FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2023

Cash and cash equivalents, restricted cash, other assets, 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, Centerspace applies FASB 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.

Fair Value Measurements on a Recurring Basis


		(in thousands)
	Balance Sheet Location	Total		Level 1	Level 2	Level 3
September 30, 2023
Assets
Notes receivable	Other assets	$	5,455	—	—	$	5,455



December 31, 2022
Assets
Notes receivable	Other assets	$	5,871	—	—	$	5,871

Centerspace utilizes an income approach with Level 3 inputs based on expected future cash flows to value the notes receivable. The inputs include market transactions for similar instruments, management estimates of comparable interest rates (range of 3.75% to 5.50%), and instrument specific credit risk of 0.5%. Changes in the fair value of these receivables from period to period are reported in interest and other income on the Condensed Consolidated Statements of Operations.


	(in thousands)
	Fair Value Measurement		Other Gains		Interest Income		Total Changes in Fair Value Included in Current-Period Earnings
Nine months ended September 30, 2023
Notes receivable	$	5,455	$	14	$	197	$	211
Nine months ended September 30, 2022
Notes receivable	$	5,865	$	11	$	600	$	611

As of September 30, 2023 and December 31, 2022, Centerspace had investments totaling $1.8 million and $1.6 million, respectively, in real estate technology venture funds consisting of privately held entities that develop technology related to the real estate industry. These investments appear within other assets on our Condensed Consolidated Balance Sheets. The investments are measured at net asset value (“NAV”) as a practical expedient under ASC 820. As of September 30, 2023, the Company had total unfunded commitments of $1.2 million.

Fair Value Measurements on a Nonrecurring Basis

There were no non-financial assets or liabilities measured at fair value on a nonrecurring basis at September 30, 2023 and December 31, 2022.

Financial Assets and Liabilities Not Measured at Fair Value

The fair value of unsecured senior notes and mortgages payable are estimated based on the discounted cash flows of the loans using market research and management estimates of comparable interest rates, excluding any prepayment penalties (Level 3).

The estimated fair values of the Company’s financial instruments as of September 30, 2023 and December 31, 2022, respectively, are as follows:


		(in thousands)
		September 30, 2023				December 31, 2022
	Balance Sheet Location	Carrying Amount		Fair Value		Carrying Amount		Fair Value
FINANCIAL ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	29,701	$	29,701	$	10,458	$	10,458
Restricted cash	Restricted cash	$	22,496	$	22,496	$	1,433	$	1,433

FINANCIAL LIABILITIES
Revolving lines of credit	Revolving lines of credit	$	—	$	—	$	113,500	$	113,500
Term loans	Notes payable	$	—	$	—	$	100,000	$	100,000
Unsecured senior notes	Notes payable	$	300,000	$	234,675	$	300,000	$	238,446
Mortgages payable - Fannie Mae	Mortgages payable	$	198,850	$	157,180	$	198,850	$	161,297
Mortgages payable - other	Mortgages payable	$	343,709	$	306,678	$	299,427	$	274,029

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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