — |  |  | 10,020 |  |  | — |
Proceeds from sale of marketable securities |  | — |  |  | 3,856 |  |  | — |
Increase in mortgages and notes receivable |  | (18,614) |  |  | (24,862) |  |  | (6,279) |
Purchase of marketable securities |  | — |  |  | (179) |  |  | (6,942) |
Proceeds from sale of real estate and other investments |  | 61,334 |  |  | 43,686 |  |  | 199,282 |
Payments for acquisitions of real estate assets |  | (273,566) |  |  | (168,696) |  |  | (158,466) |
Payments for improvements of real estate assets |  | (35,877) |  |  | (30,315) |  |  | (20,954) |
Other investing activities |  | (502) |  |  | 1,525 |  |  | 366 |
Net cash provided (used) by investing activities |  | $ | (267,225) |  |  | $ | (164,965) |  |  | $ | 7,007 |
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |  |
Proceeds from mortgages payable |  | 196,725 |  |  | — |  |  | 59,900 |
Principal payments on mortgages payable |  | (36,282) |  |  | (33,422) |  |  | (177,743) |
Proceeds from revolving lines of credit |  | 258,580 |  |  | 155,028 |  |  | 245,397 |
Principal payments on revolving lines of credit |  | (335,451) |  |  | (52,235) |  |  | (252,818) |
Proceeds from notes payable and other debt |  | 174,544 |  |  | — |  |  | 124,878 |
Principal payments on notes payable and other debt |  | (145,000) |  |  | — |  |  | — |
Payments for termination of interest rate swaps |  | (3,804) |  |  | — |  |  | — |
Proceeds from sale of common shares, net of issuance costs |  | 156,038 |  |  | 58,852 |  |  | 22,019 |
Payments for acquisition of noncontrolling interests – consolidated real estate entities |  | — |  |  | (12,221) |  |  | (1,260) |
Repurchase of common shares |  | — |  |  | — |  |  | (18,023) |
Repurchase of preferred shares |  | — |  |  | (5,629) |  |  | — |
Repurchase of partnership units |  | — |  |  | (50) |  |  | (8,147) |
Distributions paid to common shareholders |  | (38,487) |  |  | (35,045) |  |  | (32,891) |
Distributions paid to preferred shareholders |  | (6,428) |  |  | (6,528) |  |  | (6,821) |
Distributions paid to noncontrolling interests – Operating Partnership and Series E preferred units |  | (4,916) |  |  | (2,900) |  |  | (3,630) |
Distributions paid to preferred unitholders |  | (640) |  |  | (640) |  |  | (377) |
Other financing activities |  | (367) |  |  | (280) |  |  | (254) |
Net cash provided (used) by financing activities |  | $ | 214,512 |  |  | $ | 64,930 |  |  | $ | (49,770) |
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |  | 31,315 |  |  | (38,807) |  |  | 26,861 |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF YEAR |  | 7,310 |  |  | 46,117 |  |  | 19,256 |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF YEAR |  | $ | 38,625 |  |  | $ | 7,310 |  |  | $ | 46,117 |

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CENTERSPACE AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

|  | (in thousands)
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |  |  |  |  |  |
Accrued capital expenditures |  | $ | (802) |  |  | $ | (1,420) |  |  | $ | 1,273 |
Operating partnership units converted to shares |  | (4,714) |  |  | (1,750) |  |  | 7,823 |
Distributions declared but not paid |  | 11,411 |  |  | 9,802 |  |  | 9,210 |
Retirement of shares withheld for taxes |  | 933 |  |  | — |  |  | — |
Real estate assets acquired through assumption of debt |  | 20,000 |  |  | — |  |  | — |
Fair value adjustment to debt |  | 2,367 |  |  | — |  |  | — |
Property acquired through issuance of Series D preferred units |  | — |  |  | — |  |  | 16,560 |
Real estate assets acquired through exchange of note receivable |  | — |  |  | 17,663 |  |  | — |
Note receivable exchanged through real estate acquisition |  | — |  |  | (17,663) |  |  | — |
Real estate acquired through issuance of Series E preferred units |  | 217,513 |  |  | — |  |  | — |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |  |  |  |  |  |
Cash paid for interest |  | 26,528 |  |  | 26,051 |  |  | 28,679 |

| (in thousands)
Balance sheet description | December 31, 2021 |  | December 31, 2020 |  | December 31, 2019
Cash and cash equivalents | $ | 31,267 |  |  | $ | 392 |  |  | $ | 26,579 |
Restricted cash | 7,358 |  |  | 6,918 |  |  | 19,538 |
Total cash, cash equivalents and restricted cash | $ | 38,625 |  |  | $ | 7,310 |  |  | $ | 46,117 |

See Notes to Consolidated Financial Statements.
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CENTERSPACE AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
NOTE 1 • ORGANIZATION
Centerspace (“Centerspace,” “we,” “our,” or “us”) is a real estate investment trust (“REIT”) focused on the ownership, management, acquisition, redevelopment and development of apartment communities. As of December 31, 2021, we held for investment 79 apartment communities with 14,441 homes. We conduct a majority of our business activities through our consolidated operating partnership, Centerspace, LP, (the “Operating Partnership”), as well as through a number of other subsidiary entities.
All references to Centerspace, we, our, or us refer to Centerspace and its consolidated subsidiaries.
NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include our accounts and the accounts of all our subsidiaries in which we maintain a controlling interest, including the Operating Partnership. All intercompany balances and transactions are eliminated in consolidation.
Our interest in the Operating Partnership as of December 31, 2021 and 2020 was 83.3% and 93.0%, respectively, of the limited partnership units of the Operating Partnership (“Units”), which includes 100% of the general partnership interest.
The consolidated financial statements also reflect the ownership by the Operating Partnership of certain joint venture entities in which the Operating Partnership has a general partner’s or controlling interest. These entities are consolidated into our other operations with noncontrolling interests reflecting the noncontrolling partners’ share of ownership, income, and expenses.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
The following table provides a brief description of recent GAAP accounting standards updates (“ASUs”).

Standard | Description | Date of Adoption | Effect on the Financial Statements or Other Significant Matters
ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting | This ASU contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. | This ASU is optional and may be elected over time. | We adopted this guidance in June 2021 on a prospective basis. This adoption did not have a material impact on the Consolidated Financial Statements.
ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entitiy's Own Equity | This ASU simplifies accounting for convertible instruments and removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception. This ASU also simplifies the diluted earnings per share calculation in certain areas and provide updated disclosure requirements. | This ASU is effective for annual reporting periods beginning after December 31, 2021. Early adoption is permitted. | We early adopted this guidance in the first quarter of 2021 using the modified retrospective method. The adoption did not have a material impact on the Consolidated Financial Statements.

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RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform to the current financial statement presentation. These reclassifications had no impact on net income as reported in the consolidated statement of operations, total assets, liabilities or equity as reported in the consolidated balance sheets and total shareholder’s equity.
REAL ESTATE INVESTMENTS
Real estate investments are recorded at cost less accumulated depreciation and an adjustment for impairment, if any. Property, consisting primarily of real estate investments, totaled $1.8 billion and $1.4 billion as of December 31, 2021 and 2020, respectively. Upon acquisitions of real estate, we assess the fair value of acquired tangible assets (including land, buildings and personal property), which is determined by valuing the property as if it were vacant, and consider whether there were significant intangible assets acquired (for example, above- and below-market leases, the value of acquired in-place leases and resident relationships) and assumed liabilities, and allocate the purchase price based on these assessments. The as-if-vacant value is allocated to land, buildings, and personal property based on our determination of the relative fair values of these assets. The estimated fair value of the property is the amount that would be recoverable upon the disposition of the property. Techniques used to estimate fair value include discounted cash flow analysis and reference to recent sales of comparable properties. Estimates of future cash flows are based on a number of factors, including the historical operating results, known trends, and market/economic conditions that may affect the property. Land value is assigned based on the purchase price if land is acquired separately or based on a relative fair value allocation if acquired in a portfolio acquisition.
Other intangible assets acquired include amounts for in-place lease values that are based upon our evaluation of the specific characteristics of the leases. Factors considered in the fair value analysis include an estimate of carrying costs and foregone rental income during hypothetical expected lease-up periods, considering current market conditions, and costs to execute similar leases. We also consider information about each property obtained during pre-acquisition due diligence, marketing, and leasing activities in estimating the relative fair value of the tangible and intangible assets acquired.
Acquired above- and below-market lease values are recorded as the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market value lease rates for the corresponding in-place leases. The capitalized above- and below-market lease values are amortized as adjustments to rental revenue over the remaining terms of the respective leases.
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 follow the real estate project costs guidance in ASC 970, Real Estate – General, in accounting for the costs of development and redevelopment projects. As real estate is undergoing development or redevelopment, all project costs directly associated with and attributable to the development and construction of a project, including interest expense and real estate tax expense, are capitalized to the cost of the real property. The capitalization period begins when development activities and expenditures begin and are identifiable to a specific property and ends upon completion, which is when the asset is ready for its intended use. Generally, rental property is considered substantially complete upon issuance of a certificate of occupancy. General and administrative costs are expensed as incurred. We did not capitalize interest during the years ended December 31, 2021, 2020, and 2019.
Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. Renovations and improvements that improve and/or extend the useful life of the asset are capitalized and depreciated over their estimated useful life, generally five to twenty years. Property sales or dispositions are recorded when control of the assets transfers to the buyer and we have no significant continuing involvement with the property sold.
We periodically evaluate our long-lived assets, including real estate investments, for impairment indicators. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each property, and legal and environmental concerns. If indicators exist, we compare the expected future undiscounted cash flows for the property against the carrying amount of that property. If the sum of the estimated undiscounted cash flows is less than the carrying amount, an impairment loss is recorded for the difference between the estimated fair value and the carrying amount. If our anticipated holding period for properties, the estimated fair value of properties or other factors change based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future physical occupancy, rental rates, and capital
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requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.
During the years ended December 31, 2021, 2020, and 2019 we did not incur a loss for impairment on real estate.
Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal costs. Our determination of fair value is based on inputs management believes are consistent with those that market participants would use. Estimates are significantly impacted by estimates of sales price, selling velocity, and other factors. Due to uncertainties in the estimation process, actual results could differ from such estimates. Depreciation is not recorded on assets classified as held for sale.
We classify properties as held for sale when they meet the GAAP criteria, which include: (a) management commits to and initiates a plan to sell the asset; (b) the sale is probable and expected to be completed within one year under terms that are usual and customary for sales of such assets; and (c) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. We generally consider these criteria met when the transaction has been approved by our Board of Trustees, there are no known significant contingencies related to the sale, and management believes it is probable that the sale will be completed within one year. We had no properties classified as held for sale at December 31, 2021 and 2020.
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents include all cash and highly liquid investments purchased with maturities of three months or less. Cash and cash equivalents consist of our bank deposits, short-term investment certificates acquired subject to repurchase agreements, and our deposits in a money market mutual fund. We are potentially exposed to credit risk for cash deposited with FDIC-insured financial institutions in accounts which, at times, may exceed federally insured limits. We have not experienced any losses in such accounts.
As of December 31, 2021 restricted cash consisted of $5.0 million of real estate deposits for property acquisitions and $2.4 million in escrows held by lenders. As of December 31, 2020, restricted cash consisted primarily of net tax-deferred exchange proceeds remaining from a portion of our dispositions and escrows held by lenders. Escrows include funds deposited with a lender for payment of real estate taxes and insurance, and reserves to be used for replacement of structural elements and mechanical equipment at certain communities. The funds are under the control of the lender. Disbursements are made after supplying written documentation to the lender.
LEASES
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 98.2% 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.
Some of our apartment communities have commercial spaces available for lease. Lease terms for these spaces typically range from three to fifteen years. The leases for commercial spaces generally include options to extend the lease for additional terms.
Beginning in April 2020, we abated rent, common area maintenance, and real estate taxes for commercial tenants that experienced government-mandated interruptions or closures of their businesses. We elected to account for these accommodations as though 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. The accommodations were recognized as variable lease payments. During the years ended December 31, 2021 and 2020, we recognized a reduction in revenue of $47,000 and $656,000, respectively, 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. 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 operating leases for commercial spaces, excluding any variable lease income and non-lease components, as of December 31, 2021, was as follows:
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|  | (in thousands)
2022 |  | $ | 2,447 |
2023 |  | 2,455 |
2024 |  | 2,453 |
2025 |  | 2,400 |
2026 |  | 1,804 |
Thereafter |  | 880 |
Total scheduled lease income - operating leases |  | $ | 12,439 |

REVENUE
Revenue is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration the company expects to be entitled for those goods and services.
Revenue streams that are included in revenues from contracts with customers include:
•Other property revenues: We recognize revenue for rental related income not included as a component of a lease, such as other application fees, as earned, and have concluded that this is appropriate under the new standard.
•Gains or losses on sales of real estate: 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. As a result, we may recognize a gain on real estate disposition transactions that previously did not qualify as a sale or for full profit recognition under the previous accounting standard. Any gain or loss on real estate dispositions is net of certain closing and other costs associated with the disposition.
The following table presents the disaggregation of revenue streams of our rental income for the years ended December 31, 2021, 2020, and 2019:

|  |  | (in thousands)
|  |  | Year ended December 31,
Revenue Stream | Applicable Standard |  | 2021 | 2020 | 2019
Fixed lease income - operating leases | Leases |  | $ | 189,452 |  | $ | 168,119 |  | $ | 176,706 |
Variable lease income - operating leases | Leases |  | 8,565 |  | 7,068 |  | 5,586 |
Other property revenue | Revenue from contracts with customers |  | 3,688 |  | 2,807 |  | 3,463 |
Total revenue |  |  | $ | 201,705 |  | $ | 177,994 |  | $ | 185,755 |

INCOME TAXES
We operate in a manner intended to enable us to continue to qualify as a REIT under Sections 856-860 of the Code. Under those sections, a REIT which distributes at least 90% of its REIT taxable income, excluding capital gains, as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to shareholders. For the years ended December 31, 2021, 2020, and 2019, we distributed in excess of 90% of our taxable income and realized capital gains from property dispositions within the prescribed time limits. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates (including any alternative minimum tax) and may not be able to qualify as a REIT for the four subsequent taxable years. Even as a REIT, we may be subject to certain state and local income and property taxes, and to federal income and excise taxes on undistributed taxable income. In general, however, if we qualify as a REIT, no provisions for federal income taxes are necessary except for taxes on undistributed REIT taxable income and taxes on the income generated by a taxable REIT subsidiary (TRS).
We have one TRS, which is subject to corporate federal and state income taxes on its taxable income at regular statutory rates. There were no income tax provisions or material deferred income tax items for our TRS for the years ended December 31, 2021, 2020, and 2019.
We conduct our business activity as an Umbrella Partnership Real Estate Investment Trust (“UPREIT”) through our Operating Partnership. UPREIT status allows us to accept the contribution of real estate in exchange for Units. Generally, such a contribution to a limited partnership allows for the deferral of gain by an owner of appreciated real estate.
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The following table indicates how distributions were characterized for federal income tax purposes for the years ended December 31, 2021, 2020, and 2019:

CALENDAR YEAR |  | 2021 | 2020 | 2019
Tax status of distributions |  |  |  |
Capital gain |  | 0.92 | % | 13.62 | % | 38.53 | %
Ordinary income |  | 7.82 | % | 7.91 | % | 23.43 | %
Return of capital |  | 91.26 | % | 78.47 | % | 38.04 | %

VARIABLE INTEREST ENTITY
We have determined that our Operating Partnership and each of our less-than-wholly owned real estate partnerships is a variable interest entity (“VIE”), as the limited partners or the functional equivalent of limited partners lack substantive kick-out rights and substantive participating rights. We are the primary beneficiary of the VIEs, and the VIEs are required to be consolidated on our balance sheet because we have a controlling financial interest in the VIEs and have both the power to direct the activities of the VIEs that most significantly impact the economic performance of the VIEs as well as the obligation to absorb losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs. Because our Operating Partnership is a VIE, all of our assets and liabilities are held through a VIE.
OTHER ASSETS
As of December 31, 2021 and 2020, other assets consisted of the following amounts:

| in thousands
| December 31, 2021 | December 31, 2020 |
Receivable arising from straight line rents | $ | 343 |  | $ | 336 |  |
Accounts receivable, net of allowance | 667 |  | 523 |  |
Real estate related loans receivable | 6,208 |  | 6,332 |  |
Prepaid and other assets | 9,693 |  | 5,702 |  |
Intangible assets, net of accumulated amortization | 7,370 |  | 1,150 |  |
Property and equipment, net of accumulated depreciation | 3,370 |  | 2,674 |  |
Goodwill | 866 |  | 986 |  |
Deferred charges and leasing costs | 2,065 |  | 1,201 |  |
Total Other Assets | $ | 30,582 |  | $ | 18,904 |  |

Intangible assets consist of in-place leases valued at the time of acquisition. For the years ended December 31, 2021, 2020, and 2019, we recognized $13.5 million, $3.1 million, and $2.0 million, respectively, of amortization expense related to these intangibles, included within depreciation and amortization in the consolidated statements of operations. The intangible assets remaining at December 31, 2021 will be amortized in 2022.
PROPERTY AND EQUIPMENT
Property and equipment consists primarily of office equipment located at our corporate offices in Minot, North Dakota and in Minneapolis, Minnesota. The consolidated balance sheets reflects these assets at cost, net of accumulated depreciation, and are included within Other Assets. As of December 31, 2021 and 2020, property and equipment cost was $4.7 million and $4.7 million, respectively. Accumulated depreciation was $1.4 million and $2.0 million as of December 31, 2021 and 2020, respectively, and are included within other assets in the consolidated balance sheets.
MORTGAGE LOANS RECEIVABLE AND NOTES RECEIVABLE
I n 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 an initial principal balance of $6.6 million. As of December 31, 2021 and 2020, the principal balance was $6.4 million and $6.6 million, respectively, which appears within Other Assets in our Consolidated Balance Sheets. The note bears an interest rate of 4.5% with payments due in February and August of each year.
I n 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. The construction and mezzanine loans bear interest at 4.5% and
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11.5%, respectively. As of December 31, 2021, we had fully funded the $29.9 million construction loan and $13.4 million of the mezzanine loan, both of which appear within mortgage loans receivable in our 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. The loans represent an investment in an unconsolidated variable interest entity. We are not the primary beneficiary of the 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.
MARKETABLE SECURITIES
Marketable securities consisted of equity securities. We report equity securities at fair value based on quoted market prices (Level 1 inputs). Any unrealized gains or losses are included in interest and other income (loss) on the consolidated statements of operations. During the year ended December 31, 2020, we had a realized loss of $3.4 million arising from marketable securities which were disposed during the year ended December 31, 2020. As of December 31, 2021 and 2020, we had no marketable securities.
GAIN ON LITIGATION SETTLEMENT
During the year ended December 31, 2019, we recorded a gain on litigation settlement of $6.6 million from the settlement on a construction defect claim. The gain consisted of $5.2 million of cash received and $1.4 million of liabilities waived under the terms of the settlement.
NOTE 3 • EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. We have issued restricted stock units (“RSUs”) and incentive stock options (“ISOs”) under our 2015 Incentive Plan, Series D Convertible Preferred Units (“Series D preferred units”), and Series E Convertible Preferred Units (“Series E preferred units”), which could have a dilutive effect on our earnings per share upon exercise of the RSUs, ISOs, or upon conversion of the Series D or Series E preferred units (refer to Note 4 for further discussion of the preferred units). Other than the issuance of RSUs, ISOs, Series D preferred units, and Series E preferred units, we have no outstanding options, warrants, convertible stock, or other contractual obligations requiring issuance of additional common shares that would result in a dilution of earnings. Under the terms of the Operating Partnership’s Agreement of Limited Partnership, limited partners have the right to require the Operating Partnership to redeem their limited partnership units (“Units”) any time following the first anniversary of the date they acquired such Units (“Exchange Right”). 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.
For the years ended December 31, 2021, 2020, and 2019, performance-based restricted stock awards of 31,821, 26,994, and 37,822 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 the common shares for the periods presented and, therefore, were anti-dilutive. Refer to Note 16 - Share-Based Compensation for discussion of the terms for these awards.
For the year ended December 31, 2020, Series D preferred units of 228,000, stock options of 86,000, and time-based RSUs of 13,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive. Including these items would have improved earnings per share.
The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the consolidated financial statements for the years ended December 31, 2021, 2020, and 2019:
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|  | (in thousands, except per share data)
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
NUMERATOR |  |  |  |  |  |
Net income (loss) attributable to controlling interests |  | (29) |  |  | 4,441 |  |  | 78,669 |
Dividends to preferred shareholders |  | (6,428) |  |  | (6,528) |  |  | (6,821) |
Redemption of preferred shares |  | — |  |  | 297 |  |  | — |
Numerator for basic earnings per share – net income (loss) available to common shareholders |  | (6,457) |  |  | (1,790) |  |  | 71,848 |
Noncontrolling interests – Operating Partnership and Series E preferred units |  | (2,806) |  |  | (212) |  |  | 6,752 |
Dividends to preferred unitholders |  | 640 |  |  | 640 |  |  | 537 |
Numerator for diluted earnings (loss) per share |  | $ | (8,623) |  |  | $ | (1,362) |  |  | $ | 79,137 |
DENOMINATOR |  |  |  |  |  |
Denominator for basic earnings per share weighted average shares |  | 13,803 |  |  | 12,564 |  |  | 11,744 |
Effect of redeemable operating partnership units |  | 899 |  |  | 1,030 |  |  | 1,237 |
Effect of Series D preferred units |  | 228 |  |  | — |  |  | 193 |
Effect of Series E preferred units |  | 729 |  |  | — |  |  | — |
Effect of diluted restricted stock awards and restricted stock units |  | 45 |  |  | — |  |  | 8 |
Denominator for diluted earnings per share |  | 15,704 |  |  | 13,594 |  |  | 13,182 |
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC |  | $ | (0.47) |  |  | $ | (0.15) |  |  | $ | 6.06 |
NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED |  | $ | (0.47) |  |  | $ | (0.15) |  |  | $ | 6.00 |

NOTE 4 • EQUITY AND MEZZANINE EQUITY
Operating Partnership Units. Outstanding Units in the Operating Partnership were 832,000 Units at December 31, 2021 and 977,000 Units at December 31, 2020.
Exchange Rights. Pursuant to the exercise of Exchange Rights, we redeemed Units in exchange for common shares during the years ended December 31, 2021 and 2020 as detailed in the table below.

|  | (in thousands)
|  | Number of | Total Book
|  | Units | Value
Year ended December 31, 2021 |  | 144 |  | $ | (4,714) |
Year ended December 31, 2020 |  | 81 |  | $ | (1,750) |

Series E Preferred Units (Noncontrolling interest). On September 1, 2021, we issued 1.8 million Series E preferred units with a par value of $100 per Series E preferred unit as partial consideration for the acquisition of 17 apartment communities. The Series E preferred unit holders receive a preferred distribution at the rate of 3.875% per year. Each Series E preferred unit is convertible, at the holder’s option, into 1.2048 Units, representing a conversion exchange rate of $83 per unit. We have the option, at our sole election, to convert Series E preferred units into OP Units if our stock has traded at or above $83 per share for 15 of 30 consecutive trading days and we have made at least three consecutive quarters of distributions with a rate of at least $0.804 per OP unit. The Series E preferred units have an aggregate liquidation preference of $181.4 million. The holders of the Series E preferred units do not have voting rights and are required to hold the units for one year before they may elect to convert.
Common Shares and Equity Awards. Common shares outstanding on December 31, 2021 and 2020, totaled 15.0 million and 13.0 million, respectively. During the years ended December 31, 2021 and 2020, we issued approximately 27,351 and 21,000 common shares, respectively, with a total grant-date value of $1.0 million, under our 2015 Incentive Plan, as share-based compensation for employees and trustees. During the years ended December 31, 2021 and 2020, approximately 500 and 2,400 common shares were forfeited under the 2015 Incentive Plan, respectively.
Equity Distribution Agreement. In September 2021, we entered into an equity distribution agreement in connection with a new at-the-market offering program (“2021 ATM Program”), replacing our prior at-the-market offering program (“2019 ATM Program”). Under the 2021 ATM Program, we may offer and sell common shares having an aggregate sales price of up to $250.0 million, in amounts and at times determined by management. Under the 2021 ATM Program, we may enter into separate forward sale agreements. The proceeds from the sale of common shares under the 2021 ATM Program are intended to be used for general purposes, which may include the funding of acquisitions, construction or mezzanine loans, community
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renovations, and the repayment of indebtedness. As of December 31, 2021, we had common shares having an aggregate offering price of up to $158.7 million remaining available under the 2021 ATM Program.
The table below provides details on the sale of common shares during the years ended December 31, 2021 and 2020.

| (in thousands, except per share amounts)
| Number of Common Shares | Total Consideration(1) | Average Price Per Share(1)
Year ended December 31, 2021 | 1,817 |  | $ | 156,449 |  | $ | 86.13 |
Year ended December 31, 2020 | 829 |  | $ | 59,187 |  | $ | 71.39 |

(1)Total consideration is net of $2.1 million and $901,000 in commissions for the years ended December 31, 2021 and 2020, respectively.
Share Repurchase Program. On December 5, 2019, our Board of Trustees terminated the existing share repurchase program and authorized a new share purchase program to repurchase up to $50 million of our common or preferred shares over a one-year period. Under this repurchase program, we could 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. Shares repurchased during the year ended December 31, 2020 are detailed in the table below.

|  | (in thousands, except per share amounts)
|  | Number of Preferred Shares | Aggregate Cost(1) | Average Price Per Share(1)
Year ended December 31, 2020 |  | 237 |  | $ | 5,629 |  | $ | 23.75 |

(1)Amount includes commissions.
Issuance of Series C Preferred Shares. On October 2, 2017, we issued 4.1 million shares of our 6.625% Series C Cumulative Redeemable Preferred Shares (“Series C preferred shares”). As of December 31, 2021 and 2020, we had 3.9 million Series C preferred shares outstanding. The Series C preferred shares are nonvoting and redeemable for cash at $25.00 per share at our option on or after October 2, 2022. Holders of these shares are entitled to cumulative distributions, payable quarterly (as and if declared by the Board of Trustees). Distributions accrue at an annual rate of $1.65625 per share, which is equal to 6.625% of the $25.00 per share liquidation preference ($97.0 million liquidation preference in the aggregate, as of December 31, 2021 and 2020).
Series D Preferred Units (Mezzanine Equity). On February 26, 2019, we issued 165,600 Series D preferred units at an issuance price of $100 per preferred unit as partial consideration for the acquisition of SouthFork Townhomes. The Series D preferred unit holders receive a preferred distribution at the rate of 3.862% per year. The Series D preferred units have a put option which allows the holder to redeem any or all of the Series D preferred units for cash equal to the issue price. Each Series D preferred unit is convertible, at the holder's option, into 1.37931 Units, representing a conversion exchange rate of $72.50 per unit. Changes in the redemption value are based on changes in the trading value of our common shares and are charged to common shares on our Consolidated Balance Sheets each quarter. The holders of the Series D preferred units do not have any voting rights. Distributions to Series D unitholders are presented in the consolidated statements of equity within net income (loss) attributable to controlling interests and noncontrolling interests.
NOTE 5 • NONCONTROLLING INTERESTS
Interests in the Operating Partnership held by limited partners are represented by Units. The Operating Partnership’s income is allocated to holders of Units based upon the ratio of their holdings to the total Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to noncontrolling interests in accordance with the terms of the Operating Partnership’s Agreement of Limited Partnership.
We reflect noncontrolling interests in consolidated real estate entities on the Balance Sheet for the portion of properties consolidated by us that are not wholly owned by us. The earnings or losses from these properties attributable to the noncontrolling interests are reflected as net income attributable to noncontrolling interests – consolidated real estate entities in the consolidated statements of operations.
During the year ended December 31, 2020, we acquired the 47.4% noncontrolling interests in the real estate partnership that owns 71 France for $12.2 million.
Our noncontrolling interests – consolidated real estate entities at December 31, 2021 and 2020 were as follows:
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|  | (in thousands)
|  | December 31, 2021 | December 31, 2020 |
IRET - Cypress Court Apartments, LLC |  | $ | 648 |  | $ | 686 |  |

NOTE 6 • DEBT
As of December 31, 2021, 48 apartment communities were not encumbered by mortgages and are available to provide 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 unencumbered properties. As of December 31, 2021, we had additional borrowing availability of $173.5 million beyond the $76.0 million drawn, priced at an interest rate of 2.74%, including the impact of our interest rate swap. At December 31, 2020, the line of credit borrowing capacity was $250.0 million based on the value of our unencumbered asset pool (“UAP”), of which $152.9 million was drawn on the line. This credit facility was amended on September 30, 2021 to extend the maturity date to September 2025 and has an accordion option to increase borrowing capacity up to $400.0 million.
Prior to the amendment, the unsecured credit facility also had unsecured term loans of $70.0 million and $75.0 million, included within notes payable on the consolidated balance sheets. These terms loans were paid in full as of December 31, 2021.
The interest rate on the line of credit is based, at our option, on the lender's base rate plus a margin, ranging from 25-80 basis points, or the London Interbank Offered Rate (“LIBOR”), plus a margin that ranges from 125-180 basis points based on our consolidated leverage, as defined under the Third Amended and Restated Credit Agreement. 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 December 31, 2021.
In January 2021, we amended and expanded our private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc. (collectively, PGIM) to increase the aggregate amount available for issuance of unsecured senior promissory notes (“unsecured senior notes”) to $225.0 million. We also issued $50.0 million of unsecured senior notes in connection with the amendment. Under this agreement, we issued $200.0 million unsecured senior notes with $25.0 million remaining available as of December 31, 2021. In September 2021, we entered into a note purchase agreement for the issuance of $125.0 million senior unsecured promissory notes. The following table shows the notes issued under both agreements.

| (in thousands) |  |
| Amount | Maturity Date | Interest Rate
Series A | $ | 75,000 |  | September 13, 2029 | 3.84 | %
Series B | $ | 50,000 |  | September 30, 2028 | 3.69 | %
Series C | $ | 50,000 |  | June 6, 2030 | 2.70 | %
Series 2021-A | $ | 35,000 |  | September 17, 2030 | 2.50 | %
Series 2021-B | $ | 50,000 |  | September 17, 2031 | 2.62 | %
Series 2021-C | $ | 25,000 |  | September 17, 2032 | 2.68 | %
Series 2021-D | $ | 15,000 |  | September 17, 2034 | 2.78 | %

In September 2021, we entered into a $198.9 million Fannie Mae Credit Facility Agreement (“FMCF”) for financing the acquisition of 16 apartment communities. The FMCF is currently secured by mortgages on those apartment communities. The notes are interest-only, have varying maturity dates of 7, 10, and 12 years, and a blended weighted average interest rate of 2.78%. As of December 31, 2021, the FMCF had a balance of $198.9 million. The FMCF is included within mortgages payable on the Consolidated Balance Sheets.
As of December 31, 2021, we owned 15 apartment communities that served as collateral for mortgage loans, in addition to the apartment communities secured by the FMCF. All of these mortgage loans were non-recourse to us other than for standard carve-out obligations. Interest rates on mortgage loans range from 3.47% to 4.31%, and the mortgage loans have varying maturity dates from July 1, 2022, through September 1, 2031. As of December 31, 2021, we believe there are no material defaults or instances of material noncompliance in regards to any of these mortgage loans.
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We also have a $6.0 million unsecured operating 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 November 29, 2022, with pricing based on a market spread plus the one-month LIBOR index rate.
The following table summarizes our indebtedness:

|  | (in thousands) |
|  | December 31, 2021 | December 31, 2020 |  | Weighted Average Maturity in Years
Lines of credit |  | $ | 76,000 |  | $ | 152,871 |  |  | 3.75
Term loans(1) |  | — |  | 145,000 |  |  |
Unsecured senior notes(1) |  | 300,000 |  | 125,000 |  |  | 8.63
Unsecured debt |  | 376,000 |  | 422,871 |  |  | 7.84
Mortgages payable - Fannie Mae credit facility |  | 198,850 |  | — |  |  | 9.56
Mortgages payable - other |  | 284,934 |  | 298,445 |  |  | 4.93
Total debt |  | $ | 859,784 |  | $ | 721,316 |  |  | 7.19
Annual Weighted Average Interest Rates |  |  |  |  |
Lines of credit (rate with swap) (2) |  | 2.74 | % | 2.85 | % |  |
Term loans (rate with swaps) |  | — |  | 4.15 | % |  |
Unsecured senior notes |  | 3.12 | % | 3.78 | % |  |
Mortgages payable - Fannie Mae credit facility |  | 2.78 | % | — |  |  |
Mortgages payable - other |  | 3.81 | % | 3.93 | % |  |
Total debt |  | 3.26 | % | 3.62 | % |  |

(1)Included within notes payable on our consolidated balance sheets.
(2)The current rate on our line of credit is LIBOR plus 150 basis points. The LIBOR exposure on the line of credit as of December 31, 2021 was hedged using an interest rate swap with a notional of $75.0 million and a fixed rate of 2.81%. The interest rate swap was terminated in February 2022.
The aggregate amount of required future principal payments on mortgages payable, notes payable, and lines of credit as of December 31, 2021 is as follows:

|  | (in thousands)
2022 |  | $ | 27,113 |
2023 |  | 45,067 |
2024 |  | 4,054 |
2025 |  | 108,850 |
2026 |  | 49,047 |
Thereafter |  | 625,653 |
Total payments |  | $ | 859,784 |

NOTE 7 • DERIVATIVE INSTRUMENTS
Our objective in using interest rate derivatives is to add stability to interest expense and to manage our exposure to interest rate fluctuations. To accomplish this objective, we primarily use interest rate swap contracts to fix the variable rate interest debt.
The ineffective portion of a hedging instrument is not recognized currently in earnings or disclosed. Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income and subsequently reclassified into earnings in the period that the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income for our interest rate swaps will be reclassified to interest expense as interest payments are made on our term loan and line of credit. During the next 12 months, we estimate an additional $1.5 million will be reclassified as an increase to interest expense.
At December 31, 2021, we had one interest rate swap contract designated as a cash flow hedge of interest rate risk with a total notional amount of $75.0 million to fix the interest rate on the line of credit. We also had one interest rate swap with a notional amount of $70.0 million that is not effective until January 31, 2023 and was not designated as a hedge in a qualifying hedging relationship.
At December 31, 2020, we had three interest rate swap contracts designated as cash flow hedges of interest rate risk with a total notion amount of $195.0 million and one additional interest rate swap that becomes effective on January 31, 2023, with a
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notional amount of $70.0 million. These interest rate swaps fixed the interest on the term loans and a portion of the line of credit.
In September 2021, we paid $3.8 million to terminate our $50.0 million interest rate swap and our $70.0 million interest rate swap in connection with the pay down of our term loans (see Note 6 - Debt for additional details). We accelerated the reclassification of a $5.4 million loss from OCI into other income loss in Consolidated Statements of Operations as a result of the hedged transactions becoming probable not to occur.
Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements. Changes in fair value of derivatives not designated in hedging relationships are recorded directly into earnings within other income loss in the Consolidated Statements of Operations. For the year ended December 31, 2021, we recorded a gain of $419,000 related to the interest rate swap not designated in a hedging relationship. As of December 31, 2020, we did not have any outstanding interest rate hedges that were not designated as hedges in a qualifying hedging relationship.
The fair value of our derivative financial instruments as well as their classification on our Consolidated Balance Sheets as of December 31, 2021 and 2020 is detailed below.

|  |  |  |  |  |  | (in thousands)
|  |  |  |  |  |  |  |  |  |  | December 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 |  | $ | 4,610 |  |  | $ | 15,905 |  |  |
Total derivative instruments not designated as hedging instruments - interest rate swaps |  |  |  |  |  |  |  |  | Accounts Payable and Accrued Expenses |  | $ | 1,097 |  |  | $ | — |  |  |

The effect of the Company's derivative financial instruments on the consolidated statements of operations as of December 31, 2021, 2020, and 2019 is detailed below.

| (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
| Year Ended December 31, |  |  |  | Year Ended December 31,
| 2021 |  | 2020 |  | 2019 |  |  |  | 2021 |  | 2020 |  | 2019
Total derivatives in cash flow hedging relationships - interest rate swaps | $ | 2,383 |  |  | $ | (11,068) |  |  | $ | (7,040) |  |  | Interest expense |  | $ | (9,087) |  |  | $ | (2,770) |  |  | $ | (289) |

We have agreements with each of our derivative counterparties that contain a provision where if we either default or are capable of being declared in default on any of our indebtedness, then we could also be declared in default on our derivative obligations.
NOTE 8 • FAIR VALUE MEASUREMENTS
Cash and cash equivalents, restricted cash, accounts payable, accrued expenses, and other liabilities are carried at amounts that reasonably approximate their fair value due to their short-term nature. For variable rate line of credit debt that re-prices frequently, fair values are based on carrying values.
In determining the fair value of other financial instruments, we apply Financial Accounting Standard Board ASC 820, Fair Value Measurement and Disclosures. Fair value hierarchy under ASC 820 distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (Levels 1 and 2) and the reporting entity’s own assumptions about market participant assumptions (Level 3). Fair value estimates may differ from the amounts that may ultimately be realized upon sale or disposition of the assets and liabilities.
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Fair Value Measurements on a Recurring Basis

|  | (in thousands)
|  | Total | Level 1 | Level 2 | Level 3
December 31, 2021 |  |  |  |  |
Assets |  |  |  |  |
Mortgages and notes receivable |  | $ | 49,484 |  | $ | — |  | $ | — |  | $ | 49,484 |
Liabilities |  |  |  |  |
Derivative instruments - interest rate swaps |  | $ | 5,707 |  | $ | — |  | $ | — |  | $ | 5,707 |
December 31, 2020 |  |  |  |  |
Assets |  |  |  |  |
Mortgages and notes receivable |  | $ | 30,994 |  | $ | — |  | $ | — |  | $ | 30,994 |
Liabilities |  |  |  |  |
Derivative instruments - interest rate swaps |  | $ | 15,905 |  | $ | — |  | $ | — |  | $ | 15,905 |

The fair value of our interest rate swaps is determined using the market standard methodology of netting discounted expected variable cash payments and receipts. The variable cash payments and receipts are based on an expectation of future interest rates (a forward curve) derived from observable market interest rate curves. We consider both our own nonperformance risk and the counterparty’s nonperformance risk in the fair value measurement.
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 fair value of these receivables from period to period are reported in interest and other income on our Consolidated Statements of Operations.

|  | (in thousands)
|  | Fair Value Measurement | Other Gains (Losses) | Interest Income | Total Changes in Fair Value Included in Current Period Earnings
Year ended December 31, 2021 |  | $ | 49,484 |  | $ | 14 |  | $ | 2,403 |  | $ | 2,417 |
Year ended December 31, 2020 |  | $ | 30,994 |  | $ | 12 |  | $ | 1,442 |  | $ | 1,454 |

As of December 31, 2021, we had an investment of $903,000 in a real estate technology venture consisting of privately held entities that develop technology related to the real estate industry. The investment is measured at net asset value (“NAV”) as a practical expedient under ASC 820. As of December 31, 2021, we had unfunded commitments of $1.2 million.
Fair Value Measurements on a Nonrecurring Basis
There were no non-financial assets measured at fair value on a nonrecurring basis at December 31, 2021 and 2020.
Financial Assets and Liabilities Not Measured at Fair Value
The fair value of mortgages payable and unsecured senior notes is 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 December 31, 2021 and 2020 are as follows:

|  | (in thousands)
|  | December 31, 2021 | December 31, 2020 |
|  | Amount | Fair Value | Amount | Fair Value |  |
FINANCIAL ASSETS |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 31,267 |  | $ | 31,267 |  | $ | 392 |  | $ | 392 |  |  |
Restricted cash |  | 7,358 |  | 7,358 |  | 6,918 |  | 6,918 |  |  |
FINANCIAL LIABILITIES |  |  |  |  |  |  |
Revolving lines of credit(1) |  | 76,000 |  | 76,000 |  | 152,871 |  | 152,871 |  |  |
Term loans(1) |  | — |  | — |  | 145,000 |  | 145,000 |  |  |
Unsecured senior notes |  | 300,000 |  | 308,302 |  | 125,000 |  | 133,181 |  |  |
Mortgages payable - Fannie Mae credit facility |  | 198,850 |  | 198,850 |  | — |  | — |  |  |
Mortgages payable - other |  | 284,934 |  | 284,546 |  | 298,445 |  | 308,855 |  |  |

(1)Excluding the effect of the interest rate swap agreement.
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NOTE 9 • ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
We acquired $499.8 million and $191.0 million of new real estate during the years ended December 31, 2021 and 2020, respectively. Our acquisitions during the years ended December 31, 2021 and 2020 are detailed below.
Year Ended December 31, 2021

|  |  | (in thousands)
|  |  | Total | Form of Consideration | Investment Allocation
|  | Date | Acquisition |  |  |  |  |  | Intangible |
Acquisitions |  | Acquired | Cost(1) | Cash | Units(2) | Other(3) | Land | Building | Assets | Other(4)
256 homes -Union Pointe Apartment Homes - Longmont, CO |  | January 6, 2021 | $ | 76,900 |  | $ | 76,900 |  | $ | — |  | $ | — |  | $ | 5,727 |  | $ | 69,966 |  | $ | 1,207 |  | $ | — |
120 homes - Bayberry Place - Minneapolis, MN |  | September 1, 2021 | 16,673 |  | 898 |  | 9,855 |  | 5,920 |  | 1,807 |  | 14,113 |  | 753 |  | — |
251 homes - Burgandy & Hillsboro Court - Minneapolis, MN |  | September 1, 2021 | 35,569 |  | 2,092 |  | 22,542 |  | 10,935 |  | 2,834 |  | 31,148 |  | 1,587 |  | — |
97 homes - Venue on Knox - Minneapolis, MN |  | September 1, 2021 | 18,896 |  | 500 |  | 11,375 |  | 7,021 |  | 3,438 |  | 14,743 |  | 715 |  | — |
120 homes - Gatewood - St. Cloud, MN |  | September 1, 2021 | 7,781 |  | 378 |  | 3,388 |  | 4,015 |  | 327 |  | 6,858 |  | 596 |  | — |
84 homes - Grove Ridge - Minneapolis, MN |  | September 1, 2021 | 12,060 |  | 121 |  | 8,579 |  | 3,360 |  | 1,250 |  | 10,271 |  | 539 |  | — |
119 homes - The Legacy - St. Cloud, MN |  | September 1, 2021 | 10,560 |  | 229 |  | 5,714 |  | 4,617 |  | 412 |  | 9,556 |  | 592 |  | — |
151 homes - New Hope Garden & Village - Minneapolis, MN |  | September 1, 2021 | 15,006 |  | 1,435 |  | 10,812 |  | 2,759 |  | 1,603 |  | 12,578 |  | 825 |  | — |
330 homes - Palisades - Minneapolis, MN |  | September 1, 2021 | 53,354 |  | 2,884 |  | 30,470 |  | 20,000 |  | 6,919 |  | 46,577 |  | 2,211 |  | (2,353) |
96 homes - Plymouth Pointe - Minneapolis, MN |  | September 1, 2021 | 14,450 |  | 370 |  | 9,061 |  | 5,019 |  | 1,042 |  | 12,809 |  | 599 |  | — |
93 homes - Pointe West - St. Cloud, MN |  | September 1, 2021 | 7,558 |  | 91 |  | 3,605 |  | 3,862 |  | 246 |  | 6,849 |  | 463 |  | — |
301 homes - River Pointe - Minneapolis MN |  | September 1, 2021 | 38,348 |  | 2,249 |  | 21,653 |  | 14,446 |  | 3,346 |  | 33,117 |  | 1,885 |  | — |
70 homes - Southdale Parc - Minneapolis, MN |  | September 1, 2021 | 9,670 |  | 165 |  | 7,907 |  | 1,598 |  | 1,569 |  | 7,740 |  | 361 |  | — |
62 homes - Portage - Minneapolis, MN |  | September 1, 2021 | 9,171 |  | 323 |  | 5,588 |  | 3,260 |  | 2,133 |  | 6,685 |  | 353 |  | — |
200 homes - Windsor Gates - Minneapolis, MN |  | September 1, 2021 | 22,231 |  | 1,122 |  | 12,080 |  | 9,029 |  | 2,140 |  | 18,943 |  | 1,148 |  | — |
136 homes - Wingate - Minneapolis, MN |  | September 1, 2021 | 15,784 |  | 723 |  | 10,246 |  | 4,815 |  | 1,480 |  | 13,530 |  | 774 |  | — |
178 homes - Woodhaven - Minneapolis, MN |  | September 1, 2021 | 25,009 |  | 1,682 |  | 15,200 |  | 8,127 |  | 3,940 |  | 20,080 |  | 989 |  | — |
288 homes - Woodland Pointe - Minneapolis, MN |  | September 1, 2021 | 47,796 |  | 437 |  | 29,438 |  | 17,921 |  | 5,367 |  | 40,422 |  | 2,007 |  | — |
176 homes - Civic Lofts - Denver, CO |  | December 21, 2021 | 63,000 |  | 63,000 |  | — |  | — |  | 6,166 |  | 55,204 |  | 1,630 |  | — |
Total Acquisitions |  |  | $ | 499,816 |  | $ | 155,599 |  | $ | 217,513 |  | $ | 126,704 |  | $ | 51,746 |  | $ | 431,189 |  | $ | 19,234 |  | $ | (2,353) |

(1)Includes $36.1 million for additional fair value of Series E preferred units with a liquidation preference of $181.4 million for the September 1, 2021 portfolio acquisition.
(2)Fair value of Series E preferred units at the acquisition date.
(3)Payoff of debt or assumption of seller's debt upon closing.
(4)Debt discount on assumed mortgage.
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Year Ended December 31, 2020

|  |  | (in thousands)
|  |  | Total | Form of Consideration | Investment Allocation
|  | Date | Acquisition |  |  |  |  | Intangible |
Acquisitions |  | Acquired | Cost | Cash | Other(1) | Land | Building | Assets | Other(2)
Multifamily |  |  |  |  |  |  |  |  |
182 homes - Ironwood Apartments - New Hope, MN |  | March 5, 2020 | $ | 46,263 |  | $ | 28,600 |  | $ | 17,663 |  | $ | 2,165 |  | $ | 36,869 |  | $ | 824 |  | $ | 6,405 |
465 homes - Parkhouse Apartments - 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.
(2)Consists of TIF note acquired. Refer to Note 2 for further discussion.
DISPOSITIONS
During the year ended December 31, 2021, we continued our portfolio transformation by disposing of five apartment communities and one commercial property for a total sales price of $62.3 million. The dispositions for the years ended December 31, 2021 and 2020 are detailed below.
Year Ended December 31, 2021

|  |  | (in thousands)
|  | Date |  | Book Value |
Dispositions |  | Disposed | Sales Price | and Sale Cost | Gain/(Loss)
Multifamily |  |  |  |  |
76 homes-Crystal Bay-Rochester, MN |  | May 25, 2021 | $ | 13,650 |  | $ | 10,255 |  | $ | 3,395 |
40 homes-French Creek-Rochester, MN |  | May 25, 2021 | 6,700 |  | 4,474 |  | 2,226 |
182 homes-Heritage Manor-Rochester, MN |  | May 25, 2021 | 14,125 |  | 4,892 |  | 9,233 |
140 homes-Olympik Village-Rochester, MN |  | May 25, 2021 | 10,725 |  | 6,529 |  | 4,196 |
151-homes-Winchester/Village Green-Rochester, MN |  | May 25, 2021 | 14,800 |  | 7,010 |  | 7,790 |
|  |  | $ | 60,000 |  | $ | 33,160 |  | $ | 26,840 |
Other |  |  |  |  |
Minot IPS |  | October 18, 2021 | $ | 2,250 |  | $ | 1,573 |  | $ | 677 |
Total Dispositions |  |  | $ | 62,250 |  | $ | 34,733 |  | $ | 27,517 |

Year Ended December 31, 2020

|  |  | (in thousands)
|  | Date |  | Book Value |
Dispositions |  | Disposed | Sales Price | and Sale Cost | Gain/(Loss)
Multifamily |  |  |  |  |
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 |
Other |  |  |  |  |
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 |

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NOTE 10 • SEGMENTS
We operate in a single reportable segment which includes the ownership, management, development, redevelopment, and acquisition of apartment communities. Each of our operating properties is considered a separate operating segment because each property earns revenues, incurs expenses, and has discrete financial information. Our chief operating decision-makers evaluate each property’s operating results to make decisions about resources to be allocated and to assess performance. We do not group our operations based on geography, size, or type. Our apartment communities have similar long-term economic characteristics and provide similar products and services to our residents. No apartment community comprises more than 10% of consolidated revenues, profits, or assets. Accordingly, our apartment communities are aggregated into a single reportable segment. “All other” is composed of non-multifamily properties, non-multifamily components of mixed use properties, and properties disposed or designated as held for sale.
Our executive management team comprises our chief operating decision-makers. 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, 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 years ended December 31, 2021, 2020, and 2019 from our reportable segment and reconcile net operating income to net income as reported in the consolidated financial statements. Segment assets are also reconciled to total assets as reported in the consolidated financial statements.

|  | (in thousands)
Year ended December 31, 2021 |  | Multifamily | All Other | Total
Revenue |  | $ | 195,624 |  | $ | 6,081 |  | $ | 201,705 |
Property operating expenses, including real estate taxes |  | 79,096 |  | 2,761 |  | 81,857 |
Net operating income |  | $ | 116,528 |  | $ | 3,320 |  | $ | 119,848 |
Property management expenses |  |  |  | (8,752) |
Casualty loss |  |  |  | (344) |
Depreciation and amortization |  |  |  | (92,165) |
General and administrative expenses |  |  |  | (16,213) |
Gain (loss) on sale of real estate and other investments |  |  |  | 27,518 |
Interest expense |  |  |  | (29,078) |
Loss on debt extinguishment |  |  |  | (535) |
Interest and other income (loss) |  |  |  | (2,380) |
Net income (loss) |  |  |  | $ | (2,101) |

|  | (in thousands)
Year ended December 31, 2020 |  | Multifamily | All Other | Total
Revenue |  | $ | 164,126 |  | $ | 13,868 |  | $ | 177,994 |
Property operating expenses, including real estate taxes |  | 66,356 |  | 6,802 |  | 73,158 |
Net operating income |  | $ | 97,770 |  | $ | 7,066 |  | $ | 104,836 |
Property management expenses |  |  |  | (5,801) |
Casualty loss |  |  |  | (1,662) |
Depreciation and amortization |  |  |  | (75,593) |
General and administrative expenses |  |  |  | (13,440) |
Gain (loss) on sale of real estate and other investments |  |  |  | 25,503 |
Interest expense |  |  |  | (27,525) |
Loss on debt extinguishment |  |  |  | (23) |
Interest and other income |  |  |  | (1,552) |
Net income (loss) |  |  |  | $ | 4,743 |

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|  | (in thousands)
Year ended December 31, 2019 |  | Multifamily | All Other | Total
Revenue |  | $ | 148,644 |  | $ | 37,111 |  | $ | 185,755 |
Property operating expenses, including real estate taxes |  | 60,760 |  | 17,555 |  | 78,315 |
Net operating income |  | $ | 87,884 |  | $ | 19,556 |  | $ | 107,440 |
Property management expenses |  |  |  | (6,186) |
Casualty loss |  |  |  | (1,116) |
Depreciation and amortization |  |  |  | (74,271) |
General and administrative expenses |  |  |  | (14,450) |
Gain (loss) on sale of real estate and other investments |  |  |  | 97,624 |
Interest expense |  |  |  | (30,537) |
Loss on debt extinguishment |  |  |  | (2,360) |
Interest and other income |  |  |  | 2,092 |
Income (loss) before gain on litigation settlement |  |  |  | 78,236 |
Gain (loss) on litigation settlement |  |  |  | 6,586 |
Net income (loss) |  |  |  | $ | 84,822 |

Segment Assets and Accumulated Depreciation

|  | (in thousands)
As of December 31, 2021 |  | Multifamily | All Other | Total
Segment assets |  |  |  |
Property owned |  | $ | 2,244,250 |  | $ | 26,920 |  | $ | 2,271,170 |
Less accumulated depreciation |  | (436,004) |  | (7,588) |  | (443,592) |
Total property owned |  | $ | 1,808,246 |  | $ | 19,332 |  | $ | 1,827,578 |
Cash and cash equivalents |  |  |  | 31,267 |
Restricted cash |  |  |  | 7,358 |
Other assets |  |  |  | 30,582 |
Mortgage loans receivable |  |  |  | 43,276 |
Total Assets |  |  |  | $ | 1,940,061 |

|  | (in thousands)
As of December 31, 2020 |  | Multifamily | All Other | Total
Segment assets |  |  |  |
Property owned |  | $ | 1,727,287 |  | $ | 85,270 |  | $ | 1,812,557 |
Less accumulated depreciation |  | (368,717) |  | (30,532) |  | (399,249) |
Total property owned |  | $ | 1,358,570 |  | $ | 54,738 |  | $ | 1,413,308 |
Cash and cash equivalents |  |  |  | 392 |
Restricted cash |  |  |  | 6,918 |
Other assets |  |  |  | 18,904 |
Mortgage loans receivable |  |  |  | 24,661 |
Total Assets |  |  |  | $ | 1,464,183 |

NOTE 11 • RETIREMENT PLANS
We sponsor a defined contribution 401(k) plan to provide retirement benefits for employees that meet minimum employment criteria. We currently match, dollar for dollar, employee contributions to the 401(k) plan in an amount equal to up to 5.0% of the eligible wages of each participating employee. Matching contributions are fully vested when made. We recognized expense of approximately $1.0 million, $875,000, and $738,000 in the years ended December 31, 2021, 2020, and 2019, respectively.
NOTE 12 • COMMITMENTS AND CONTINGENCIES
Legal Proceedings. We are involved in various lawsuits arising in the normal course of business. We believe that such matters will not have a material adverse effect on our consolidated financial statements.
Environmental Matters. It is generally our policy to obtain a Phase I environmental assessment of each property that we seek to acquire. Such assessments have not revealed, nor are we aware of, any environmental liabilities that we believe would have a material adverse effect on our financial position or results of operations. We own properties that contain or potentially contain
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(based on the age of the property) asbestos, lead, or underground storage tanks. For certain of these properties, we estimated the fair value of the conditional asset retirement obligation and chose not to book a liability because the amounts involved were immaterial. With respect to certain other properties, we have not recorded any related asset retirement obligation as the fair value of the liability cannot be reasonably estimated due to insufficient information. We believe we do not have sufficient information to estimate the fair value of the asset retirement obligations for these properties because a settlement date or range of potential settlement dates has not been specified by others and, additionally, there are currently no plans or expectation of plans to demolish these properties or to undertake major renovations that would require removal of the asbestos, lead and/or underground storage tanks. These properties are expected to be maintained by repairs and maintenance activities that would not involve the removal of the asbestos, lead and/or underground storage tanks. Also, a need for renovations caused by resident changes, technology changes or other factors has not been identified.
Insurance. We carry insurance coverage on our properties in amounts and types that we believe are customarily obtained by owners of similar properties and are sufficient to achieve our risk management objectives.
Restrictions on Taxable Dispositions. Thirty-four of our apartment communities, consisting of approximately 6,511 homes, are subject to restrictions on taxable dispositions under agreements entered into with some of the sellers or contributors of the properties and are effective for varying periods. We do not believe that the agreements materially affect the conduct of our business or our decisions whether to dispose of restricted properties during the restriction period because we generally hold these and our other properties for investment purposes rather than for sale. Where we deem it to be in our shareholders’ best interests to dispose of such properties, we generally seek to structure sales of such properties as tax deferred transactions under Section 1031 of the Code. Otherwise, we may be required to provide tax indemnification payments to the parties to these agreements.
Redemption Value of Units. Pursuant to a Unitholder’s exercise of its Exchange Rights, we have the right, in our sole discretion, to acquire such Units by either making a cash payment or acquiring the Units for our common shares, on a one-for-one basis. All Units receive the same per Unit cash distributions as the per share dividends paid on common shares. Units are redeemable for an amount of cash per Unit equal to the average of the daily market price of our common shares for the ten consecutive trading days immediately preceding the date of valuation of the Unit. As of December 31, 2021 and 2020, the aggregate redemption value of the then-outstanding Units owned by limited partners, as determined by the ten-day average market price for our common shares, was approximately $90.9 million and $69.0 million, respectively.
NOTE 13 • SHARE BASED COMPENSATION
Share-based awards are provided to officers, non-officer employees, and trustees under our 2015 Incentive Plan approved by shareholders on September 15, 2015, as amended and restated on May 18, 2021 which allows for awards in the form of cash, unrestricted, and restricted common shares, stock options, stock appreciation rights, and restricted stock units (“RSUs”) up to an aggregate of 775,000 shares over the ten-year period in which the plan will be in effect. Under our 2015 Incentive Plan, officers and non-officer employees may earn share awards under a long-term incentive plan, which is a forward-looking program that measures long-term performance over the stated performance period. These awards are payable to the extent deemed earned in shares. The terms of the long-term incentive awards granted under the program may vary from year to year. Through December 31, 2021, awards under the 2015 Incentive Plan consisted of restricted and unrestricted common shares, RSUs, and stock options. We account for forfeitures of restricted and unrestricted common shares, RSUs, and stock options when they occur instead of estimating the forfeitures.
Year Ended December 31, 2021 LTIP Awards
Awards granted to employees on January 1, 2021, consist of an aggregate of 6,410 time-based RSU awards, 19,224 performance based RSUs based on total shareholder return (“TSR”), and 43,629 stock options. The time-based RSUs 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 and expire 10 years after grant date. 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:

Exercise price | $ | 70.64 |
Risk-free rate | 0.650 | %
Expected term | 6.25 years
Expected volatility | 21.08 | %
Dividend Yield | 3.963 | %

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The TSR performance RSUs are earned based on the Company’s 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. Compensation expense is recognized 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. The Company based the expected volatility on a weighted average of the historical volatility of the Company’s 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.
Awards granted to trustees in May 2021 consisted of 6,061 RSUs with a one-year vesting period. All of these awards are classified as equity awards. We recognize compensation expense associated with the time-based awards ratably over the requisite service period. The fair value of share awards at grant date for non-employee trustees was approximately $425,000, $533,000, and $505,000 for the years ended December 31, 2021, 2020, and 2019, respectively.
Share-Based Compensation Expense
Total share-based compensation expense recognized in the consolidated financial statements for the years ended December 31, 2021, 2020, and 2019, for all share-based awards was as follows:

|  | (in thousands)
|  | Year Ended December 31,
|  | 2021 | 2020 | 2019
Share based compensation expense |  | $ | 2,687 |  | $ | 2,106 |  | $ | 1,905 |

Restricted Share Awards
The total fair value of time-based share grants vested during the years ended December 31, 2020 and 2019 was $136,000 and $310,000, respectively.
The activity for the years ended December 31, 2020 and 2019, related to our restricted share awards was as follows:

|  | Awards with Service Conditions
|  |  | Wtd Avg Grant-
|  | Shares | Date Fair Value
Unvested at December 31, 2018 |  | 7,191 |  |
Granted |  | — |  |
Vested |  | (4,999) |  | $ | 61.06 |
Forfeited |  | — |  |
Unvested at December 31, 2019 |  | 2,192 |  | 59.20 |
Granted |  | — |  |
Vested |  | (2,192) |  | $ | 59.20 |
Forfeited |  | — |  |
Unvested at December 31, 2020 |  | — |  |

Restricted Stock Units
During the year ended December 31, 2021, we issued 7,416 time-based RSUs to employees and 6,277 to trustees. The RSUs to employees generally vest over a three-year period and the RSUs to trustees generally vest over a one-year period. The fair value of the time-based RSUs granted during the year ended December 31, 2021 was $980,000. The total compensation cost related to non-vested time-based RSUs not yet recognized is $491,000, which we expect to recognize over a weighted average period of 1.2 years.
The unamortized value of RSUs with market conditions as of December 31, 2021, 2020, and 2019, was approximately $1.1 million, $487,000, and $1.3 million, respectively.
The activity for the years ended December 31, 2021, 2020, and 2019, related to our RSUs was as follows:
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|  | RSUs with Service Conditions |  | RSUs with Market Conditions
|  |  | Wtd Avg Grant- |  |  | Wtd Avg Grant-
|  | Shares | Date Fair Value |  | Shares | Date Fair Value
Unvested at December 31, 2018 |  | 18,260 |  | $ | 55.13 |  |  | 25,319 |  | $ | 62.84 |
Granted |  | 16,084 |  | $ | 59.76 |  |  | 12,978 |  | $ | 79.49 |
Vested |  | (11,633) |  | $ | 55.35 |  |  | — |  | — |
Forfeited |  | (365) |  | $ | 51.73 |  |  | (475) |  | $ | 57.70 |
Unvested at December 31, 2019 |  | 22,346 |  | $ | 58.41 |  |  | 37,822 |  | $ | 68.62 |
Granted |  | 17,981 |  | $ | 68.25 |  |  | — |  | $ | — |
Vested |  | (14,991) |  | $ | 59.10 |  |  | (13,357) |  | 74.68 |
Change in awards(1) |  | — |  | $ | — |  |  | 4,436 |  | $ | — |
Forfeited |  | (508) |  | $ | 62.99 |  |  | (1,907) |  | $ | 63.92 |
Unvested at December 31, 2020 |  | 24,828 |  | $ | 65.03 |  |  | 26,994 |  | $ | 67.87 |
Granted |  | 13,693 |  | $ | 71.54 |  |  | 19,224 |  | $ | 87.04 |
Vested |  | (17,065) |  | $ | 63.42 |  |  | (35,920) |  | $ | 65.34 |
Change in awards(1) |  | — |  | — |  |  | 8,926 |  | — |
Forfeited |  | (482) |  | $ | 70.44 |  |  | — |  | $ | — |
Unvested at December 31, 2021 |  | 20,974 |  | $ | 69.97 |  |  | 19,224 |  | $ | 87.04 |

(1)Represents the change in the number of restricted stock units earned at the end of the measurement period.
Stock Options
During the year ended December 31, 2021, we issued 43,629 stock options to employees. The stock options vest over a four-year period. The fair value of the stock options granted during the year ended December 31, 2021 was $7.383 per share. The total compensation costs related to non-vested stock options not yet recognized is $387,000, which we expect to recognize over a weighted average period of 2.4 years.
The stock option activity for the years ended December 31, 2021 and 2020 was as follows:

|  | Number of Shares | Weighted Average Exercise Price
Outstanding at December 31, 2019 |  | — |  | — |
Granted |  | 141,000 |  | $ | 66.36 |
Exercised |  | — |  | — |
Forfeited |  | (1,952) |  | $ | 66.36 |
Outstanding at December 31, 2020 |  | 139,048 |  | $ | 66.36 |
Exercisable at December 31, 2020 |  | — |  | — |
Granted |  | 43,629 |  | 70.64 |
Exercised |  | — |  | — |
Forfeited |  | — |  | — |
Outstanding at December 31, 2021 |  | 182,677 |  | 67.38 |
Exercisable at December 31, 2021 |  | 34,758 |  | 66.36 |

The intrinsic value of a stock option represents the amount by which the current price of the underlying stock exceeds the exercise price of the option. As of December 31, 2021, stock options outstanding had an aggregate intrinsic value of $8.0 million with a weighted average remaining contractual term of 8.54 years.
NOTE 14 • SUBSEQUENT EVENTS
On January 4, 2022, we acquired a portfolio of three apartment communities located in the Minneapolis, Minnesota region for an aggregate purchase price of $68.1 million. The acquisition was financed through the assumption of $41.6 million in mortgage debt, the issuance of 209,156 Units, and cash.
On January 26, 2022, we acquired Noko Apartments in Minneapolis, Minnesota for an aggregate purchase price of $46.4 million. We financed the development of Noko Apartments with a construction loan and a mezzanine loan which had
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principal balances of $29.9 million and $13.4 million, respectively, as of December 31, 2021. The loans were exchanged to fund, in part, the acquisition.
On February 23, 2022, we paid $3.3 million to terminate our $75.0 million interest rate swap and our $70.0 million forward swap.
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CENTERSPACE AND SUBSIDIARIES
December 31, 2021
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

|  |  |  |  | Gross amount at which carried at |  |  | Life on which
|  | Initial Cost to Company |  | close of period |  |  | depreciation in
|  |  |  | Costs capitalized |  |  |  |  | Date of | latest income
|  |  | Buildings & | subsequent to |  | Buildings & |  | Accumulated | Construction | statement is
Description | Encumbrances(1) | Land | Improvements | acquisition | Land | Improvements | Total | Depreciation | or Acquisition | computed
Same-Store |  |  |  |  |  |  |  |  |  |  |
71 France - Edina, MN | $ | 52,149 |  | $ | 4,721 |  | $ | 61,762 |  | $ | 625 |  | $ | 4,801 |  | $ | 62,307 |  | $ | 67,108 |  | $ | (17,093) |  | 2016 | 30-37 | years
Alps Park - Rapid City, SD | — |  | 287 |  | 5,551 |  | 691 |  | 336 |  | 6,193 |  | 6,529 |  | (1,817) |  | 2013 | 30-37 | years
Arcata - Golden Valley, MN | — |  | 2,088 |  | 31,036 |  | 413 |  | 2,128 |  | 31,409 |  | 33,537 |  | (9,627) |  | 2015 | 30-37 | years
Ashland - Grand Forks, ND | — |  | 741 |  | 7,569 |  | 364 |  | 823 |  | 7,851 |  | 8,674 |  | (2,688) |  | 2012 | 30-37 | years
Avalon Cove - Rochester, MN | — |  | 1,616 |  | 34,074 |  | 825 |  | 1,808 |  | 34,707 |  | 36,515 |  | (7,327) |  | 2016 | 30-37 | years
Boulder Court - Eagan, MN | — |  | 1,067 |  | 5,498 |  | 3,124 |  | 1,576 |  | 8,113 |  | 9,689 |  | (4,590) |  | 2003 | 30-37 | years
Canyon Lake - Rapid City, SD | — |  | 305 |  | 3,958 |  | 2,285 |  | 420 |  | 6,128 |  | 6,548 |  | (3,287) |  | 2001 | 30-37 | years
Cardinal Point - Grand Forks, ND | — |  | 1,600 |  | 33,400 |  | 400 |  | 1,727 |  | 33,673 |  | 35,400 |  | (4,132) |  | 2013 | 30-37 | years
Castlerock - Billings, MT | — |  | 736 |  | 4,864 |  | 2,257 |  | 1,045 |  | 6,812 |  | 7,857 |  | (4,582) |  | 1998 | 30-37 | years
Chateau - Minot, ND | — |  | 301 |  | 20,058 |  | 1,185 |  | 326 |  | 21,218 |  | 21,544 |  | (6,880) |  | 2013 | 30-37 | years
Cimarron Hills - Omaha, NE | 8,700 |  | 706 |  | 9,588 |  | 4,684 |  | 1,639 |  | 13,339 |  | 14,978 |  | (7,998) |  | 2001 | 30-37 | years
Commons and Landing at Southgate - Minot, ND | — |  | 5,945 |  | 47,512 |  | 2,448 |  | 6,424 |  | 49,481 |  | 55,905 |  | (15,690) |  | 2015 | 30-37 | years
Connelly on Eleven - Burnsville, MN | — |  | 2,401 |  | 11,515 |  | 16,010 |  | 3,206 |  | 26,720 |  | 29,926 |  | (14,315) |  | 2003 | 30-37 | years
Cottonwood - Bismarck, ND | — |  | 1,056 |  | 17,372 |  | 5,799 |  | 1,962 |  | 22,265 |  | 24,227 |  | (13,046) |  | 1997 | 30-37 | years
Country Meadows - Billings, MT | — |  | 491 |  | 7,809 |  | 1,623 |  | 599 |  | 9,324 |  | 9,923 |  | (5,872) |  | 1995 | 30-37 | years
Cypress Court - St. Cloud, MN | 11,338 |  | 1,583 |  | 18,879 |  | 545 |  | 1,625 |  | 19,382 |  | 21,007 |  | (5,995) |  | 2012 | 30-37 | years
Deer Ridge - Jamestown, ND | — |  | 711 |  | 24,129 |  | 348 |  | 785 |  | 24,403 |  | 25,188 |  | (7,292) |  | 2013 | 30-37 | years
Donovan - Lincoln, NE | 11,270 |  | 1,515 |  | 15,730 |  | 4,952 |  | 1,817 |  | 20,380 |  | 22,197 |  | (6,531) |  | 2012 | 30-37 | years
Dylan - Denver, CO | — |  | 12,155 |  | 77,215 |  | 1,138 |  | 12,241 |  | 78,267 |  | 90,508 |  | (10,892) |  | 2018 | 30 | years
Evergreen - Isanti, MN | — |  | 1,129 |  | 5,524 |  | 628 |  | 1,159 |  | 6,122 |  | 7,281 |  | (2,290) |  | 2008 | 30-37 | years
Freightyard - Minneapolis, MN | — |  | 1,889 |  | 23,616 |  | 1,296 |  | 1,895 |  | 24,906 |  | 26,801 |  | (2,091) |  | 2019 | 30 | years
Gardens - Grand Forks, ND | — |  | 518 |  | 8,702 |  | 141 |  | 535 |  | 8,826 |  | 9,361 |  | (2,100) |  | 2015 | 30-37 | years
Grand Gateway - St. Cloud, MN | — |  | 814 |  | 7,086 |  | 2,152 |  | 970 |  | 9,082 |  | 10,052 |  | (3,972) |  | 2012 | 30-37 | years
GrandeVille Shores - Rochester, MN | 46,320 |  | 6,588 |  | 67,072 |  | 5,741 |  | 6,776 |  | 72,625 |  | 79,401 |  | (16,311) |  | 2015 | 30-37 | years
Greenfield - Omaha, NE | — |  | 578 |  | 4,122 |  | 3,007 |  | 876 |  | 6,831 |  | 7,707 |  | (2,769) |  | 2007 | 30-37 | years
Homestead Garden - Rapid City, SD | — |  | 655 |  | 14,139 |  | 1,219 |  | 792 |  | 15,221 |  | 16,013 |  | (3,944) |  | 2015 | 30-37 | years
Lakeside Village - Lincoln, NE | 11,158 |  | 1,215 |  | 15,837 |  | 3,369 |  | 1,476 |  | 18,945 |  | 20,421 |  | (6,098) |  | 2012 | 30-37 | years
Legacy - Grand Forks, ND | — |  | 1,362 |  | 21,727 |  | 10,958 |  | 2,474 |  | 31,573 |  | 34,047 |  | (19,735) |  | 1995-2005 | 30-37 | years
Legacy Heights - Bismarck, ND | — |  | 1,207 |  | 13,742 |  | 290 |  | 1,142 |  | 14,097 |  | 15,239 |  | (3,102) |  | 2015 | 30-37 | years
Lugano at Cherry Creek - Denver, CO | — |  | 7,679 |  | 87,766 |  | 1,317 |  | 7,679 |  | 89,083 |  | 96,762 |  | (7,670) |  | 2019 | 30 | years
Meadows - Jamestown, ND | — |  | 590 |  | 4,519 |  | 2,075 |  | 730 |  | 6,454 |  | 7,184 |  | (4,101) |  | 1998 | 30-37 | years
Monticello Crossings - Monticello, MN | — |  | 1,734 |  | 30,136 |  | 649 |  | 1,951 |  | 30,568 |  | 32,519 |  | (6,660) |  | 2017 | 30-37 | years
Monticello Village - Monticello, MN | — |  | 490 |  | 3,756 |  | 1,211 |  | 655 |  | 4,802 |  | 5,457 |  | (2,655) |  | 2004 | 30-37 | years
Northridge - Bismarck, ND | — |  | 884 |  | 7,515 |  | 296 |  | 1,048 |  | 7,647 |  | 8,695 |  | (1,912) |  | 2015 | 30-37 | years
Olympic Village - Billings, MT | — |  | 1,164 |  | 10,441 |  | 4,047 |  | 1,885 |  | 13,767 |  | 15,652 |  | (8,539) |  | 2000 | 30-37 | years
Oxbo - St Paul, MN | — |  | 5,809 |  | 51,586 |  | 263 |  | 5,822 |  | 51,836 |  | 57,658 |  | (8,896) |  | 2018 | 30 | years
Park Meadows - Waite Park, MN | — |  | 1,143 |  | 9,099 |  | 9,976 |  | 2,140 |  | 18,078 |  | 20,218 |  | (13,170) |  | 1997 | 30-37 | years
Park Place - Plymouth, MN | — |  | 10,609 |  | 80,781 |  | 13,587 |  | 10,819 |  | 94,158 |  | 104,977 |  | (15,767) |  | 2018 | 30 | years

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CENTERSPACE AND SUBSIDIARIES
December 31, 2021
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

|  |  |  |  | Gross amount at which carried at |  |  | Life on which
|  | Initial Cost to Company |  | close of period |  |  | depreciation in
|  |  |  | Costs capitalized |  |  |  |  | Date of | latest income
|  |  | Buildings & | subsequent to |  | Buildings & |  | Accumulated | Construction | statement is
Description | Encumbrances(1) | Land | Improvements | acquisition | Land | Improvements | Total | Depreciation | or Acquisition | computed
Plaza - Minot, ND | — |  | 867 |  | 12,784 |  | 3,118 |  | 1,011 |  | 15,758 |  | 16,769 |  | (6,270) |  | 2009 | 30-37 | years
Pointe West - Rapid City, SD | — |  | 240 |  | 3,538 |  | 2,209 |  | 463 |  | 5,524 |  | 5,987 |  | (4,044) |  | 1994 | 30-37 | years
Ponds at Heritage Place - Sartell, MN | — |  | 395 |  | 4,564 |  | 540 |  | 419 |  | 5,080 |  | 5,499 |  | (1,773) |  | 2012 | 30-37 | years
Quarry Ridge - Rochester, MN | 23,409 |  | 2,254 |  | 30,024 |  | 5,223 |  | 2,412 |  | 35,089 |  | 37,501 |  | (12,114) |  | 2006 | 30-37 | years
Red 20 - Minneapolis, MN | 20,775 |  | 1,900 |  | 24,116 |  | 521 |  | 1,908 |  | 24,629 |  | 26,537 |  | (7,560) |  | 2015 | 30-37 | years
Regency Park Estates - St. Cloud, MN | 7,167 |  | 702 |  | 10,198 |  | 6,155 |  | 1,179 |  | 15,876 |  | 17,055 |  | (5,205) |  | 2011 | 30-37 | years
Rimrock West - Billings, MT | — |  | 330 |  | 3,489 |  | 2,044 |  | 568 |  | 5,295 |  | 5,863 |  | (3,403) |  | 1999 | 30-37 | years
River Ridge - Bismarck, ND | — |  | 576 |  | 24,670 |  | 1,154 |  | 922 |  | 25,478 |  | 26,400 |  | (9,018) |  | 2008 | 30-37 | years
Rocky Meadows - Billings, MT | — |  | 656 |  | 5,726 |  | 1,632 |  | 840 |  | 7,174 |  | 8,014 |  | (4,817) |  | 1995 | 30-37 | years
Rum River - Isanti, MN | — |  | 843 |  | 4,823 |  | 515 |  | 870 |  | 5,311 |  | 6,181 |  | (2,358) |  | 2007 | 30-37 | years
Silver Springs - Rapid City, SD | — |  | 215 |  | 3,007 |  | 1,077 |  | 273 |  | 4,026 |  | 4,299 |  | (1,142) |  | 2015 | 30-37 | years
South Pointe - Minot, ND | — |  | 550 |  | 9,548 |  | 5,814 |  | 1,489 |  | 14,423 |  | 15,912 |  | (10,819) |  | 1995 | 30-37 | years
Southpoint - Grand Forks, ND | — |  | 576 |  | 9,893 |  | 284 |  | 663 |  | 10,090 |  | 10,753 |  | (2,696) |  | 2013 | 30-37 | years
Southfork - Lakeville, MN | 21,675 |  | 3,502 |  | 40,153 |  | 8,626 |  | 3,583 |  | 48,698 |  | 52,281 |  | (6,292) |  | 2019 | 30 | years
Sunset Trail - Rochester, MN | — |  | 336 |  | 12,814 |  | 3,429 |  | 826 |  | 15,753 |  | 16,579 |  | (9,579) |  | 1999 | 30-37 | years
Thomasbrook - Lincoln, NE | 13,100 |  | 600 |  | 10,306 |  | 5,474 |  | 1,710 |  | 14,670 |  | 16,380 |  | (9,080) |  | 1999 | 30-37 | years
West Stonehill - Waite Park, MN | 16,425 |  | 939 |  | 10,167 |  | 10,933 |  | 1,912 |  | 20,127 |  | 22,039 |  | (12,812) |  | 1995 | 30-37 | years
Westend - Denver, CO | — |  | 25,525 |  | 102,180 |  | 935 |  | 25,532 |  | 103,108 |  | 128,640 |  | (13,525) |  | 2018 | 30 | years
Whispering Ridge - Omaha, NE | 19,187 |  | 2,139 |  | 25,424 |  | 3,715 |  | 2,551 |  | 28,727 |  | 31,278 |  | (9,162) |  | 2012 | 30-37 | years
Woodridge - Rochester, MN | — |  | 370 |  | 6,028 |  | 5,380 |  | 761 |  | 11,017 |  | 11,778 |  | (6,625) |  | 1997 | 30-37 | years
Total Same-Store | $ | 262,673 |  | $ | 129,597 |  | $ | 1,258,137 |  | $ | 180,716 |  | $ | 146,004 |  | $ | 1,422,446 |  | $ | 1,568,450 |  | $ | (419,730) |  |  |  |
Non-Same-Store |  |  |  |  |  |  |  |  |  |  |
Bayberry Place - Minneapolis, MN | 11,048 |  | 1,807 |  | 14,113 |  | 538 |  | 1,865 |  | 14,593 |  | 16,458 |  | (177) |  | 2021 | 30 | years
Burgundy and Hillsboro Court - Minneapolis, MN | 23,570 |  | 2,834 |  | 31,149 |  | 1,177 |  | 2,913 |  | 32,247 |  | 35,160 |  | (398) |  | 2021 | 30 | years
Civic Lofts - Denver, CO | — |  | 6,166 |  | 55,182 |  | 51 |  | 6,171 |  | 55,228 |  | 61,399 |  | (148) |  | 2021 | 30 | years
Gatewood - St Cloud, MN | 5,156 |  | 327 |  | 6,858 |  | 348 |  | 342 |  | 7,191 |  | 7,533 |  | (95) |  | 2021 | 30 | years
Grove Ridge - Minneapolis, MN | 7,992 |  | 1,250 |  | 10,271 |  | 405 |  | 1,293 |  | 10,633 |  | 11,926 |  | (133) |  | 2021 | 30 | years
Ironwood - Minneapolis, MN | — |  | 2,165 |  | 36,874 |  | 238 |  | 2,167 |  | 37,110 |  | 39,277 |  | (2,564) |  | 2020 | 30 | years
Legacy Waite Park - St Cloud, MN | 6,923 |  | 412 |  | 9,556 |  | 428 |  | 426 |  | 9,970 |  | 10,396 |  | (135) |  | 2021 | 30 | years
New Hope Garden and Village - Minneapolis, MN | 9,943 |  | 1,603 |  | 12,578 |  | 480 |  | 1,651 |  | 13,010 |  | 14,661 |  | (170) |  | 2021 | 30 | years
Palisades - Minneapolis, MN | 22,260 |  | 6,919 |  | 46,577 |  | 386 |  | 6,959 |  | 46,923 |  | 53,882 |  | (574) |  | 2021 | 30 | years
Parkhouse - Thornton, CO | — |  | 10,474 |  | 132,105 |  | 987 |  | 10,484 |  | 133,082 |  | 143,566 |  | (6,922) |  | 2020 | 30 | years
Plymouth Pointe - Minneapolis, MN | 9,575 |  | 1,042 |  | 12,810 |  | 526 |  | 1,073 |  | 13,305 |  | 14,378 |  | (174) |  | 2021 | 30 | years
Pointe West St Cloud - St Cloud, MN | 5,008 |  | 246 |  | 6,850 |  | 437 |  | 260 |  | 7,273 |  | 7,533 |  | (98) |  | 2021 | 30 | years
Portage - Minneapolis, MN | 5,991 |  | 2,133 |  | 6,685 |  | 415 |  | 2,226 |  | 7,007 |  | 9,233 |  | (83) |  | 2021 | 30 | years
River Pointe - Minneapolis, MN | 25,412 |  | 3,346 |  | 33,118 |  | 951 |  | 3,426 |  | 33,989 |  | 37,415 |  | (422) |  | 2021 | 30 | years
Southdale Parc - Minneapolis, MN | 5,301 |  | 1,569 |  | 7,740 |  | 302 |  | 1,618 |  | 7,993 |  | 9,611 |  | (96) |  | 2021 | 30 | years
Union Pointe - Denver, CO | — |  | 5,727 |  | 69,966 |  | 336 |  | 5,736 |  | 70,293 |  | 76,029 |  | (2,723) |  | 2021 | 30 | years
Venue on Knox - Minneapolis, MN | 11,660 |  | 3,438 |  | 14,743 |  | 548 |  | 3,530 |  | 15,199 |  | 18,729 |  | (177) |  | 2021 | 30 | years
Windsor - Minneapolis, MN | 14,731 |  | 2,140 |  | 18,943 |  | 738 |  | 2,204 |  | 19,617 |  | 21,821 |  | (243) |  | 2021 | 30 | years
Wingate - Minneapolis, MN | $ | 10,459 |  | $ | 1,480 |  | $ | 13,530 |  | $ | 503 |  | $ | 1,526 |  | $ | 13,987 |  | $ | 15,513 |  | $ | (180) |  | 2021 | 30 | years
Woodhaven - Minneapolis, MN | 14,408 |  | 3,940 |  | 20,080 |  | 627 |  | 4,040 |  | 20,607 |  | 24,647 |  | (245) |  | 2021 | 30 | years
Woodland Pointe - Minneapolis, MN | 31,673 |  | 5,367 |  | 40,422 |  | 843 |  | 5,449 |  | 41,183 |  | 46,632 |  | (516) |  | 2021 | 30 | years
Total Non-Same-Store | $ | 221,110 |  | $ | 64,385 |  | $ | 600,150 |  | $ | 11,264 |  | $ | 65,359 |  | $ | 610,440 |  | $ | 675,799 |  | $ | (16,273) |  |  |  |
Total Multifamily | $ | 483,783 |  | $ | 193,982 |  | $ | 1,858,287 |  | $ | 191,980 |  | $ | 211,363 |  | $ | 2,032,886 |  | $ | 2,244,249 |  | $ | (436,003) |  |  |  |

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Table of Contents
CENTERSPACE AND SUBSIDIARIES
December 31, 2021
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)

|  |  |  |  | Gross amount at which carried at |  |  | Life on which
|  | Initial Cost to Company |  | close of period |  |  | depreciation in
|  |  |  | Costs capitalized |  |  |  |  | Date of | latest income
|  |  | Buildings & | subsequent to |  | Buildings & |  | Accumulated | Construction | statement is
Description | Encumbrances(1) | Land | Improvements | acquisition | Land | Improvements | Total | Depreciation | or Acquisition | computed
Other - Mixed Use |  |  |  |  |  |  |  |  |  |  |
71 France - Edina, MN | — |  | $ | — |  | $ | 5,879 |  | $ | 867 |  | $ | — |  | $ | 6,746 |  | $ | 6,746 |  | $ | (1,399) |  | 2016 | 30-37 | years
Lugano at Cherry Creek - Denver, CO | — |  | — |  | 1,600 |  | 657 |  | — |  | 2,257 |  | 2,257 |  | (148) |  | 2019 | 30 | years
Oxbo - St Paul, MN | — |  | — |  | 3,472 |  | 54 |  | — |  | 3,526 |  | 3,526 |  | (541) |  | 2015 | 30 | years
Plaza - Minot, ND | — |  | 389 |  | 5,444 |  | 3,447 |  | 607 |  | 8,673 |  | 9,280 |  | (4,303) |  | 2009 | 30-37 | years
Red 20 - Minneapolis, MN | — |  | — |  | 2,525 |  | 475 |  | — |  | 3,000 |  | 3,000 |  | (810) |  | 2015 | 30-37 | years
Total Other - Mixed Use | — |  | $ | 389 |  | $ | 18,920 |  | $ | 5,500 |  | $ | 607 |  | $ | 24,202 |  | $ | 24,809 |  | $ | (7,201) |  |  |  |
Other - Commercial |  |  |  |  |  |  |  |  |  |  |
3100 10th St SW - Minot, ND | — |  | $ | 246 |  | $ | 1,866 |  | $ | — |  | $ | 246 |  | $ | 1,866 |  | $ | 2,112 |  | $ | (388) |  | 2019 | 30 | years
Total Other - Commercial | — |  | $ | 246 |  | $ | 1,866 |  | $ | — |  | $ | 246 |  | $ | 1,866 |  | $ | 2,112 |  | $ | (388) |  |  |  |
Total | $ | 483,783 |  | $ | 194,617 |  | $ | 1,879,073 |  | $ | 197,480 |  | $ | 212,216 |  | $ | 2,058,954 |  | $ | 2,271,170 |  | $ | (443,592) |  |  |  |

(1)Amounts in this column are the mortgages payable balance as of December 31, 2021. These amounts do not include amounts owing under the Company's multi-bank line of credit, term loans, or unsecured senior notes.
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Table of Contents
CENTERSPACE AND SUBSIDIARIES
December 31, 2021 and 2020
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
Reconciliations of the carrying value of total property owned for the years ended December 31, 2021 and 2020 are as follows:

|  | (in thousands)
|  | Year Ended December 31, |  |
|  | 2021 | 2020 |  |
Balance at beginning of year |  | $ | 1,812,557 |  | $ | 1,643,078 |  |  |
Additions during year |  |  |  |  |
Multifamily and Other |  | 491,648 |  | 181,771 |  |  |
Improvements and Other |  | 34,427 |  | 27,460 |  |  |
|  | 2,338,632 |  | 1,852,309 |  |  |
Deductions during year |  |  |  |  |
Cost of real estate sold |  | (57,698) |  | (38,111) |  |  |
Other (1) |  | (9,764) |  | (1,641) |  |  |
Balance at close of year |  | $ | 2,271,170 |  | $ | 1,812,557 |  |  |

Reconciliations of accumulated depreciation/amortization for the years ended December 31, 2021 and 2020 are as follows:

|  | (in thousands)
|  | Year Ended December 31, |  |
|  | 2021 | 2020 |  |
Balance at beginning of year |  | $ | 399,249 |  | $ | 349,122 |  |  |
Additions during year |  |  |  |  |
Provisions for depreciation |  | 78,268 |  | 72,051 |  |  |
Deductions during year |  |  |  |  |
Accumulated depreciation on real estate sold or classified as held for sale |  | (24,161) |  | (21,440) |  |  |
Other (1) |  | (9,764) |  | (484) |  |  |
Balance at close of year |  | $ | 443,592 |  | $ | 399,249 |  |  |

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Table of Contents
CENTERSPACE AND SUBSIDIARIES
December 31, 2021 and 2020
Schedule III - REAL ESTATE AND ACCUMULATED DEPRECIATION (in thousands)
Reconciliations of unimproved land for the years ended December 31, 2021 and 2020 are as follows:

|  | (in thousands)
|  | Year Ended December 31, |  |
|  | 2021 | 2020 |  |
Balance at beginning of year |  | $ | — |  | $ | 1,376 |  |  |
Deductions during year |  |  |  |  |
Cost of real estate sold |  | — |  | (1,376) |  |  |
Balance at close of year |  | — |  | — |  |  |
Total real estate investments, excluding mortgage notes receivable (2) |  | $ | 1,827,578 |  | $ | 1,413,308 |  |  |

(1)Consists of the write off of fully depreciated assets and accumulated amortization and miscellaneous disposed assets.
(2)The net basis, including held for sale properties, for Federal Income Tax purposes was $1.8 billion and $1.4 billion at December 31, 2021 and December 31, 2020, respectively.
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