What changed in this filing

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Item 1. Financial Statements

2023-08-10 compared with 2023-05-11 · 178 added, 126 removed, 492 unchanged (38% of the section changed)

22 unchanged sentences

Preferred stock, $ 0.01 par value, 250,000,000 shares authorized;

no shares issued and outstanding as of March 31, 2023 and December 31, 2022

no shares issued and outstanding as of June 30, 2023 and December 31, 2022

Common stock - Class A, $ 0.01 par value, 562,500,000 shares authorized;

3,835,013 shares issued and outstanding as of March 31, 2023 and December 31, 2022

3,868,697 and 3,835,013 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

Common stock - Class C, $ 0.01 par value, 187,500,000 shares authorized;

8,489 shares issued and outstanding as of March 31, 2023 and December 31, 2022

8,489 shares issued and outstanding as of June 30, 2023 and December 31, 2022

Additional paid-in-capital

11 unchanged sentences

Three Months Ended

Six Months Ended

Rental and other property revenues

6 unchanged sentences

Acquisition and other transaction costs

Weather-related losses, net

Depreciation and amortization

4 unchanged sentences

(Provision for) recovery of credit losses, net

Gain on sale of real estate investments

Interest expense, net

Total other (loss) income

Total other income

Net loss attributable to noncontrolling interests

7 unchanged sentences

Weighted average diluted common shares outstanding (2)

(1) The consolidated financial statements for the three months ended March 31, 2023 represent the Company’s results of operations as an independent, publicly traded company.

The combined consolidated financial statements for the three months ended March 31, 2022 present the Company’s results of operations prior to the spin-off transaction on October 6, 2022, which represents a carve-out of operations attributable to the Company related to Bluerock Residential’s single-family residential home business.

As a result, results of operations for the three months ended March 31, 2023 may not be comparable to the Company’s results of operations for the prior period presented.

(2) Basic and diluted net loss per common share for the three months ended March 31, 2022 were calculated using the number of common stock shares distributed on October 6, 2022 in connection with the spin-off transaction.

(1) The consolidated financial statements for the three and six months ended June 30, 2023 represent the Company’s results of operations as an independent, publicly traded company.

The combined consolidated financial statements for the three and six months ended June 30, 2022 present the Company’s results of operations prior to the spin-off transaction on October 6, 2022, which represents a carve-out of operations attributable to the Company related to Bluerock Residential’s single-family residential home business.

As a result, results of operations for the three and six months ended June 30, 2023 may not be comparable to the Company’s results of operations for the prior periods presented.

(2) Basic and diluted net loss per common share for the three and six months ended June 30, 2022 were calculated using the number of common stock shares distributed on October 6, 2022 in connection with the spin-off transaction.

See Notes to Combined Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

FOR THE THREE MONTHS ENDED MARCH 31, 2023

FOR THE THREE MONTHS ENDED JUNE 30, 2023

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

1 unchanged sentence

Noncontrolling

Balance, April 1, 2023

Issuance of LTIP Units for equity incentive plan compensation

Issuance of C-LTIP Units to Manager

Issuance of restricted Class A common stock to Manager

Distributions to partially owned properties noncontrolling interests

Conversion of Operating Partnership Units to Class A common stock

Adjustment for noncontrolling interest ownership in the Operating Partnership

Balance, June 30, 2023

See Notes to Combined Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

FOR THE THREE MONTHS ENDED JUNE 30, 2022

COMBINED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands)

Noncontrolling

Balance, April 1, 2022

Contributions, net

Distributions to partially owned properties noncontrolling interests

Balance, June 30, 2022

See Notes to Combined Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

FOR THE SIX MONTHS ENDED JUNE 30, 2023

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands, except share and per share amounts)

Class A Common Stock

Class C Common Stock

Noncontrolling

Balance, January 1, 2023

Issuance of LTIP Units for director compensation

Issuance of LTIP Units to Manager

Issuance of LTIP Units for equity incentive plan compensation

Issuance of C-LTIP Units to Manager

Issuance of restricted Class A common stock to Manager

Acquisition of noncontrolling interests

Distributions to partially owned noncontrolling interests

Distributions to partially owned properties noncontrolling interests

Conversion of Operating Partnership Units to Class A common stock

Contributions from noncontrolling interests

Adjustment for noncontrolling interest ownership in the Operating Partnership

Balance, March 31, 2023

Balance, June 30, 2023

See Notes to Combined Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

FOR THE THREE MONTHS ENDED MARCH 31, 2022

FOR THE SIX MONTHS ENDED JUNE 30, 2022

COMBINED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

3 unchanged sentences

Contributions, net

Distributions to partially owned noncontrolling interests

Balance, March 31, 2022

Distributions to partially owned properties noncontrolling interests

Balance, June 30, 2022

See Notes to Combined Consolidated Financial Statements

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

1 unchanged sentence

Preferred returns on unconsolidated real estate joint ventures

Gain on sale of real estate investments

Fair value adjustment of interest rate caps and swaps

1 unchanged sentence

Distributions of income and preferred returns from preferred equity investments in unconsolidated real estate joint ventures

Share-based compensation attributable to equity incentive plan

Share-based compensation to Manager – LTIP/C-LTIP Units

Share-based compensation attributable to equity incentive plans

Share-based compensation to Manager – C-LTIP Units

Changes in operating assets and liabilities:

3 unchanged sentences

Accounts payable and other accrued liabilities

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Cash flows from investing activities:

3 unchanged sentences

Repayments on notes receivable

Purchase of interests from noncontrolling interests

Proceeds from sale of real estate investments

Proceeds from redemption of unconsolidated real estate joint ventures

2 unchanged sentences

Cash flows from financing activities:

Distributions to partially owned noncontrolling interests

Distributions to partially owned properties noncontrolling interests

Contributions from Bluerock Residential

Contributions from noncontrolling interests

Purchase of interests from noncontrolling interests

Borrowings on mortgages payable

Repayments on mortgages payable

Proceeds from revolving credit facilities

Repayments on revolving credit facilities

Payments of deferred financing fees

Net cash (used in) provided by financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash

Net cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of year

25 unchanged sentences

The Company’s Value-Add strategy focuses on repositioning lower-quality, less current assets to drive rent growth and expand margins to increase net operating income and maximize the Company’s return on investment.

As of March 31, 2023, the Company held an aggregate of 4,160 residential units held through seventeen real estate investments, consisting of ten consolidated operating investments and seven investments held through preferred equity investments.

As of March 31, 2023, the Company’s consolidated operating investments were approximately 94.5 % occupied.

As of June 30, 2023, the Company held an aggregate of 4,077 residential units held through seventeen real estate investments, consisting of ten consolidated operating investments and seven investments held through preferred equity investments.

As of June 30, 2023, the Company’s consolidated operating investments were approximately 94.4 % occupied.

The Company intends to elect to be taxed and to operate in a manner that will allow it to qualify as a real estate investment trust (“REIT”) for federal income tax purposes beginning with its taxable year ending December 31, 2022 upon the filing of its U.S.

8 unchanged sentences

The combined consolidated financial statements include the Company’s accounts and those of the Operating Partnership and its subsidiaries.

As of March 31, 2023, limited partners other than the Company owned approximately 67.32 % of the common units of the Operating Partnership ( 62.67 % is held by holders of limited partnership interest in the Operating Partnership (“OP Units”) and 4.65 % is held by holders of the Operating Partnership’s long-term incentive plan units (“LTIP Units”), including 3.45 % which are not vested at March 31, 2023).

As of June 30, 2023, limited partners other than the Company owned approximately 67.87 % of the common units of the Operating Partnership ( 61.05 % is held by holders of limited partnership interest in the Operating Partnership (“OP Units”) and 6.82 % is held by holders of the Operating Partnership’s long-term incentive plan units (“LTIP Units”), including 4.54 % which are not vested as of June 30, 2023).

The combined consolidated financial statements include certain prior period reclassifications made by the Company to reflect the Operating Partnership unitholders’ approximately 66 % ownership in the Company following the spin-off transaction.

27 unchanged sentences

Refer to the CECL section of this Note for further information regarding CECL and the Company’s provision for credit losses.

The Company did not have any loan investments at March 31, 2023.

The Company did not have any loan investments at June 30, 2023.

Significant Risks and Uncertainties

The COVID-19 Pandemic and Uncertainty Due to Economic Volatility

The Company’s results of operations in the future may be directly or indirectly affected by uncertainties such as the effects of the novel coronavirus (“COVID-19”) pandemic or inflation and related volatility in the market.

State, local and federal entities imposed various temporary restrictions on eviction, late fees, and rent prices as a result of the COVID-19 pandemic.

While many of those temporary restrictions have ended, the Company continues to monitor policies related to these restrictions to reduce the consequences of such policies on the Company’s financial condition.

If conditions similar to those experienced during the COVID-19 pandemic were to reoccur, such conditions and any resulting macro-economic changes could have material and adverse effects on the Company’s financial condition, results of operations and cash flows.

Additionally, inflation accelerated rapidly in 2022 and into the first quarter of 2023.

Uncertainty Due to Economic Volatility

The Company’s results of operations in the future may be directly or indirectly affected by uncertainties such as the effects of inflation and related volatility in the market.

Inflation accelerated rapidly in 2022 and into the first quarter of 2023.

The Company’s operating costs, including utilities and payroll, may increase as a result of increases in inflation.

The Federal Reserve has continued to increase interest rates to curb the effects of rising inflation.

The Federal Reserve continued to increase interest rates to curb the effects of rising inflation during this period and has indicated that it foresees further interest rate increases before the end of 2023.

Rising interest rates cause uncertainty in credit and capital markets which could have material and adverse effects on the Company’s financial condition, results of operations and cash flows.

The Company continues to closely monitor the impact of COVID-19 and economic volatility on all aspects of its business.

The Company continues to closely monitor the impact of economic volatility on all aspects of its business.

Summary of Significant Accounting Policies

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission (“SEC”) on March 22, 2023 for discussion of the Company’s significant accounting policies.

During the three months ended March 31, 2023, there were no material changes to these policies.

During the six months ended June 30, 2023, there were no material changes to these policies.

Interim Financial Information

30 unchanged sentences

As the investment no longer displays the characteristics that are similar to those of the pool of loans or preferred equity investments, the investment is removed from the CECL collective (pool) analysis described above.

Note 3 – Sale of Real Estate Assets

During the second quarter 2023, the Company closed on the following sales:

one unit in the Golden Pacific portfolio, six units in the Peak JV 2 portfolio, and two units in the Peak JV 3 portfolio, pursuant to the terms and conditions of multiple separate purchase and sales agreements.

The nine units were sold for an aggregate of approximately $ 2.8 million, subject to certain prorations and adjustments typical in such real estate transactions.

After deduction for payments of closing costs and fees of $ 0.1 million, the sales of the nine units generated net proceeds of approximately $ 2.7 million and a gain on sales of approximately $ 0.7 million.

Note 4 - Investments in Real Estate

As of March 31, 2023, the Company held seventeen real estate investments, consisting of ten consolidated operating investments and seven investments held through preferred equity investments.

As of June 30, 2023, the Company held seventeen real estate investments, consisting of ten consolidated operating investments and seven investments held through preferred equity investments.

The following tables provide summary information regarding the Company’s consolidated operating investments and preferred equity investments.

7 unchanged sentences

Yauger Park Villas

Depreciation expense was $ 4.0 million and $ 2.5 million for the three months ended March 31, 2023 and 2022, respectively.

Depreciation expense was $ 4.0 million and $ 3.0 million, and $ 8.0 million and $ 5.5 million, for the three and six months ended June 30, 2023 and 2022, respectively.

Intangibles related to the Company’s consolidated investments in real estate consist of the value of in-place leases.

Amortization expense related to the in-place leases was zero and $ 1.7 million for the three months ended March 31, 2023 and 2022, respectively.

Amortization expense related to the in-place leases was zero and $ 1.0 million, and zero and $ 2.6 million, for the three and six months ended June 30, 2023 and 2022, respectively.

Preferred Equity Investments

1 unchanged sentence

Location / Market

The Cottages at Warner Robins

Warner Robins, GA

The Woods at Forest Hill

1 unchanged sentence

Willow Park, TX

The Cottages at Warner Robins

Warner Robins, GA

Total Lease-up Units

Development Investment Name

The Cottages at Myrtle Beach

1 unchanged sentence

The Cottages of Port St.

Total Lease-up Units

Development Investment Name

Wayford at Innovation Park

2 unchanged sentences

Operating Investment Name

Number of Units

Peak Housing (1)

Total Operating Units

(1) Peak Housing is a stabilized operating portfolio and the number of units shown represents those collateralizing the Company’s preferred equity investment in the Peak REIT OP as of March 31, 2023 (refer to Note 6 for further information).

(1) Peak Housing is a stabilized operating portfolio and the number of units shown represents those collateralizing the Company’s preferred equity investment in the Peak REIT OP as of June 30, 2023 (refer to Note 7 for further information).

Unit counts excludes units presented in the consolidated operating investments table above .

11 unchanged sentences

Acquisition of Additional Interests in Properties

During the three months ended March 31, 2023, the Company acquired the noncontrolling partner’s interest in the following properties ($ in thousands):

During the six months ended June 30, 2023, the Company acquired the noncontrolling partner’s interest in the following consolidated operating investments ($ in thousands):

January 6, 2023

2 unchanged sentences

Note 6 – Notes and Interest Receivable

At March 31, 2023 and December 31, 2022, the Company held no loan investments and there were no outstanding interest receivable amounts due to the Company.

At June 30, 2023 and December 31, 2022, the Company held no loan investments and there were no outstanding interest receivable amounts due to the Company.

Allowance for Credit Losses

The provision for and recovery of credit losses of the Company’s loan investments at December 31, 2022 is summarized in the table below (amounts in thousands).

The Company had no provision for or recovery of credit losses at March 31, 2023.

The Company had no provision for or recovery of credit losses on loan investments at June 30, 2023.

Beginning balance, net as of January 1, 2022

Recovery of credit losses on pool of assets, net (1)

Provision for credit losses, end of period

Allowance for credit losses, end of period

(1) Under CECL, a provision for credit losses for similar assets is calculated based on a historical default rate applied to the remaining life of the assets.

The recovery of credit losses during the year ended December 31, 2022 was a result of the sale of The Hartley at Blue Hill.

The following table is a summary of the interest income from loan investments for the three months ended March 31, 2022 (amounts in thousands).

The Company did no t record any interest income from loan investments during the three months ended March 31, 2023 as it held no loan investments during this period.

The following table is a summary of the interest income from loan investments for the three and six months ended June 30, 2022 (amounts in thousands).

The Company did no t record any interest income from loan investments during the three and six months ended June 30, 2023 as it held no loan investments during this period.

Three Months Ended

March 31, 2022

Six Months Ended

June 30, 2022

The Hartley at Blue Hill (1)

4 unchanged sentences

Note 7 – Preferred Equity Investments in Unconsolidated Real Estate Joint Ventures

The carrying amount of the Company’s preferred equity investments in unconsolidated real estate joint ventures as of March 31, 2023 and December 31, 2022 is summarized in the table below (amounts in thousands):

The carrying amount of the Company’s preferred equity investments in unconsolidated real estate joint ventures as of June 30, 2023 and December 31, 2022 is summarized in the table below (amounts in thousands):

The Cottages at Myrtle Beach

3 unchanged sentences

Wayford at Innovation Park

Provision for credit losses

Allowance for credit losses

The provision for and recovery of credit losses of the Company’s preferred equity investments at March 31, 2023 and December 31, 2022 are summarized in the table below (amounts in thousands):

Allowance for Credit Losses

The provision for and recovery of credit losses of the Company’s preferred equity investments at June 30, 2023 and December 31, 2022 are summarized in the table below (amounts in thousands):

Beginning balances, net as of January 1, 2023 and 2022, respectively

Provision for (recovery of) credit losses on pool of assets, net (1)

Provision for credit losses, net, end of period

Allowance for credit losses, net, end of period

Recovery of credit loss – Alexan Southside Place (2)

(1) Under CECL, a provision for credit losses for similar assets is calculated based on a historical default rate applied to the remaining life of the assets.

The provision for credit losses during the three months ended March 31, 2023 was primarily attributable to an increase in the trailing twelve-month historical default rate.

The provision for credit losses during the six months ended June 30, 2023 was primarily attributable to an increase in the trailing twelve-month historical default rate.

(2) In 2021, Alexan Southside Place, the property underlying the Company’s preferred equity investment, was sold.

In 2022, the Company recognized a partial recovery of a previously recorded credit loss on Alexan Southside Place.

As of March 31, 2023, the Company, through wholly-owned subsidiaries of the Operating Partnership, had outstanding preferred equity investments in seven joint ventures which are classified as held to maturity debt securities as the Company has the intention and ability to hold the investments to maturity.

As of June 30, 2023, the Company, through wholly-owned subsidiaries of the Operating Partnership, had outstanding preferred equity investments in seven joint ventures which are classified as held to maturity debt securities as the Company has the intention and ability to hold the investments to maturity.

The Company earns a fixed return on these investments, which is included within preferred returns on unconsolidated real estate joint ventures in its combined consolidated statements of operations.

Each joint venture’s purpose is to develop or operate a portfolio of residential units.

The preferred returns on the Company’s unconsolidated real estate joint ventures for the three months ended March 31, 2023 and 2022 are summarized below (amounts in thousands):

The preferred returns on the Company’s unconsolidated real estate joint ventures for the three and six months ended June 30, 2023 and 2022 are summarized below (amounts in thousands):

Three Months Ended

Six Months Ended

The Cottages at Myrtle Beach

4 unchanged sentences

Total preferred returns on unconsolidated joint ventures (1)

The occupancy percentages of the Company’s unconsolidated real estate joint ventures at March 31, 2023 and December 31, 2022 are as follows:

March 31, 2023

(1) Total includes both current and accrued preferred return amounts.

The accrued portion of the total preferred returns was $ 2.6 million and $ 1.4 million, and $ 4.9 million and $ 2.3 million, for the three and six months ended June 30, 2023 and 2022, respectively.

The occupancy percentages of the Company’s unconsolidated real estate joint ventures at June 30, 2023 and December 31, 2022 are as follows:

June 30, 2023

December 31, 2022

5 unchanged sentences

Willow Park (6)

(1) The development had not commenced lease-up as of March 31, 2023.

(2) The development had not commenced lease-up as of December 31, 2022.

(1) The Cottages at Myrtle Beach commenced lease-up in April 2023.

(2) The Cottages at Warner Robins commenced lease-up in February 2023.

(3) The Cottages of Port St.

Lucie commenced lease-up in June 2023.

(4) The Woods at Forest Hill commenced lease-up in October 2022.

(5) Wayford at Innovation Park had not commenced lease-up as of June 30, 2023.

(6) Willow Park commenced lease-up in late June 2022.

7 unchanged sentences

Peak REIT OP may sell the units collateralizing the Company’s preferred equity investment, though Peak REIT OP is required to distribute any net sale proceeds to the Company, after consideration for partnership operating expenses and reserve requirements, until the Company’s full preferred equity investment has been repaid in full, subject to certain rate of return requirements and including any accrued but unpaid preferred returns.

On March 9, 2023, the Company’s preferred equity investment in the Peak REIT OP was partially redeemed for $ 4.1 million, which included principal investment of $ 4.0 million and accrued preferred return of $ 0.1 million, leaving the Company’s remaining preferred equity investment in the Peak REIT OP at $ 16.3 million.

During 2023, the Company’s preferred equity investment in the Peak REIT OP was partially redeemed in the aggregate amount of $ 7.2 million, which included principal investment of $ 6.8 million and accrued preferred return of $ 0.4 million.

As of June 30, 2023, the Company’s remaining preferred equity investment in the Peak REIT OP was $ 13.5 million, with 565 units as collateral underlying the Company's remaining investment.

The Woods at Forest Hill Interests

1 unchanged sentence

The Company made an original commitment to invest $ 3.3 million of preferred equity interests in the Woods JV.

On March 17, 2023, the Company increased its commitment in the Woods JV by $ 2.3 million, for a total preferred equity investment commitment of $ 5.6 million, of which $ 3.5 million had been funded as of March 31, 2023.

On March 17, 2023, the Company increased its commitment in the Woods JV by $ 2.3 million, for a total preferred equity investment commitment of $ 5.6 million, of which $ 4.9 million had been funded as of June 30, 2023.

The Company earns a 13.0 % per annum accrued return on its original preferred equity investment of $ 3.3 million.

On its additional preferred equity investment commitment of $ 2.3 million, the Company will earn an accrued return on its outstanding capital contributions at a rate of 15.0 % per annum compounded monthly, subject to a minimum multiple.

On its additional preferred equity investment commitment of $ 2.3 million, the Company earns an accrued return on its outstanding capital contributions at a rate of 15.0 % per annum compounded monthly, subject to a minimum multiple.

Willow Park Interests

1 unchanged sentence

The Company made an original commitment to invest $ 2.5 million of preferred equity interests in the Willow Park JV.

On February 28, 2023, the Company increased its commitment in the Willow Park JV by $ 2.1 million, for a total preferred equity investment commitment of $ 4.6 million, of which $ 3.0 million had been funded as of March 31, 2023.

On February 28, 2023, the Company increased its commitment in the Willow Park JV by $ 2.1 million, for a total preferred equity investment commitment of $ 4.6 million, of which $ 4.4 million had been funded as of June 30, 2023.

The Company earns a 13.0 % per annum accrued return on its original preferred equity investment of $ 2.5 million.

On its additional preferred equity investment commitment of $ 2.1 million, the Company will earn an accrued return on its outstanding capital contributions at a rate of 15.0 % per annum compounded monthly, subject to a minimum multiple.

On its additional preferred equity investment commitment of $ 2.1 million, the Company earns an accrued return on its outstanding capital contributions at a rate of 15.0 % per annum compounded monthly, subject to a minimum multiple.

Note 8— Revolving Credit Facilities

The outstanding balances on the revolving credit facilities as of March 31, 2023 and December 31, 2022 are as follows (amounts in thousands):

The outstanding balances on the revolving credit facilities as of June 30, 2023 and December 31, 2022 are as follows (amounts in thousands):

Revolving Credit Facilities

March 31, 2023

June 30, 2023

December 31, 2022

2 unchanged sentences

Deutsche Bank Credit Facility (“DB Credit Facility”)

On April 6, 2022, the Company entered into a credit facility with Deutsche Bank Securities Inc.

(“Deutsche Bank”), as sole lead arranger, Deutsche Bank AG, New York Branch, as administrative agent, the financial institutions party thereto as lenders and Computershare Trust Company, N.A., as paying agent and calculation agent (the “DB Credit Facility”).

On April 6, 2022, certain of the Company’s subsidiaries entered into a credit facility (the “DB Credit Facility”) with Deutsche Bank Securities Inc.

The DB Credit Facility provides for a revolving loan with a maximum commitment amount of $ 150 million.

Borrowings under the DB Credit Facility are limited to financings related to the acquisition, renovation, rehabilitation, maintenance and leasing of single-family residential units initially only in the Peak JV 2 portfolio, though in the second quarter 2023, the DB Credit Facility was amended such that borrowings can also be applied to units in the Indy-Springfield (formerly Peak JV 1) and Savannah-84 (formerly Peak JV 4) portfolios.

During the initial term of the DB Credit Facility, borrowings bear interest on the amount drawn at Term SOFR plus 2.80 %, and borrowings can be prepaid without premium or penalty.

The interest rate on outstanding borrowings was 7.47 % at March 31, 2023.

The interest rate on outstanding borrowings was 7.96 % at June 30, 2023.

The DB Credit Facility matures on April 6, 2024 and contains two (2) one-year extension options, subject to certain conditions.

The DB Credit Facility contains certain financial and operating covenants, including maximum leverage ratio, minimum debt yield and minimum debt service coverage ratio.

During the period ended March 31, 2023, Deutsche Bank waived the minimum debt service coverage ratio covenant in lieu of the Company reducing the outstanding balance under the DB Credit Facility to remain in compliance with such covenant.

At March 31, 2023, the DB Credit Facility was drawn at $ 29 million, the maximum available amount as of such date.

The Company has guaranteed the obligations under the DB Credit Facility.

At June 30, 2023, the DB Credit Facility was drawn at $ 50 million and the Company was in compliance with all covenants under the DB Credit Facility.

The availability of borrowings under the DB Credit Facility at June 30, 2023 was approximately $ 17 million and is based on the collateral and compliance with various ratios related to those assets.

ILE Sunflower Credit Facility

4 unchanged sentences

Borrowings under the ILE Sunflower Credit Facility bear interest at LIBOR plus 3.0 %, subject to a rate floor, and can be prepaid without penalty or premium.

The interest rate on outstanding borrowings was 7.83 % at March 31, 2023.

The interest rate on outstanding borrowings was 8.20 % at June 30, 2023.

The ILE Sunflower Credit Facility matures on December 27, 2024 and contains certain financial and operating covenants, including a minimum fixed charge coverage ratio.

At March 31, 2023, ILE was in compliance with all covenants under the ILE Sunflower Credit Facility and the initial commitment was fully drawn at $ 20 million.

At June 30, 2023, ILE was in compliance with all covenants under the ILE Sunflower Credit Facility and the initial commitment was fully drawn at $ 20 million.

A principal of ILE has guaranteed the obligations under the ILE Sunflower Credit Facility and the Company and ILE have pledged certain assets as collateral.

Note 9 – Mortgages Payable

The following table summarizes certain information as of March 31, 2023 and December 31, 2022, with respect to the Company’s senior mortgage indebtedness (amounts in thousands):

The following table summarizes certain information as of June 30, 2023 and December 31, 2022, with respect to the Company’s senior mortgage indebtedness (amounts in thousands):

Outstanding Principal

As of March 31, 2023

As of June 30, 2023

Interest-only

1 unchanged sentence

Maturity Date

August 9, 2028

Navigator Villas (4)

3 unchanged sentences

Floating Rate:

August 9, 2028

Wayford at Concord (6)

7 unchanged sentences

(2) The loan requires monthly payments of principal and interest.

(3) During the second quarter 2023, one ILE credit agreement was amended to reduce and temporarily convert its interest rate from floating to fixed rate through August 1, 2023, upon which such date an interest rate swap will become effective, converting the credit agreement to a fixed rate of 6.00 % .

(4) The principal balance includes a $ 14.3 million senior loan at a fixed rate of 4.31 % and a $ 5.6 million supplemental loan at a fixed rate of 5.23 % .

(5) The principal balance includes a $ 10.0 million senior loan at a fixed rate of 4.81 % and a $ 4.5 million supplemental loan at a fixed rate of 4.96 % .

(5) ILE’s floating rate debt represents the debt outstanding from one credit agreement and bears interest at one-month Term SOFR plus 3.00 % , subject to a 4.00 % rate floor.

In March 2023, the one-month Term SOFR in effect was 4.66 % .

(6) The Wayford at Concord loan bears interest at the 30-day average SOFR plus 2.23 % .

In March 2023, the 30-day average SOFR in effect was 4.53 % .

In June 2023, the 30-day average SOFR in effect was 5.04 % .

SOFR rate is subject to a 2.50 % rate cap through April 2025.

6 unchanged sentences

Loss on Extinguishment of Debt and Debt Modification Costs

Upon repayment of or in conjunction with a material change (i.e.

a 10% or greater difference in the cash flows between instruments) in the terms of an underlying debt agreement, the Company writes-off any unamortized deferred financing costs and fair market value adjustments related to the original debt that was extinguished.

Upon repayment of or in conjunction with a material change (i.e., a 10% or greater difference in the cash flows between instruments) in the terms of an underlying debt agreement, the Company writes-off any unamortized deferred financing costs and fair market value adjustments related to the original debt that was extinguished.

Prepayment penalties incurred on the early repayment of debt and costs incurred in a debt modification that are not capitalized are also included within loss on extinguishment of debt and debt modification costs on the combined consolidated statements of operations.

Loss on extinguishment of debt and debt modification costs were zero for the three months ended March 31, 2023 and 2022.

Loss on extinguishment of debt and debt modification costs were zero for the three and six months ended June 30, 2023 and 2022.

Debt maturities

As of March 31, 2023, contractual principal payments for the five subsequent years and thereafter are as follows (amounts in thousands):

2023 (April 1–December 31)

As of June 30, 2023, contractual principal payments for the five subsequent years and thereafter are as follows (amounts in thousands):

2023 (July 1–December 31)

Unamortized fair value debt adjustment

Deferred financing costs, net

The net book value of real estate assets providing collateral for these above borrowings, including the revolving credit facilities (refer to Note 7 for further information), was $ 300.0 million as of March 31, 2023.

The net book value of real estate assets providing collateral for these above borrowings, including the revolving credit facilities (refer to Note 8 for further information), was $ 369.6 million as of June 30, 2023.

The mortgage loans encumbering the Company’s properties are nonrecourse, subject to certain exceptions for which the Company would be liable for any resulting losses incurred by the lender.

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Fair Value of Financial Instruments

As of March 31, 2023 and December 31, 2022, the carrying values of cash and cash equivalents, restricted cash, accounts receivable, due to affiliates, accounts payable, and other accrued liabilities approximate their fair value based on their highly-liquid nature and/or short-term maturities.

As of June 30, 2023 and December 31, 2022, the carrying values of cash and cash equivalents, restricted cash, accounts receivable, due to affiliates, accounts payable, and other accrued liabilities approximate their fair value based on their highly-liquid nature and/or short-term maturities.

Derivative Financial Instruments

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This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and volatility.

The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts).

The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

The fair value of interest rate caps is determined using the market-standard methodology of discounting the future expected cash receipts which would occur if floating interest rates rise above the strike rate of the caps.

The floating interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.

The inputs used in the valuation of interest rate caps and swaps fall within Level 2 of the fair value hierarchy.

The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.The inputs used in the valuation of interest rate caps and swaps fall within Level 2 of the fair value hierarchy.

Fair Value of Debt

As of March 31, 2023 and December 31, 2022, based on the discounted amount of future cash flows using rates currently available to the Company for similar liabilities, the fair value of the Company’s mortgages payable is estimated at $ 94.1 million and $ 93.7 million, respectively, compared to the carrying amounts, before adjustments for deferred financing costs, net, of $ 99.0 million and $ 99.5 million, respectively.

As of June 30, 2023 and December 31, 2022, based on the discounted amount of future cash flows using rates currently available to the Company for similar liabilities, the fair value of the Company’s mortgages payable is estimated at $ 92.8 million and $ 93.7 million, respectively, compared to the carrying amounts, before adjustments for deferred financing costs, net, of $ 98.6 million and $ 99.5 million, respectively.

The fair value of mortgages payable is estimated based on the Company’s current interest rates (Level 3 inputs of the fair value hierarchy) for similar types of borrowing arrangements.

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To accomplish these objectives, the Company primarily uses interest rate caps and swaps as part of its interest rate risk management strategy.

Interest rate caps involve the receipt of variable-rate amounts from

a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

Interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

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The Company does not use derivative financial instruments for trading or speculative purposes.

As of March 31, 2023, the Company had interest rate caps and swaps which effectively limit the Company’s exposure to interest rate risk by providing a ceiling on the underlying interest rate for $ 68.6 million of the Company’s debt.

The table below presents the classification and fair value of the Company’s derivative financial instruments on the combined consolidated balance sheets as of March 31, 2023 and December 31, 2022 (amounts in thousands):

As of June 30, 2023, the Company had interest rate caps and swaps which effectively limit the Company’s exposure to interest rate risk by providing a ceiling on the underlying interest rate for $ 94.1 million of the Company’s debt.

The table below presents the classification and fair value of the Company’s derivative financial instruments on the combined consolidated balance sheets as of June 30, 2023 and December 31, 2022 (amounts in thousands):

Derivatives not designated as hedging

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Balance Sheet Location

March 31, 2023

June 30, 2023

December 31, 2022

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Accounts receivable, prepaids and other assets

The table below presents the classification and effect of the Company’s derivative financial instruments on the combined consolidated statements of operations for the three months ended March 31, 2023 and 2022 (amounts in thousands):

The table below presents the classification and effect of the Company’s derivative financial instruments on the combined consolidated statements of operations for the three and six months ended June 30, 2023 and 2022 (amounts in thousands):

The Effect of Derivative Instruments on the

Statements of Operations

Derivatives not designated as hedging

Location of Gain (Loss)

The Effect of Derivative Instruments on the

Three Months Ended June 30,

Six Months Ended June 30,

instruments under ASC 815-20

Recognized in Income

Statements of Operations

Three Months Ended March 31,

Interest rate caps

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The number of C-LTIP Units payable and issued to the Manager for the base management fee, the incentive fee and expense reimbursements will be equal to the dollar amount (of the portion deemed payable in C-LTIP Units) of the fees earned or reimbursement amount divided by the average of the closing prices of the Class A common stock for the five business days prior to issuance.

For the three months ended March 31, 2023, the Company recorded a base management fee of $ 1.9 million and expense reimbursements of $ 0.4 million.

For the three and six months ended June 30, 2023, the Company recorded base management fees of $ 2.0 million and $ 3.9 million, respectively, and expense reimbursements of $ 0.4 million and $ 0.9 million, respectively.

The expense reimbursements were recorded as part of general and administrative expenses in the Company’s consolidated statement of operations.

There was no incentive fee expense for the first quarter 2023.

The table below presents the related party amounts payable to the Manager as of March 31, 2023 and December 31, 2022 pursuant to the terms of the Management Agreement (amounts in thousands).

There was no incentive fee expense for the first or second quarter 2023.

The table below presents the related party amounts payable to the Manager as of June 30, 2023 and December 31, 2022 pursuant to the terms of the Management Agreement (amounts in thousands).

The Company records these payables in due to affiliates in its combined consolidated balance sheets.

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Total amounts payable to the Manager

As of March 31, 2023 and December 31, 2022, the Company had no receivables due from any related parties.

As of June 30, 2023 and December 31, 2022, the Company had no receivables due from any related parties.

Administrative Services Agreement

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Pursuant to the terms of the CSA, costs with respect to the NY Lease were paid by BREH on behalf of Bluerock Residential.

Recorded as part of general and administrative expenses in the Company’s combined consolidated statements of operations, operating expenses paid by BREH on behalf of Bluerock Residential of $ 0.2 million were expensed during the three months ended March 31, 2022.

Additionally, Bluerock Residential paid operating expenses on behalf of BREH of $ 0.2 million during the three months ended March 31, 2022.

Recorded as part of general and administrative expenses in the Company’s combined consolidated statements of operations, operating expenses paid by BREH on behalf of Bluerock Residential of $ 0.2 million and $ 0.4 million were expensed during the three and six months ended June 30, 2022, respectively.

Additionally, Bluerock Residential paid operating expenses on behalf of BREH of $ 0.2 million and $ 0.5 million during the three and six months ended June 30, 2022, respectively.

These prior period amounts were allocated to the Company by applying an allocation percentage, which was determined by taking the number of units carved out of the Bluerock Residential portfolio divided by Bluerock Residential’s total portfolio unit count, to the total operating expenses paid on behalf of or by Bluerock Residential.

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Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss attributable to common stockholders, less dividends on LTIP Units expected to vest, by the weighted average number of common shares outstanding for the period.

Diluted net loss per common

share is computed by dividing net loss attributable to common stockholders by the sum of the weighted average number of common shares outstanding and any potential dilutive shares for the period.

Net loss attributable to common stockholders is computed by adjusting net loss for the non-forfeitable dividends paid on non-vested LTIP Units and C-LTIP Units.

Basic net loss per common share is computed by dividing net loss attributable to common stockholders, less dividends on restricted stock, LTIP Units and C-LTIP Units expected to vest, by the weighted average number of common shares outstanding for the period.

Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the sum of the weighted average number of common shares outstanding and any potential dilutive shares for the period.

Net loss attributable to common stockholders is computed by adjusting net loss for the non-forfeitable dividends paid on non-vested restricted stock, LTIP Units and C-LTIP Units.

The Company considers the requirements of the two-class method when preparing earnings per share.

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Earnings per share is not affected by the two-class method because the Company’s Class A and C common stock participate in dividends on a one -for- one basis.

The following table reconciles the components of basic and diluted net loss per common share for the three months ended March 31, 2023 and 2022 (amounts in thousands, except share and per share amounts):

The following table reconciles the components of basic and diluted net loss per common share for the three and six months ended June 30, 2023 and 2022 (amounts in thousands, except share and per share amounts):

Three Months Ended

Six Months Ended

Net loss attributable to noncontrolling interests

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Amounts relate to shares of the Company’s Class A and Class C common stock outstanding.

For the three and six months ended June 30, 2023, potential vesting of restricted stock of 1,418 shares and 4,002 shares of Class A common stock, respectively, are excluded from the diluted shares calculation as the effect is antidilutive.

The effect of the conversion of OP Units is not reflected in the computation of basic and diluted earnings per share, as they are exchangeable for Class A common stock on a one-for-one basis.

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Operating Partnership and Long-Term Incentive Plan Units

As of March 31, 2023, limited partners other than the Company owned approximately 67.32 % of the common units of the Operating Partnership ( 7,370,727 OP Units, or 62.67 %, is held by OP Unit holders, and 546,632 LTIP Units, or 4.65 %, is held by LTIP Unit holders, including 3.45 % which are not vested at March 31, 2023).

As of June 30, 2023, limited partners other than the Company owned approximately 67.87 % of the common units of the Operating Partnership ( 7,368,303 OP Units, or 61.05 %, is held by OP Unit holders, and 823,219 LTIP Units, or 6.82 %, is held by LTIP Unit holders, including 4.54 % which are not vested as of June 30, 2023).

Subject to certain restrictions set forth in the Operating Partnership’s Partnership Agreement, OP Units are exchangeable for Class A common stock on a one-for-one basis, or, at the Company’s election, redeemable for cash.

LTIP Units may be convertible into OP Units under certain conditions and then may be settled in shares of the Company’s Class A common stock, or, at the Company’s election, cash.

On February 22, 2023, the Company granted 85,750 and 17,462 C-LTIP Units pursuant to the Management Agreement to the Manager in payment of the base management fee and operating expense reimbursement, respectively, for the fourth quarter 2022.

LTIP Units and C-LTIP Units may be convertible into OP Units under certain conditions and then may be settled in shares of the Company’s Class A common stock or, at the Company’s election, cash.

The Company granted C-LTIP Units to the Manager pursuant to the Management Agreement in payment of the base management fee and the operating expense reimbursement as follows:

85,750 and 17,462 C-LTIP Units, respectively, granted on February 22, 2023 for the fourth quarter 2022, and 114,391 and 20,531 C-LTIP Units, respectively, granted on May 17, 2023 for the first quarter 2023.

Such C-LTIP Units were fully vested upon issuance.

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2022 Equity Incentive Plan for Entities (the “BHM Entities Plan”).

stock appreciation rights, performance units, incentive awards and other equity-based awards, and are administered by the compensation committee of the Board.

Together, the Company refers to the BHM Individuals Plan and the BHM Entities Plan as the “BHM Incentive Plans.” The BHM Incentive Plans provide for the grant of options to purchase shares of our common stock, stock awards, stock appreciation rights, performance units, incentive awards and other equity-based awards, and are administered by the compensation committee of the Board.

LTIP Unit Grants

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Such LTIP Units were fully vested upon issuance and the Company recognized expense of $ 0.3 million based on the fair value at the date of grant.

During the three months ended March 31, 2023, the Company recognized compensation expense of approximately $ 0.5 million.

As of March 31, 2023, there was $ 8.4 million of total unrecognized compensation expense related to unvested LTIP Units granted under the Incentive Plans.

On May 25, 2023, the Company granted 141,665 LTIP Units pursuant to the BHM Incentive Plans to the Manager as an annual long-term incentive equity grant for the year ended December 31, 2022.

Such LTIP Units will vest in equal installments on an annual basis over a three -year period from April 1, 2023.

During the three and six months ended June 30, 2023, the Company recognized compensation expense for such LTIP Units of approximately $ 0.5 million and $ 1.3 million, respectively.

Such expense was recorded as part of general and administrative expenses in the Company's consolidated statements of operations.

As of June 30, 2023, there was $ 10.3 million of total unrecognized compensation expense related to unvested LTIP Units granted under the BHM Incentive Plans.

The remaining expense is expected to be recognized over a period of 4.0 years.

Restricted Stock Grants

On May 25, 2023, the Company granted 31,260 shares of Class A common stock as restricted stock grants (“RSGs”), pursuant to the BHM Incentive Plans, to the Manager as an annual incentive grant for the year ended December 31, 2022.

Such RSGs will vest in equal installments on an annual basis over a three -year period from April 1, 2023.

During the three and six months ended June 30, 2023, the Company recognized compensation expense for such RSGs of approximately $ 0.02 million and $ 0.02 million, respectively.

Such expense was recorded as part of general and administrative expenses in the Company’s consolidated statements of operations.

As of June 30, 2023, there was $ 0.5 million of total unrecognized compensation expense related to the unvested RSGs granted under the BHM Incentive Plans.

The remaining expense is expected to be recognized over a period of 2.8 years.

The Company currently uses authorized and unissued shares to satisfy share award grants.

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There is no assurance that the Company will declare dividends.

Holders of OP Units and LTIP Units are entitled to receive "distribution equivalents"

Holders of restricted stock, OP Units, LTIP Units and C-LTIP Units are entitled to receive "distribution equivalents"

at the same time as dividends are paid to holders of the Company's Class A common stock.

Note 14 – Commitments and Contingencies

The aggregate amount of the Company’s contractual commitments to fund future cash obligations in certain of its preferred equity and joint venture investments was $ 4.1 million and $ 3.4 million as of March 31, 2023 and December 31, 2022, respectively.

The aggregate amount of the Company’s contractual commitments to fund future cash obligations in certain of its preferred equity and joint venture investments was $ 1.1 million and $ 3.4 million as of June 30, 2023 and December 31, 2022, respectively.

The Company is subject to various legal actions and claims arising in the ordinary course of business.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements