BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2026

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

Centerspace conducts a majority of its business activities through a consolidated operating partnership, Centerspace, LP, a North Dakota limited partnership (the “Operating Partnership”), as well as through a number of other consolidated subsidiary entities. The accompanying Condensed Consolidated Financial Statements include the Company’s accounts and the accounts of all its subsidiaries in which it maintains a controlling interest, including the Operating Partnership. All intercompany balances and transactions are eliminated in consolidation.

The Condensed Consolidated Financial Statements also reflected the Operating Partnership’s ownership of a joint venture entity in which the Operating Partnership had a general partner or controlling interest. The joint venture entity no longer held any assets or liabilities and was deconsolidated as of December 31, 2025. This entity was consolidated into the Company’s operations with noncontrolling interests reflecting the noncontrolling partners’ share of ownership, income, and expenses.

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Centerspace’s unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with GAAP are omitted. The year-end balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments necessary for the fair presentation of financial position, results of operations, and cash flows for the interim periods, have been included.

The current period’s results of operations are not necessarily indicative of results which ultimately may be achieved for the year. The interim Condensed Consolidated Financial Statements and accompanying notes thereto should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 17, 2026.

USE OF ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

RECLASSIFICATIONS

Certain previously reported amounts within net cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows and amounts within the Condensed Consolidated Statements of Equity have been reclassified to conform to the current financial statement presentation. These reclassifications had no impact on net loss as reported in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), total assets, liabilities or equity as reported in the Condensed Consolidated Balance Sheets and the classifications within the Condensed Consolidated Statements of Cash Flows.

RECENT ACCOUNTING PRONOUNCEMENTS

The following table provides a brief description of Financial Accounting Standards Board (“FASB”) recent accounting standards updates (“ASU”).


Standard	Description	Date of Adoption	Effect on the Financial Statements or Other Significant Matters
ASU 2024-03, Income Statement - Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses; ASU 2025-01, Income Statement - Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) - Clarifying the Effective Date	This ASU is intended to improve financial reporting by requiring public companies disclose additional information about specific expense categories in the notes to the financial statements. In 2025, an additional ASU was issued to provide clarification on the effective date of the original ASU.	This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted.	The ASU will require additional disclosure but is not expected to have a material impact on the Consolidated Financial Statements.
ASU 2025-10, Government Grants (Topic 832) - Accounting for Government Grants Received by Business Entities	This ASU establishes authoritative guidance on the accounting for government grants received by business entities.	This ASU is effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods.	This ASU is not expected to have a material impact on the Consolidated Financial Statements.
ASU 2025-11, Interim Reporting (Topic 270) - Narrow-Scope Improvements	This ASU is intended to provide clarity on the current interim reporting disclosure requirements.	This ASU is effective for interim reporting periods within annual periods beginning after December 15, 2027.	This ASU may require additional disclosure but is not expected to have a material impact on the Consolidated Financial Statements.
ASU 2025-12, Codification Improvements	This ASU is intended to provide technical corrections, clarifications, and minor improvements to the FASB Accounting Standards Codification.	This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods.	This ASU is not expected to have a material impact on the Consolidated Financial Statements.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Cash and cash equivalents include all cash and highly liquid investments purchased with maturities of three months or less. Cash and cash equivalents consist of bank deposits and deposits in money market mutual funds. The Company is potentially exposed to credit risk for cash deposited with FDIC-insured financial institutions in accounts which, at times, may exceed federally insured limits.

As of March 31, 2026 and December 31, 2025, restricted cash consisted of $2.7 million and $2.8 million, respectively, in escrows held by lenders and security deposits. Escrows include funds deposited with a lender for payment of real estate taxes and insurance and reserves to be used for replacement of structural elements and mechanical equipment at certain communities. The escrow funds are under the control of the lender. Disbursements are made after supplying written documentation to the lender.

LEASES

As a lessor, Centerspace primarily leases multifamily apartment homes which qualify as operating leases with terms that are generally one year or less. Rental revenues are recognized in accordance with FASB Accounting Standards Codification (“ASC”) 842, Leases, using a method that represents a straight-line basis over the term of the lease. For the three months ended March 31, 2026 and 2025, rental income represented approximately 98.6% and 98.4% of total revenues, respectively. For the three months ended March 31, 2026 and 2025, other property revenues represented the remaining 1.4% and 1.6%, respectively, of total revenues and are primarily driven by other fee income, which is typically recognized when earned, at a point in time.

Some of the Company’s apartment communities have commercial spaces available for lease. Lease terms for these spaces typically range from three to fifteen years. The leases for commercial spaces generally include options to extend the lease for additional terms, subject to adjustments in rent and certain other items.

Many of the leases contain non-lease components for utility reimbursement from residents and common area maintenance from commercial tenants. Centerspace has elected the practical expedient to combine lease and non-lease components. The combined components are included in lease income and are accounted for under ASC 842.

The aggregate amount of future scheduled lease income on commercial operating leases, excluding any variable lease income and non-lease components, as of March 31, 2026, was as follows:


	(in thousands)
2026 (remainder)	$	2,477
2027	3,070
2028	2,682
2029	2,297
2030	2,184
Thereafter	5,991
Total scheduled lease income - operating leases	$	18,701

REVENUES AND GAINS OR LOSSES ON SALE OF REAL ESTATE

Revenue is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration to which the Company expects to be entitled for those goods and services.

Revenue streams that are included in revenues from contracts with customers include other property revenues such as application fees and other miscellaneous items. Centerspace recognizes revenue for these rental related items not included as a component of a lease as earned.

The following table presents the disaggregation of revenue streams for the three months ended March 31, 2026 and 2025:


		(in thousands)
		Three Months Ended March 31,
Revenue Stream	Applicable Standard	2026		2025
Fixed lease income - operating leases	Leases	$	60,743	$	62,197
Variable lease income - operating leases	Leases	3,387		3,831
Other property revenue	Revenue from contracts with customers	939		1,065
Total revenue		$	65,069	$	67,093

In addition to lease income and other property revenue, the Company recognizes gains or losses on the sale of real estate and other investments when the criteria for derecognition of an asset are met, including when (1) a contract exists and (2) the buyer obtained control of the nonfinancial asset that was sold. During the three months ended March 31, 2026 and 2025, the Company did not recognize any gain or loss on the sale of real estate and other investments. Any gain or loss on real estate dispositions is net of certain closing and other costs associated with the disposition.

IN-PLACE LEASE AMORTIZATION

The Company records in-place lease assets at the time of acquisition. The amortization periods reflect the average remaining term of in-place leases acquired, which are generally less than one year for multifamily apartment homes and average lease term for the commercial spaces in the Company’s mixed use properties. During the three months ended March 31, 2026 and 2025, the Company recognized $737,000 and $1.1 million, respectively, of amortization expense related to intangibles, included within depreciation and amortization in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

MARKET CONCENTRATION RISK

The Company is subject to increased exposure from economic and other competitive factors specific to markets where it holds a significant percentage of the carrying value of its real estate portfolio. As of March 31, 2026, Centerspace held more than 10% of the carrying value of its real estate portfolio in the Minneapolis, Minnesota; Denver, Colorado; and Boulder / Ft. Collins, Colorado markets.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates long-lived assets, including real estate investments, for impairment indicators at least quarterly. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, the expected holding period of each property, and legal and environmental concerns. If indicators exist, the Company compares the estimated future undiscounted cash flows for the property against the carrying amount of that property. If the sum of the estimated undiscounted cash flows is less than the carrying amount, an impairment loss is generally recorded for the difference between the estimated fair value and the carrying amount. If the anticipated holding period for properties, the estimated fair value of properties, or other factors change based on market conditions or otherwise, the evaluation of impairment charges may be different and such differences could be material to the consolidated financial statements. The evaluation of estimated cash flows is subjective and is based, in part, on assumptions regarding future physical occupancy, rental rates, and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.

During the three months ended March 31, 2026, the Company incurred a loss of $9.7 million for the impairment of one apartment community in Denver, Colorado. During the three months ended March 31, 2025, the Company did not record a loss for impairment on real estate.

VARIABLE INTEREST ENTITIES

Centerspace has determined that its Operating Partnership and each of its less-than-wholly owned real estate partnerships are variable interest entities (each, a “VIE”), as the limited partners or the functional equivalent of limited partners lack substantive kick-out rights and substantive participating rights. The Company is the primary beneficiary of the VIEs, and the VIEs are required to be consolidated on the balance sheet because the Company has a controlling financial interest in the VIEs and has both the power to direct the activities of the VIEs that most significantly impact the economic performance of the VIEs as well as the obligation to absorb losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs. Because the Operating Partnership is a VIE, all of the Company’s assets and liabilities are held through a VIE.

REAL ESTATE RELATED NOTES RECEIVABLE

In connection with the acquisition of The Lydian, an apartment community in Denver, Colorado, the Company has a tax increment financing note receivable (“TIF”) with an initial principal balance of $4.1 million. As of March 31, 2026 and December 31, 2025, the principal balance was $3.9 million, which appears within other assets in the Condensed Consolidated Balance Sheets at fair value. The note bears interest at a rate of 6.0% and matures September 30, 2041.

In connection with the acquisition of Ironwood, an apartment community in New Hope, Minnesota, the Company has a TIF note receivable with an initial principal balance of $6.6 million. As of March 31, 2026 and December 31, 2025, the principal balance was $4.6 million and $4.9 million, respectively, which appears within other assets in the Condensed Consolidated Balance Sheets at fair value. The note bears interest at a rate of 4.5% with payments due in February and August of each year. The note matures February 1, 2039, and may be prepaid in whole or in part at any time.

In 2023, the Company originated a $15.1 million mezzanine loan for the development of an apartment community located in Inver Grove Heights, Minnesota. The mezzanine loan bears interest at 10.0% per annum, which accrues and is added to the principal balance and is payable at maturity. As of March 31, 2026 and December 31, 2025, the Company had funded $15.1 million of the mezzanine loan. As of March 31, 2026 and December 31, 2025, the principal balance was $18.4 million and $18.0 million, respectively. The loan matures in December 2027 unless extended to December 2028 in accordance with the terms of the mezzanine loan agreement. The loan is secured by a pledge of and first priority security interest against 100% of the membership interests in the mezzanine borrower and the agreement provides the Company with an option to purchase the development at a discount to future appraised value. The loan represents an investment in an unconsolidated variable interest entity. The Company is not the primary beneficiary of the VIE as Centerspace does not have the power to direct the activities which most significantly impact the entity’s economic performance nor does Centerspace have significant influence over the entity. The note receivable appears within other assets in the Condensed Consolidated Balance Sheets at fair value.

ADVERTISING COSTS

Advertising costs are expensed as incurred and reported on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) within the property operating expenses, excluding real estate taxes line item. During the three months ended March 31, 2026 and 2025, total advertising expense was $651,000 and $623,000, respectively.

INVOLUNTARY CONVERSION OF ASSETS

During the three months ended March 31, 2026, Centerspace recorded $936,000 in casualty losses resulting from one new loss event and updated loss estimates on previously reported events along with $698,000 in insurance receivables reported within other assets on the Condensed Consolidated Balance Sheets and receipt of insurance proceeds totaling $459,000 which was in excess of previously recorded receivables. Any business interruption insurance proceeds will be recognized when received in accordance with ASC 610-30.

During the three months ended March 31, 2025, Centerspace recognized $512,000 in casualty losses resulting from two new insurance events and updated loss estimates from two previously reported events. Any business interruption insurance proceeds will be recognized when received in accordance with ASC 610-30.