What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-09 compared with 2023-08-10 · 300 added, 141 removed, 529 unchanged (45% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

September 30,

Net Real Estate Investments

14 unchanged sentences

Due to affiliates

Distributions payable

Total Liabilities

6.0 % Series A Redeemable Preferred Stock, liquidation preference $ 25.00 per share, 30,000,000 shares authorized;

152,222 and no shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Stockholders’ Equity

Preferred stock, $ 0.01 par value, 220,000,000 shares authorized;

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

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

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

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

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

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

Additional paid-in-capital

11 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30, (1)

Rental and other property revenues

10 unchanged sentences

Operating loss

Other income (expense)

Other (expense) income

Preferred returns on unconsolidated real estate joint ventures

3 unchanged sentences

Total other income

Net loss attributable to noncontrolling interests

Net (loss) income from continuing operations

Discontinued operations

Income on operations of rental property

Gain on sale of assets from discontinued operations

Income from discontinued operations

Net (loss) income

Preferred stock dividends

Net (loss) income attributable to noncontrolling interests

Operating partnership units

Partially owned properties

Net loss attributable to noncontrolling interests

Net loss attributable to common stockholders

Net loss per common share – Basic (2)

Net loss per common share – Diluted (2)

Net (loss) income attributable to noncontrolling interests

Net (loss) income attributable to common stockholders

Net (loss) income per common share – Basic (2)

Continuing operations

Discontinued operations

Net (loss) income per common share – Diluted (2)

Continuing operations

Discontinued operations

Weighted average basic common shares outstanding (2)

Weighted average diluted common shares outstanding (2)

(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.

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

The combined consolidated financial statements for the three and nine months ended September 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 such, results of operations for the three and nine months ended September 30, 2023 may not be comparable to the Company’s results of operations for the prior periods presented.

(2) Basic and diluted net income (loss) per common share for the three and nine months ended September 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 JUNE 30, 2023

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands, except share and per share amounts)

(In thousands, except share amounts)

Class A Common Stock

Class C Common Stock

Noncontrolling

Balance, April 1, 2023

Issuance of LTIP Units for equity incentive plan compensation

Distributions

Balance, July 1, 2023

Issuance of restricted Class A common stock and LTIP Units for equity incentive plan compensation

Issuance of C-LTIP Units to Manager

Issuance of restricted Class A common stock to Manager

Series A Preferred Stock distributions declared

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

Balance, September 30, 2023

See Notes to Combined Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

FOR THE THREE MONTHS ENDED JUNE 30, 2022

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022

COMBINED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

1 unchanged sentence

Noncontrolling

Balance, April 1, 2022

Balance, July 1, 2022

Contributions, net

Distributions to partially owned properties noncontrolling interests

Balance, June 30, 2022

Balance, September 30, 2022

See Notes to Combined Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

FOR THE SIX MONTHS ENDED JUNE 30, 2023

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands, except share and per share amounts)

(In thousands, except share amounts)

Class A Common Stock

1 unchanged sentence

Noncontrolling

Distributions

Balance, January 1, 2023

Issuance of LTIP Units for equity incentive plan compensation

Issuance of restricted Class A common stock and 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

Series A Preferred Stock distributions declared

Distributions to partially owned properties noncontrolling interests

Acquisition of noncontrolling interests

Conversion of Operating Partnership Units to Class A common stock

1 unchanged sentence

Adjustment for noncontrolling interest ownership in the Operating Partnership

Balance, June 30, 2023

Balance, September 30, 2023

See Notes to Combined Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

FOR THE SIX MONTHS ENDED JUNE 30, 2022

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

COMBINED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

4 unchanged sentences

Distributions to partially owned properties noncontrolling interests

Balance, June 30, 2022

Net income (loss)

Balance, September 30, 2022

See Notes to Combined Consolidated Financial Statements

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities

4 unchanged sentences

Gain on sale of real estate investments

Gain on sale of assets from discontinued operations

Fair value adjustment of interest rate caps and swaps

28 unchanged sentences

Payments of deferred financing fees

Purchase of interest rate caps

Net proceeds from issuance of 6.0% Series A Redeemable Preferred Stock

Net cash provided by financing activities

25 unchanged sentences

The Company owns and operates high-quality single-family properties located in attractive markets with a focus on the knowledge-economy and high-quality of life growth markets of the Sunbelt and Western United States.

The Company’s principal objective is to generate attractive risk-adjusted returns on investments where it believes it can drive growth in funds from operations and net asset value by acquiring pre-existing single-family residential homes, developing build-to-rent communities, and through Value-Add renovations.

The Company’s principal objective is to generate attractive risk-adjusted returns on investments where it believes it can drive growth in funds from operations and net asset value by acquiring pre-existing single-family residential units, developing build-to-rent communities, and through Value-Add renovations.

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 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.

federal income tax return for such taxable year.

As a REIT, the Company generally will not be subject to corporate-level income taxes.

To qualify and maintain its REIT status, the Company will be required, among other requirements, to distribute annually at least 90 % of its “REIT taxable income,” as defined by the Internal Revenue Code of 1986, as amended (the “Code”), to the Company’s stockholders.

If the Company fails to qualify and maintain its qualification as a REIT in any taxable year, it would be subject to federal income tax on its taxable income at regular corporate tax rates and it would not be permitted to qualify as a REIT for four years following the year in which its qualification was denied.

The Company intends to organize and operate in such a manner that it would qualify and remain qualified as a REIT.

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

The seventeen investments contain an aggregate of 3,996 residential units, comprised of 2,331 consolidated operating units and 1,665 units held through preferred equity investments.

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

In October 2023, the Company filed its U.S.

federal income tax return for the taxable year ending December 31, 2022 and elected to be treated, and currently qualifies, as a real estate investment trust (“REIT”) for federal income tax purposes.

As a REIT, the Company generally is not subject to corporate-level income taxes.

To maintain its REIT status, the Company is required, among other requirements, to distribute annually at least 90 % of its “REIT taxable income,” as defined by the Internal Revenue Code of 1986, as amended (the “Code”), to the Company’s stockholders.

If the Company fails to qualify as a REIT in any taxable year, it would be subject to federal income tax on its taxable income at regular corporate tax rates and it would not be permitted to qualify as a REIT for four years following the year in which its qualification was denied.

The Company intends to continue to organize and operate in such a manner as to remain qualified as a REIT.

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

2 unchanged sentences

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

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).

As of September 30, 2023, limited partners other than the Company owned approximately 68.27 % of the common units of the Operating Partnership ( 60.30 % is held by holders of limited partnership interest in the Operating Partnership (“OP Units”) and 7.97 % is held by holders of the Operating Partnership’s long-term incentive plan units (“LTIP Units”), including 4.48 % which are not vested as of September 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.

Reclassifications to net loss on the combined consolidated statements of operations, along with reclassifications to stockholders’ equity and noncontrolling interest for Operating Partnership unitholders on the combined consolidated balances sheets and statements of stockholders’ equity, were made for the period ending and prior to October 6, 2022.

Reclassifications to net income (loss) on the combined consolidated statements of operations, along with reclassifications to stockholders’ equity and noncontrolling interest for Operating Partnership unitholders on the combined consolidated balances sheets and statements of stockholders’ equity, were made for the period ending and prior to October 6, 2022.

Real Estate Investments and Preferred Equity Investments

25 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 June 30, 2023.

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

Significant Risks and Uncertainties

1 unchanged sentence

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.

As inflation accelerated rapidly in 2022 and into 2023, the Federal Reserve increased interest rates a total of seven times during 2022 and four times to date during 2023 to curb the effects of rising inflation.

The Company’s operating costs, including utilities and payroll, may increase as a result of increases in 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 long-term impact of these economic developments will largely depend on any future action by the Federal Reserve, future laws that may be enacted, the impact on job growth and the broader economy, and reactions by consumers, companies, governmental entities and capital markets.

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

1 unchanged sentence

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

During the nine months ended September 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 – Discontinued Operations

The following table summarizes amounts related to discontinued operations that resulted from trailing sales activity of multifamily investments in 2021 (amounts in thousands).

The Company previously concluded that these multifamily investment sales were discontinued operations as the asset group represented a component of an entity, the component met the criteria of held for sale in 2021, and the disposals represented a strategic shift in the Company’s business from multifamily apartment communities to single-family residential units.

As a result, certain items were reclassified as part of discontinued operations for comparative purposes.

Three Months Ended

Nine Months Ended

September 30, 2022

Total Revenues

Property operating

Total expenses

Income on operations of rental property

Gain on sale of real estate investments

Income from discontinued operations

There are no amounts in the statement of cash flows that are included in discontinued operations for the nine months ended September 30, 2022.

Note 4 – Sale of Real Estate Assets

3 unchanged sentences

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.

During the third quarter 2023, the Company closed on the sales of eighteen units in the Peak JV 3 portfolio pursuant to the terms and conditions of multiple separate purchase and sales agreements.

The eighteen units were sold for an aggregate of approximately $ 3.0 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 eighteen units generated net proceeds of approximately $ 2.9 million and no gain on sales.

Note 5 - Investments in Real Estate

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.

As of September 30, 2023, the Company held seventeen real estate investments, consisting of ten consolidated operating investments and seven 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 $ 3.0 million, and $ 8.0 million and $ 5.5 million, for the three and six months ended June 30, 2023 and 2022, respectively.

Depreciation expense was $ 4.1 million and $ 3.5 million, and $ 12.1 million and $ 9.1 million, for the three and nine months ended September 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 $ 1.0 million, and zero and $ 2.6 million, for the three and six months ended June 30, 2023 and 2022, respectively.

Amortization expense related to the in-place leases was zero and $ 0.1 million, and zero and $ 2.7 million, for the three and nine months ended September 30, 2023 and 2022, respectively.

Preferred Equity Investments

9 unchanged sentences

The Cottages of Port St.

Total Lease-up Units

Development Investment Name

Wayford at Innovation Park

Charlotte, NC

Total Development Units

Total Lease-up Units

Operating Investment Name

2 unchanged sentences

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 June 30, 2023 (refer to Note 7 for further information).

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

(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 September 30, 2023 (refer to Note 8 for further information).

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

Note 6 – Acquisition of Real Estate and Additional Interests

9 unchanged sentences

(1) The $ 4.3 million of total assets acquired includes $ 0.1 million of acquisition expenses that have been capitalized as the acquisition of additional real estate units has been accounted for as an asset acquisition.

Acquisition of Additional Interests in Properties

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

Acquisition of Additional Interests in Investments

During the nine months ended September 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 7 – Notes and Interest Receivable

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.

At September 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 on loan investments at June 30, 2023.

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

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

Beginning balance, net as of January 1, 2022

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

Recovery of credit losses on pool of assets (1)

Allowance for credit losses, end of period

1 unchanged sentence

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 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.

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

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

Three Months Ended

Six Months Ended

June 30, 2022

Nine Months Ended

September 30, 2022

The Hartley at Blue Hill (1)

4 unchanged sentences

Note 8 – 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 June 30, 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 September 30, 2023 and December 31, 2022 is summarized in the table below (amounts in thousands):

September 30,

The Cottages at Myrtle Beach

5 unchanged sentences

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):

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

September 30,

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

3 unchanged sentences

(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 six months ended June 30, 2023 was primarily attributable to an increase in the trailing twelve-month historical default rate.

The provision for credit losses during the nine months ended September 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 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.

As of September 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 and six months ended June 30, 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 nine months ended September 30, 2023 and 2022 are summarized below (amounts in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

The Cottages at Myrtle Beach

5 unchanged sentences

(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

The accrued portion of the total preferred returns was $ 2.7 million and $ 2.1 million, and $ 7.6 million and $ 4.4 million, for the three and nine months ended September 30, 2023 and 2022, respectively.

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

September 30, 2023

December 31, 2022

Peak Housing (1)

The Cottages at Myrtle Beach (2)

4 unchanged sentences

Willow Park (3)

(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.

Peak Housing Interests

On March 3, 2023, the Company’s agreement with the operating partnership of Peak REIT OP regarding its total preferred equity investment was amended.

(1) Percent occupied for Peak Housing at September 30, 2023 excludes 41 down/renovation units.

(2) The Cottages investments commenced lease-up in 2023 as follows:

at Myrtle Beach in April, at Warner Robins in February, and of Port St.

Lucie in June.

(3) The Woods at Forest Hill and Willow Park commenced lease-up in October 2022 and late June 2022, respectively.

(4) Wayford at Innovation Park commenced lease-up in August 2023.

Peak Housing Interests and Financing

The Company, along with the operating partnership of Peak Housing REIT (the "Peak REIT OP"), holds a common equity interest in Peak JV 3.

In addition to its common equity interest, the Company, through a wholly-owned lender-entity, provided a $ 20.0 million mezzanine loan to the Peak JV 3 portfolio owner.

The entity through which the Company provided the loan (the lender-entity) and the entity to which the loan was provided (the property owner) consolidate into the Company's financial statements.

As such, the loan receivable balance and the loan payable balance, and the loan interest income and loan interest expense attributable to the Company, are eliminated through consolidation on the combined consolidated balance sheets and statements of operations, respectively.

The Company (as lender entity) recognizes Peak REIT OP's portion of interest expense on the loan as income and this amount is reflected in net income (loss) attributable to common stockholders in the Company's combined consolidated statements of operations.

The mezzanine loan matures on December 31, 2023, contains two six-month extension options, subject to certain conditions, and can be prepaid without penalty.

During 2023, proceeds from the sales of 18 units in the Peak JV 3 portfolio (refer to Note 4 for further information) have been used to reduce the outstanding balance of the mezzanine loan provided by the Company to $ 17.9 million as of September 30, 2023.

On March 3, 2023, the Company’s agreement with Peak REIT OP regarding its total preferred equity investment in Peak Housing was amended.

Previously, the Company earned a 7.0 % current return and a 3.0 % accrued return, for a total preferred return of 10.0 % per annum, on $ 16.0 million of its investment.

2 unchanged sentences

As part of the amendment, the Company’s two tranches of preferred equity investments were combined into one $ 20.3 million preferred equity investment earning a 6.4 % current return and a 3.2 % accrued return, for a total preferred return of 9.6 % per annum.

In addition, the amendment increased the collateral underlying the Company’s preferred equity investment from 474 units to 648 units.

In addition, the amendment increased the collateral underlying the Company’s preferred equity investment from 474 units to 648 units, and the net assets of the Peak REIT OP were included as additional collateral.

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.

During 2023, the Company’s preferred equity investment in the Peak REIT OP was partially redeemed in the aggregate amount of $ 9.3 million, which included principal investment of $ 8.5 million and accrued preferred return of $ 0.8 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 Company's partial redemption of its preferred equity investment was a result of the sale by Peak REIT OP of 146 of the 648 units that collateralized the Company's investment.

As of September 30, 2023, the Company’s remaining preferred equity investment in the Peak REIT OP was $ 11.8 million, with a remaining 502 units as collateral underlying the Company's investment.

The Woods at Forest Hill Interests

The Company is party to a joint venture agreement with the Peak REIT OP (the “Woods JV”) to develop approximately 76 build for rent, single-family residential homes in Forest Hill, Texas.

The Company is party to a joint venture agreement with the Peak REIT OP (the “Woods JV”) to develop approximately 76 build-for-rent, single-family residential units in Forest Hill, Texas.

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 $ 4.9 million had been funded as of June 30, 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 nearly all had been funded as of September 30, 2023.

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

1 unchanged sentence

Willow Park Interests

The Company is party to a joint venture agreement with the Peak REIT OP (the “Willow Park JV”) to develop approximately 46 build for rent, single-family residential homes in Willow Park, Texas.

The Company is party to a joint venture agreement with the Peak REIT OP (the “Willow Park JV”) to develop approximately 46 build-for-rent, single-family residential units in Willow Park, Texas.

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 $ 4.4 million had been funded as of June 30, 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 nearly all had been funded as of September 30, 2023.

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

1 unchanged sentence

Note 9— Revolving Credit Facilities

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

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

Revolving Credit Facilities

June 30, 2023

September 30, 2023

December 31, 2022

7 unchanged sentences

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 7.96 % at June 30, 2023.

The interest rate on outstanding borrowings was 8.13 % at September 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.

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.

At September 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 September 30, 2023 was approximately $ 10 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 8.20 % at June 30, 2023.

The interest rate on outstanding borrowings was 8.43 % at September 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 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.

At September 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 10 – Mortgages Payable

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):

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

Outstanding Principal

As of June 30, 2023

As of September 30, 2023

September 30,

Interest-only

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(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 % .

(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 became 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 $ 5.5 million supplemental loan at a fixed rate of 5.23 % .

1 unchanged sentence

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

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

In September 2023, the 30-day average SOFR in effect was 5.31 % .

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

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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 and six months ended June 30, 2023 and 2022.

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

Debt maturities

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)

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

2023 (October 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 8 for further information), was $ 369.6 million as of June 30, 2023.

The net book value of real estate assets providing collateral for these above borrowings, including the revolving credit facilities (refer to Note 9 for further information), was $ 368.5 million as of September 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 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.

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

Derivative Financial Instruments

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Fair Value of Debt

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.

As of September 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 $ 91.9 million and $ 93.7 million, respectively, compared to the carrying amounts, before adjustments for deferred financing costs, net, of $ 98.1 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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The Company does not use derivative financial instruments for trading or speculative purposes.

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):

As of September 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 $ 94.0 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 September 30, 2023 and December 31, 2022 (amounts in thousands):

Derivatives not designated as hedging

2 unchanged sentences

Balance Sheet Location

June 30, 2023

September 30, 2023

December 31, 2022

3 unchanged sentences

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 and six months ended June 30, 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 nine months ended September 30, 2023 and 2022 (amounts in thousands):

The Effect of Derivative Instruments on the

2 unchanged sentences

Location of Gain (Loss)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

instruments under ASC 815-20

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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 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.

For the three and nine months ended September 30, 2023, the Company recorded base management fees of $ 2.0 million and $ 5.9 million, respectively, and expense reimbursements of $ 0.5 million and $ 1.4 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 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).

There has been no incentive fee expense incurred during the nine months ended September 30, 2023.

The table below presents the related party amounts payable to the Manager as of September 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.

Amounts payable to the Manager under the Management Agreement

September 30, 2023

December 31, 2022

Base management fee

Operating and direct expense reimbursements

Offering expense reimbursements

Total amounts payable to the Manager

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

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

Selling Commissions and Dealer Manager Fees

In conjunction with the offering of the Company’s Series A Preferred Stock (refer to Note 14 for further information), the Company engaged a related party as dealer manager, and pays up to 10 % of the gross offering proceeds from the offering as selling commissions and dealer manager fees.

The dealer manager re-allows the substantial majority of the selling commissions and dealer manager fees to participating broker-dealers and incurs costs in excess of the 10 %, which costs are borne by the dealer manager without reimbursement by the Company.

For the nine months ended September 30, 2023, the Company has incurred $ 0.3 million in selling commissions and discounts and $ 0.1 million in dealer manager fees and discounts related to its offering of Series A Preferred Stock.

In addition, the Manager was, or shall be, reimbursed for offering costs of $ 0.1 million in conjunction with the offering of Series A Preferred Stock during the nine months ended September 30, 2023.

The selling commissions, dealer manager fees, discounts and reimbursements for offering costs were recorded as a reduction to the proceeds of the offering.

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 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.

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 $ 0.6 million were expensed during the three and nine months ended September 30, 2022, respectively.

Additionally, Bluerock Residential paid operating expenses on behalf of BREH of $ 0.2 million and $ 0.7 million during the three and nine months ended September 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.

1 unchanged sentence

Both the ASA and CSA were terminated in connection with the completion of the spin-off transaction on October 6, 2022.

Note 13 – Stockholders’ Equity

Note 14 – Stockholders’ Equity and Redeemable Preferred Stock

On October 6, 2022 (the “Distribution Date”), each of the Company’s stockholders received one share of the Company’s common stock for every eight shares of Bluerock Residential common stock held as of the close of business on September 29, 2022.

1 unchanged sentence

As the Company had no common stock outstanding prior to the Distribution Date, basic and diluted earnings per share for all prior periods have been calculated based on the aggregate of 3,843,502 shares of the Company’s common stock distributed to its stockholders on the Distribution Date.

Net Loss Per Common Share

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.

Net (Loss) Income Per Common Share

Basic net (loss) income per common share is computed by dividing net (loss) income 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) income per common share is computed by dividing net (loss) income 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) income attributable to common stockholders is computed by adjusting net (loss) income 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.

2 unchanged sentences

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 and six months ended June 30, 2023 and 2022 (amounts in thousands, except share and per share amounts):

The following table reconciles the components of basic and diluted net (loss) income per common share for the three and nine months ended September 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

Net loss attributable to common stockholders

Nine Months Ended

September 30,

(Loss) income from continuing operations (1)

Net (loss) income from continuing operations attributable to noncontrolling interests

(Loss) income from continuing operations attributable to BHM

Income from discontinued operations

Net income from discontinued operations attributable to noncontrolling interests

Income from discontinued operations attributable to BHM

Net (loss) income attributable to common stockholders

Weighted average common shares outstanding (2)

1 unchanged sentence

Weighted average common shares outstanding and potential dilutive shares (2)

Net loss per common share, basic

Net loss per common share, diluted

Net (loss) income per common share, basic

Continuing operations

Discontinued operations

Net (loss) income per common share, diluted

Continuing operations

Discontinued operations

Loss from continuing operations for both the three and nine months ended September 30, 2023 includes $( 12 ) of preferred stock dividend expense.

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.

For the three and nine months ended September 30, 2023, potential vesting of restricted Class A common stock of zero shares and 3,702 shares, 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.

1 unchanged sentence

As such, the assumed conversion of these OP Units would have no net impact on the determination of diluted earnings per share.

Series A Redeemable Preferred Stock

On June 28, 2023, the SEC declared effective the Company’s registration statement on Form S-11 (File No.

333-269415) (the “2023 Registration Statement”).

On June 30, 2023, the Company filed a prospectus supplement to the 2023 Registration Statement offering a maximum of 20,000,000 shares of 6.0 % Series A Redeemable Preferred Stock (the “Series A Preferred Stock”) at $ 25.00 per share (the “Stated Value”), for a maximum offering amount of $ 500,000,000 in Series A Preferred Stock (the “Series A Preferred Offering”), and on August 11, 2023, the Company made the initial issuances of Series A Preferred Stock pursuant to the Series A Preferred Offering.

The Series A Preferred Stock ranks senior to all classes of the Company’s common stock.

The Series A Preferred Stock is entitled, when and as authorized by the Board and declared by the Company out of legally available funds, to priority cumulative dividends at an annual rate of 6.0 % of the Stated Value to be paid monthly, in arrears.

Holders may, at their option, elect to have the Company redeem their shares through the first year from issuance subject to a 12 % redemption fee.

After year one , the redemption fee decreases to 9 %, after year two it decreases to 6 %, after year three it decreases to 3 %, and after year four there is no redemption fee.

Any redeemed shares are entitled to any accrued but unpaid dividends at the time of the redemption, payable by the Company, at its option, in either cash or in equal value of shares of its Class A common stock.

The Company has the right to redeem the Series A Preferred Stock beginning two years from the original issuance for the Stated Value, plus any accrued and unpaid dividends, in either cash or in equal value of shares of its Class A common stock, at the Company's option, with the number of shares of Class A common stock issued for redemption (if any) based on the closing price per share of the Class A common stock for the single trading day prior to the date of redemption.

As of September 30, 2023, the Company had issued 152,222 shares of Series A Preferred Stock pursuant to the Series A Preferred Offering with net proceeds of approximately $ 3.4 million after commissions, dealer manager fees and discounts of approximately $ 0.4 million.

The Company did not redeem any shares of Series A Preferred Stock during the nine months ended September 30, 2023.

Operating Partnership and Long-Term Incentive Plan Units

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).

As of September 30, 2023, limited partners other than the Company owned approximately 68.27 % of the common units of the Operating Partnership ( 7,368,303 OP Units, or 60.30 %, is held by OP Unit holders, and 973,463 LTIP Units, or 7.97 %, is held by LTIP Unit holders, including 4.48 % which are not vested as of September 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 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.

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

(a) 85,750 and 17,462 C-LTIP Units, respectively, granted on February 22, 2023 for the fourth quarter 2022, (b) 114,391 and 20,531 C-LTIP Units, respectively, granted on May 17, 2023 for the first quarter 2023, and (c) 125,491 and 24,753 C-LTIP Units, respectively, granted on August 15, 2023 for the second quarter 2023.

Such C-LTIP Units were fully vested upon issuance.

10 unchanged sentences

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.

The Company recognizes compensation expense ratably over the vesting period for time-based LTIP Units based on the fair value at the date of grant.

During the three and nine months ended September 30, 2023, the Company recognized compensation expense for such LTIP Units of approximately $ 0.7 million and $ 1.7 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.

As of September 30, 2023, there was $ 9.6 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 3.7 years.

2 unchanged sentences

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.

During the three and nine months ended September 30, 2023, the Company recognized compensation expense for such RSGs of approximately $ 0.05 million and $ 0.06 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.

As of September 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 2.5 years.

1 unchanged sentence

Distributions

There is no assurance that the Company will declare dividends.

Declaration Date

Payable to stockholders of record as of

Paid / Payable Date

Series A Preferred Stock (1)

September 11, 2023

August 25, 2023

October 5, 2023

September 11, 2023

September 25, 2023

October 5, 2023

(1) Holders of record of newly issued Series A Preferred Stock shares that are held only a portion of the applicable monthly dividend period will receive a prorated dividend based on the actual number of days in the applicable dividend period during which each such share of Series A Preferred Stock was outstanding.

A portion of each dividend may constitute a return of capital for tax purposes.

There is no assurance that the Company will continue to declare dividends or at this rate.

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.

Distributions declared and paid for the nine months ended September 30, 2023 were as follows (amounts in thousands):

Distributions

Series A Preferred Stock

Note 15 – 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 $ 1.1 million and $ 3.4 million as of June 30, 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 $ 0.2 million and $ 3.4 million as of September 30, 2023 and December 31, 2022, respectively.

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

Although the outcome of any legal matter cannot be predicted with certainty, management does not believe that any of these legal proceedings or matters will have a material adverse effect on the consolidated financial position or results of operations or liquidity of the Company.

Note 16 – Subsequent Events

Declaration of Dividends

Declaration Date

Payable to stockholders of record as of

Paid / Payable Date

Series A Preferred Stock (1)

October 13, 2023

October 25, 2023

November 3, 2023

October 13, 2023

November 24, 2023

December 5, 2023

October 13, 2023

December 22, 2023

January 5, 2024

Series A Preferred Stock Special Dividend

November 7, 2023

Each day of November 1 - 30, 2023

December 5, 2023

November 7, 2023

Each day of December 1 - 31, 2023

January 5, 2024

(2) Holders of record of Series A Preferred Stock shares as of the close of business on each day of the applicable month are entitled to additional contingent special daily dividends for each such day, to be aggregated and payable (if at all) on the payable date, in each case equal to the amount (if any) by which (i) the Stated Value of the Series A Preferred Stock multiplied by (a) the sum of (I) the average 10-year Daily Treasury Par Yield Curve Rate for the period from the 26 th of the prior month to the 25 th of the applicable month (as reported by the United States Department of the Treasury), plus (II) two percent ( 2.0 )%, divided by (b) twelve ( 12 ), divided further by (c) the actual number of days in the applicable month, exceeds (ii) the quotient of (a) $ 0.125 divided by (b) the actual number of days in the applicable month.

Distributions Paid

The following distributions were declared and/or paid to the Company's stockholders subsequent to September 30, 2023 (amounts in thousands):

Declaration Date

Distributions per Share

Total Distribution

Series A Preferred Stock

September 11, 2023

August 25, 2023

October 5, 2023

Series A Preferred Stock

September 11, 2023

September 25, 2023

October 5, 2023

Series A Preferred Stock

October 13, 2023

October 25, 2023

November 3, 2023

Sale of Willow Park Interests

On October 26, 2023, Willow Park, the underlying asset of an unconsolidated joint venture located in Willow Park, Texas, was sold.

Upon the sale, the Company’s preferred equity investment was redeemed for $ 4.1 million, which included $ 2.9 million of its total principal investment and $ 1.2 million of accrued preferred return.

The accrued preferred return was earned by the Company on its total principal investment and based on rates and terms agreed upon for its original and additional principal investments (refer to Note 8 for further information).

The remaining $ 1.7 million of the Company’s principal investment is collateralized by The Woods at Forest Hill and Peak REIT OP.

Willow Park Loan Financing

On October 26, 2023, the Company provided a $ 9.4 million senior mortgage loan (the “Willow Loan”) to the new owner of Willow Park, an unaffiliated third party.

The Willow Loan bears interest at a fixed rate of 5.08 % per annum during the initial term with regular monthly payments that are interest-only.

The Willow Loan matures on October 28, 2024, contains two six-month extension options subject to certain conditions, and can be prepaid in part, subject to a minimum payment, or in whole without penalty.

Incentive Grant Forfeitures and Reissuances

Effective November 2, 2023, for tax efficiency purposes, the Manager forfeited (i) 367,357 unvested LTIP Units granted to the Manager on November 3, 2022 in payment of the initial staking grant pursuant to the BHM Entities Plan, and (ii) (a) 83,995 unvested LTIP Units and (b) 31,260 unvested RSGs that were, in each case, granted to the Manager on May 25, 2023 in payment of the annual equity incentive grant pursuant to the BHM Entities Plan.

On November 3, 2023, by mutual agreement of the Manager and the Company, and at the direction of the Manager, the foregoing aggregate numbers of unvested LTIP Units and unvested RSGs were issued directly to and among certain of the BREH Personnel (as defined below), pursuant to the BHM Individuals Plan, as equity compensation for services provided to the Manager in such capacities.

These issuances are in satisfaction of the Manager’s obligation to its affiliate, BREH, for compensation-related expenses incurred by BREH in connection with its employment of the Manager’s executive management team and personnel who provide other services to the Manager (collectively, the “BREH Personnel”).

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