EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2023

Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares of beneficial interest (“common shares”) outstanding during the period. Centerspace has issued restricted stock units (“RSUs”) and incentive stock options (“ISOs”) under the 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 the earnings per share upon the vesting of the RSUs or exercise of the ISOs or upon conversion of the Series D or Series E preferred units (refer to Note 4 for further discussion of the Series D and the Series E preferred units). Other than the issuance of RSUs, ISOs, Series D preferred units, and Series E preferred units, there are no outstanding options, warrants, convertible stock or other contractual obligations requiring issuance of additional shares that would result in 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 Centerspace’s sole discretion, it may issue common shares in exchange for Units on a one-for-one basis.

The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2023 and 2022.


	(in thousands, except per share data)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
NUMERATOR


Net income (loss) attributable to controlling interests	$	7,774	$	(523)	$	49,482	$	(12,103)
Dividends to preferred shareholders	(1,607)		(1,607)		(4,821)		(4,821)

Numerator for basic earnings (loss) per share – net income (loss) available to common shareholders	6,167		(2,130)		44,661		(16,924)
Noncontrolling interests – Operating Partnership and Series E preferred units(1)	1,204		(439)		6,233		(3,546)

Dividends to preferred unitholders(2)	—		160		480		480
Numerator for diluted earnings (loss) per share	$	7,371	$	(2,409)	$	51,374	$	(19,990)
DENOMINATOR
Denominator for basic earnings per share weighted average shares	14,989		15,373		14,988		15,280
Effect of redeemable operating partnership units(1)	908		—		—		—
Effect of Series D preferred units(2)	—		—		228		—
Effect of Series E preferred units	2,093		—		2,105		—
Effect of dilutive restricted stock units and stock options	28		—		23		—
Denominator for diluted earnings per share	18,018		15,373		17,344		15,280



NET INCOME (LOSS) PER COMMON SHARE – BASIC	$	0.41	$	(0.14)	$	2.98	$	(1.11)



NET INCOME (LOSS) PER COMMON SHARE – DILUTED	$	0.41	$	(0.14)	$	2.96	$	(1.11)

(1)For the nine months ended September 30, 2023, the impact of Units was excluded from the calculation of calculation of net income (loss) per common share - diluted as they were anti-dilutive.

(2)For the three months ended September 30, 2023, dividends to preferred unitholders and the effect of Series D preferred units are excluded in the calculation of net income (loss) per common share - diluted as they were anti-dilutive.

For the three months ended September 30, 2023, Series D preferred units of 228,000, as converted and performance-based RSUs of 26,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the three months ended September 30, 2022, operating partnership units of 984,000, Series D preferred units of 228,000, as converted, Series E preferred units of 2.2 million, as converted, time-based RSUs of 7,000, weighted average stock options of 23,000, and performance-based RSUs of 30,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the nine months ended September 30, 2023, operating partnership units of 943,000 and performance-based RSUs of 26,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

For the nine months ended September 30, 2022, operating partnership units of 980,000, Series D preferred units of 228,000, as converted, Series E preferred units of 2.2 million, as converted, time-based RSUs of 10,000, weighted average stock options of 38,000, and performance-based RSUs of 33,000 were excluded from the calculation of diluted earnings per share because they were anti-dilutive.