What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-09 compared with 2023-11-09 · 398 added, 416 removed, 413 unchanged (66% of the section changed)

1 unchanged sentence

BLUEROCK HOMES TRUST, INC.

COMBINED CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

September 30,

Net Real Estate Investments

1 unchanged sentence

Furniture, fixtures and equipment

Total Gross Real Estate Investments

Total Gross Operating Real Estate Investments

Accumulated depreciation

Total Net Operating Real Estate Investments

Operating real estate held for sale, net

Total Net Real Estate Investments

1 unchanged sentence

Restricted cash

Notes and accrued interest receivable, net

Accounts receivable, prepaids and other assets, net

Preferred equity investments in unconsolidated real estate joint ventures, net

In-place lease intangible assets, net

LIABILITIES AND EQUITY

7 unchanged sentences

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

832,303 and 436,675 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Stockholders’ Equity

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

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

no shares issued and outstanding at March 31, 2024 and December 31, 2023

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 September 30, 2023 and December 31, 2022, respectively

3,871,265 shares issued and outstanding at March 31, 2024 and December 31, 2023

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

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

8,489 shares issued and outstanding at March 31, 2024 and December 31, 2023

Additional paid-in-capital

6 unchanged sentences

TOTAL LIABILITIES AND EQUITY

See Notes to Combined Consolidated Financial Statements

See Notes to Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands, except share and per share amounts)

Three Months Ended

Nine Months Ended

September 30, (1)

Rental and other property revenues

6 unchanged sentences

Acquisition and other transaction costs

Weather-related losses, net

Depreciation and amortization

Total expenses

Operating loss

Other (expense) income

Other income (expense)

Other income, net

Preferred returns on unconsolidated real estate joint ventures

(Provision for) recovery of credit losses, net

Gain on sale of real estate investments

Provision for credit losses, net

Gain on sale and impairment of real estate investments, net

Interest expense, net

Total other income

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

Interest income

Total other income (expense)

Preferred stock dividends

Net (loss) income attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

Operating partnership units

Partially owned properties

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

Net loss attributable to noncontrolling interests

Net loss attributable to common stockholders

Net loss per common share – Basic

Net loss per common share – Diluted

Weighted average basic common shares outstanding

Weighted average diluted common shares outstanding

(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

See Notes to Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023

FOR THE THREE MONTHS ENDED MARCH 31, 2024

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

4 unchanged sentences

Distributions

Balance, July 1, 2023

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

Balance, January 1, 2024

Issuance of restricted Class A common stock and long-term incentive plan (“LTIP”) Units for equity incentive plan compensation

Issuance of C-LTIP Units to Manager

1 unchanged sentence

Distributions to partially owned properties’ noncontrolling interests

Contributions from noncontrolling interests

Adjustment for noncontrolling interest ownership in the Operating Partnership

Balance, September 30, 2023

See Notes to Combined Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022

COMBINED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands)

Noncontrolling

Balance, July 1, 2022

Contributions, net

Distributions to partially owned properties noncontrolling interests

Balance, September 30, 2022

See Notes to Combined Consolidated Financial Statements

Balance, March 31, 2024

See Notes to Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023

FOR THE THREE MONTHS ENDED MARCH 31, 2023

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

3 unchanged sentences

Noncontrolling

Distributions

Balance, January 1, 2023

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

Issuance of LTIP Units for equity incentive plan compensation

Issuance of C-LTIP Units to Manager

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

Distributions to partially owned properties’ noncontrolling interests

Contributions from noncontrolling interests

Adjustment for noncontrolling interest ownership in the Operating Partnership

Balance, September 30, 2023

See Notes to Combined Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

COMBINED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(In thousands)

Noncontrolling

Balance, January 1, 2022

Contributions, net

Distributions to partially owned properties noncontrolling interests

Net income (loss)

Balance, September 30, 2022

See Notes to Combined Consolidated Financial Statements

Balance, March 31, 2023

See Notes to Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities

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

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

Depreciation and amortization

1 unchanged sentence

Preferred returns on unconsolidated real estate joint ventures

Gain on sale of real estate investments

Gain on sale of assets from discontinued operations

Gain on sale and impairment of real estate investments, net

Fair value adjustment of interest rate caps and swaps

Provision for (recovery of) credit losses, net

Provision for credit losses, net

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

Share-based compensation attributable to equity incentive plans

Share-based compensation attributable to equity incentive plan

Share-based compensation to Manager – C-LTIP Units

Changes in operating assets and liabilities:

Due to affiliates, net

Due (from) to affiliates, net

Accounts receivable, prepaids and other assets

1 unchanged sentence

Accounts payable and other accrued liabilities

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

8 unchanged sentences

Cash flows from financing activities:

Distributions to common stockholders

Distributions to noncontrolling interests

Distributions to partially owned properties’ noncontrolling interests

Contributions from Bluerock Residential

Distributions to preferred stockholders

Contributions from noncontrolling interests

Purchase of interests from noncontrolling interests

Borrowings on mortgages payable

Repayments on mortgages payable

2 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

Net increase in cash, cash equivalents and restricted cash

Net cash provided by (used in) financing activities

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

Cash, cash equivalents and restricted cash, beginning of year

8 unchanged sentences

Distributions payable – declared and unpaid

Mortgage assumed upon property acquisition

Capital expenditures held in accounts payable and other accrued liabilities

See Notes to Combined Consolidated Financial Statements

See Notes to Consolidated Financial Statements

BLUEROCK HOMES TRUST, INC.

NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Organization and Nature of Business

Bluerock Homes Trust, Inc.

(the “Company” or “Bluerock Homes”) was formed in Maryland as a wholly owned subsidiary of Bluerock Residential Growth REIT, Inc (“Bluerock Residential”) on December 16, 2021, and historically operated as part of Bluerock Residential and not as a standalone company.

On October 6, 2022, Bluerock Residential completed a spin-off transaction that resulted in its single-family residential real estate business and certain other assets being contributed to Bluerock Homes, and Bluerock Homes becoming an independent, publicly traded company.

Financial statements for the period ended and prior to October 6, 2022 have been derived from Bluerock Residential's historical accounting records and are presented on a carve-out basis.

All revenues and costs as well as assets and liabilities directly associated with the business activity of the Company are included in the financial statements.

The financial statements for the period ended and prior to October 6, 2022 also include general and administrative expenses that have been allocated to the Company from Bluerock Residential based on relative unit count.

These allocated expenses are for corporate office expenses and management including, but not limited to, executive oversight, asset management, treasury, finance, human resources, tax, accounting, financial reporting, information technology and investor relations.

However, amounts recognized by the Company are not representative of the amounts that would have been reflected in these financial statements had the Company operated independently of Bluerock Residential.

Any references to “the Company” for all periods ended October 6, 2022 and prior refer to Bluerock Homes as owned by Bluerock Residential.

(the “Company”) was incorporated in Maryland on December 16, 2021.

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.

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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 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 of March 31, 2024, the Company held twenty real estate investments, consisting of twelve consolidated investments and eight preferred equity and loan investments.

The twenty investments represent an aggregate of 4,366 residential units, comprised of 2,745 consolidated units, of which 170 units are under development, and 1,621 units through preferred equity and loan investments.

As of March 31, 2024, the Company’s consolidated operating investments were approximately 94.8 % occupied.

The Company has 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.

2 unchanged sentences

The Company conducts its operations through Bluerock Residential Holdings, L.P., its operating partnership (the “Operating Partnership”), of which it is the sole general partner.

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

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 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.

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

As of March 31, 2024, limited partners other than the Company owned approximately 69.34 % of the common units of the Operating Partnership ( 58.20 % is held by holders of limited partnership interest in the Operating Partnership (“OP Units”) and 11.14 % is held by holders of the Operating Partnership’s long-term incentive plan units (“LTIP Units”), including 3.68 % which are not vested as of March 31, 2024).

Certain amounts in prior year financial statement presentation have been reclassified to conform to the current year presentation.

Real Estate Investments and Preferred Equity Investments

14 unchanged sentences

As such, the Company next evaluates if these investments are considered a security under ASC 320 Investments – Debt Securities .

For investments that meet the criteria of a security under ASC 320 Investments – Debt Securities , the Company classifies each preferred equity investment as a held-to-maturity debt security as the Company has the intention and ability to hold the investment 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.

For investments that meet the criteria of a security under ASC 320 Investments – Debt Securities , except as noted regarding Note B of the Wayford at Pringle Loan Financing (refer to Note 6), the Company classifies each preferred equity investment as a held-to-maturity debt security as the Company has the intention and ability to hold the investment 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 consolidated statements of operations.

The Company evaluates the collectability of each preferred equity investment and estimates a provision for credit loss, as applicable.

Refer to the Current Expected Credit Losses (“CECL”) section of this Note for further information regarding CECL and the Company’s provision for credit losses.

The Company accounts for these investments as preferred equity investments in unconsolidated real estate joint ventures in its combined consolidated balance sheets.

The Company accounts for these investments as preferred equity investments in unconsolidated real estate joint ventures in its consolidated balance sheets.

For investments that do not meet the criteria of a security under ASC 320 Investments – Debt Securities , the Company has concluded that the characteristics and the facts and circumstances indicate that loan accounting treatment is appropriate.

4 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 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.

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.

As inflation accelerated rapidly in the first half of 2023, the Federal Reserve increased interest rates a total of four times during 2023 to curb the effects of rising inflation.

While the Federal Reserve has held rates steady since July 2023, there can be no assurances that interest rates will not rise again, and the Company’s operating costs, including utilities and payroll, may increase as a result of increases in inflation.

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.

3 unchanged sentences

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the Securities and Exchange Commission (“SEC”) on March 12, 2024 for discussion of the Company’s significant accounting policies.

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

During the three months ended March 31, 2024, there were no material changes to these policies.

Interim Financial Information

The accompanying unaudited combined consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the Unites States of America (“GAAP”) for interim financial reporting, and the instructions to Form 10-Q and Article 10-1 of Regulation S-X.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the Unites States of America (“GAAP”) for interim financial reporting, and the instructions to Form 10-Q and Article 10-1 of Regulation S-X.

Accordingly, the financial statements for interim reporting do not include all the information and notes or disclosures required by GAAP for complete financial statements.

2 unchanged sentences

The balance sheet at December 31, 2023 has been derived from the audited financial statements at that date but does not include all the information and disclosures required by GAAP for complete financial statements.

It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s audited combined consolidated financial statements for the year ended December 31, 2022 contained in the Annual Report on Form 10-K as filed with the SEC on March 22, 2023.

It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s audited consolidated financial statements for the year ended December 31, 2023 contained in the Annual Report on Form 10-K as filed with the SEC on March 12, 2024.

Use of Estimates

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2021-01 “Reference Rate Reform (Topic 848)” (“ASU 2021-01”).

The amendments in ASU 2021-01 permit entities to elect certain optional expedients in connection with reference rate reform activities and their impact on debt, contract modifications and derivative instruments as it is expected the global market will transition from LIBOR and other interbank offered rates to alternative reference rates.

The amendments in ASU 2021-01 permit entities to elect certain optional expedients in connection with reference rate reform activities and their impact on debt, contract modifications and derivative instruments as it is expected the global market will transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

The amendments in ASU 2021-01 are effective immediately, though as the sunset date of Topic 848 was deferred through the issuance of ASU No.

1 unchanged sentence

The Company has not elected the optional expedients, though it continues to evaluate the impact of the guidance and may apply elections as applicable as changes in the market occur.

In November 2023, the FASB issued Accounting Standards Update No.

2023-07 “Improvements to Reportable Segment Disclosures (Topic 280)” (“ASU 2023-07”).

The amendments in ASU 2023-07 require additional disclosures regarding reportable segments, including a segment’s significant expenses on both an annual and interim basis.

The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods with fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of adopting ASU 2023-07 on its financial disclosures.

In December 2023, the FASB issued Accounting Standards Update No.

2023-09 “Improvements to Income Tax Disclosures (Topic 740)” (“ASU 2023-09”).

The amendments in ASU 2023-09 require additional disclosure with respect to the effective tax rate reconciliation and information on income taxes paid.

The amendments in ASU 2023-09 are effective for the Company for annual reporting periods beginning after December 15, 2024.

The Company is currently evaluating the impact of adopting ASU 2023-09 on its financial disclosures.

Current Expected Credit Losses

13 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 3 – Acquisition of Real Estate and Additional Interests

Acquisition of Villas at Huffmeister

On March 25, 2024, the Company, through a 95 % owned joint venture entity, acquired a 294 -unit single-family residential community located in Houston, Texas known as Villas at Huffmeister.

The purchase price of $ 41.2 million was funded, in part, with a $ 24.3 million senior loan assumption secured by Villas at Huffmeister, along with cash of $ 17.4 million funded by the Company.

Purchase Price Allocation

The real estate acquisition above has been accounted for as an asset acquisition.

The purchase price was allocated to the acquired assets and mortgage assumed based on their estimated fair values at the date of acquisition.

The following table summarizes the assets acquired and mortgage assumed at the acquisition date for Villas at Huffmeister (amounts in thousands):

Purchase Price

Building improvements

Land improvements

Furniture and fixtures

In-place leases

Total assets acquired (1)

Mortgage assumed

Fair value adjustment

Total liabilities assumed

(1) The $ 41.8 million of total assets acquired includes $ 0.6 million of acquisition expenses that have been capitalized as the acquisition of Villas at Huffmeister has been accounted for as an asset acquisition .

Note 4 – 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.

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.

Sale of Consolidated Operating Units

During the first quarter 2024, the Company closed on the following sales:

one unit in the Indy-Springfield portfolio, four units in the Peak JV 2 portfolio, and nineteen units in the Peak JV 3 portfolio, pursuant to the terms and conditions of multiple separate purchase and sales agreements.

The twenty-four units were sold for an aggregate of approximately $ 3.9 million, subject to certain prorations and adjustments typical in such real estate transactions, and generated net proceeds of approximately $ 3.7 million and a gain on sales of approximately $ 0.3 million.

Held for Sale

At March 31, 2024, the Company classified an aggregate of 96 units as held for sale in its consolidated balance sheets, and for the three months ended March 31, 2024, the Company recorded an impairment of $ 0.1 million related to held for sale units which is included in gain on sale and impairment of real estate investments, net in the consolidated statements of operations.

The units are included in the following portfolios:

34 units of Indy-Springfield, 11 units of Peak JV 2, and 51 units of Peak JV 3.

These units were identified based on submarket analysis and individual unit-level operational review.

Note 5 - Investments in Real Estate

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.

Consolidated Operating Investments

As of March 31, 2024, the Company held twenty real estate investments, consisting of twelve consolidated operating investments and eight held through preferred equity and loan investments.

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

Consolidated Investments

Operating Investment Name

Market / Location

Golden Pacific

Indy-Springfield, formerly Peak JV 1

Indy-Springfield

Navigator Villas

Dallas-Fort Worth, TX

Savannah-84, formerly Peak JV 4

Villas at Huffmeister

Wayford at Concord

Yauger Park Villas

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.

Total Operating Units

Development Investment Name

Abode Wendell Falls (2)

Total Development Units

(1) Total operating units includes an aggregate of 96 units classified as held for sale and includes the following portfolios:

34 units in Indy-Springfield, 11 units in Peak JV 2, and 51 units in Peak JV 3.

(2) Abode Wendell Falls is a build to rent development project expected to commence construction in the second quarter 2024.

The total estimated project cost is $ 56.0 million, of which $ 6.6 million had been incurred as of March 31, 2024.

Depreciation expense was $ 4.0 million and $ 4.0 million for the three months ended March 31, 2024 and 2023, 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 $ 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

There was no amortization expense related to in-place leases for the three months ended March 31, 2024 and 2023.

Preferred Equity and Loan Investments

Lease-up Investment Name

Location / Market

The Cottages at Warner Robins

Warner Robins, GA

The Woods at Forest Hill (1)

6 unchanged sentences

Charlotte, NC

Wayford at Pringle (2)

Charlotte, NC

Total Lease-up Units

Development Investment Name

Total Development 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 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

Acquisition of Additional Savannah-84 units, formerly Peak JV 4

On February 23, 2023, the Company acquired 18 single-family residential units located in Savannah, Georgia that were added to the existing Savannah-84 portfolio.

The Company has a 100 % interest in the units and the purchase price of approximately $ 4.2 million was fully funded in cash upon acquisition.

Purchase Price Allocation

The real estate acquisition above has been accounted for as an asset acquisition.

The purchase price was allocated to the acquired assets based on their estimated fair values at the date of acquisition.

The following table summarizes the assets acquired at the acquisition date for the additional Savannah-84 units (amounts in thousands):

Purchase Price

Total assets acquired (1)

(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 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

Indy-Springfield, formerly Peak JV 1

March 8, 2023

(1) The Woods at Forest Hill unit count decreased from 76 units at December 31, 2023 to 56 units at March 31, 2024 resulting from the sales of 20 units during the first quarter 2024.

Proceeds from the sales of these units were used to paydown the Company’s loan investment in The Woods at Forest Hill.

Refer to Note 6 for further information.

(2) Wayford at Pringle is a loan investment for which the Company disburses loan proceeds to the borrower for unit acquisitions upon construction completion.

Of the total 102 -build for rent units that are to be acquired, construction of 37 units was completed during the first quarter 2024 for which the Company provided the borrower with loan proceeds for their acquisition.

The Company estimates that all units will be completed and acquired, and its loan commitment fully funded, by the end of 2024.

Refer to Note 6 for further information.

(3) 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, 2024 (refer to Note 7 for further information).

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

Note 6 – Notes and Interest Receivable

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.

Following is a summary of the notes and accrued interest receivable due from loan investments at March 31, 2024, and December 31, 2023 (amounts in thousands):

Investment Name

March 31, 2024

December 31, 2023

Notes Receivable

The Woods at Forest Hill

Wayford at Pringle

Total notes receivable

Accrued Interest Receivable

The Woods at Forest Hill

Wayford at Pringle

Total accrued interest receivable

Total notes and accrued interest receivable

Allowance for credit losses

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 (1)

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 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

Nine Months Ended

September 30, 2022

The Hartley at Blue Hill (1)

Weatherford 185 (2)

(1) In the first quarter 2022, The Hartley at Blue Hill property was sold and the mezzanine loan provided by the Company was paid off in full.

The Hartley at Blue Hill senior loan provided by the Company was paid off in full in the second quarter 2022.

(2) On July 22, 2022, the Weatherford 185 mezzanine loan provided by the Company was paid off in full.

Allowance for Credit Losses

The provision for credit losses of the Company’s loan investments at March 31, 2024 and December 31, 2023 are summarized in the table below (amounts in thousands).

Beginning balances, net as of January 1, 2024 and 2023, respectively

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

Allowance for credit losses, net, end of period

(1) Under CECL, a provision for, or recovery of, 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 period ended March 31, 2024 was attributable to the addition of one investment to the pool of assets and an increase in the trailing twelve-month historical default rate.

The following table is a summary of the interest income from loan investments for the three months ended March 31, 2024 (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.

Investment Name

March 31, 2024

The Woods at Forest Hill

Wayford at Pringle

The occupancy percentages of the Company’s loan investments at March 31, 2024 and December 31, 2023 are as follows:

Investment Name

The Woods at Forest Hill

Wayford at Pringle (1)

(1) Wayford at Pringle commenced lease-up in February 2024.

Peak Housing Financing

Prior to 2024, the Company provided a mezzanine loan to the portfolio owner in Peak JV 3, which is owned through a joint venture between the Company and the operating partnership of Peak Housing REIT (the “Peak REIT OP”).

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 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 consolidated statements of operations.

The mezzanine loan matures on June 30, 2024, has one six-month extension option subject to certain conditions, and can be prepaid without penalty.

At December 31, 2023, the outstanding balance of the loan provided by the Company was $ 15.9 million.

During the first quarter 2024, proceeds from the sales of 19 units in the Peak JV 3 portfolio (refer to Note 4 for further information) have been used to reduce the outstanding balance of the loan to $ 13.5 million at March 31, 2024.

Wayford at Pringle Loan Financing

On January 10, 2024, the Company entered into an agreement to provide a loan in the maximum aggregate amount up to $ 30.1 million (the “Pringle Loan”) to an unaffiliated, third-party borrower to acquire 102 -build for rent, single-family residential units in Charlotte, North Carolina to be known as Wayford at Pringle.

The project is currently under development, and the Company will disburse loan proceeds to the borrower for unit acquisitions as construction is completed.

The Pringle Loan is comprised of two notes as follows:

Note A in the maximum principal amount up to $ 22.3 million and Note B in the maximum principal amount up to $ 7.8 million.

Note B has certain conversion options that require the consent of both parties before such options can be exercised;

neither party has unilateral control to enforce a conversion.

The Company has evaluated both notes and concluded that loan accounting treatment is appropriate for Note A, whereas Note B, due to the conversion options, meets the criteria of a debt security and is considered as available for sale.

The Company records both notes in notes and accrued interest receivable, net in its consolidated balance sheets, and the interest income earned on both notes is recorded in interest income from loan investments in its consolidated statements of operations.

Note A and Note B both have an initial maturity of January 12, 2026 and contain four (4) six-month extension options subject to certain conditions.

Note A bears interest on the amount drawn at the one-month Secured Overnight Financing Rate (“SOFR”) plus 4.50 % through initial maturity, and if extended, such rate becomes subject to a 5.31 % rate floor.

Note A has regular monthly payments that are interest-only during the term of the loan, and no prepayment of Note A, in part or in whole, can be made prior to prepayment of Note B subject to certain conditions.

On Note B, interest shall accrue on the amount drawn at a rate of 15.00 % per annum, compounded monthly, with outstanding principal and accrued interest amounts due upon maturity.

Note B can be prepaid in part or in whole subject to minimum interest.

As of March 31, 2024, construction was completed on 37 of the total 102 units and the Company had funded $ 1.8 million of Note A and fully funded the $ 7.8 million of Note B.

There were no unrealized gains or losses associated with Note B as of March 31, 2024 as the Company determined that the $ 7.8 million face value of Note B represents its fair value at such measurement date.

The Woods at Forest Hill Loan Financing

In December 2023, the Company assumed an $ 8.3 million senior loan (the “Woods Loan”) made to an unaffiliated third-party borrower for 76 -build for rent, single family residential units in Forest Hill, Texas.

The Woods Loan investment was in addition to the Company’s existing preferred equity investment in The Woods at Forest Hill.

The borrower is currently in the process of selling the individual units collateralizing the Company’s loan and preferred equity investments.

With each unit sale, the borrower is repaying the loan and accrued interest, after consideration for partnership operating expenses and reserve requirements, until the Company’s full loan investment has been repaid in full.

Subsequently, pursuant to the waterfall of the joint venture agreement, the remaining available proceeds shall be used to repay the Company’s preferred equity investment, including any accrued but unpaid preferred returns, until the investment has been repaid in full.

During the first quarter 2024, the Company received paydowns on the Woods Loan in the aggregate amount of $ 4.1 million, which included principal investment of $ 4.0 million and accrued interest of $ 0.1 million.

The paydowns on the Woods Loan were a result of the sales by the borrower of 20 of the 76 units that collateralized the Company’s loan and preferred equity investments.

At March 31, 2024, the Company’s outstanding principal investment in the Woods Loan was $ 4.3 million, with a remaining 56 units as collateral underlying the Company’s loan and preferred equity investments.

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

September 30,

The carrying amount of the Company’s preferred equity investments in unconsolidated real estate joint ventures at March 31, 2024 and December 31, 2023 is summarized in the table below (amounts in thousands):

Investment Name

The Cottages at Myrtle Beach

The Cottages at Warner Robins

The Cottages of Port St.

3 unchanged sentences

Allowance for Credit Losses

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,

The provision for credit losses of the Company’s preferred equity investments at March 31, 2024 and December 31, 2023 are summarized in the table below (amounts in thousands):

Beginning balances, net as of January 1, 2024 and 2023, respectively

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

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

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 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 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.

(1) Under CECL, a provision for, or recovery of, 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 period ended March 31, 2024 was primarily attributable to an increase in the trailing twelve-month historical default rate.

At March 31, 2024, the Company, through wholly-owned subsidiaries of the Operating Partnership, had outstanding preferred equity investments in six 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 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 nine months ended September 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 months ended March 31, 2024 and 2023 are summarized below (amounts in thousands):

Three Months Ended

Nine Months Ended

September 30,

Investment Name

The Cottages at Myrtle Beach

3 unchanged sentences

Wayford at Innovation Park

Willow Park (1)

Total preferred returns on unconsolidated joint ventures (2)

(1) The Company’s preferred equity investments in The Cottages at Warner Robins and Willow Park were redeemed on December 15, 2023 and October 26, 2023, respectively.

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

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

The accrued portion of the total preferred returns was $ 2.5 million and $ 2.4 million for the three months ended March 31, 2024 and 2023, respectively.

The occupancy percentages of the Company’s unconsolidated real estate joint ventures at March 31, 2024 and December 31, 2023 are as follows:

Investment Name

March 31, 2024

December 31, 2023

1 unchanged sentence

The Cottages at Myrtle Beach (3)

The Cottages at Warner Robins (2)

The Cottages of Port St.

1 unchanged sentence

Wayford at Innovation Park (4)

Willow Park (3)

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

(1) Chandler had not commenced lease-up as of March 31, 2024.

(2) Percent occupied for Peak Housing excludes 12 and 32 down/renovation units at March 31,2024 and December 31, 2023, respectively.

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

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

at Myrtle Beach in April 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.

On the Company’s remaining $ 4.3 million investment, it earned a 4.0 % current return and a 4.0 % accrued return, for a total preferred return of 8.0 % per annum.

On the Company’s total $ 20.3 million investment, it earned a total weighted average preferred return of 9.6 % per annum.

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, and the net assets of the Peak REIT OP were included as additional collateral.

Peak Housing Interests

Prior to 2024, the Company made a preferred equity investment in the Peak REIT OP in the aggregate amount of $ 20.3 million which was collateralized by 648 single-family residential units (“Peak Housing”).

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.

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 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 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.

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

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 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.

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.

During 2023, the Company’s preferred equity investment was partially redeemed resulting from the sales by Peak REIT OP of 196 of the 648 units that collateralized the Company’s investment.

At December 31, 2023, the Company’s outstanding preferred equity investment in Peak REIT OP was $ 10.6 million, with a remaining 452 units as collateral underlying the Company’s investment.

During the first quarter 2024, the Company’s preferred equity investment in the Peak REIT OP was partially redeemed in the aggregate amount of $ 2.0 million, which included principal investment of $ 1.8 million and accrued preferred return of $ 0.2 million.

The Company’s partial redemption of its preferred equity investment was a result of the sales by Peak REIT OP of 45 of the 452 units that collateralized the Company’s investment.

At March 31, 2024, the Company’s outstanding preferred equity investment in the Peak REIT OP was $ 8.8 million, with a remaining 407 units as collateral underlying the Company’s investment.

Note 8— Revolving Credit Facilities

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

The outstanding balances on the revolving credit facilities at March 31, 2024 and December 31, 2023 are as follows (amounts in thousands):

Revolving Credit Facilities

September 30, 2023

March 31, 2024

December 31, 2023

DB Credit Facility

ILE Sunflower Credit Facility

Deutsche Bank Credit Facility (“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.

Amended DB Credit Facility

Amended ILE Sunflower Credit Facility

Amended Deutsche Bank Credit Facility (“Amended DB Credit Facility”)

On December 29, 2023, certain of the Company’s subsidiaries entered into an amended and restated credit facility (the “Amended DB 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, and the Company as a guarantor.

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 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 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

On December 27, 2021, the Company’s unaffiliated joint venture partner, ILE, entered into a credit facility with Sunflower Bank, N.A.

(the “ILE Sunflower Credit Facility”).

The ILE Sunflower Credit Facility provides for a revolving loan with an initial commitment amount of $ 20 million, which commitment contains an accordion feature to a maximum total commitment of up to $ 50 million.

The ILE Sunflower Credit Facility, along with four other separate non-revolving credit facilities (refer to Note 10 for further information), is used in the financing of acquisitions of single-family residential units.

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 8.43 % 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 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.

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

Borrowings under the Amended DB Credit Facility are limited to financings related to the acquisition, renovation, rehabilitation, maintenance and leasing of single-family residential units in the Indy-Springfield,Peak JV 2 and Savannah-84 portfolios.

Borrowings under the Amended DB Credit Facility 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 8.13 % at March 31, 2024.

The Amended DB Credit Facility matures on April 6, 2025 and contains a one-year extension option, subject to certain conditions.

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

At March 31, 2024, the Amended DB Credit Facility was drawn at $ 85 million and the Company was in compliance with all covenants under the Amended DB Credit Facility.

The availability of borrowings under the Amended DB Credit Facility at March 31, 2024 was approximately $ 15 million and is based on the collateral and compliance with various ratios related to those assets.

Amended ILE Sunflower Credit Facility

On June 27, 2023, the Company, along with its unaffiliated joint venture partner, ILE, entered into an amended and restated credit facility with Sunflower Bank, N.A.

(the “Amended ILE Sunflower Credit Facility”).

The Amended ILE Sunflower Credit Facility transitioned the interest rate on borrowings from LIBOR to a SOFR-based rate.

There were no other material changes in terms from the previous credit facility.

The Amended ILE Sunflower Credit Facility provides for a revolving loan with an initial commitment amount of $ 20 million, which commitment contains an accordion feature to a maximum total commitment of up to $ 50 million.

The Amended ILE Sunflower Credit Facility, along with four other separate non-revolving credit facilities (refer to Note 9 for further information), is used in the financing of acquisitions of single-family residential units.

Borrowings under the Amended ILE Sunflower Credit Facility bear interest at Term SOFR plus 3.11 %, subject to a rate floor, and can be prepaid without penalty or premium.

The interest rate on outstanding borrowings was 8.45 % at March 31, 2024.

The Amended 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, 2024, the Company was in compliance with all covenants under the Amended ILE Sunflower Credit Facility and the initial commitment was fully drawn at $ 20 million.

A principal of ILE has guaranteed the obligations under the Amended ILE Sunflower Credit Facility and the joint venture has pledged certain assets as collateral.

Note 9 – Mortgages Payable

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):

The following table summarizes certain information as of March 31, 2024 and December 31, 2023 with respect to the Company’s senior mortgage indebtedness (amounts in thousands):

Outstanding Principal

As of September 30, 2023

September 30,

As of March 31, 2024

Interest-only

1 unchanged sentence

Maturity Date

August 9, 2028

Navigator Villas (3)

Villas at Huffmeister

October 1, 2029

Yauger Park Villas (4)

7 unchanged sentences

Total mortgages payable

(1) ILE’s fixed rate debt represents the aggregate debt outstanding across two separate credit agreements.

Of the $ 25.3 million balance, $ 6.5 million held through one credit agreement has a fixed rate of 3.50 % , while the remaining $ 18.8 million held through the second credit agreement has a fixed rate of 3.75 % .

Both credit agreements mature in 2026.

(1) ILE’s fixed rate debt represents the aggregate debt outstanding across three separate credit agreements.

Of the outstanding balance, one credit agreement (“CA1”) has a balance of $ 6.4 million at a fixed rate of 3.50 %, the second credit agreement (“CA2”) has a balance of $ 18.5 million at a fixed rate of 3.75 %, and the third credit agreement (“CA3”) has a balance of $ 4.5 million at a fixed rate of 6.00 % .

CA1 and CA2 both mature in 2026;

CA3 matures in 2028.

(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 became effective, converting the credit agreement to a fixed rate of 6.00 % .

(3) The principal balance includes a $ 14.1 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

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

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

In March 2024, the 30-day average SOFR in effect was 5.32 % .

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

7 unchanged sentences

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 and nine months ended September 30, 2023 and 2022.

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

The Company had no loss on extinguishment of debt and debt modification costs during the three months ended March 31, 2024 and 2023.

Debt maturities

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)

At March 31, 2024, contractual principal payments for the five subsequent years and thereafter are as follows (amounts in thousands):

2024 (April 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 9 for further information), was $ 368.5 million as of September 30, 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 $ 403.4 million at March 31, 2024.

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.

19 unchanged sentences

Fair Value of Financial Instruments

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.

At March 31, 2024 and December 31, 2023, 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.

The carrying values of notes receivable approximate fair value because stated interest rate terms are consistent with interest rate terms on new deals with similar leverage and risk profiles.

The fair values of notes receivable are classified in Level 3 of the fair value hierarchy due to the significant unobservable inputs that are utilized in their respective valuations.

Derivative Financial Instruments

3 unchanged sentences

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 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 fair value of interest rate swaps is 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 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 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.

At March 31, 2024 and December 31, 2023, 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 $ 116.8 million and $ 93.0 million, respectively, compared to the carrying amounts, before adjustments for deferred financing costs, net, of $ 121.5 million and $ 97.6 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.

12 unchanged sentences

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

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):

At March 31, 2024, 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 $ 128.9 million of the Company’s debt.

The following table summarizes the Company's derivative financial instruments at March 31, 2024 ($ in thousands):

Interest Rate Caps

Interest Rate Swaps

Notional balance

Number of instruments

Earliest maturity date (1)

Latest maturity date

(1) In April 2024, the Company entered into a new interest rate cap agreement that becomes effective upon the May 2024 maturity date of the current rate cap and is in the same notional amount as the current rate cap.

The table below presents the classification and fair value of the Company’s derivative financial instruments on the consolidated balance sheets at March 31, 2024 and December 31, 2023 (amounts in thousands):

Derivatives not designated as hedging

2 unchanged sentences

Balance Sheet Location

September 30, 2023

March 31, 2024

December 31, 2023

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

The table below presents the classification and effect of the Company’s derivative financial instruments on the consolidated statements of operations for the three months ended March 31, 2024 and 2023 (amounts in thousands):

The Effect of Derivative Instruments on the

2 unchanged sentences

Location of Gain (Loss)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

instruments under ASC 815-20

6 unchanged sentences

Management Agreement

On October 5, 2022, the Company entered into a management agreement (the “Management Agreement”) with the Operating Partnership and Bluerock Homes Manager, LLC (the “Manager”), which is an affiliate of Bluerock Real Estate, LLC (“BRE”), pursuant to which the Manager will provide for the day-to-day management of the Company’s operations.

Pursuant to the terms of the Management Agreement, the Manager will provide the Company with a management team and appropriate support personnel to provide such management services to the Company.

In October 2022, the Company entered into a management agreement (the “Management Agreement”) with the Operating Partnership and Bluerock Homes Manager, LLC (the “Manager”), which is an affiliate of Bluerock Real Estate, LLC (“BRE”), pursuant to which the Manager provides for the day-to-day management of the Company’s operations.

Pursuant to the terms of the Management Agreement, the Manager provides the Company with a management team and appropriate support personnel to provide such management services to the Company.

The Management Agreement requires the Manager to manage the Company’s business affairs under the supervision and direction of the Company’s board of directions (the “Board”).

Specifically, the Manager will be responsible for (i) the selection, purchase and sale of the Company’s portfolio investments, (ii) the Company’s financing activities, and (iii) providing the Company with advisory services, in each case in conformity with the investment guidelines and other policies approved and monitored by its Board.

The initial term of the Management Agreement expires on October 6, 2023 and will be automatically renewed for a one-year term on each anniversary date thereafter unless earlier terminated or not renewed in accordance with the terms thereof.

The Company will pay the Manager a base management fee (the “base management fee”) in an amount equal to 1.50 % of the Company’s New Stockholders’ Equity (as defined in the Management Agreement) per year, as well as an incentive fee (the “incentive fee”) with respect to each calendar quarter (or part thereof that the Management Agreement is in effect) in arrears.

The Company will also be required to reimburse the Manager for certain expenses and pay all operating expenses, except those specifically required to be borne by the Manager under the Management Agreement.

The Management Agreement provides that (i) the base management fee and the incentive fee shall be allocated and payable as one half ( 50 %) in C-LTIP Units and the remainder payable in cash or C-LTIP Units, at the discretion of the Board, and (ii) expense reimbursements shall be payable either in cash or C-LTIP Units, at the discretion of the Board.

Specifically, the Manager is responsible for (i) the selection, purchase and sale of the Company’s portfolio investments, (ii) the Company’s financing activities, and (iii) providing the Company with advisory services, in each case in conformity with the investment guidelines and other policies approved and monitored by its Board.

The Management Agreement expires on October 6, 2024 and will be automatically renewed for a one-year term on each anniversary date thereafter unless earlier terminated or not renewed in accordance with the terms thereof.

The Company pays the Manager a base management fee (the “base management fee”) in an amount equal to 1.50 % of the Company’s New Stockholders’ Equity (as defined in the Management Agreement) per year, as well as an incentive fee (the “incentive fee”) with respect to each calendar quarter (or part thereof that the Management Agreement is in effect) in arrears.

The Company is required to reimburse the Manager for certain expenses and pay all operating expenses, except those specifically required to be borne by the Manager under the Management Agreement.

The Management Agreement provides that (i) the base management fee and the incentive fee shall be allocated and payable as one half ( 50 %) in C-LTIP Units and the remainder payable in cash or C-LTIP Units, at the discretion of the Board, and (ii) operating expense reimbursements shall be payable either in cash or C-LTIP Units, at the discretion of the Board.

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 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 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.

For the three months ended March 31, 2024 and 2023, the Company recorded base management fees of $ 2.1 million and $ 1.9 million, respectively.

For the first quarter 2024, the Company will pay the base management fee to the Manager as one half ( 50 %) in C-LTIP Units and the remainder in cash;

for the first quarter 2023, the Company paid the full base management fee to the Manager through the issuance of C-LTIP Units.

There have been no incentive fee expenses incurred during 2024 or the year ended December 31, 2023.

For the three months ended March 31, 2024 and 2023, the Company recorded operating expense reimbursements of $ 1.2 million and $ 0.3 million, respectively.

For the first quarter 2024, the Company will pay the full operating expense reimbursement to the Manager in cash;

for the first quarter 2023, the Company paid the full operating expense reimbursement to the Manager through the issuance of C-LTIP Units.

The operating expense reimbursement for the first quarter 2024 included a $ 0.8 million reimbursement to the Manager for accounting and legal services.

Prior to the fourth quarter 2023, the Manager elected to not seek reimbursement for accounting and legal services during the Company's first year of operations.

In addition, for the three months ended March 31, 2024 and 2023, the Company recorded direct expense reimbursements of $ 0.1 million and $ 0.1 million, respectively, which were paid to the Manager in cash.

Both the operating and direct expense reimbursements were recorded as part of general and administrative expenses in the Company’s consolidated statements of operations.

The table below presents the related party amounts payable to the Manager at March 31, 2024 and December 31, 2023 pursuant to the terms of the Management Agreement (amounts in thousands).

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

Amounts payable to the Manager under the Management Agreement

September 30, 2023

March 31, 2024

December 31, 2023

3 unchanged sentences

Total amounts payable to the Manager

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

At March 31, 2024 and December 31, 2023, the Company had no receivables due from any related parties.

Selling Commissions and Dealer Manager Fees

1 unchanged sentence

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.

For the three months ended March 31, 2024, the Company incurred $ 0.7 million in selling commissions and discounts and $ 0.3 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 $ 0.2 million in conjunction with the offering of Series A Preferred Stock during the three months ended March 31, 2024.

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

Prior to the completion of the spin-off transaction on October 6, 2022, Bluerock Residential was party to an Administrative Services Agreement (the “ASA”) and a Leasehold Cost-Sharing Agreement (the “CSA”) with BRE and its affiliate, Bluerock Real Estate Holdings, LLC (together “BREH”).

Pursuant to the ASA, BREH provided Bluerock Residential with certain human resources, investor relations, marketing, legal and other administrative services (the “Services”).

In addition, the ASA permitted certain Bluerock Residential employees to provide services to BREH, on an at-cost basis, generally allocated based on the use of such services for the benefit of the business of BREH, and otherwise subject to the terms of the Services provided by BREH to Bluerock Residential under the ASA.

Pursuant to the CSA, Bluerock Residential and BREH were allocated costs, including those costs associated with tenant improvements, with respect to the lease for their New York headquarters (the “NY Lease”).

Payments by Bluerock Residential of any amounts payable to BREH under the ASA and CSA were made in cash or, at the discretion of its board of directors, in the form of Bluerock Residential’s long-term incentive plan units.

Pursuant to the terms of the ASA, operating expenses were (i) paid by BREH on behalf of Bluerock Residential, and (ii) paid by Bluerock Residential on behalf of BREH.

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 $ 0.6 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.

Prior period operating expense amounts recognized by the Company are not representative of the amounts that would have been reflected in the financial statements had the Company operated independently of Bluerock Residential.

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 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.

An aggregate of 3,843,502 shares of the Company’s common stock was distributed to its stockholders, comprised of 3,835,013 shares of the Company’s Class A common stock and 8,489 shares of the Company’s Class C common stock.

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) 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.

Net Loss Per Common Share

Basic and diluted 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.

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.

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) 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):

The following table reconciles the components of basic and diluted net loss per common share for the three months ended March 31, 2024 and 2023 (amounts in thousands, except share and per share amounts):

Three Months Ended

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

Net loss attributable to common stockholders

Weighted average common shares outstanding (1)

1 unchanged sentence

Weighted average common shares outstanding and potential dilutive shares (1)

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.

Net loss per common share, basic

Net loss per common share, diluted

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

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.

(2) For the three months ended March 31, 2024, potential vesting of restricted Class A common stock of 4,531 shares 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.

The income allocable to such OP Units is allocated on this same basis and reflected as noncontrolling interests in the accompanying combined consolidated financial statements.

The income allocable to such OP Units is allocated on this same basis and reflected as noncontrolling interests in the accompanying consolidated financial statements.

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.

During the three months ended March 31, 2024, the Company issued 395,628 shares of 6.0 %Series A Redeemable Preferred Stock (the “Series A Preferred Stock”) at $ 25.00 per share (the “Stated Value”) under its continuous registered offering with net proceeds of approximately $ 8.6 million after (i) commissions, dealer manager fees and sales discounts of approximately $ 1.0 million, and (ii) costs related to establishing the offering of Series A Preferred Stock of approximately $ 0.3 million.

As of March 31, 2024, the Company had issued a total of 832,303 shares of Series A Preferred Stock with total net proceeds of approximately $ 17.3 million after commissions, dealer manager fees, sales discounts and offering costs.

As of March 31, 2024, the Company had not redeemed any shares of Series A Preferred Stock.

Class A Common Stock Repurchase Plan

On February 13, 2024, the Board authorized a stock repurchase plan for the repurchase, from time to time, of up to an aggregate of $ 5 million of the Company’s outstanding shares of Class A common stock, with such repurchases to be conducted in accordance with the requirements of Rule 10b-18 of the Securities Exchange Act of 1934 (the “Exchange Act”) and subject to Rule 10b-5 of the Exchange Act.

The repurchase plan has a term of one year and may be discontinued at any time.

The extent to which the Company repurchases shares of its Class A common stock under the repurchase plan, and the timing of any such repurchases, depends on a variety of factors including general business and market conditions and other corporate considerations.

The Company expects to repurchase shares of its Class A common stock through open market transactions subject to market conditions, certain price limitations and other conditions established under the plan.

Open market repurchases will be structured to occur in conformity with the method, timing, price and volume requirements of Rule 10b-18 of the Exchange Act.

As of March 31, 2024, no repurchases of Class A common stock had been made by the Company.

Operating Partnership and Long-Term Incentive Plan Units

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).

As of March 31, 2024, limited partners other than the Company owned approximately 69.34 % of the common units of the Operating Partnership ( 7,365,735 OP Units, or 58.20 %, is held by OP Unit holders, and 1,410,986 LTIP Units, or 11.14 %, is held by LTIP Unit holders, including 3.68 % which are not vested as of March 31, 2024).

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 (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.

On February 21, 2024, the Company granted 151,600 and 95,204 C-LTIP Units pursuant to the Management Agreement to the Manager in payment of the (i) base management fee of $ 2.0 million, and (ii) operating expense reimbursement of $ 1.3 million, respectively, for the fourth quarter 2023.

Such C-LTIP Units were fully vested upon issuance.

8 unchanged sentences

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.

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.

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.

During the three months ended March 31, 2024 and 2023, the Company recognized compensation expense for such LTIP Units of approximately $ 0.7 million and $ 0.5 million, respectively.

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

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.

At March 31, 2024, there was $ 8.3 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 3.3 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 nine months ended September 30, 2023, the Company recognized compensation expense for such RSGs of approximately $ 0.05 million and $ 0.06 million, respectively.

In November 2023, the Company issued 31,260 shares of Class A common stock as restricted stock grants (“RSGs”) as equity compensation, pursuant to the BHM Individuals Plans, directly to and among certain of the Manager’s executive management team and personnel who provide other services to the Manager.

Such RSGs will vest one-third on May 25, 2024, and the remainder will vest ratably on an annual basis over a two-year period from April 1, 2024.

During the three months ended March 31, 2024, the Company recognized compensation expense for such RSGs of approximately $ 0.05 million.

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

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.

At March 31, 2024, there was $ 0.4 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 2.0 years.

4 unchanged sentences

Paid / Payable Date

Class A common stock Special Dividend

December 19, 2023

December 29, 2023

January 5, 2024

Class C common stock Special Dividend

December 19, 2023

December 29, 2023

January 5, 2024

Series A Preferred Stock (1)

September 11, 2023

August 25, 2023

October 13, 2023

September 11, 2023

September 25, 2023

October 5, 2023

December 22, 2023

January 5, 2024

January 15, 2024

January 25, 2024

February 5, 2024

January 15, 2024

February 23, 2024

March 5, 2024

January 15, 2024

March 25, 2024

April 5, 2024

Series A Preferred Special Dividend (2)

November 7, 2023

Each day of December 1 - 31, 2023

January 5, 2024

January 15, 2024

Each day of January 1 - 31, 2024

February 5, 2024

January 15, 2024

Each day of February 1 - 29, 2024

March 5, 2024

January 15, 2024

Each day of March 1 - 31, 2024

April 5, 2024

(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.

(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, divided by (b) twelve , 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.

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):

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 three months ended March 31, 2024 were as follows (amounts in thousands):

Distributions

First Quarter

Class A common stock

Class C common stock

Series A Preferred Stock (1)

LTIP / C-LTIP Units

Total first quarter

(1) Series A Preferred Stock amounts include the standard dividend at an annual rate of 6.0 % of the Stated Value and any special dividends .

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 $ 0.2 million and $ 3.4 million as of September 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 loan and consolidated real estate investments was $ 20.7 million and $ 0.2 million at March 31, 2024 and December 31, 2023, respectively.

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

6 unchanged sentences

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

April 12, 2024

April 25, 2024

April 12, 2024

June 25, 2024

Series A Preferred Special Dividend

April 12, 2024

Each day of April 1 - 30, 2024

Series A Preferred Enhanced Special Dividend

June 25, 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, divided by (b) twelve, 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.

(3) Holders of record of Series A Preferred Stock shares are entitled to an enhanced special dividend equal to the amount by which (i) the Stated Value of the Series A Preferred Stock multiplied by (a) the sum of (I) the average of the one-month Term SOFR for each day commencing on the 26 th of the prior month to the 25 th of the applicable month, plus (II) two percent, divided by (b) twelve , exceeds (ii) the standard monthly dividend of $ 0.125 per share of Series A Preferred Stock.

The enhanced special dividend will be aggregated with the standard monthly dividend so as to affect a dividend rate on the Series A Preferred Stock that is subject to a 6.5 % minimum and 8.5 % maximum annual rate.

Distributions Paid

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

The following distributions were declared and/or paid to the Company’s stockholders subsequent to March 31, 2024 (amounts in thousands):

Declaration Date

Distributions per Share

Distribution per Share

Total Distribution

Series A Preferred Stock (1)

September 11, 2023

August 25, 2023

October 5, 2023

Series A Preferred Stock

September 11, 2023

September 25, 2023

October 5, 2023

January 15, 2024

March 25, 2024

April 5, 2024

Series A Preferred Stock (1)

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”).

April 12, 2024

April 25, 2024

(1) Series A Preferred Stock distribution per share amounts include the standard dividend at an annual rate of 6.0 % of the Stated Value and any special dividends.

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