[PART I. FINANCIAL INFORMATION](index=3&type=section&id=Part%20I.%20Financial%20Information) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2023 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Centerspace and its subsidiaries for the quarter ended March 31, 2023, including balance sheets, statements of operations, comprehensive income (loss), equity, and cash flows, along with detailed notes explaining the company's organization, accounting policies, and specific financial line items [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time, reflecting its financial position | Metric | March 31, 2023 (Unaudited) (in thousands) | December 31, 2022 (Audited) (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | **ASSETS** | | | | Total real estate investments | $1,901,744 | $1,998,723 | | Cash and cash equivalents | $8,939 | $10,458 | | Restricted cash | $48,903 | $1,433 | | Other assets | $19,298 | $22,687 | | **TOTAL ASSETS** | **$1,978,884** | **$2,033,301** | | **LIABILITIES** | | | | Accounts payable and accrued expenses | $56,639 | $58,812 | | Revolving lines of credit | $143,469 | $113,500 | | Notes payable, net | $299,412 | $399,007 | | Mortgages payable, net | $474,999 | $495,126 | | **TOTAL LIABILITIES** | **$974,519** | **$1,066,445** | | **EQUITY** | | | | Total shareholders' equity | $759,252 | $729,537 | | Noncontrolling interests | $228,553 | $220,759 | | **TOTAL EQUITY** | **$987,805** | **$950,296** | | **TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY** | **$1,978,884** | **$2,033,301** | - Total assets decreased by **$54.4 million** from December 31, 2022, to March 31, 2023, primarily driven by a reduction in real estate investments[12](index=12&type=chunk) - Total liabilities decreased by **$91.9 million**, mainly due to significant reductions in notes payable and mortgages payable[12](index=12&type=chunk) - Total equity increased by **$37.5 million**, reflecting an improvement in the company's financial position[12](index=12&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, expenses, and net income or loss over a period, indicating its operational profitability | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (YoY) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Revenue | $67,897 | $60,314 | +12.6% | | Total Expenses | $65,459 | $64,225 | +1.9% | | Gain (loss) on sale of real estate and other investments | $60,159 | — | N/A | | Operating income (loss) | $62,597 | $(3,911) | N/A | | Interest expense | $(10,319) | $(7,715) | +33.8% | | Interest and other income (loss) | $49 | $1,063 | -95.4% | | **NET INCOME (LOSS)** | **$52,327** | **$(10,563)** | N/A | | Net income (loss) attributable to controlling interests | $43,571 | $(8,589) | N/A | | **NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS** | **$41,964** | **$(10,196)** | N/A | | NET INCOME (LOSS) PER COMMON SHARE – BASIC | $2.79 | $(0.68) | N/A | | NET INCOME (LOSS) PER COMMON SHARE – DILUTED | $2.76 | $(0.68) | N/A | - The company reported a significant turnaround from a net loss of **$10.6 million** in Q1 2022 to a net income of **$52.3 million** in Q1 2023, primarily driven by a **$60.2 million** gain on the sale of real estate[15](index=15&type=chunk) - Revenue increased by **12.6%** year-over-year, while total expenses saw a modest increase of **1.9%**[15](index=15&type=chunk) - Diluted EPS improved substantially from **$(0.68)** in Q1 2022 to **$2.76** in Q1 2023[15](index=15&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) This statement presents net income or loss alongside other comprehensive income items, providing a complete view of changes in equity from non-owner sources | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :-------------------------------------------------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income (loss) | $52,327 | $(10,563) | | Other comprehensive income (loss): | | | | Unrealized gain (loss) from derivative instrument | — | $1,581 | | (Gain) loss on derivative instrument reclassified into earnings | $138 | $304 | | **Total comprehensive income (loss)** | **$52,465** | **$(8,678)** | | Comprehensive income (loss) attributable to controlling interests | $43,892 | $(6,221) | - Total comprehensive income (loss) significantly improved from a loss of **$8.7 million** in Q1 2022 to an income of **$52.5 million** in Q1 2023, mirroring the net income trend[17](index=17&type=chunk) [Condensed Consolidated Statements of Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) This statement tracks changes in the company's equity accounts, including net income, distributions, and share transactions, over a period | Metric | Balance at December 31, 2022 (in thousands) | Net income (loss) attributable to controlling interests and noncontrolling interests (in thousands) | Distributions - common shares and Units (in thousands) | Shares repurchased (in thousands) | Balance at March 31, 2023 (in thousands) | | :----------------------------------- | :---------------------------------------- | :------------------------------------------------------------------------------------------------ | :--------------------------------------------------- | :-------------------------------- | :--------------------------------------- | | Total Equity | $950,296 | $52,167 | $(11,668) | $(1,022) | $987,805 | - Total equity increased from **$950.3 million** at December 31, 2022, to **$987.8 million** at March 31, 2023, primarily due to net income, partially offset by distributions and share repurchases[20](index=20&type=chunk) - Common shares outstanding increased slightly from **15,020** at December 31, 2022, to **15,032** at March 31, 2023, despite share repurchases, due to share-based compensation and unit conversions[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement categorizes cash inflows and outflows from operating, investing, and financing activities, showing liquidity and solvency | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by (used by) operating activities | $21,804 | $11,598 | | Net cash provided by (used by) investing activities | $131,184 | $(12,731) | | Net cash provided by (used by) financing activities | $(107,037) | $(21,770) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $45,951 | $(22,903) | | Cash, cash equivalents, and restricted cash at end of period | $57,842 | $15,722 | - Net cash from operating activities increased by **$10.2 million** year-over-year, reaching **$21.8 million** in Q1 2023[22](index=22&type=chunk) - Investing activities generated **$131.2 million** in Q1 2023, a significant improvement from a **$12.7 million** outflow in Q1 2022, primarily due to proceeds from the sale of real estate[22](index=22&type=chunk) - Financing activities resulted in a net cash outflow of **$107.0 million** in Q1 2023, largely due to principal payments on notes and mortgages payable, and distributions[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements, clarifying accounting policies and specific line items [NOTE 1 • ORGANIZATION](index=9&type=section&id=NOTE%201%20%E2%80%A2%20ORGANIZATION) This note describes Centerspace's business as a REIT focused on apartment communities and its operational structure - Centerspace is a North Dakota real estate investment trust (REIT) focused on owning, managing, acquiring, redeveloping, and developing apartment communities[27](index=27&type=chunk) - As of March 31, 2023, Centerspace owned interests in **75 apartment communities**, comprising **13,497 apartment homes**[27](index=27&type=chunk) [NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=NOTE%202%20%E2%80%A2%20BASIS%20OF%20PRESENTATION%20AND%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the accounting principles used in preparing the financial statements and details key revenue recognition and expense policies - The financial statements are prepared in accordance with GAAP for interim financial information and SEC regulations, omitting certain annual disclosures[30](index=30&type=chunk) - Rental income constituted approximately **98.3%** of total revenues for the three months ended March 31, 2023[37](index=37&type=chunk) Revenue Stream Disaggregation (Three Months Ended March 31) | Revenue Stream | 2023 (in thousands) | 2022 (in thousands) | | :--------------------------------- | :------------------ | :------------------ | | Fixed lease income - operating leases | $63,265 | $56,673 | | Variable lease income - operating leases | $3,500 | $2,523 | | Other property revenue | $1,132 | $1,118 | | **Total revenue** | **$67,897** | **$60,314** | - A gain of **$60.2 million** on the sale of real estate and other assets was recognized for the three months ended March 31, 2023, compared to no gain in the prior year[43](index=43&type=chunk) - The company incurred **$2.2 million** in cash severance and benefits, **$737 thousand** in accelerated share-based compensation, and **$306 thousand** in other transition-related expenses due to the former CEO's departure[51](index=51&type=chunk) [NOTE 3 • EARNINGS PER SHARE](index=12&type=section&id=NOTE%203%20%E2%80%A2%20EARNINGS%20PER%20SHARE) This note provides the calculation and reconciliation of basic and diluted earnings per share, including factors affecting the denominator Earnings Per Share Reconciliation (Three Months Ended March 31) | Metric | 2023 (in thousands, except per share data) | 2022 (in thousands, except per share data) | | :------------------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Net income (loss) attributable to controlling interests | $43,571 | $(8,589) | | Numerator for basic earnings (loss) per share | $41,964 | $(10,196) | | Numerator for diluted earnings (loss) per share | $50,690 | $(12,193) | | Denominator for basic earnings per share weighted average shares | 15,025 | 15,097 | | Denominator for diluted earnings per share | 18,359 | 15,097 | | **NET INCOME (LOSS) PER COMMON SHARE – BASIC** | **$2.79** | **$(0.68)** | | **NET INCOME (LOSS) PER COMMON SHARE – DILUTED** | **$2.76** | **$(0.68)** | - Diluted EPS significantly improved to **$2.76** in Q1 2023 from a loss of **$0.68** in Q1 2022[58](index=58&type=chunk) - Performance-based RSUs of **36 thousand** were excluded from diluted EPS calculation in Q1 2023 as they were anti-dilutive[54](index=54&type=chunk) [NOTE 4 • EQUITY AND MEZZANINE EQUITY](index=13&type=section&id=NOTE%204%20%E2%80%A2%20EQUITY%20AND%20MEZZANINE%20EQUITY) This note details changes in equity and mezzanine equity, including operating partnership units, preferred units, and share repurchase activities - Operating Partnership Units outstanding were **967 thousand** at March 31, 2023, down from **971 thousand** at December 31, 2022[59](index=59&type=chunk) - Series E preferred units outstanding decreased from **1.8 million** at December 31, 2022, to **1.7 million** at March 31, 2023, with **13 thousand** units redeemed for **16 thousand** common shares valued at **$935 thousand** in Q1 2023[62](index=62&type=chunk)[63](index=63&type=chunk) - The company repurchased **19,464 common shares** for **$1.0 million** at an average price of **$52.51 per share** during Q1 2023, with **$19.9 million** remaining authorized under the Share Repurchase Program[67](index=67&type=chunk)[68](index=68&type=chunk) - As of March 31, 2023, **$126.6 million** remained available under the 2021 ATM Program for common share offerings[65](index=65&type=chunk) [NOTE 5 • DEBT](index=15&type=section&id=NOTE%205%20%E2%80%A2%20DEBT) This note provides a comprehensive breakdown of the company's debt obligations, including lines of credit, notes, and mortgages, with associated interest rates and maturities Debt Summary (in thousands) | Debt Type | March 31, 2023 Carrying Amount (in thousands) | March 31, 2023 Weighted Average Interest Rate | December 31, 2022 Carrying Amount (in thousands) | December 31, 2022 Weighted Average Interest Rate | Weighted Average Maturity in Years at March 31, 2023 | | :------------------------------------ | :-------------------------------------------- | :------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :--------------------------------------------------- | | Lines of credit | $143,469 | 6.39% | $113,500 | 4.12% | 2.00 | | Term loans | — | — | $100,000 | 5.57% | — | | Unsecured senior notes | $300,000 | 3.12% | $300,000 | 3.12% | 8.01 | | Mortgages payable - Fannie Mae credit facility | $198,850 | 2.78% | $198,850 | 2.78% | 7.99 | | Mortgages payable - other | $279,340 | 3.85% | $299,427 | 3.85% | 5.09 | | **Total debt** | **$921,659** | **3.71%** | **$1,011,777** | **3.62%** | **6.06** | - Total debt decreased by **$90.1 million** from December 31, 2022, to March 31, 2023, primarily due to the full repayment of a **$100.0 million** term loan[72](index=72&type=chunk)[79](index=79&type=chunk) - The weighted average interest rate on total debt increased slightly from **3.62%** to **3.71%** due to rising interest rates affecting variable rate lines of credit[72](index=72&type=chunk) - As of March 31, 2023, **$110.5 million** in additional borrowing availability remained under its **$250.0 million** unsecured credit facility[74](index=74&type=chunk) [NOTE 6 • DERIVATIVE INSTRUMENTS](index=16&type=section&id=NOTE%206%20%E2%80%A2%20DERIVATIVE%20INSTRUMENTS) This note explains the company's use of derivative instruments, primarily interest rate swaps, to manage exposure to interest rate fluctuations - The company uses interest rate derivatives to manage exposure to interest rate fluctuations, primarily through interest rate swap contracts to fix variable interest rate debt[83](index=83&type=chunk) - In February 2022, the company terminated its **$75.0 million** interest rate swap and **$70.0 million** forward swap, incurring a **$3.2 million** payment[85](index=85&type=chunk) - As of March 31, 2023, and December 31, 2022, the company had no remaining interest rate swaps[85](index=85&type=chunk) [NOTE 7 • FAIR VALUE MEASUREMENTS](index=17&type=section&id=NOTE%207%20%E2%80%A2%20FAIR%20VALUE%20MEASUREMENTS) This note details the fair value measurements of financial instruments, including notes receivable and investments, using various valuation techniques and inputs Fair Value Measurements on a Recurring Basis (Notes Receivable) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------- | :---------------------------- | :---------------------------- | | Notes receivable | $5,661 | $5,871 | - Notes receivable are valued using an income approach with Level 3 inputs, including market transactions, comparable interest rates (**3.75% to 5.00%**), and instrument-specific credit risk (**0.5% to 1.0%**)[91](index=91&type=chunk) - Investments in real estate technology venture funds, measured at NAV, totaled **$1.5 million** at March 31, 2023, with unfunded commitments of **$1.4 million**[92](index=92&type=chunk)[114](index=114&type=chunk) [NOTE 8 • ACQUISITIONS AND DISPOSITIONS](index=18&type=section&id=NOTE%208%20%E2%80%A2%20ACQUISITIONS%20AND%20DISPOSITIONS) This note summarizes the company's real estate acquisition and disposition activities, including sales proceeds and recognized gains or losses - Centerspace did not acquire new real estate during the three months ended March 31, 2023[96](index=96&type=chunk) - During Q1 2023, Centerspace disposed of **nine apartment communities** across four transactions for an aggregate sales price of **$144.3 million**, realizing a gain of **$60.2 million**[100](index=100&type=chunk)[102](index=102&type=chunk) Dispositions (Three Months Ended March 31, 2023) | Dispositions | Sale Price (in thousands) | Book Value and Sales Cost (in thousands) | Gain/(Loss) (in thousands) | | :-------------------------------------- | :------------------------ | :--------------------------------------- | :------------------------- | | 115 homes - Boulder Court - Eagan, MN | $14,605 | $4,970 | $9,635 | | 498 homes - 2 Nebraska apartment communities | $48,500 | $14,975 | $33,525 | | 892 homes - 5 Minnesota apartment communities | $74,500 | $55,053 | $19,447 | | 62 homes - Portage - Minneapolis, MN | $6,650 | $9,098 | $(2,448) | | **Total Dispositions** | **$144,255** | **$84,096** | **$60,159** | [NOTE 9 • SEGMENTS](index=19&type=section&id=NOTE%209%20%E2%80%A2%20SEGMENTS) This note identifies the company's reportable operating segments and provides financial information, including Net Operating Income, for each segment - Centerspace operates in a single reportable segment: ownership, management, development, redevelopment, and acquisition of apartment communities[103](index=103&type=chunk) - Net Operating Income (NOI) for the multifamily segment increased to **$36.6 million** in Q1 2023 from **$31.8 million** in Q1 2022[106](index=106&type=chunk)[108](index=108&type=chunk) Net Operating Income (NOI) Reconciliation (Three Months Ended March 31) | Metric | 2023 (in thousands) | 2022 (in thousands) | | :----------------------------------- | :------------------ | :------------------ | | Total Revenue | $67,897 | $60,314 | | Property operating expenses, including real estate taxes | $28,923 | $25,873 | | **Net operating income** | **$38,974** | **$34,441** | | Net income (loss) | $52,327 | $(10,563) | [NOTE 10 • COMMITMENTS AND CONTINGENCIES](index=20&type=section&id=NOTE%2010%20%E2%80%A2%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the company's various commitments and potential liabilities, including legal proceedings and unfunded investment commitments - Centerspace is involved in a lawsuit regarding water damage from a retaining wall, with an unpredictable outcome and potential settlement[110](index=110&type=chunk) - **Thirty-two properties** (**6,115 apartment homes**) are subject to restrictions on taxable dispositions, which the company manages through tax-deferred transactions (Section 1031) to avoid indemnification payments[112](index=112&type=chunk)[113](index=113&type=chunk) - Unfunded commitments in real estate technology venture funds totaled **$1.4 million** as of March 31, 2023[114](index=114&type=chunk) [NOTE 11 • SHARE-BASED COMPENSATION](index=21&type=section&id=NOTE%2011%20%E2%80%A2%20SHARE-BASED%20COMPENSATION) This note details the nature and amount of share-based compensation expense, including information on RSU and stock option awards - Share-based compensation expense was **$1.5 million** for Q1 2023, up from **$719 thousand** in Q1 2022[117](index=117&type=chunk) - The vesting of unvested time-based RSUs and stock options for the former CEO, Mark Decker, was accelerated on March 31, 2023, resulting in an additional **$737 thousand** in share-based compensation expense[118](index=118&type=chunk) - 2023 LTIP awards included **14,256 time-based RSUs**, **20,497 performance RSUs** (TSR-based), and **45,955 stock options**, with specific vesting schedules and valuation assumptions[116](index=116&type=chunk) [NOTE 12 • SUBSEQUENT EVENTS](index=22&type=section&id=NOTE%2012%20%E2%80%A2%20SUBSEQUENT%20EVENTS) This note reports significant events that occurred after the balance sheet date but before the financial statements were issued - Through May 1, 2023, Centerspace repurchased **104,503 common shares** for **$5.7 million** at an average price of **$54.51 per share**[120](index=120&type=chunk) - On April 26, 2023, the company closed on a **$90.0 million** secured note payable with a **5.04% interest rate** and a **12-year term**[121](index=121&type=chunk) - Subsequent to March 31, 2023, **$47.8 million** of net tax-deferred exchange proceeds were released from restricted cash[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an executive summary, detailed analysis of the company's financial performance for the three months ended March 31, 2023, compared to 2022, including GAAP and non-GAAP measures like NOI, FFO, and Core FFO. It also discusses liquidity, capital resources, debt, equity, and potential risks such as inflation and supply chain issues - Centerspace is a REIT focused on owning, managing, acquiring, redeveloping, and developing apartment communities, with **75 communities** and **13,497 apartment homes** as of March 31, 2023[128](index=128&type=chunk) - The company sold **nine non-core apartment communities** for **$144.3 million**, realizing a **$60.2 million** gain, and used proceeds to pay down a **$100.0 million** term loan[132](index=132&type=chunk) Key Financial Performance Highlights (Three Months Ended March 31) | Metric | 2023 | 2022 | Change (YoY) | | :------------------------------------------------ | :--------- | :--------- | :----------- | | Revenue | $67.9 million | $60.3 million | +12.6% | | Total Expenses | $65.5 million | $64.2 million | +1.9% | | Net income (loss) per diluted share | $2.76 | $(0.68) | N/A | | Core FFO applicable to common shares and Units | $19.5 million | $17.9 million | +8.9% | | Same-store revenue growth | 10.5% | N/A | N/A | | Same-store NOI growth | 11.0% | N/A | N/A | | Weighted Average Occupancy (Same-store) | 94.8% | 94.1% | +0.7 pp | | General and administrative expenses | $7.7 million | $4.5 million | +71.6% | | Interest expense | $10.3 million | $7.7 million | +33.8% | [Executive Summary](index=23&type=section&id=Executive%20Summary) This summary provides a high-level overview of Centerspace's business model, strategic focus, and key financial highlights for the period - Centerspace is a REIT focused on apartment communities, aiming to maximize resident satisfaction and retention through high-quality assets and resident-centered operations[128](index=128&type=chunk)[129](index=129&type=chunk) - Property owned at historical cost was **$2.4 billion** at March 31, 2023, down from **$2.5 billion** at December 31, 2022[128](index=128&type=chunk) [Overview of the Three Months Ended March 31, 2023](index=23&type=section&id=Overview%20of%20the%20Three%20Months%20Ended%20March%2031%2C%202023) This section highlights the significant operational and financial achievements and challenges during the first quarter of 2023 - Sold **nine non-core apartment communities** for **$144.3 million**, realizing a **$60.2 million** gain, and used proceeds to pay down a **$100.0 million** term loan[132](index=132&type=chunk) - Revenue increased by **12.6%** to **$67.9 million**, driven by **10.5% growth** from same-store communities[132](index=132&type=chunk) - Net income per diluted share was **$2.76**, a significant improvement from a net loss of **$0.68** in the prior year[132](index=132&type=chunk) - Core FFO increased by **$1.6 million** to **$19.5 million**, primarily due to increased NOI, offset by higher interest expense and lower other income[133](index=133&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's revenues, expenses, and profitability metrics, including same-store performance and non-GAAP measures - Same-store revenue increased by **10.5%** (**$5.6 million**) due to **9.6% growth** in average monthly revenue per occupied home and a **0.7% increase** in weighted average occupancy to **94.8%**[142](index=142&type=chunk) - Same-store Net Operating Income (NOI) increased by **11.0%** (**$3.4 million**) to **$34.3 million**[142](index=142&type=chunk) - General and administrative expenses surged by **71.6%** (**$3.2 million**) to **$7.7 million**, mainly due to executive severance and transition costs related to the CEO departure[148](index=148&type=chunk) - Interest expense rose by **33.8%** (**$2.6 million**) to **$10.3 million**, attributed to larger debt balances from 2022 acquisitions and rising interest rates[150](index=150&type=chunk) Funds from Operations (FFO) and Core FFO (Three Months Ended March 31) | Metric | 2023 (in thousands) | 2022 (in thousands) | | :----------------------------------------- | :------------------ | :------------------ | | FFO applicable to common shares and Units | $16,254 | $18,526 | | Core FFO applicable to common shares and Units | $19,542 | $17,922 | | FFO per share and Unit - diluted | $0.89 | $1.01 | | Core FFO per share and Unit - diluted | $1.07 | $0.98 | - FFO decreased by **12.3%** to **$16.3 million**, impacted by severance costs and increased interest expense, while Core FFO increased by **8.9%** to **$19.5 million**[159](index=159&type=chunk)[160](index=160&type=chunk) [Acquisitions and Dispositions](index=28&type=section&id=Acquisitions%20and%20Dispositions) This section summarizes the company's activities related to acquiring and selling real estate properties during the reporting period - No acquisitions were made during Q1 2023[162](index=162&type=chunk) - **Nine apartment communities** were disposed of in Q1 2023 for an aggregate sales price of **$144.3 million**[162](index=162&type=chunk) [Distributions Declared](index=29&type=section&id=Distributions%20Declared) This section outlines the common and preferred share distributions declared by the company for the reported quarter - Distributions of **$0.73 per common share and Unit** were declared for Q1 2023 and Q1 2022[163](index=163&type=chunk) - Preferred share distributions were **$0.4140625 per Series C preferred share** and **$0.96875 per Series E preferred unit** for both periods[163](index=163&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations, detailing sources and uses of capital - Total liquidity as of March 31, 2023, was approximately **$121.4 million**, including **$112.5 million** available on lines of credit and **$8.9 million** in cash and cash equivalents[168](index=168&type=chunk) - The company's primary liquidity sources include cash from operations, unsecured lines of credit, property dispositions, and offerings of preferred/common shares and long-term debt[165](index=165&type=chunk) - Key liquidity demands include operating expenses, debt service, capital improvements, distributions, and acquisitions[166](index=166&type=chunk) - During Q1 2023, capital was generated from **$141.6 million** in net proceeds from property sales and **$30.0 million** from lines of credit[186](index=186&type=chunk) - Capital was used for **$100.0 million repayment** on a term loan, **$20.7 million** in mortgage principal payments, **$14.9 million** in distributions, **$1.0 million** in share repurchases, and **$11.2 million** for capital improvements[186](index=186&type=chunk) [Inflation and Supply Chain](index=31&type=section&id=Inflation%20and%20Supply%20Chain) This section discusses the potential impacts of macroeconomic factors like inflation and supply chain disruptions on the company's operations and financial performance - Short-term apartment leases (one year or less) allow for rent increases in an inflationary environment, subject to market conditions[181](index=181&type=chunk) - Inflation and supply chain pressures are expected to increase operating expenses, particularly energy, salary, and construction material costs, potentially impacting returns on value-add projects[182](index=182&type=chunk) - Prolonged market disruption or declining credit conditions could negatively affect access to capital and refinancing efforts, while rising interest rates could increase borrowing costs[183](index=183&type=chunk) [Off-Balance Sheet Arrangements](index=31&type=section&id=Off-Balance%20Sheet%20Arrangements) This section discloses any significant transactions, agreements, or other contractual arrangements not recorded on the balance sheet - As of March 31, 2023, Centerspace had no significant off-balance sheet arrangements[184](index=184&type=chunk) [Critical Accounting Policies](index=31&type=section&id=Critical%20Accounting%20Policies) This section describes the accounting policies that require management's most difficult, subjective, or complex judgments and estimates - Management's estimates and assumptions in financial statements affect reported asset/liability amounts and revenue/expense disclosures[185](index=185&type=chunk) - No significant changes to critical accounting policies occurred during the three months ended March 31, 2023[185](index=185&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the company's exposure to market risk, primarily from fluctuations in interest rates on its debt obligations. Centerspace uses derivative instruments to manage interest rate exposure but not for speculative purposes - Centerspace's market risk primarily stems from fluctuations in interest rates (LIBOR and SOFR) affecting current and future fixed and variable rate debt[188](index=188&type=chunk) - The company uses derivative instruments to stabilize interest expense and manage interest rate exposure, but not for trading or speculative purposes[188](index=188&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of March 31, 2023. No material changes to internal controls over financial reporting were identified during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2023, ensuring timely and accurate reporting[191](index=191&type=chunk) - No material changes to internal controls over financial reporting occurred during the quarter ended March 31, 2023[192](index=192&type=chunk) [PART II. OTHER INFORMATION](index=34&type=section&id=Part%20II.%20Other%20Information) This section provides additional disclosures on legal proceedings, risk factors, equity sales, and other relevant information not covered in the financial statements [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) Centerspace is involved in routine litigation incidental to its business and is currently a defendant in a lawsuit concerning water damage from a retaining wall. The company does not anticipate a material adverse effect on its financial statements from these proceedings - The company is a defendant in a lawsuit regarding water damage from a retaining wall, with an uncertain outcome and potential settlement[110](index=110&type=chunk) - No material pending legal proceedings, other than ordinary routine litigation, are known to the company[195](index=195&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) The company highlights a new risk factor related to potential losses from cash and cash equivalents held in deposit accounts exceeding FDIC insurance limits, particularly in light of recent financial institution failures. No other material changes to previously disclosed risk factors were noted - A new risk factor identifies potential loss or delayed access to funds exceeding FDIC insurance limits if financial institutions holding cash and cash equivalents fail[196](index=196&type=chunk)[197](index=197&type=chunk) - The company has not experienced losses from cash held in bank accounts and has no exposure to recently failed financial institutions like SVB or Signature Bank[197](index=197&type=chunk) - No other material changes to the risk factors discussed in the Annual Report on Form 10-K for 2022 were reported[198](index=198&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the issuance of unregistered common shares to limited partners of the Operating Partnership and the company's share repurchase activities under its authorized program - On January 31, 2023, **3,526 unregistered Common Shares** were issued to limited partners of the Operating Partnership in exchange for their Units[199](index=199&type=chunk) Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Number of Shares and Units Purchased | Average Price Paid per Share and Unit | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Amount of Shares That May Yet Be Purchased Under the Plans or Programs | | :-------------------- | :--------------------------------------- | :------------------------------------ | :--------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------- | | January 1 - 31, 2023 | — | — | — | $20.9 million | | February 1 - 28, 2023 | — | — | — | $20.9 million | | March 1 - 31, 2023 | 19,464 | $52.51 | 19,464 | $19.9 million | | **Total** | **19,464** | **$52.51** | **19,464** | | - As of March 31, 2023, **$19.9 million** remained authorized for purchase under the **$50.0 million** share repurchase program approved on March 10, 2022[201](index=201&type=chunk) [Item 3. Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[202](index=202&type=chunk) [Item 4. Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Centerspace - Mine Safety Disclosures are not applicable to the registrant[202](index=202&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item - No other information was reported[202](index=202&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q report, including organizational documents, employment agreements, severance agreements, and various certifications and XBRL documents - Exhibits include Articles of Amendment, Trustee's Regulations, Articles Supplementary, Employment Agreement with Anne Olson, Change in Control Severance Agreement, and Separation Agreement with Mark Decker, Jr[205](index=205&type=chunk) - Certifications under Sections 302 and 906 by the CEO and CFO are filed, along with various XBRL documents for financial statements[205](index=205&type=chunk) [Signatures](index=36&type=section&id=Signatures) The report is duly signed on behalf of Centerspace by Anne Olson, President and Chief Executive Officer, and Bhairav Patel, Executive Vice President and Chief Financial Officer, as of May 1, 2023 - The report was signed by Anne Olson, President and CEO, and Bhairav Patel, Executive Vice President and CFO, on May 1, 2023[207](index=207&type=chunk)

Financial Data and Key Metrics Changes - Centerspace reported core FFO for Q4 2022 of $1.17 per diluted share, bringing the full year core FFO to $4.43 per diluted share, an increase of 11% over the prior year [36][4] - The same-store portfolio achieved a 9% growth in net operating income compared to 2021, with revenue growth of 10% for the full year [34][4] - Total debt as of December 31, 2022, was $1 billion with a weighted average interest rate of 3.62% [15] Business Line Data and Key Metrics Changes - The same-store portfolio saw an average new lease increase of 8% and renewals increased by 8.4% during 2022 [12] - In Q4, same-store new lease rates increased by 1.8% on average, while same-store renewals achieved average increases of 7.2% [34] - The company experienced a 26% increase in utility expenses contributing to the overall same-store expense increase in 2022 [35] Market Data and Key Metrics Changes - The company noted that its portfolio is among the least exposed to new supply in the public markets, providing a strong value proposition to residents [10] - The financial health of residents remains strong, with a weighted average occupancy increase of 40 basis points to 94.9% in Q4 [12] Company Strategy and Development Direction - Centerspace plans to continue improving its portfolio and has deployed about $125 million in capital for acquisitions and share buybacks [8] - The company expects to close on the sale of 11 assets for approximately $155 million to $165 million, which will be used to pay down debt [17] - The management is focused on enhancing operational efficiencies and maintaining strong revenue growth despite inflationary pressures [14][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's fundamentals and the ability to navigate expense challenges, particularly in the Midwest and Mountain West markets [7] - The outlook for 2023 anticipates core FFO to be roughly flat compared to 2022 at $4.42 per share, with total expenses expected to grow by 5.5% [16][9] Other Important Information - The company closed on a $100 million unsecured term loan facility to enhance balance sheet flexibility during market volatility [15] - Management indicated that the majority of inflationary increases were realized in the second half of 2022, suggesting moderated expense growth moving forward [35] Q&A Session Summary Question: Can you walk through the asset dispositions and their impact? - Management detailed the locations of the assets being sold and estimated a dilutive impact of $0.08 to $0.10 on guidance [20][21] Question: What is the status of the RUBS program? - The RUBS program is expected to contribute to revenue growth, with utility expenses projected to remain flat due to residents being responsible for their own utilities [22][42] Question: What are the expectations for bad debt and occupancy in 2023? - Projections for bad debt in 2023 are about 40 basis points, with occupancy expected to remain around 95% [47] Question: How does the company view its dividend levels? - Management indicated that the dividend is considered secure, with a strong asset base providing financial security [49] Question: What is the acquisition pipeline looking like? - Management noted that while there are opportunities, the volume of transactions has decreased compared to previous years [71]

Part I [Business Overview](index=4&type=section&id=Item%201.%20Business) Centerspace is a REIT specializing in owning, managing, and developing apartment communities across the Midwest and Mountain West - Centerspace is a REIT focused on owning, managing, and developing apartment communities, with **84 communities** and **15,065 homes** and a net real estate investment of **$2.0 billion** as of December 31, 2022[15](index=15&type=chunk)[40](index=40&type=chunk) - The company operates as an Umbrella Partnership Real Estate Investment Trust (UPREIT) through its operating partnership, facilitating tax-deferred property contributions[17](index=17&type=chunk)[43](index=43&type=chunk) - Business strategies focus on enhancing resident experience, scaling for efficiency, leveraging technology, and committing to ESG initiatives[20](index=20&type=chunk)[21](index=21&type=chunk) - As of December 31, 2022, the company had **471 employees**, with **52.0% identifying as female** and diverse ethnic representation[85](index=85&type=chunk)[34](index=34&type=chunk) - The company faces direct competition from other apartment communities, single-family homes, and various real estate investors, including REITs[36](index=36&type=chunk)[104](index=104&type=chunk) [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant operational, financial, and stock-related risks, including macroeconomic volatility, sector concentration, and REIT status maintenance - Operations are materially affected by uncertain global macroeconomic and political conditions, including inflation and geopolitical instability[62](index=62&type=chunk)[92](index=92&type=chunk) - Investments are significantly concentrated in the multifamily sector, increasing vulnerability to market downturns[68](index=68&type=chunk) - The company faces risks from security breaches and cyber-attacks, having previously experienced a non-material ransomware attack[77](index=77&type=chunk)[108](index=108&type=chunk) - Financing risks include inability to refinance debt on favorable terms due to high interest rates and restrictive debt covenants[115](index=115&type=chunk)[116](index=116&type=chunk)[131](index=131&type=chunk) - Failure to qualify as a REIT would result in federal income tax at corporate rates, significantly reducing funds for distribution and investment[148](index=148&type=chunk)[170](index=170&type=chunk) [Unresolved Staff Comments](index=22&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved comments from the SEC staff - No unresolved staff comments were reported[179](index=179&type=chunk) [Properties](index=22&type=section&id=Item%202.%20Properties) As of December 31, 2022, the portfolio included 84 apartment communities with 15,065 homes, concentrated in Minnesota and Colorado - As of December 31, 2022, the company owned **84 apartment communities** with **15,065 homes**, categorized into same-store and non-same-store pools[161](index=161&type=chunk) Properties by State (as of Dec 31, 2022) | State | Total Value (in thousands) | % of Total | | :--- | :--- | :--- | | Minnesota | $ 1,046,037 | 52.3 % | | Colorado | 632,310 | 31.6 % | | North Dakota | 203,955 | 10.2 % | | Nebraska | 73,023 | 3.7 % | | South Dakota | 24,179 | 1.2 % | | Montana | 19,219 | 1.0 % | | **Total** | **$ 1,998,723** | **100.0 %** | - The portfolio comprises **71 same-store communities** with **11,330 homes** and **24 non-same-store communities** with **3,735 homes**[162](index=162&type=chunk)[185](index=185&type=chunk)[203](index=203&type=chunk) [Legal Proceedings](index=25&type=section&id=Item%203.%20Legal%20Proceedings) The company is not involved in any material pending or threatened legal proceedings - The company is not aware of any material pending or threatened legal proceedings[187](index=187&type=chunk) [Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business operations - This item is not applicable[188](index=188&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=26&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common shares trade on the NYSE under 'CSR', with approximately 2,524 shareholders and recent share repurchases - The company's common shares are traded on the NYSE under the symbol **'CSR'**[189](index=189&type=chunk) - As of February 14, 2023, there were approximately **2,524 common shareholders** of record[190](index=190&type=chunk) - A stock performance graph compares the company's five-year cumulative total return against key industry indices[193](index=193&type=chunk)[213](index=213&type=chunk) - In Q4 2022, the company purchased **430,502 shares and units** at an average price of **$67.37**[192](index=192&type=chunk) [Reserved](index=27&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company reported strong operational performance in FY2022 with increased Core FFO and NOI, despite a net loss, driven by acquisitions and strategic financing Key Performance Metrics (FY 2022 vs. FY 2021) | Metric | FY 2022 | FY 2021 | | :--- | :--- | :--- | | Net Loss per Diluted Share | ($1.35) | ($0.47) | | Core FFO per Diluted Share | $4.43 | $3.99 | | Same-Store NOI Growth | 9.0% | N/A | - During 2022, the company acquired **five apartment communities** for **$211.9 million** and issued **321,000 common shares** via its ATM program for **$31.4 million** in net proceeds[248](index=248&type=chunk)[537](index=537&type=chunk)[47](index=47&type=chunk) Consolidated Results of Operations (in thousands) | Metric | FY 2022 | FY 2021 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $256,716 | $201,705 | +27.3% | | Net Operating Income (NOI) | $148,079 | $119,848 | +23.6% | | Net Loss | ($17,641) | ($2,101) | +739.6% | Funds from Operations (FFO) and Core FFO (in thousands, except per share) | Metric | FY 2022 | FY 2021 | | :--- | :--- | :--- | | FFO applicable to common shares and Units | $79,928 | $54,925 | | Core FFO applicable to common shares and Units | $81,883 | $62,085 | | FFO per diluted share and Unit | $4.32 | $3.54 | | Core FFO per diluted share and Unit | $4.43 | $3.99 | - Total liquidity was approximately **$153.0 million** as of December 31, 2022, comprising **$142.5 million** in credit lines and **$10.5 million** in cash[268](index=268&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate fluctuations on its **$213.5 million** variable-rate debt, with a **$2.1 million** annual impact per 100 basis points change - The primary market risk stems from interest rate fluctuations on variable rate debt obligations[289](index=289&type=chunk) - As of December 31, 2022, the company had **$213.5 million** in variable-rate borrowings, with a **100 basis point** interest rate change impacting net income by an estimated **$2.1 million** annually[314](index=314&type=chunk) - During 2022, the company terminated its remaining interest rate swaps, increasing exposure to variable rate movements[339](index=339&type=chunk) [Financial Statements and Supplementary Data](index=39&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates the consolidated financial statements and the independent auditor's report by reference, starting on page F-1 - Consolidated financial statements, related notes, and the Independent Registered Public Accounting Firm's Report are included starting on page F-1[316](index=316&type=chunk)[363](index=363&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=39&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants regarding accounting principles or financial disclosure - No changes in or disagreements with accountants were reported[342](index=342&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Management concluded that disclosure controls and procedures were effective as of December 31, 2022[292](index=292&type=chunk) - Management assessed and found internal control over financial reporting effective as of December 31, 2022, as audited by Grant Thornton LLP[293](index=293&type=chunk)[347](index=347&type=chunk) - No material changes in internal control over financial reporting were identified during the fourth quarter[343](index=343&type=chunk) [Other Information](index=40&type=section&id=Item%209B.%20Other%20Information) No information is reported under this item - No information is reported[348](index=348&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=40&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - This item is not applicable[349](index=349&type=chunk) Part III [Trustees, Executive Officers and Corporate Governance](index=40&type=section&id=Item%2010.%20Trustees%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on trustees, executive officers, and corporate governance is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Shareholders[322](index=322&type=chunk) [Executive Compensation](index=40&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information, including tables, is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Shareholders[323](index=323&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=40&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Security ownership information for beneficial owners and management is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Shareholders[324](index=324&type=chunk) [Certain Relationships and Related Transactions, and Trustee Independence](index=40&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Trustee%20Independence) Information on related party transactions and trustee independence is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Shareholders[325](index=325&type=chunk) [Principal Accountant Fees and Services](index=40&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the 2023 proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Shareholders[326](index=326&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=40&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all exhibits and financial statement schedules, including Schedule III, filed with or incorporated into the report - This section lists the financial statements, Schedule III (Real Estate and Accumulated Depreciation), and all exhibits filed with the report[327](index=327&type=chunk)[351](index=351&type=chunk) [10-K Summary](index=41&type=section&id=Item%2016.%2010-K%20Summary) The company has not provided a summary for this item - No summary has been provided for this item[331](index=331&type=chunk) Financial Statements and Supplementary Data [Reports of Independent Registered Public Accounting Firm](index=47&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Grant Thornton LLP issued unqualified opinions on the consolidated financial statements and internal control over financial reporting - Grant Thornton LLP issued an unqualified opinion on the fair presentation of financial statements in conformity with GAAP[391](index=391&type=chunk) - An unqualified opinion was also issued on the effectiveness of internal control over financial reporting as of December 31, 2022[365](index=365&type=chunk)[368](index=368&type=chunk) - The firm determined there were no critical audit matters from the current period audit[393](index=393&type=chunk) [Consolidated Financial Statements](index=49&type=section&id=Consolidated%20Financial%20Statements) Consolidated financial statements for FY2022 show total assets of **$2.03 billion**, a net loss of **$17.6 million**, and increased operating cash flow Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Real Estate Investments | $1,998,723 | $1,870,854 | | **Total Assets** | **$2,033,301** | **$1,940,061** | | Total Liabilities | $1,066,445 | $918,450 | | **Total Equity** | **$950,296** | **$996,280** | Consolidated Statement of Operations Data (in thousands) | Account | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Revenue | $256,716 | $201,705 | $177,994 | | Operating Income | $13,861 | $29,892 | $33,843 | | **Net Loss** | **($17,641)** | **($2,101)** | **$4,743 (Income)** | Consolidated Cash Flow Data (in thousands) | Account | FY 2022 | FY 2021 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $91,991 | $84,028 | | Net Cash from Investing Activities | ($160,094) | ($267,225) | | Net Cash from Financing Activities | $41,369 | $214,512 | [Notes to Consolidated Financial Statements](index=55&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, **$1.01 billion** in debt, **$211.9 million** in 2022 acquisitions, and share-based compensation plans - The company operates as an UPREIT, holding an **82.9% interest** in its Operating Partnership as of December 31, 2022, with financial statements relying on real estate valuation estimates[410](index=410&type=chunk)[440](index=440&type=chunk)[442](index=442&type=chunk) Total Debt Summary (as of Dec 31, 2022, in thousands) | Debt Type | Balance | Weighted Avg. Maturity (Years) | | :--- | :--- | :--- | | Lines of credit | $113,500 | 2.75 | | Term loans | $100,000 | 0.89 | | Unsecured senior notes | $300,000 | 8.26 | | Mortgages payable | $498,277 | 6.69 | | **Total Debt** | **$1,011,777** | **5.76** | - In 2022, the company acquired **five apartment communities** for **$211.9 million**, with no property dispositions during the year[537](index=537&type=chunk)[566](index=566&type=chunk)[568](index=568&type=chunk) - Total share-based compensation expense was **$2.6 million** in 2022, including grants of **30,245 stock options** and various RSUs to employees and trustees[604](index=604&type=chunk)[487](index=487&type=chunk)[578](index=578&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 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 (State or other jurisdict ...

Centerspace (NYSE:CSR) Q2 2022 Earnings Conference Call August 2, 2022 10:00 AM ET Company Participants Joe McComish - VP, Finance Mark Decker - CEO Bhairav Patel - CFO Anne Olson - COO Conference Call Participants John Kim - BMO Brad Heffern - RBC Capital Markets Rob Stevenson - Janney Connor Mitchell - Piper Sandler Buck Horne - Raymond James Wes Golladay - Baird Operator Good morning and welcome to today's Centerspace Second Quarter Earnings Call. My name is Candice and I'll be your moderator for today's ...

PART I FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements.) This section presents Centerspace's unaudited condensed consolidated financial statements, detailing balance sheets, operations, and cash flows, highlighting asset stability, net loss, and acquisition-related financing [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly increased to **$1.948 billion**, driven by property investments, while total liabilities remained stable and equity grew to **$1.011 billion** due to share issuances | Balance Sheet Items | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | **Total real estate investments** | $1,913,593 | $1,870,854 | | Cash and cash equivalents | $13,156 | $31,267 | | **TOTAL ASSETS** | **$1,947,613** | **$1,940,061** | | **TOTAL LIABILITIES** | **$918,368** | **$918,450** | | **Total equity** | **$1,010,618** | **$996,280** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a **net loss of $3.7 million** for Q2 2022, a shift from prior-year net income, primarily due to the absence of a large gain on real estate sales | Metric (in thousands, except EPS) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | **Revenue** | $63,116 | $46,656 | | **Total Expenses** | $59,308 | $43,923 | | Gain on sale of real estate | $27 | $26,840 | | **Operating Income** | $3,835 | $29,573 | | **Net Income (Loss)** | $(3,743) | $23,103 | | **Net Loss Available to Common Shareholders** | $(4,598) | $19,931 | | **Diluted EPS** | $(0.30) | $1.48 | | Metric (in thousands, except EPS) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | **Revenue** | $123,430 | $93,304 | | **Total Expenses** | $123,533 | $88,930 | | Gain on sale of real estate | $27 | $26,840 | | **Operating Loss** | $(76) | $31,214 | | **Net Loss** | $(14,306) | $17,944 | | **Net Loss Available to Common Shareholders** | $(14,794) | $13,457 | | **Diluted EPS** | $(0.97) | $1.02 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was **$34.5 million**, while investing and financing activities resulted in net cash usage, reflecting acquisitions and debt payments | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $34,491 | $30,574 | | Net cash used by investing activities | $(23,547) | $(40,792) | | Net cash used by financing activities | $(34,499) | $16,546 | | **Net decrease in cash** | **$(23,555)** | **$6,328** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, debt structure of **$874.2 million**, termination of interest rate swaps, and **$116.9 million** in property acquisitions, operating as a multifamily REIT - As of June 30, 2022, Centerspace owned interests in **83 apartment communities** comprising **14,838 apartment homes**[33](index=33&type=chunk) - During the six months ended June 30, 2022, the company acquired **four apartment communities** in Minneapolis, MN, for a total cost of **$116.9 million**; there were no dispositions in the period[102](index=102&type=chunk)[104](index=104&type=chunk) - In February 2022, the company paid **$3.2 million** to terminate its remaining interest rate swaps, and as of June 30, 2022, the company had no interest rate swaps[85](index=85&type=chunk) | Debt Summary | June 30, 2022 (in thousands) | | :--- | :--- | | Unsecured debt | $373,000 | | Mortgages payable | $501,210 | | **Total debt** | **$874,210** | | Weighted average interest rate | 3.27% | | Weighted average maturity | 6.96 years | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2022 financial results, highlighting strong revenue growth, a net loss due to non-recurring gains, **11.5% same-store NOI growth**, and a **$196.2 million liquidity position** [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Q2 2022 saw **total revenue increase 35.3% to $63.1 million** and **NOI grow 32.3%**, driven by acquisitions and same-store revenue growth, despite a net loss due to prior-year gains | Performance Metric | Three Months Ended June 30, 2022 (in thousands) | Three Months Ended June 30, 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $63,116 | $46,656 | 35.3% | | Same-Store Revenue | $48,867 | $43,762 | 11.7% | | **Total NOI** | $36,900 | $27,896 | 32.3% | | Same-Store NOI | $29,167 | $26,152 | 11.5% | | Same-Store Avg. Occupancy | 94.8% | 94.9% | (0.1)% | - The increase in same-store revenue for Q2 2022 was primarily driven by an **11.8% growth in average monthly revenue per occupied home**[147](index=147&type=chunk) - General and administrative expenses increased by **37.5%** in Q2 2022, mainly due to **$1.1 million** in abandoned pursuit costs and higher professional fees and travel costs[157](index=157&type=chunk) [Funds from Operations (FFO)](index=27&type=section&id=Funds%20from%20Operations%20(FFO)) **FFO increased 39.6% to $19.1 million** for Q2 2022, with Core FFO at **$21.0 million**, driven by higher NOI from both same-store and non-same-store communities | FFO Metric (in thousands, except per share) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net Loss Available to Common Shareholders | $(4,598) | $19,931 | | **FFO applicable to common shares and Units** | **$19,085** | **$13,674** | | **Core FFO applicable to common shares and units** | **$21,016** | **$14,124** | | FFO per share and Unit - diluted | $1.02 | $0.95 | | Core FFO per share and Unit - diluted | $1.12 | $0.98 | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Total liquidity stood at **$196.2 million**, comprising cash and available credit, with capital used for acquisitions, debt repayments, and improvements, partially offset by ATM program proceeds - Total liquidity was approximately **$196.2 million** as of June 30, 2022, down from **$211.3 million** at year-end 2021[182](index=182&type=chunk) - The company has a **$250.0 million** revolving line of credit with an accordion option to increase capacity to **$400.0 million**, with **$177.0 million** available as of June 30, 2022[183](index=183&type=chunk) - On June 13, 2022, the Board approved a new share repurchase program authorizing the repurchase of up to **$50.0 million** of common shares, with no shares repurchased under this program as of June 30, 2022[191](index=191&type=chunk)[69](index=69&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk exposure to interest rate fluctuations has increased due to the termination of all interest rate swaps, impacting variable-rate debt - Centerspace's exposure to market risk from interest rate fluctuations has increased as of June 30, 2022, due to the termination of its interest rate swaps which previously fixed the variable rate on its line of credit[202](index=202&type=chunk)[203](index=203&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[205](index=205&type=chunk) - No changes in internal controls over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[206](index=206&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material pending legal proceedings beyond routine litigation incidental to its business operations - As of the filing date, Centerspace is not involved in any material pending legal proceedings[209](index=209&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor highlights the potential negative impact of inflation and price volatility, where rising costs may outpace the ability to increase rents - A new risk factor has been added regarding the impact of inflation and price volatility, noting that rising operating and borrowing costs could adversely affect results if they increase faster than the company's ability to raise rents[210](index=210&type=chunk)[211](index=211&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued **615 unregistered Common Shares** in exchange for Operating Partnership Units and purchased **3,552 units** for cash at an average price of **$92.03** - On April 30, 2022, the Company issued **615 unregistered Common Shares** in exchange for Operating Partnership Units under the private offering exemption[213](index=213&type=chunk) | Period | Total Units Purchased | Average Price Paid per Unit | | :--- | :--- | :--- | | April 1 - 30, 2022 | 2,899 | $93.67 | | May 1 - 31, 2022 | 353 | $85.85 | | June 1 - 30, 2022 | 300 | $83.45 | | **Total** | **3,552** | **$92.03** | [Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q report, including corporate governance documents and officer certifications

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 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 (State or other jurisdiction ...

Centerspace (NYSE:CSR) Q4 2021 Earnings Conference Call March 1, 2022 10:00 AM ET Company Participants Mark Decker - President and CEO Anne Olson - COO Bhairav Patel - EVP and CFO John Kirchmann - EVP Conference Call Participants Rob Stevenson - Janney Alexander Goldfarb - Piper Sandler John Kim - BMO Capital Markets Buck Horne - Raymond James Operator Good day and welcome to the Centerspace Q4 2021 Earnings Call. My name is Brica and I'll be today's event specialist. [Operator Instructions] I would now lik ...

Employee and Team Dynamics - As of December 31, 2021, the company had 462 employees, comprising 394 full-time and 68 part-time[44] - The average tenure of team members is 4.3 years, with 52% of total team members being female[46] - Over 12,000 training courses were completed by team members, indicating a strong focus on employee development[46] - The company has a pay-for-performance strategy, aligning team members' compensation with overall company performance[45] Financial Performance and Risks - The ongoing COVID-19 pandemic has materially impacted the company's financial condition, cash flow, and results of operations[57] - The concentration of investments in the multifamily sector makes the company vulnerable to downturns in this asset class[70] - Competition from various institutions, including other REITs and private partnerships, may negatively impact the company's earnings due to their greater financial resources[73] - Short-term leases expose the company to quicker impacts from declining market rents, affecting rental revenues[75] - Adverse changes in taxes and laws, including recent property tax increases, may affect cash available for distributions and the ability to pay debt[78] - The company faces risks associated with cybersecurity breaches, which could lead to significant costs and reputational damage[81] - The company faces risks related to employee theft or fraud, which could result in significant financial or reputational harm[102] Growth and Market Strategy - The company intends to explore acquisitions or developments in new and existing geographic markets, which introduces various risks[63] - The company may face challenges in managing growth effectively, particularly through the acquisition of additional real estate properties[77] Legal and Regulatory Risks - Changes in federal or state laws regarding climate change could result in increased costs for the company without a corresponding increase in revenue[69] - Environmental laws may impose liabilities for hazardous substances, potentially affecting the ability to sell or rent properties[85] - The company may incur substantial costs related to compliance with laws benefiting disabled persons, impacting investment strategies[95] - Joint ventures may present risks that could adversely affect financial performance and operational results due to shared decision-making authority[96] - Legislative or regulatory changes affecting REITs could adversely impact the company and its shareholders, as tax laws are subject to review and potential amendments[129] Debt and Financing - The company reported outstanding borrowings of approximately $859.8 million as of December 31, 2021[106] - The company anticipates needing to refinance a significant portion of its outstanding debt as it matures, which may not be possible on favorable terms[103] - Rising interest rates could increase the company's interest costs and affect its ability to refinance fixed-rate debt[107] - The company is required to make distributions of at least 90% of its REIT taxable income, limiting its ability to retain cash for future growth[119] - The company has a private shelf agreement for issuing up to $225.0 million of unsecured senior promissory notes, with $200.0 million already issued and $25.0 million remaining available as of December 31, 2021[252] - As of December 31, 2021, the company had a balance of $198.9 million under the Fannie Mae Credit Facility Agreement, secured by mortgages on 16 apartment communities, with a blended weighted average interest rate of 2.78%[254] - The company prepaid two variable rate term loans and terminated two interest rate swaps during the year ended December 31, 2021, with a remaining swap notional of $75.0 million at an average pay rate of 2.81%[251] - The aggregate fair value of the company's interest rate swaps was a liability of $5.7 million as of December 31, 2021[251] - The company has no variable-rate mortgage debt outstanding and $76.0 million of variable-rate borrowings under its line of credit, with $75.0 million fixed through interest rate swaps[255] - The company must distribute at least 90% of its REIT taxable income to maintain its REIT status, and failure to do so could result in corporate income tax on undistributed income[127] - If the company fails to qualify as a REIT, it would be subject to federal income tax at regular corporate rates, which could materially adversely affect its ability to make distributions to shareholders[127] - The company has tax protection agreements in place on thirty-four properties, which require it to make unitholders whole if those properties are sold in a taxable transaction[133] - The company is exposed to credit risk from interest rate swaps in the event of non-performance by the counterparty[251] Debt Structure and Interest Rates - Mortgage loan indebtedness decreased by $13.5 million as of December 31, 2021, compared to December 31, 2020, primarily due to loan maturities and prepayments[256] - 100.0% of the $284.9 million mortgage debt was at fixed rates of interest as of December 31, 2021, with a weighted average interest rate of 3.81%, down from 3.93% in 2020[256] - The total fixed-rate debt for 2022 is $27,113,000, with future principal payments of $45,067,000 in 2023 and $4,054,000 in 2024[258] - The average interest rate for fixed-rate debt is 3.85% for 2022, decreasing to 3.80% for 2024 and thereafter[258] - The company has $76,000,000 in variable-rate debt, with an average interest rate of 2.74%[258] - The total fair value of fixed-rate debt is $791,698,000[258] - The company aims to maintain low exposure to interest rate risk but acknowledges potential vulnerabilities to fluctuations in interest rates[256] Market Perception and Stock Performance - The company has experienced an increase in online reputation management scores from 3.46 to 3.48 out of 5 stars[46] - The company’s stock price may fluctuate significantly due to various market conditions and investor perceptions[112] - The company’s ability to pay distributions is not guaranteed and may be affected by operating and financial results[116] - Material weaknesses in internal control over financial reporting could adversely affect investor confidence and the company's stock price[121]

Centerspace (NYSE:CSR) Q3 2021 Earnings Conference Call November 2, 2021 10:00 AM ET Company Participants Mark Decker - CEO Anne Olson - COO John Kirchmann - CFO Conference Call Participants John Kim - BMO Capital Markets Gaurav Mehta - National Securities Rob Stevenson - Janney Daniel Santos - Piper Sandler Buck Horne - Raymond James Amanda Sweitzer - Baird Operator Good morning, and welcome to the Centerspace Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note, this event is b ...