8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 1, 2021

CENTERSPACE

(Exact name of Registrant as specified in its charter)

North Dakota	001-35624	45-0311232
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. 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)

Not Applicable

(Former name or former address, if changed from last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐    Written communications pursuant to Rule 425 under the Securities Act

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

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

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth 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. ☐

Explanatory Note.

On September 2, 2021, Centerspace, a North Dakota real estate investment trust (the "Company"), filed a Current Report on Form 8-K (the "Original Report") reporting the completion on September 1, 2021 of the acquisition by Centerspace, LP, a North Dakota limited partnership and operating partnership of the Company (the "Partnership"), of certain real estate assets managed by KMS Management. In the Original Report, the Company indicated that it would amend the Original Report at a later date to include the financial information required by Item 9.01(a) and (b) of Form 8-K.

This Current Report on Form 8-K/A (this "Current Report") amends the Original Report to include the financial information required by Item 9.01(a) and (b) of Form 8-K.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Real Estate Property Acquired.

The financial statements required by this item are filed as Exhibit 99.1 to this Current Report and are incorporated herein by reference.

(b) Pro Forma Financial Information

The pro forma financial information required by this item is filed as Exhibit 99.2 to this Current Report and incorporated herein by reference.

(d) Exhibits

Exhibit
Number	Description
99.1	Financial Statements of Real Estate Property Acquired - KMS portfolio Statements of Revenues and Certain Expenses for the Six Months Ended June 30, 2021 (unaudited) and for the Year Ended December 31, 2020
99.2	Pro Forma Condensed Consolidated Financial Information - Centerspace Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2021 (unaudited) Notes to the Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2021 (unaudited) Pro Forma Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 2021 (unaudited) Pro Forma Condensed Consolidated Statement of Operations of the Year Ended December 30, 2020 (unaudited) Notes to the Pro Forma Condensed Consolidated Statements of Operations for the Six Months Ended June 30, 2021 (unaudited) and the Year Ended December 31, 2020 (unaudited)
104	Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL Document.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Centerspace
	By	/s/ Mark O. Decker, Jr.
		Mark O. Decker, Jr.
Date: November 12, 2021		President and Chief Executive Officer

EX-99.1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Trustees and Shareholders

Centerspace

We have audited the combined statement of revenues and certain expenses of KMS Properties (“KMS”), for the year ended December 31, 2020, and the related notes (the “Financial Statement”).

Management’s responsibility for the Financial Statement

Management is responsible for the preparation and fair presentation of the Financial Statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Financial Statement that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on the Financial Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Financial Statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Financial Statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Financial Statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Financial Statement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the Financial Statement referred to above presents fairly, in all material respects, the revenue and certain expenses (described in Note 2) of KMS Properties for the year ended December 31, 2020 in accordance with accounting principles generally accepted in the United States of America.

Emphasis of matter

We draw attention to Note 2 to the Financial Statement, which describes that the Financial Statement was prepared for the purposes of complying with certain rules and regulations of the Securities and Exchange Commission (for inclusion in the Current Report on Form 8-K/A of Centerspace) and is not intended to be a complete presentation of KMS’ revenues and expenses. Our opinion is not modified with respect to this matter.

/s/ GRANT THORNTON LLP

Minneapolis, MN

November 12, 2021

KMS PROPERTIES

COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES

	(in thousands)
	Six Months Ended June 30, 2021 (unaudited)		Year Ended December 31, 2020
Revenues
Rental revenue	$	16,262	$	32,440
Other revenue	1,048		2,508
Total revenues	17,310		34,948
Certain expenses
Property operating expenses	6,333		13,726
Real estate taxes, insurance, and management fee	3,015		6,099
Interest expense	352		862
Total certain expenses	$	9,700	$	20,687
Revenues in excess of expenses	$	7,610	$	14,261

The accompanying notes are an integral part of this statement

KMS PROPERTIES

NOTES TO THE COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES

For the Six Months Ended June 30, 2021 (Unaudited) and

For the Year Ended December 31, 2020

1.Organization and Description of Business

On September 2, 2021, Centerspace, collectively with its subsidiaries (“Centerspace,” “the Company”), entered into contribution agreements with certain entities managed by KMS Management (collectively, the “Sellers” or “KMS”) under which Centerspace, LP (the “Partnership”), the consolidated operating partnership of Centerspace, would acquire 17 communities (19 real estate assets) (the “KMS Properties”), consisting of 14 apartment communities in Minneapolis, Minnesota and three apartment communities in St. Cloud, Minnesota for an aggregate acquisition cost, including transaction costs, of $368.9 million. The acquired assets are subject to $126.5 million in mortgage liabilities of which $20.0 million was assumed at a rate of 4.31%, with the remaining $106.5 million financed through a $198.9 million Credit Facility. The Sellers were paid in the form of cash and preferred operating partnership units.

2.Basis of Presentation and Significant Accounting Policies

The accompanying statements of revenues and certain expenses (the “Statement”) for the KMS Properties have been prepared in accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission for inclusion in a Current Report on Form 8-K. The Statement includes the combined historical revenues and certain expenses of the KMS Properties, exclusive of items which may not be comparable or directly related to the proposed future operations of the KMS Properties subsequent to the acquisition. Accordingly, the Statement is not representative of the actual operations for the periods presented as they exclude depreciation expense, legal and accounting fees, income tax expense, and certain interest and amortization expenses.

The Statement includes historical financials for the year-ended December 31, 2020 and six months ended June 30, 2021. The KMS Properties have not been acquired from a related party, thus audited financials are presented only for the most recent fiscal year.

The Statement for the six months ended June 30, 2021 is unaudited. In the opinion of Management, the unaudited interim period includes all normal and recurring adjustments necessary for a fair and consistent presentation of the KMS Properties’ results of operations. The results of operations for the unaudited interim period presented are not necessarily indicative of full year results of operations.

Use of Estimates

The preparation of the Statement in conformity with US GAAP requires management to make estimates and assumptions relating to the reporting and disclosure of revenues and certain expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Rental revenue is recognized on a straight-line basis over the lease term, which are generally twelve-month terms. Other revenue largely represents utility reimbursement income which is generally recognized as revenue in the period in which the costs are incurred, parking revenue, laundry revenue, and other revenues, which are recognized as earned.

Property Operating Expenses

Property operating expenses represent the direct expenses of operating the properties and consist primarily of repairs and maintenance, utilities, and other operating expenses that are expected to continue in the proposed future operations of the properties.

3.Tenant Concentrations

As of June 30, 2021, no individual residents represented greater than 5% of KMS Properties’ rental revenue.

4.    Commitments and Contingencies

From time to time, KMS Properties is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. Management does not believe that the impact of such matters will have a material adverse effect on the statements when resolved.

Since March 2020, apartment properties have been impacted by measures taken by local, state and federal authorities to mitigate the impact of COVID-19, such as the Minnesota eviction moratoriums. With the uncertainty resulting from the continued spread of COVID-19, and the novel Delta Variant, the business could be impacted in the coming months.

5.     Subsequent Events

Management has evaluated events and transactions that have occurred through November 12, 2021 the date the Statements of Revenues and Certain Expenses were available to be issued and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosure in the Statements of Revenues and Certain Expenses.

EX-99.2

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following pro forma condensed consolidated financial statements of Centerspace, collectively with its subsidiaries (the “Company") are based on the unaudited historical condensed consolidated financial statements as of and for the six months ended June 30, 2021 and the historical audited consolidated financial statements of the Company as of and for the year ended December 31, 2020, adjusted to reflect the following transactions, in accordance with Article 11 of Regulation S-X:

a.On September 1, 2021, Centerspace, LP (the “Partnership”), the operating partnership of Centerspace, entered into certain Contribution Agreements (the “Contribution Agreements”) with certain entities managed by KMS Management (each such entity, a “Seller” and collectively, the “Sellers” or “KMS”) under which the Partnership acquired 17 communities (19 real estate assets) (the “KMS Properties”), for $368.9 million (the “KMS Acquisition”). The Sellers were paid in the form of cash and preferred operating partnership units (“POP Units”). The Company also assumed a $20.0 million mortgage from the Sellers.

b.Additionally, on September 1, 2021, certain wholly-owned indirect subsidiaries of the Company (“the “Borrowers”) entered into a certain Master Credit Facility Agreement (the “MCFA”) with Walker & Dunlop, LLC (“Walker & Dunlop”). Under the MCFA, Walker & Dunlop agreed to provide loans to the Borrowers in an aggregate amount of fixed advances of $198.9 million for purposes of financing certain multifamily residential properties (the “Properties”) purchased pursuant to the Contribution Agreements. The notes issued pursuant to the MCFA are interest-only, have varying maturity dates of 84, 120 and 144 months, and a blended, weighted average interest rate of 2.76%. Certain customary prepayment premiums apply in the event of a prepayment of the loans.

c.In connection with the issuance of POP Units as part of the consideration for the transactions, the Partnership amended its Limited Partnership Agreement on September 1, 2021 to issue a new class of Series E POP Units. The POP Units have a $100 par value per unit and a 3.875% coupon and are convertible, at the holder’s option, into common units of the Partnership (“Common Units”) at an exchange rate of 1 POP Unit to 1.2048 Common Units, subject to certain limitations and conditions.

The following unaudited pro forma consolidated financial statements have been prepared by the Company’s management based upon the Company’s historical financial statements and the historical financial statements of the KMS Properties after giving effect to the KMS Acquisition. The unaudited pro forma financial information is intended to reflect the consummation of the Company’s acquisition of the acquired real estate properties.

The unaudited pro forma consolidated statements of operations for the fiscal year ended December 31, 2020 and the six months ended June 30, 2021 combine the historical financial statements of Centerspace and the KMS Properties and assume the KMS Acquisition occurred on January 1, 2020, the first day of the Company’s most recently completed fiscal year. For purposes of the unaudited pro forma condensed consolidated balance sheet, the transactions have been assumed to occur on June 30, 2021.

The unaudited pro forma condensed consolidated financial information is presented for informational purposes only and is not necessarily indicative of the Company’s financial position or results of operations that would have occurred had the events been consummated as of the dates indicated. In addition, the unaudited pro forma condensed consolidated financial information is not necessarily indicative of the Company’s future financial condition or operating results. The unaudited pro forma adjustments are based upon available information and certain assumptions that the Company’s management believe are reasonable. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed consolidated financial information. In the Company’s opinion, all material adjustments necessary to reflect the effect of the KMS Acquisition have been made. The unaudited pro forma consolidated financial information does not give effect to the potential impact of current financial conditions, or any anticipated revenue enhancements, cost savings or operating synergies that may result from the KMS Acquisition.

The Company does not have any material relationship with KMS Management or its subsidiaries, including the Sellers, outside of the ordinary course of business, other than in respect of the transactions contemplated by the Contribution Agreements.

The unaudited pro forma condensed consolidated financial information was based on and should be read in conjunction with the Company’s and the KMS Properties’ historical financial statements referenced below:

a.The Company’s unaudited condensed consolidated financial statements as of June 30, 2021 and for the six months ended June 30, 2021, included in the Company’s Form 10-Q, filed with the SEC on August 2, 2021;

b.The Company’s consolidated financial statements for the year ended December 31, 2020 included in the Company’s Form 10-K filed with the SEC on February 22, 2021;

c.The KMS Properties’ audited combined statement of revenues and certain expenses and accompanying notes for the year ended December 31, 2020 attached as Exhibit99.1to the Company’s Current Report on Form 8-K/A filed with the SEC on November 12, 2021, to which this Exhibit 99.2 is attached; and

d.The KMS Properties’ unaudited combined statement of revenues and certain expenses as of and for six months ended June 30, 2021 attached as Exhibit 99.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on November 12, 2021, to which this Exhibit 99.2 is attached.

The Company and the KMS Properties prepare their financial information in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) with all amounts stated in U.S. dollars (“USD”).

CENTERSPACE AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2021 (unaudited)

	(in thousands)
	Centerspace Historical (a)		Acquisitions (b)			Financing Transactions			Consolidated Pro Forma
ASSETS
Real estate investments
Property owned	$	1,838,837	$	354,399		$	—		$	2,193,236
Less accumulated depreciation	(407,400)		—			—			(407,400)
	1,431,437		354,399			—			1,785,836
Mortgage loans receivable at fair value	37,457		—						37,457
Total real estate investments	1,468,894		354,399			—			1,823,293
Cash and cash equivalents	5,194		(131,337)			121,961		(e)	(4,182)
Restricted cash	8,444		—			—			8,444
Other assets	17,218		16,818			—			34,036
TOTAL ASSETS	$	1,499,750	$	239,880		$	121,961		$	1,861,591
LIABILITIES, MEZZANINE EQUITY, AND EQUITY
LIABILITIES
Accounts payable and accrued expenses	$	52,413	$	—		$	—		$	52,413
Revolving lines of credit	87,000		—			—			87,000
Notes payable, net of unamortized loan costs of $714	319,286		—			(75,000)		(e)	244,286
Mortgages payable, net of unamortized loan costs of $1,220	287,143		22,367			196,961		(e)	506,471
TOTAL LIABILITIES	$	745,842	$	22,367		$	121,961		$	890,170
COMMITMENTS AND CONTINGENCIES
SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $100 par value, 166 units issued and outstanding at June 30)	$	18,022	$	—		$	—		$	18,022
EQUITY
Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, $25 per share liquidation	$	93,530	$	—		—			$	93,530
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 14,045 shares issued and outstanding at June 30, 2021)	1,033,940		44,905		(c)	—			1,033,985
Accumulated distributions in excess of net income	(433,310)		—			—			(433,310)
Accumulated other comprehensive income (loss)	(12,064)		—			—			(12,064)
Total shareholders’ equity	$	682,096	$	44,905		$	—		$	682,141
Noncontrolling interests – Operating Partnership (881 units at June 30, 2021) and Series E Preferred Units (Cumulative convertible preferred units,$100 par value, 1,814 units issued and outstanding at September 30, 2021, aggregate liquidation preference of $181,397)	53,133		172,608		(c,d)	—			270,601
Noncontrolling interests – consolidated real estate entities	657		—			—			657
Total equity	$	735,886	$	217,513		$	—		$	953,399
TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY	$	1,499,750	$	239,880		$	121,961		$	1,861,591

CENTERSPACE AND SUBSIDIARIES

NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2021 (unaudited)

(a)Reflects the Company’s historical unaudited consolidated balance sheet as of June 30, 2021. Refer to the Company’s historical consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 2, 2021.

(b)On September 1, 2021, the Company acquired the KMS properties, comprising 17 communities (19 real estate assets) for a total purchase price of $368.9 million. The KMS Acquisition is accounted for as an asset acquisition. Accordingly, the Company assesses the fair value of acquired tangible and intangible assets and liabilities, including land, buildings, site improvements, furniture, fixtures and equipment, acquired in place leases, and other identified assets and assumed liabilities. The following table sets forth the Company’s allocation of the purchase price to the acquired assets and assumed liabilities based on their relative estimated fair values:

				(in thousands)
				Form of Consideration						Investment Allocation
Acquisition	Date acquired	Total acquisition cost		Cash (1)		Units (2)		Other (3)		Land		Building		Intangible assets		Other(4)
KMS Properties	September 1, 2021	$	368,850	$	24,632	$	217,513	$	126,705	$	40,801	$	313,598	$	16,818	$	(2,367)

(1)Cash payment at the election of Seller and transaction costs of $9.1 million capitalized and allocated across the assets acquired at their relative fair values

(2)Value of Series E preferred units at the acquisition date

(3)Payoff of mortgages payable of the Seller and accrued interest at closing. Centerspace assumed debt with a principal balance of $20.0 million in conjunction with the acquisition

(4)Debt mark-to-market adjustment on assumed mortgage

(c)Represents the rebalancing of equity accounts between controlling and noncontrolling interests resulting from the changes in the common shareholders’ ownership interest in Centerspace’s subsidiaries while maintaining control.

(d)Represents the adjustment to total equity to reflect the issuance of a new class of Series E POP Units issued in connection with the transaction. 1.8 million Series E POP Units were issued at a total value of $217.5 million.

(e)The Company entered into the MCFA for loans in the aggregate of $198.9 million. The notes issued pursuant to the MCFA are interest-only, have varying maturity dates of 84, 120 and 144 months, and a blended, weighted average interest rate of 2.76%. The MCFA is collateralized by the KMS Properties. Financing costs of $1.9 million have been deferred and recognized as a contra-liability as a direct offset to the corresponding debt incurred.

Further, $75 million of the MCFA proceeds was used by the Company to pay down an unsecured term loan in full.

CENTERSPACE AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 (unaudited)

	(in thousands, except per share amounts)
	Centerspace Historical Income Statement (a)		KMS Acquisition Transaction Accounting Adjustments(b)			Financing Transaction Accounting Adjustments			Pro Forma Combined
REVENUE	$	93,304	$	17,310		$	—		$	110,614
EXPENSES
Property operating expenses, excluding real estate taxes	26,467		6,333			—			32,800
Real estate taxes	11,534		2,225			—			13,759
Property management expense	3,852		789			—			4,641
Casualty (gain) loss	74		—			—			74
Depreciation and amortization	39,300		6,335		(c)	—			45,635
General and administrative	7,703		—			—			7,703
TOTAL EXPENSES	$	88,930	$	15,682		$	—		$	104,612
Operating income	4,374		1,628			—			6,002
Interest Expense	(14,320)		(591)		(d)	(1,148)		(f)	(16,059)
Interest and other income (loss)	1,050		—			—			1,050
Income (loss) before gain (loss) on sale of real estate and other investments	(8,896)		1,037			(1,148)			(9,007)
Gain (loss) on sale of real estate and other investments	26,840		—			—			26,840
NET INCOME (LOSS)	$	17,944	$	1,037		$	(1,148)		$	17,833
Dividends to preferred unitholders	(320)		—			—			(320)
Net (income) loss attributable to noncontrolling interests – Operating Partnership and Series E Preferred Units	(917)		(1,692)		(e)	—			(2,609)
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities	(36)		—			—			(36)
Net income (loss) attributable to controlling interests	16,671		(655)			(1,148)			14,868
Dividends to preferred shareholders	(3,214)		—			—			(3,214)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS	$	13,457	$	(655)		$	(1,148)		$	11,654
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC								(g)	$	0.88
NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED								(g)	$	0.88

CENTERSPACE AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2021 (unaudited)

	(in thousands, except per share data)
	Centerspace Historical Income Statement (a)		KMS Acquisition Transaction Accounting Adjustments (b)			Financing Transaction Accounting Adjustments			Pro Forma Combined
REVENUE	$	177,994	$	34,949		$	—		$	212,943
EXPENSES
Property operating expenses, excluding real estate taxes	51,625		13,025			—			64,650
Real estate taxes	21,533		4,377			—			25,910
Property management expense	5,801		1,722			—			7,523
Casualty loss	1,662		—			—			1,662
Depreciation and amortization	75,593		29,488		(c)	—			105,081
General and administrative expenses	13,440		—			—			13,440
TOTAL EXPENSES	169,654		48,612			—			218,266
Operating income (loss)	8,340		(13,663)			—			(5,323)
Interest Expense	(27,525)		(1,177)		(d)	(2,334)		(f)	(31,036)
Loss on extinguishment of debt	(23)		—			—			(23)
Interest and other income (loss)	(1,552)		—			—			(1,552)
Income (loss) before gain (loss) on sale of real estate and other investments	(20,760)		(14,840)			(2,334)			(37,934)
Gain (loss) on sale of real estate and other investments	25,503		—			—			25,503
NET INCOME (LOSS)	$	4,743	$	(14,840)		$	(2,334)		$	(12,431)
Dividends to preferred unitholders	(640)		—			—			(640)
Net (income) loss attributable to noncontrolling interests – Operating Partnership and Series E Preferred Units	212		3,119		(e)	—			3,331
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities	126		—			—			126
Net income (loss) attributable to controlling interests	4,441		(11,721)			(2,334)			(9,614)
Dividends to preferred shareholders	(6,528)		—			—			(6,528)
Redemption of preferred shares	297		—			—			297
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS	$	(1,790)	$	(11,721)		$	(2,334)		$	(15,845)
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC								(g)	$	(1.26)
NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED								(g)	$	(1.26)

CENTERSPACE AND SUBSIDIARIES

NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2021

AND FOR THE YEAR ENDED DECEMBER 31, 2020 (unaudited)

(a)Reflects the Company’s historical condensed consolidated statements of operations for the six months ended June 30, 2021 and for the year ended December 31, 2020. Refer to the Company’s historical condensed consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 2, 2021 and the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2021.

(b)Amounts represent the incremental impact of the KMS Properties acquired by the Company based on the historical operations of those properties for the periods prior to acquisition.

(c)Amounts represent the total expected depreciation and amortization expense of the real estate properties acquired by the Company including depreciation of $4.5 million and $9.2 million for the six months ended June 30, 2021 and year ended December 31, 2020, respectively. Depreciation is to be computed using the straight-line method over the remaining estimated useful lives of the assets including 30 years for buildings and five years for improvements, furniture, fixtures and equipment. The annual period also includes the amortization of $16.8 million of acquired in-place leases which had remaining useful lives of 6 months at acquisition. The depreciation and amortization adjustments are calculated based on the Company’s acquisition cost for the real estate properties and intangible assets.

(d)Represents the removal of the historical interest expense of the KMS Properties as Centerspace paid down the mortgage debt on all KMS properties, with the exception of the $20.0 million debt that was assumed. As a result, the historical interest expense not associated with the assumed debt was removed as if the debt was paid down January 1, 2020 in conjunction with the acquisition.

(e)Represents the adjustment to record pro forma net (income) loss attributable to the noncontrolling interest of the Operating Partnership Units relative to its new ownership interest percentage from the issuance of Series E POP Units. Additionally, the adjustment records pro forma net (income) loss attributable to the Series E POP Units based on its relative ownership interest percentage.

(f)Amount represents the incremental interest expense of $2.9 million and $5.8 million for the six months ended June 30, 2020 and year ended December 31, 2020, respectively, related to the borrowings under the Company’s Master Credit Facility entered into in conjunction with the respective real estate property acquisitions. The incremental interest expense is calculated based on the actual terms of the respective financing agreement as if the financing was entered into and outstanding as of January 1, 2020. The total is reduced by $1.7 million and $3.5 million for the six months ended June 30, 2021 and the year ended December 31, 2021, respectively, as if the $75.0 million unsecured term loan were paid down in conjunction with the transaction on January 1, 2020.

(g)The pro forma weighted-average shares of common stock outstanding for the six months ended June 30, 2021 and for the year ended December 31, 2020 were calculated assuming the Series E Preferred Operating Partnership Units issued on September 1, 2021 had been issued on January 1, 2020. Under the terms of the Limited Partnership Agreement, the Sellers can convert each POP Unit into 1.2048 Common Units, subject to certain limitations and conditions.

The six months ended June 30 2021 give effect to the dilutive impact of the Company’s restricted stock units and restricted stock awards, redeemable operating partnership units, Series D preferred units, and Series E preferred units as if they were converted into common shares. All potential common shares of beneficial interest were excluded from the year ended December 31, 2020 as the effect would be anti-dilutive.

The following table sets forth a reconciliation of numerators and denominators used to compute pro forma basic and diluted earnings (loss) per share:

	(in thousands, except per share data)
	Six Months Ended		Year Ended
	June 30, 2021		December 31, 2020
NUMERATOR
Pro forma net income (loss) attributable to controlling interests - basic	$	14,868	$	(9,614)
Dividends to preferred shareholders	(3,214)		(6,528)
Redemption of preferred shares	—		297
Numerator for pro forma basic earnings (loss) per share – net income available to common shareholders	11,654		(15,845)
Noncontrolling interests – Operating Partnership and Series E preferred units	2,609		(3,331)
Dividends to preferred unitholders	320		640
Pro forma numerator for diluted earnings (loss) per share	$	14,583	$	(18,536)
DENOMINATOR
Denominator for pro forma basic earnings per share weighted average shares	13,216		12,564
Effect of redeemable operating partnership units	940		—
Effect of Series D preferred units	228		—
Effect of Series E preferred units	2,186		—
Effect of dilutive restricted stock units and stock options	17		—
Denominator for diluted earnings per share	16,587		12,564
Pro forma basic earnings (loss) per common share	$	0.88	$	(1.26)
Pro forma diluted earnings (loss) per common share	$	0.88	$	(1.26)

XML

Cover Page Cover Page	Sep. 01, 2021
Entity Information [Line Items]
Document Type	8-K/A
Document Period End Date	Sep. 01, 2021
Entity Registrant Name	CENTERSPACE
Entity Incorporation, State or Country Code	ND
Entity File Number	001-35624
Entity Tax Identification Number	45-0311232
Entity Address, Address Line One	3100 10th Street SW
Entity Address, Address Line Two	Post Office Box 1988
Entity Address, City or Town	Minot
Entity Address, State or Province	ND
Entity Address, Postal Zip Code	58702
City Area Code	701
Local Phone Number	837-4738
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0000798359
Amendment Flag	false
Common Shares
Entity Information [Line Items]
Title of 12(b) Security	Common Shares of Beneficial Interest, no par value
Trading Symbol	CSR
Security Exchange Name	NYSE
Series C Cumulative Redeemable Preferred Shares
Entity Information [Line Items]
Title of 12(b) Security	Series C Cumulative Redeemable Preferred Shares
Trading Symbol	CSR -PRC
Security Exchange Name	NYSE