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Item 2. Management’s Discussion and Analysis

2024-05-09 compared with 2023-11-09 · 200 added, 208 removed, 221 unchanged (65% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of the historical results of operations and liquidity and capital resources of Bluerock Homes Trust, Inc.

(“Bluerock Homes,” “the Company,” “we,” “us,” or “our”), which 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.

You should read the following discussion and analysis in conjunction with the accompanying financial statements of Bluerock Homes and the notes thereto.

The following discussion and analysis should be read in conjunction with the accompanying financial statements of Bluerock Homes Trust, Inc., and the notes thereto.

As used herein, the terms “the Company”, “we”, “our”, and “us” refer to Bluerock Homes Trust, Inc., a Maryland corporation formed on December 16, 2021, and, as required by context, Bluerock Residential Holdings, L.P., a Delaware limited partnership, which we refer to as our “Operating Partnership,” and to their subsidiaries.

We refer to Bluerock Homes Manager, LLC, a Delaware limited liability company, and an entity affiliated with the Company, as our Manager.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements.

The matters discussed in these forward-looking statements are subject to risk, uncertainties and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements.

For the period ended and prior to October 6, 2022, the financial statements 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 Bluerock Homes are included in the financial statements.

These financial statements also include general and administrative expenses that have been allocated to Bluerock Homes 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 Bluerock Homes are not representative of the amounts that would have been reflected in these financial statements had it operated independently of Bluerock Residential.

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

Forward-Looking Statements

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● the board of directors’ determination as to timing and payment of dividends, and our ability to pay future distributions at the dividend rates we have paid (if any);

● our ability to qualify and maintain our qualification as a real estate investment trust ("REIT");

● our ability to qualify and maintain our qualification as a real estate investment trust (“REIT”);

● litigation, including costs associated with prosecuting or defending claims and any adverse outcomes.

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Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this report, whether as a result of new information, future events, changed circumstances or any other reason.

The forward-looking statements should be read in light of the risk factors set forth in Item 1A of this Quarterly Report on Form 10-Q, in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission ("SEC") on March 22, 2023, and subsequent filings by us with the SEC, or ("Risk Factors").

The forward-looking statements should be read in light of the risk factors set forth in Item 1A of this Quarterly Report on Form 10-Q, in Part I, Item 1A of our 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, and subsequent filings by us with the SEC, or (“Risk Factors”).

We own and operate 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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Our 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 our return on investment.

As of September 30, 2023, we 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, our consolidated operating investments were approximately 94.4% occupied.

In October 2023, we filed our U.S.

federal income tax return for the taxable year ending December 31, 2022 and elected to be treated, and currently qualify, as a REIT for federal income tax purposes.

As of March 31, 2024, we 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, our consolidated operating investments were approximately 94.8% occupied.

We have elected to be treated, and currently qualify, as a REIT for federal income tax purposes.

As a REIT, we generally are not subject to corporate-level income taxes.

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

If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate tax rates and we would not be permitted to qualify as a REIT for four years following the year in which our qualification is denied.

Such an event could materially and adversely affect our net income and results of operations.

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Higher construction costs could adversely impact our investments in real estate assets and our expected yields on development projects.

Additionally, recent developments in the banking industry have caused uncertainty and concern regarding the strength of the banking system.

As a result, the cost of obtaining debt from credit and capital markets has increased as many lenders have increased interest rates, enacted tighter lending standards, and reduced and, in some cases, ceased to provide funding to borrowers.

Additionally, developments in the banking industry in early 2023 caused uncertainty and concern regarding the strength of the banking system.

As a result, the cost of obtaining debt from credit and capital markets increased as many lenders increased interest rates, enacted tighter lending standards, and reduced and, in some cases, ceased to provide funding to borrowers.

Although our banking relationships are primarily with large national banks, a significant disruption to the banking system could lead to market-wide liquidity problems which could adversely affect our access to capital and our cost of capital.

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Other Significant Developments

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

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

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

Acquisition of Additional Interests in Investments

During the nine months ended September 30, 2023, we acquired the noncontrolling partner’s interest in the following consolidated operating investments ($ in thousands):

January 6, 2023

Indy-Springfield, formerly Peak JV 1

Sale of Real Estate Assets

During the second quarter 2023, we 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, we 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.

Preferred Equity Investment Activity

During the nine months ended September 30, 2023, our preferred equity investment activity was as follows:

(i) we increased our preferred equity investment commitments in (a) the Willow Park joint venture by $2.1 million, for a total commitment of $4.6 million, and (b) The Woods at Forest Hill joint venture by $2.3 million, for a total commitment of $5.6 million, and (ii) our preferred equity investment in the operating partnership of Peak Housing REIT ( 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, leaving our remaining preferred equity investment in the Peak REIT OP at $11.8 million as of September 30, 2023.

Additionally, we funded an aggregate of approximately $7.5 million of preferred equity investments in The Woods at Forest Hill, Wayford at Innovation Park and Willow Park.

Acquisition of Villas at Huffmeister

On March 25, 2024, we, 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 that we funded.

Sale of Consolidated Operating Units

During the first quarter 2024, we 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.

Loan Investment Activity

During the first quarter 2024, we (i) provided funding in the aggregate amount of $9.6 million for the Wayford at Pringle loan investment, with a remaining commitment of $20.5 million to be funded, and (ii) received paydowns on The Woods at Forest Hill loan investment in the aggregate amount of $4.1 million, which included principal investment of $4.0 million and accrued interest of $0.1 million, reducing the outstanding principal balance to $4.3 million at March 31, 2024.

Peak Housing Interests

During the first quarter 2024, our preferred equity investment in the operating partnership of Peak Housing REIT (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.

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

Held for Sale

At March 31, 2024, we classified an aggregate of 96 units as held for sale in our consolidated balance sheets, and for the three months ended March 31, 2024, we 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 our 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.

Series A Redeemable Preferred Stock

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

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

On June 30, 2023, we 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, for a maximum offering amount of $500,000,000 in Series A Preferred Stock (the “Series A Preferred Offering”), and on August 11, 2023, we made the initial issuance of Series A Preferred Stock pursuant to the Series A Preferred Offering.

As of September 30, 2023, we 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.

During the three months ended March 31, 2024, we 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 a 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, we 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.

Stockholders’ Equity

Our total stockholders’ equity decreased $4.9 million from $160.0 million as of December 31, 2022 to $155.1 million as of September 30, 2023.

The decrease in our total stockholders’ equity is primarily attributable to an adjustment of $3.6 million for noncontrolling interest ownership in the Operating Partnership and a net loss of $2.9 million, partially offset by an increase of $1.5 million related to the acquisition of noncontrolling interests.

Our total stockholders’ equity decreased $2.9 million from $147.4 million as of December 31, 2023 to $144.5 million as of March 31, 2024.

The decrease in our total stockholders’ equity is primarily attributable to an adjustment of $1.9 million for noncontrolling interest ownership in the Operating Partnership, a net loss of $0.8 million, and preferred dividends declared of $0.3 million.

Results of Operations

The following is a summary of our consolidated operating real estate investments as of September 30, 2023:

The following is a summary of our consolidated real estate investments as of March 31, 2024:

Operating Investment Name

Market / Location

Number of Units (1)

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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

Total Units / Average

(1) Represents the average of the ending average effective rent per occupied unit as of the last day of each month in the three months ended September 30, 2023.

(2) Percent occupied is calculated as (i) the number of units occupied as of September 30, 2023 divided by (ii) total number of units, expressed as a percentage.

Total Operating Units / Average

Development Investment Name

Abode Wendell Fall (4)

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) Represents the average of the ending average effective rent per occupied unit as of the last day of each month in the three months ended March 31, 2024.

(3) Percent occupied is calculated as (i) the number of units occupied as of March 31, 2024 divided by (ii) total number of units, expressed as a percentage.

Percent occupied excludes an aggregate of 46 down/renovation units.

The following is a summary of our consolidated operational results for the three and nine months ended September 30, 2023 and 2022 ($ in thousands, except average rental rates):

Three Months Ended September 30,

Nine Months Ended September 30,

(4) 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.

The following is a summary of our consolidated operational results for the three months ended March 31, 2024 and 2023 ($ in thousands, except average rental rates):

Three Months Ended March 31,

Rental and other property revenues

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(1) Represents the average of the ending occupancy as of the last day of each month in the period presented.

Average occupancy excludes an average of 50 and 46 down/renovation units for the three months ended March 31, 2024 and 2023, respectively.

(2) Represents the average of the ending average effective rent per occupied unit as of the last day of each month in the period presented.

The following is a summary of our preferred equity investments as of September 30, 2023:

The following is a summary of our preferred equity and loan investments as of March 31, 2024:

Total Actual/

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Cost Per Unit

The Cottages at Warner Robins

Warner Robins, GA

The Woods at Forest Hill (2)

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Charlotte, NC

Wayford at Pringle (3)

Charlotte, NC

Total Lease-up Units

Development Investment Name

Total Development Units

Operating Investment Name

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Total Units/Average

(1) For lease-up investments, represents the average pro forma effective monthly rent per occupied unit for all expected occupied units upon stabilization.

For operating investments, represents the average effective monthly rent per occupied unit for the three months ended September 30, 2023.

(2) Peak Housing is a stabilized operating portfolio and the number of units shown represents those collateralizing our preferred equity investment in the Peak REIT OP as of September 30, 2023 (refer to Note 8 of our combined consolidated financial statements for further information).

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

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

Rental and other property revenues increased $1.6 million, or 18%, to $10.2 million for the three months ended September 30, 2023 as compared to $8.6 million for the same prior year period.

The increase was primarily due to unit count growth of 137 units, net of 27 units sold, in our portfolio since July 1, 2022 and operational improvements from our active management and organic market rent growth.

(1) For lease-up and development investments, represents the average pro forma effective monthly rent per occupied unit for all expected occupied units upon stabilization.

For operating investments, represents the average effective monthly rent per occupied unit for the three months ended March 31, 2024.

(2) 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 our loan investment in The Woods at Forest Hill.

Construction cost amounts shown are based on the initial 76 units.

Refer to Note 6 of our consolidated financial statements for further information.

(3) Wayford at Pringle is a loan investment for which we disburse 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 we provided the borrower with loan proceeds for their acquisition.

The cost to date amount represents outlays related to completed units and those under construction, and we estimate that all units will be completed and acquired, and our loan commitment fully funded, by the end of 2024.

Refer to Note 6 of our consolidated financial statements for further information.

(4) Peak Housing is a stabilized operating portfolio and the number of units shown represents those collateralizing our preferred equity investment in the Peak REIT OP as of March 31, 2024 (refer to Note 7 of our consolidated financial statements for further information).

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

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Rental and other property revenues increased $0.7 million, or 7%, to $10.8 million for the three months ended March 31, 2024 as compared to $10.1 million for the same prior year period.

The increase was primarily due to $0.3 million in operational improvements from our active management and organic market rent growth and a $0.3 million increase in ancillary income (such as late fees, term fees, and damage fees).

Our average rent per occupied unit increased $58, or 3.8%, to $1,600 as compared to $1,542 during the prior year period.

Average occupancy increased 30 basis points from 94.2% to 94.5% on a year over year basis.

The improvement was partially driven by:

The improvements were partially driven by:

(i) stabilization of units under renovation within our value-enhancement strategy, and (ii) stabilization of units that are sometimes purchased from owner occupants which can create modest frictional vacancy for a brief period of time after acquisition.

Interest income from loan investments decreased $0.1 million, or 100%, to zero for the three months ended September 30, 2023 as compared to $0.1 million for the same prior year period due to the payoff of one loan since September 30, 2022.

We did not have any loan investments during the three months ended September 30, 2023.

Property operating expenses increased $0.7 million, or 15%, to $5.1 million for the three months ended September 30, 2023 as compared to $4.4 million for the same prior year period.

The increase was primarily due to the acquisition of units since July 1, 2022 and additional repairs and maintenance as part of our lease up stabilization strategy.

Interest income from loan investments amounted to $0.4 million for the three months ended March 31, 2024 as compared to zero for the same prior year period due to three new loan investments since the fourth quarter 2023.

We did not have any loan investments during the three months ended March 31, 2023.

Property operating expenses increased $0.4 million, or 10%, to $5.0 million for the three months ended March 31, 2024 as compared to $4.6 million for the same prior year period.

The increase was primarily due to:

(i) a $0.3 million increase in expenses (primarily repairs and maintenance) incurred as part of our lease up stabilization strategy and (ii) a $0.1 million or 4% increase in insurance and real estate taxes.

Property operating expenses consist of controllable (payroll, repairs and maintenance, turnover, administrative, advertising, and utilities) and non-controllable (real estate taxes and insurance) expenses.

Controllable expenses were $2.6 million and $2.3 million, and non-controllable expenses were $2.5 million and $2.1 million, for the three months ended September 30, 2023 and 2022, respectively.

Property management and asset management fee expenses were $1.1 million for the three months ended September 30, 2023, consistent with the prior year period.

Controllable expenses were $2.5 million and $2.2 million, and non-controllable expenses were $2.5 million and $2.4 million, for the three months ended March 31, 2024 and 2023, respectively.

Property management and asset management fee expenses were $1.1 million for the three months ended March 31, 2024, consistent with the prior year period.

Property management fees are based on a stated percentage of property revenues and asset management fees are based on a stated percentage of capital contributions or assets under management, where applicable.

Although revenues increased 18% compared to the prior year period, the negotiation of management fees with two property managers in 2023 resulted in property management fees remaining consistent with the prior year period.

General and administrative expenses amounted to $1.7 million for the three months ended September 30, 2023 as compared to $1.8 million for the same prior year period.

Amounts recognized during the three months ended September 30, 2023 represent our operations as a standalone company.

For the period ended and prior to October 6, 2022, allocations of certain general, administrative, sales and marketing expenses were allocated to us from Bluerock Residential based on relative unit count.

As such, expense amounts recognized during the three months ended September 30, 2022 are not representative of the amounts that would have been reflected in the financial statements had we operated independently of Bluerock Residential.

Management fees to related party amounted to $2.0 million for the three months ended September 30, 2023.

Commencing on October 6, 2022, we are externally managed and advised by our Manager pursuant to a Management Agreement.

There was no management fee expense prior to October 6, 2022.

Acquisition and other transaction costs amounted to $0.01 million for the three months ended September 30, 2023 as compared to $0.03 million for the same prior year period.

Although property revenues increased 6% compared to the prior year period, the negotiation of management fees with two property managers in 2023 resulted in property management fees remaining consistent with the prior year period.

General and administrative expenses amounted to $2.9 million for the three months ended March 31, 2024 as compared to $2.0 million for the same prior year period.

Of the $2.9 million total expense in the first quarter 2024, $1.7 million related to direct costs incurred by us, while the remaining $1.2 million related to the operating expense reimbursement to our Manager, which includes rent, utilities, and IT expenses.

The expense reimbursement to our Manager also included a $0.8 million reimbursement for accounting and legal services.

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

For the first quarter 2024, we will pay the full operating expense reimbursement of $1.2 million to the Manager in cash;

for the same prior year period, we paid the full operating expense reimbursement of $0.3 million to the Manager through the issuance of C-LTIP Units.

Management fees to related party amounted to $2.1 million for the three months ended March 31, 2024 as compared to $1.9 million for the same prior year period.

The increase was due to an increase in equity primarily from our continuous registered offering of Series A Preferred Stock, which began in the third quarter of 2023.

For the first quarter 2024, we will pay the base management fee of $2.1 million to the Manager as one half (50%) in C-LTIP Units and the remainder in cash;

for the same prior year period, we paid the full base management fee of $1.9 million to the Manager through the issuance of C-LTIP Units.

Acquisition and other transaction costs amounted to zero for the three months ended March 31, 2024 as compared to $1.5 million for the same prior year period.

Acquisition costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods.

Depreciation and amortization expenses were $4.1 million for the three months ended September 30, 2023 as compared to $3.6 million for the same prior year period, with the increase primarily attributable to the acquisition of units since July 1, 2022.

Other Income and Expense

Other income and expense amounted to income of $0.2 million for the three months ended September 30, 2023 compared to income of $2.6 million for the same prior year period.

This was due to a $2.5 million net increase in interest expense attributable to a $3.2 million decrease in the fair value of interest rate caps and swaps, a $0.2 million increase in interest expense attributable to an increase in the outstanding debt to $167.1 million at September 30, 2023 as compared to $153.6 million at September 30, 2022, partially offset by a $0.9 million increase in interest income from our short-term investments.

In addition, there was a $0.2 million increase in property casualty losses.

The $2.7 million increase in net interest expense and property casualty losses was partially offset by an increase in preferred returns on unconsolidated real estate joint ventures of $0.3 million as funding to our preferred equity investments increased to $85.3 million at September 30, 2023 as compared to $83.0 million at September 30, 2022.

In addition, 18 units were sold during the quarter at net book value with no gain on sales.

Discontinued Operations

Income from discontinued operations amounted to income of zero for the three months ended September 30, 2023 as compared to income of $0.3 million for the same prior year period due to trailing sales activity of multifamily investments in 2021.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Rental and other property revenues increased $7.5 million, or 32%, to $30.6 million for the nine months ended September 30, 2023 as compared to $23.1 million for the same prior year period.

The increase was primarily due to unit count growth of 542 units, net of 27 units sold, in our portfolio since January 1, 2022 and operational improvements from our active management and organic market rent growth.

Our average rent per occupied unit increased $145, or 10.2%, to $1,560 as compared to $1,415 during the prior year period.

Average occupancy increased 220 basis points from 92.0% to 94.2% on a year over year basis.

The improvement was partially driven by:

Interest income from loan investments decreased $1.3 million, or 100%, to zero for the nine months ended September 30, 2023 as compared to $1.3 million for the same prior year period due to the payoff of two loans in 2022.

We did not have any loan investments during the nine months ended September 30, 2023.

Property operating expenses increased $3.2 million, or 29%, to $14.2 million for the nine months ended September 30, 2023 as compared to $11.0 million for the same prior year period.

The increase was primarily due to the acquisition of units since January 1, 2022 and additional repairs and maintenance as part of our lease up stabilization strategy.

Controllable expenses were $6.8 million and $5.3 million, and non-controllable expenses were $7.4 million and $5.7 million, for the nine months ended September 30, 2023 and 2022, respectively.

Property management and asset management fee expenses were $3.3 million for the nine months ended September 30, 2023 as compared to $2.6 million in the same prior year period.

The increase was primarily due to the acquisition of units since January 1, 2022 , partially offset by lower property management fees negotiated with two property managers in 2023.

General and administrative expenses amounted to $5.5 million for the nine months ended September 30, 2023 as compared to $5.0 million for the same prior year period.

Amounts recognized during the nine months ended September 30, 2023 represent our operations as a standalone company.

As such, expense amounts recognized during the nine months ended September 30, 2022 are not representative of the amounts that would have been reflected in the financial statements had we operated independently of Bluerock Residential.

Management fees to related party amounted to $5.9 million for the nine months ended September 30, 2023.

Commencing on October 6, 2022, we are externally managed and advised by our Manager pursuant to a Management Agreement.

There was no management fee expense prior to October 6, 2022.

Acquisition and other transaction costs amounted to $1.8 million for the nine months ended September 30, 2023 as compared to $0.1 million for the same prior year period.

The 2023 expense primarily relates to the transition of property management services for over 1,000 units.

Depreciation and amortization expenses were $12.1 million for the nine months ended September 30, 2023 as compared to $12.2 million for the same prior year period, with the decrease primarily attributable to in-place leases being fully amortized prior to 2023 partially offset by the acquisition of units since January 1, 2022.

The 2023 expense primarily relates to the transition of property management services for over 1,000 homes.

Depreciation and amortization expenses were $4.0 million for the three months ended March 31, 2024, consistent with the prior year period.

Other Income and Expense

Other income and expense amounted to income of $2.1 million for the nine months ended September 30, 2023 compared to income of $3.3 million for the same prior year period.

This was due to a $4.1 million net increase in interest expense attributable to a $4.1 million decrease in the fair value of interest rate caps and swaps, a $1.6 million increase in interest expense attributable to an increase in the outstanding debt to $167.1 million at September 30, 2023 as compared to $153.6 million at September 30, 2022 (which was offset by a $1.6 million increase in interest income from our short-term investments), a $0.4 million increase in the allowance for credit losses on unconsolidated real estate joint ventures, and $0.2 million from property casualty losses.

These expenses were partially offset by an increase in preferred returns on unconsolidated real estate joint ventures of $2.8 million as funding to our preferred equity investments increased to $85.3 million at September 30, 2023 as compared to $39.6 million at December 31, 2021 and an increase in gain on sale of real estate investments of $0.7 million due to the sale of 27 units during the nine months ended September 30, 2023.

Discontinued Operations

Income from discontinued operations amounted to income of zero for the nine months ended September 30, 2023 as compared to income of $0.3 million for the same prior year period due to trailing sales activity of multifamily investments in 2021.

Other income and expense amounted to income of $0.7 million for the three months ended March 31, 2024 as compared to expense of $0.4 million for the same prior year period.

This was primarily due to a $1.1 million increase in interest income from our short-term investments and a $0.3 million gain on sales of real estate investments from the sale of 24 homes during the three months ended March 31, 2024, partially offset by a $0.1 million net increase in interest expense, a $0.1 million impairment on real estate, and a $0.1 million increase in provision for credit losses.

Net Operating Income

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However, NOI should only be used as a supplemental measure of our financial performance.

The following table reflects net (loss) income attributable to common stockholders together with a reconciliation to NOI, as computed in accordance with GAAP for the periods presented (amounts in thousands):

The following table reflects net loss attributable to common stockholders together with a reconciliation to NOI, as computed in accordance with GAAP for the periods presented (amounts in thousands):

Three Months Ended

Nine Months Ended

September 30,

Net (loss) income attributable to common stockholders

Net (loss) income attributable to Operating Partnership Units

Net (loss) income attributable to common stockholders and unit holders

Add common stockholders and Operating Partnership Units pro-rata share of:

Net loss attributable to common stockholders

Net loss attributable to Operating Partnership Units

Net loss attributable to common stockholders and unit holders

Net loss attributable to partially owned properties’ noncontrolling interests

Income from discontinued operations

Real estate depreciation and amortization

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Non-cash interest expense

Unrealized loss (gain) on derivatives

Provision for (recovery of) credit losses

Unrealized loss on derivatives

Provision for credit losses

Property management and asset management fees

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Corporate operating expenses

Weather-related losses, net

Interest income

Preferred dividends

Other expense (income), net

Other income, net

Preferred returns on unconsolidated real estate joint ventures

Gain on sale of real estate investments

Interest income from loan investments

Gain on sale and impairment of real estate investments, net

Total property income

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Liquidity is a measure of our ability to meet potential cash requirements, both short- and long-term.

Our primary short-term liquidity requirements historically have related to (i) our operating expenses and other general business needs, (ii) acquisition of properties, (iii) committed investments and capital requirements to fund development and renovations at existing properties, (iv) ongoing commitments to repay borrowings, including our revolving credit facilities and our maturing debt, and (v) distributions to stockholders.

Our primary short-term liquidity requirements historically have related to (i) our operating expenses and other general business needs, (ii) investment in real estate, (iii) distributions to stockholders, (iv) committed investments and capital requirements to fund development and renovations at existing properties, (v) ongoing commitments to repay borrowings, including our revolving credit facilities and our maturing debt, and (vi) Class A common stock repurchases under our stock repurchase plan.

Our ability to access capital on favorable terms as well as to use cash from operations to continue to meet our short-term liquidity needs could be affected by various risks and uncertainties, including the risks detailed in Part I, Item 1A titled “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on March 12, 2024.

While consolidated occupancy remains strong at 94.4% as of September 30, 2023, in future periods we may experience reduced levels of tenant retention, and reduced foot traffic and lease applications from prospective tenants.

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

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

In general, we believe our available cash balances, cash flows from operations, proceeds from the Series A Preferred Offering, proceeds from our revolving credit facilities, proceeds from future mortgage debt financings for acquisitions and/or development projects, and other financing arrangements will be sufficient to fund our liquidity requirements with respect to our existing portfolio for the next 12 months.

While consolidated occupancy remains strong at 94.8% as of March 31, 2024, in future periods we may experience reduced levels of tenant retention, and reduced foot traffic and lease applications from prospective tenants.

In general, we believe our available cash balances, cash flows from operations, proceeds from the offering of our Series A Preferred Stock, proceeds from our revolving credit facilities, proceeds from future mortgage debt financings for acquisitions and/or development projects, and other financing arrangements will be sufficient to fund our liquidity requirements with respect to our existing portfolio for the next 12 months.

In general, we expect that our results related to our existing portfolio will improve in future periods as a result of anticipated future investments in and acquisitions of single-family residential properties and build-to-rent development properties.

We believe we will be able to meet our primary liquidity requirements going forward through, among other sources:

● $89.4 million in cash available at September 30, 2023;

● capacity of $100 million, of which approximately $10 million was available as of September 30, 2023 on our revolving credit facilities dedicated to single-family residential investments;

● $92.3 million in cash available at March 31, 2024;

● capacity of $65 million, of which approximately $15 million was available at March 31, 2024, on our revolving credit facilities;

● proceeds from future mortgage debt financings for acquisition and/or development projects;

● cash generated from operating activities;

● proceeds from our Series A Preferred Offering and potential offerings of common and preferred stock, as well as issuances of units of limited partnership interest in our Operating Partnership (“OP Units”).

The following table summarizes our contractual obligations as of September 30, 2023 related to our mortgage notes secured by our properties and revolving credit facilities.

At September 30, 2023, our estimated future required payments on these obligations were as follows (amounts in thousands):

● proceeds from the offering of our Series A Preferred Stock and potential offerings of common and preferred stock, as well as issuances of units of limited partnership interest in our Operating Partnership (“OP Units”).

The following table summarizes our contractual obligations as of March 31, 2024 related to our mortgage notes secured by our properties and revolving credit facilities.

At March 31, 2024, our estimated future required payments on these obligations were as follows (amounts in thousands):

Mortgages Payable (Principal)

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Estimated interest payments are based on the stated rates for mortgage notes payable assuming the interest rate in effect for the most recent quarter remains in effect through the respective maturity dates.

As of September 30, 2023, the aggregate amount of our contractual commitments to fund future cash obligations in certain of our preferred equity and joint venture investments was $0.2 million.

As equity capital market conditions permit, we may supplement our capital for short-term liquidity needs with proceeds of potential offerings of common and preferred stock, as well as issuance of OP Units.

At March 31, 2024, the aggregate amount of our contractual commitments to fund future cash obligations in certain of our loan and consolidated real estate investments was $20.7 million.

As equity capital market conditions permit, we may supplement our capital for short-term liquidity needs with proceeds of potential offerings of our common and preferred stock, as well as the issuance of OP Units.

Given the significant volatility in the trading price of REIT equities and our otherwise stable financial condition and liquidity position, we cannot provide assurances that these offerings are a likely source of capital to meet short-term liquidity needs.

Our primary long-term liquidity requirements relate to (i) costs for additional single-family residential investments, including build-to-rent development investments, (ii) repayment of long-term debt and our revolving credit facilities, (iii) capital expenditures, and (iv) cash redemption requirements related to our Series A Preferred Stock.

We intend to finance our long-term liquidity requirements with net proceeds of additional issuances of common and preferred stock, including our Series A Preferred Offering, our revolving credit facilities, as well as future acquisition or project-based borrowings.

On February 13, 2024, our board of directors (the “Board”) authorized a stock repurchase plan for the repurchase, from time to time, of up to an aggregate of $5 million of our 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 we repurchase shares of our 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.

We expect to repurchase shares of our 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, we had not made any repurchases of our Class A common stock.

Our primary long-term liquidity requirements relate to (i) costs for additional single-family residential investments, including build-to-rent development properties, (ii) repayment of long-term debt and our revolving credit facilities, (iii) capital expenditures, (iv) cash redemption requirements related to our Series A Preferred Stock, and (v) Class A common stock repurchases under our stock repurchase plan.

We intend to finance our long-term liquidity requirements with net proceeds of additional issuances of common and preferred stock, including issuances in connection with the continuous registered offering of our Series A Preferred Stock, our revolving credit facilities, as well as future acquisition or project-based borrowings.

Our success in meeting these requirements will therefore depend upon our ability to access capital.

Further, our ability to access equity capital is dependent upon, among other things, general market conditions for REITs and the capital markets generally, market perceptions about us and our asset class, and current trading prices of our securities.

As we did in the three months ended September 30, 2023, we may also selectively sell consolidated operating assets at appropriate times, which would be expected to generate cash sources for both our short-term and long-term liquidity needs.

As we did in the three months ended March 31, 2024, we may also selectively sell consolidated operating assets at appropriate times, which would be expected to generate cash sources for both our short-term and long-term liquidity needs.

We may also meet our long-term liquidity needs through borrowings from a number of sources, either at the corporate or project level.

We believe our revolving credit facilities will serve as our primary debt source that will continue to enable us to deploy our capital more efficiently and provide capital structure flexibility as we grow our asset base.

In addition to restrictive covenants, our revolving credit facilities contain material financial covenants.

At March 31, 2024, we were in compliance with all covenants under our credit facilities.

We will continue to monitor the debt markets, including Fannie Mae and Freddie Mac, and as market conditions permit, access borrowings that are advantageous to us.

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We expect to maintain a distribution on our Series A Preferred Stock in accordance with the terms which require monthly dividends.

While our distributions through September 30, 2023 have been paid from cash flow from operations and in accordance with our policy, distributions in the future may be paid from cash flow from operations, proceeds from our Series A Preferred Offering, the sales of assets and additional sources, such as from borrowings.

While our distributions through March 31, 2024 have been paid from cash flow from operations and in accordance with our policy, distributions in the future may be paid from cash flow from operations, proceeds from the offering of our Series A Preferred Stock, the sales of assets and additional sources, such as from borrowings.

We have notes receivable in conjunction with properties that are in various stages of development and in lease-up.

To date, these investments have been structured as senior loans, and in the future, we may also provide mezzanine financing to these types of projects.

The notes receivable provide a current stated return and require repayment based on a fixed maturity date.

If the property does not repay the notes receivable upon maturity, our income, FFO, CFFO and cash flows could be reduced below the stated returns currently being recognized if the property does not produce sufficient cash flow to pay its operating expenses and debt service, or to refinance its debt obligations.

We also have preferred equity interests in properties that are in various stages of development, in lease-up and operating, and our preferred equity investments are structured to provide a current and/or accrued preferred return during all phases.

Each joint venture in which we own a preferred equity interest is required to redeem our preferred equity interests, plus any accrued preferred return, based on a fixed maturity date, generally in relation to the property’s construction loan or mortgage loan maturity.

Upon redemption of the preferred membership interests, our income, FFO, CFFO and cash flows could be reduced below the preferred returns currently being recognized.

Alternatively, if the joint ventures do not redeem our preferred membership interest when required, our income, FFO, CFFO and cash flows could be reduced if the development project does not produce sufficient cash flow to pays its operating expenses, debt service and preferred return obligations.

Upon redemption of the preferred equity interests, our income, FFO, CFFO and cash flows could be reduced below the preferred returns currently being recognized.

Alternatively, if the joint ventures do not redeem our preferred equity interest when required, our income, FFO, CFFO and cash flows could be reduced if the development project does not produce sufficient cash flow to pays its operating expenses, debt service and preferred return obligations.

As we evaluate our capital position and capital allocation strategy, we may consider alternative means of financing our development loan and preferred equity investment activities at the subsidiary level.

Off-Balance Sheet Arrangements

As of September 30, 2023, we have off-balance sheet arrangements that may have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.

As of September 30, 2023, we own interests in seven joint ventures that are accounted for as held to maturity debt securities.

As of March 31, 2024, we have off-balance sheet arrangements that may have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.

At March 31, 2024, we own interests in six joint ventures that are accounted for as held to maturity debt securities.

Cash Flows from Operating Activities

As of September 30, 2023, we owned indirect equity interests in seventeen real estate investments, consisting of ten consolidated operating investments and seven preferred equity investments.

During the nine months ended September 30, 2023, net cash provided by operating activities was $6.8 million after net loss of $10.1 million was adjusted for the following:

As of March 31, 2024, we held twenty real estate investments, consisting of twelve consolidated investments and eight preferred equity and loan investments, with the twenty investments representing an aggregate of 4,366 residential units.

During the three months ended March 31, 2024, net cash provided by operating activities was $1.1 million after net loss of $3.2 million was adjusted for the following:

● non-cash items of $6.5 million;

● distributions of income and preferred returns from preferred equity investments in unconsolidated real estate joint ventures of $0.2 million;

● an increase in accounts payable and other accrued liabilities of $1.2 million;

● an increase in due to affiliates of $0.4 million;

● an increase in accounts receivable, prepaids and other assets of $1.6 million;

● a decrease in accounts payable and other accrued liabilities of $0.7 million;

● a decrease in due to affiliates of $0.1 million.

Cash Flows from Investing Activities

During the nine months ended September 30, 2023, net cash used in investing activities was $4.9 million, primarily due to the following:

● $7.5 million used in additional investments in unconsolidated real estate joint ventures;

● $7.2 million used on capital expenditures;

During the three months ended March 31, 2024, net cash used in investing activities was $19.3 million, due to the following:

● $17.5 million used in acquiring consolidated real estate investments;

● $8.5 million of proceeds from the redemption of unconsolidated real estate joint ventures;

● $9.6 million used in investments in notes receivable;

● $1.7 million used on capital expenditures;

● $4.0 million of repayments of notes receivable;

● $3.7 million of proceeds from sale of real estate investments;

● $1.8 million of proceeds from the redemption of unconsolidated real estate joint ventures.

Cash Flows from Financing Activities

During the nine months ended September 30, 2023, net cash provided by financing activities was $11.2 million, primarily due to the following:

During the three months ended March 31, 2024, net cash provided by financing activities was $30.9 million, primarily due to the following:

● $35.0 million of proceeds from revolving credit facilities;

● net proceeds of $3.4 million from the issuance of shares of Series A Preferred Stock in our Series A Preferred Offering;

● net proceeds of $8.6 million from the issuance of shares of Series A Preferred Stock;

● $1.0 million of contributions from noncontrolling interests;

● $6.0 million of repayments on revolving credit facilities;

● $5.0 million used in the purchase of interests from noncontrolling interests;

● $8.5 million of distributions to noncontrolling interests;

● $3.9 million of distributions to common stockholders;

● $0.5 million of payments of deferred financing fees;

● $0.4 million of repayments on our mortgages payable;

● $0.2 million of distributions to preferred stockholders;

● $0.1 million of distributions paid to partially owned properties’ noncontrolling interests.

Capital Expenditures

The following table summarizes our total capital expenditures for the nine months ended September 30, 2023 and 2022 (amounts in thousands):

Nine Months Ended

September 30,

The following table summarizes our total capital expenditures for the three months ended March 31, 2024 and 2023 (amounts in thousands):

Three Months Ended

Redevelopment/renovations

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Our calculation of CFFO differs from the methodology used for calculating CFFO by certain other REITs and, accordingly, our CFFO may not be comparable to CFFO reported by other REITs.

Our management utilizes FFO and CFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition and other transaction costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods.

Our management utilizes FFO and CFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition and pursuit costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods.

Furthermore, although FFO and CFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and CFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs.

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Neither FFO nor CFFO should be considered as an alternative to net income, including net income (loss) attributable to common stockholders, as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

We 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 us.

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 our business activity are included in the financial statements.

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

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

As such, the results presented in the table below are not directly comparable and should not be considered an indication of our future operating performance.

The table below presents our calculation of FFO and CFFO for the periods presented ($ in thousands):

The table below presents our calculation of FFO and CFFO for the three months ended March 31, 2024 and 2023 ($ in thousands):

Three Months Ended

Nine Months Ended

September 30,

Net (loss) income attributable to common stockholders

Net (loss) income attributable to Operating Partnership Units

Net (loss) income attributable to common stockholders and unit holders

Net loss attributable to common stockholders

Net loss attributable to Operating Partnership Units

Net loss attributable to common stockholders and unit holders

Real estate depreciation and amortization

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

Adjustment for partially owned properties' noncontrolling interests

2 unchanged sentences

Non-cash interest expense

Unrealized loss (gain) on derivatives

Provision for (recovery of) credit losses

Weather-related losses, net

Unrealized loss on derivatives

Provision for credit losses

Non-real estate depreciation and amortization

Other expense (income), net

Other income, net

Non-cash equity compensation

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Distributions

Payable to stockholders

Declaration Date

of record as of

Payable to stockholders of record as of

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 we will continue to declare dividends or at this rate.

Holders of 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 our Class A common stock.

Our board of directors (the “Board”) will determine the amount of dividends to be paid to our stockholders.

The determination of our Board will be based on several factors, including funds available from operations, our capital expenditure requirements and the annual distribution requirements necessary to qualify and maintain our REIT status for federal income tax purposes.

Holders of 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 our Class A common stock.

Our Board will determine the amount of dividends to be paid to our stockholders.

The determination of our Board will be based on several factors, including funds available from operations, our capital expenditure requirements and the annual distribution requirements necessary to maintain our REIT status for federal income tax purposes.

As a result, our distribution rate and payment frequency may vary from time to time.

To qualify and maintain our REIT status, we will be required to distribute annually at least 90% of our “REIT taxable income”, as defined by the Internal Revenue Code of 1986, determined without regard to the dividends paid deduction and excluding net capital gains, to our stockholders.

However, to maintain our REIT status for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income”, as defined by the Internal Revenue Code of 1986, determined without regard to the dividends paid deduction and excluding net capital gains, to our stockholders each year.

While our policy is generally to pay distributions from cash flow from operations, we may declare distributions in excess of funds from operations.

Significant Accounting Policies and Critical Accounting Estimates

Our significant accounting policies and critical accounting estimates are disclosed in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” of our Combined Consolidated Financial Statements.

Subsequent Events

Other than the items disclosed in Note 16 "Subsequent Events"

to our interim Combined Consolidated Financial Statements for the period ended September 30, 2023, no material events have occurred that required recognition or disclosure in these financial statements.

Refer to Note 16 of our interim Combined Consolidated Financial Statements for discussion.

Other than the items disclosed in Note 15 “Subsequent Events” to our interim Consolidated Financial Statements for the period ended March 31, 2024, no material events have occurred that required recognition or disclosure in these financial statements.

Refer to Note 15 of our interim Consolidated Financial Statements for discussion.

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 2. Management’s Discussion and Analysis