What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2025-03-20 compared with 2024-03-12 · 105 added, 82 removed, 1012 unchanged (16% of the section changed)

9 unchanged sentences

● weather conditions that may increase or decrease energy costs and other weather-related expenses;

● oversupply of single-family housing or a reduction in demand for real estate in the markets in which our properties are located;

● costs and time period required to convert acquisitions to rental homes;

● oversupply of residential housing or a reduction in demand for real estate in the markets in which our properties are located;

● costs and time period required to convert acquisitions to rental properties;

● a favorable interest rate environment that may result in a significant number of potential residents of our properties deciding to purchase homes instead of renting;

● rules, regulations and/or policy initiatives by government and private actors, including HOAs, to discourage or deter the purchase of single-family properties by entities owned or controlled by institutional investors;

● rules, regulations and/or policy initiatives by government and private actors, including HOAs, to discourage or deter the purchase of residential properties by entities owned or controlled by institutional investors;

● construction of new supply;

4 unchanged sentences

Many of our costs, such as operating expenses and general and administrative expenses, interest expense and real estate acquisition and construction costs, could be adversely impacted by periods of heightened inflation.

The annual rate of inflation in the United States for December 2023 was 3.4%, with a recent peak of 9.1% in June 2022.

However, an increase in inflation could have an adverse impact on our operating expenses as well as our general and administrative expenses.

For example, it is possible that the impact of the rate of inflation may not be adequately offset by annual rent escalations or the resetting of rents from our renewal and re-leasing activities, which may adversely affect our business, financial condition, results of operations, and cash flows.

Inflation in the United States remained elevated throughout 2023 and 2024 and may continue to remain high in the future.

While inflation has shown signs of moderating, it remains uncertain whether substantial inflation in the United States will be sustained over an extended period of time or have a significant effect on the United States or other economies.

Rising inflation could have an adverse impact on our operating expenses as well as our general and administrative expenses.

For example, it is possible that the impact of the rate of inflation may not be adequately offset by annual rent escalations or the resetting of rents from our renewal and re-leasing activities,

which may adversely affect our business, financial condition, results of operations, and cash flows.

Compensation costs and professional service fees are also subject to the impact of inflation and are expected to increase proportionately with increasing market prices for such services.

Consequently, inflation may increase our general and administrative expenses over time and may adversely impact our results of operations and cash flows.

In March 2022, the Federal Reserve began, and continued to raise interest rates into the third quarter of 2023 in an effort to curb inflation.

While the Federal Reserve has held rates steady since July 2023, there can be no assurances that interest rates will not rise again, Our exposure to increases in interest rates in the short term is limited to our variable-rate borrowings.

While the Federal Reserve has held rates steady between July 2023 and September 2024 and reduced interest rates by 50-basis points in September 2024, 25-basis points in November 2024 and 25-basis points in December 2024, there can be no assurances that interest rates will not rise again.

Our exposure to increases in interest rates in the short term is limited to our variable-rate borrowings.

As of December 31, 2024, we had interest rate caps and swaps which effectively limit our exposure to interest rate risk by providing a ceiling on the underlying floating interest rate for $155.6 million of our floating rate debt.

5 unchanged sentences

As a result, our business, financial condition, results of operations, cash flows, liquidity and ability to satisfy our debt service obligations and to pay dividends and distributions to security holders could be adversely affected over time.

Our current portfolio primarily consists of interests in single-family properties, located primarily in markets in the Sunbelt and Western United States.

Any adverse developments in local economic conditions or the demand for single-family properties in these markets may negatively impact our results of operations.

Our current portfolio of properties consists primarily of single-family properties geographically concentrated in the Sunbelt and Western United States, and our portfolio going forward may consist primarily of the same.

As such, we are currently susceptible to local economic conditions and the supply of and demand for single-family properties in these markets.

If there is a downturn in the economy or an oversupply of or decrease in demand for single-family properties in these markets, our business could be materially adversely affected to a greater extent than if we owned a real estate portfolio that was more diversified in terms of both geography and industry focus.

Our current portfolio primarily consists of interests in residential properties, located primarily in markets in the Sunbelt and Western United States.

Any adverse developments in local economic conditions or the demand for residential properties in these markets may negatively impact our results of operations.

Our current portfolio of properties consists primarily of residential properties geographically concentrated in the Sunbelt and Western United States, and our portfolio going forward may consist primarily of the same.

As such, we are currently susceptible to local economic conditions and the supply of and demand for residential properties in these markets.

If there is a downturn in the economy or an oversupply of or decrease in demand for residential properties in these markets, our business could be materially adversely affected to a greater extent than if we owned a real estate portfolio that was more diversified in terms of both geography and industry focus.

We are employing a business model with a limited track record, which may make our business difficult to evaluate.

Our business strategy involves purchasing, renovating, maintaining, and managing a large number of residential properties, including single-family properties, and leasing them to qualified residents.

Until recently, the single-family rental business consisted primarily of private and individual investors in local markets and was managed individually or by small, non-institutional owners and property managers.

Our business strategy involves purchasing, renovating, maintaining, and managing a large number of residential properties and leasing them to qualified residents.

Entry into this market by large, well-capitalized investors is a relatively recent trend, so few peer companies exist and none have yet established long-term track records that might assist us in predicting whether our business model and investment strategy can be implemented and sustained over an extended period of time.

Entry into this market by large, well-capitalized investors is a relatively recent trend, so few peer companies exist and none have yet established long-term track records that might assist us in predicting whether this aspect of our business model and investment strategy can be implemented and sustained over an extended period of time.

It may be difficult for you to evaluate our potential future performance without the benefit of established long-term track records from companies implementing a similar business model.

9 unchanged sentences

● the availability of, and our ability to identify, attractive acquisition opportunities consistent with our investment strategy;

● our ability to compete with other investors entering the single-family rental industry;

● our ability to compete with other investors entering the residential rental industry;

● costs that are beyond our control, including title litigation, litigation with residents or tenant organizations, legal compliance, property taxes, HOA fees, and insurance;

13 unchanged sentences

There has been vigorous and continuing political debate and discussion, in which we participate, with respect to residential housing laws and regulations, with particular focus on the single-family residential housing industry.

In late 2023, legislation was introduced that could, if enacted, discourage or deter the purchase of single-family properties by entities owned or controlled by institutional investors.

Since late 2023, legislation has been introduced that could, if enacted, discourage or deter the purchase of single-family properties by entities owned or controlled by

institutional investors.

It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could take effect.

4 unchanged sentences

The HOAs in which we own our properties may have enacted or may from time to time enact onerous or arbitrary rules that restrict our ability to restore, market, lease, or operate our properties in accordance with our investment strategy, or require us to restore or maintain such properties at standards or costs that are in excess of our planned budgets.

Some HOAs impose limits on the number of property owners who may lease their homes, which, if met or exceeded, would cause us to incur additional costs to sell the property and opportunity costs from lost rental revenue.

Some HOAs impose limits on the number of property owners who may lease their properties, which, if met or exceeded, would cause us to incur additional costs to sell the property and opportunity costs from lost rental revenue.

Furthermore, we may have residents who violate HOA rules and incur fines for which we may be liable as the property owner and for which we may not be able to obtain reimbursement from the resident.

12 unchanged sentences

If the costs associated with property taxes, HOA fees and assessments, or insurance rise significantly and we are unable to increase rental rates due to rent control laws or other regulations to offset such increases, our results of operations would be negatively affected.

Our investments are and will continue to be concentrated in our markets and in the single-family properties sector of the real estate industry, which exposes us to seasonal fluctuations in rental demand and downturns in our markets or in the single-family properties sector.

Our investments in real estate assets are and will continue to be concentrated in our markets and in the single-family properties sector of the real estate industry.

A downturn or slowdown in the rental demand for single-family housing caused by adverse economic, regulatory, or environmental conditions, or other events, in our markets may have a greater impact on the value of our properties or our operating results than if we had more fully diversified our investments.

Our investments are and will continue to be concentrated in our markets and in the residential properties sector of the real estate industry, which exposes us to seasonal fluctuations in rental demand and downturns in our markets or in the residential properties sector.

Our investments in real estate assets are and will continue to be concentrated in our markets and in the residential properties sector of the real estate industry.

A downturn or slowdown in the rental demand for housing caused by adverse economic, regulatory, or environmental conditions, or other events, in our markets may have a greater impact on the value of our properties or our operating results than if we had more fully diversified our investments.

We believe that there are seasonal fluctuations in rental demand with demand higher in the spring and summer than in the late fall and winter.

Such seasonal fluctuations may impact our operating results.

Any future outbreaks of infectious disease, which may include COVID-19 or a future pandemic, could also result in demand for single-family rental properties decreasing substantially and/or occupancy decreasing materially.

Any future outbreaks of infectious disease, which may include COVID-19 or a future pandemic, could also result in demand for residential rental properties decreasing substantially and/or occupancy decreasing materially.

See “—Our business, results of operations, financial condition, and cash flows may be adversely affected by pandemics and outbreaks of infectious disease, which may include COVID-19.”

In addition to general, regional, national, and international economic conditions, our operating performance will be impacted by the economic conditions in our markets.

We base a substantial part of our business plan on our belief that property values and operating fundamentals for single-family properties in our markets will continue to improve over the near to intermediate term.

We base a substantial part of our business plan on our belief that property values and operating fundamentals for residential properties in our markets will continue to improve over the near to intermediate term.

However, these markets have experienced substantial economic downturns in recent years and could experience similar or worse economic downturns in the future.

13 unchanged sentences

See “—Our business, results of operations, financial condition, and cash flows may be adversely affected by pandemics and outbreaks of infectious disease, which may include COVID-19.” If our assumptions regarding the costs or timing of renovation and maintenance across our properties prove to be materially inaccurate, our operating results and ability to make distributions to our stockholders may be adversely affected.

We have in the past acquired and may from time to time in the future acquire some of our homes through the auction process, which could subject us to significant risks that could adversely affect us.

We have in the past acquired and may from time to time in the future acquire some of our homes through the auction process, including auctions of homes that have been foreclosed upon by third-party lenders.

We have in the past acquired and may from time to time in the future acquire some of our residential properties through the auction process, which could subject us to significant risks that could adversely affect us.

We have in the past acquired and may from time to time in the future acquire some of our residential properties through the auction process, including auctions of properties that have been foreclosed upon by third-party lenders.

Such auctions may occur simultaneously in a number of markets, including monthly auctions on the same day of the month in certain markets.

As a result, we may only be able to visually inspect properties from the street and will purchase these homes without a contingency period and in “as is” condition with the risk that unknown defects in the property may exist.

Upon acquiring a new home, we may have to evict residents who are in unlawful possession before we can secure possession and control of the home.

As a result, we may only be able to visually inspect properties from the street and will purchase these properties without a contingency period and in “as is” condition with the risk that unknown defects in the property may exist.

Upon acquiring a new residential property, we may have to evict residents who are in unlawful possession before we can secure possession and control of the property.

The holdover occupants may be the former owners or residents of a property or others who are illegally in possession.

19 unchanged sentences

We are subject to certain risks associated with bulk portfolio acquisitions and dispositions.

We have acquired and disposed of, and may continue to acquire and dispose of, properties we acquire or sell in bulk from or to other owners of single-family homes, banks, and loan servicers.

We have acquired and disposed of, and may continue to acquire and dispose of, properties we acquire or sell in bulk from or to other owners of residential properties, banks, and loan servicers.

When we purchase properties in this manner, we often do not have the opportunity to conduct interior inspections or conduct more than cursory exterior inspections on a portion of the properties.

1 unchanged sentence

Bulk portfolio acquisitions are also more complex than single-family home acquisitions, and we may not be able to implement this strategy successfully.

The costs involved in locating and performing due diligence (when feasible) on portfolios of homes as well as negotiating and entering into transactions with potential portfolio sellers could be significant, and there is a risk that either the seller may withdraw from the entire transaction for failure to come to an agreement or the seller may not be willing to sell us the bulk portfolio on terms that we view as favorable.

In addition, a seller may require that a group of homes be purchased as a package even though we may not want to purchase certain individual assets in the bulk portfolio.

The costs involved in locating and performing due diligence (when feasible) on portfolios of residential properties as well as negotiating and entering into transactions with potential portfolio sellers could be significant, and there is a risk that either the seller may withdraw from the entire transaction for failure to come to an agreement or the seller may not be willing to sell us the bulk portfolio on terms that we view as favorable.

In addition, a seller may require that a group of residential properties be purchased as a package even though we may not want to purchase certain individual assets in the bulk portfolio.

Moreover, to the extent the management and leasing of such properties has not been consistent with our property management and leasing standards, we may be subject to a variety of risks, including risks relating to the condition of the properties, the credit quality and employment stability of the residents, and compliance with applicable laws, among others.

49 unchanged sentences

Numerous tenant rights and consumer rights organizations exist throughout the country and operate in our markets, and we may attract attention from some of these organizations and become a target of legal demands, litigation, and negative publicity.

Many such consumer organizations have become more active and better funded in connection with mortgage foreclosure-related issues, and with the increased market for homes arising from displaced homeownership, some of these organizations may shift their litigation, lobbying, fundraising, and grassroots organizing activities to focus on landlord-resident issues.

Many such consumer organizations have become more active and better funded in connection with mortgage foreclosure-related issues, and with the increased market for residential properties arising from displaced homeownership, some of these organizations may shift their litigation, lobbying, fundraising, and grassroots organizing activities to focus on landlord-resident issues.

While we intend to conduct our business lawfully and in compliance with applicable landlord-tenant and consumer laws, such organizations might work in conjunction with trial and pro bono lawyers in one or multiple states to attempt to bring claims against us on a class action basis for damages or injunctive relief and to seek to publicize our activities in a negative light.

13 unchanged sentences

economy and high unemployment could result in tenant defaults under leases, vacancies in our properties and concessions or reduced rental rates under new leases due to reduced demand.

In addition, such downturns could result in reduced demand for homes, which may reduce home prices and make home purchases more affordable as an alternative to renting, which also may materially adversely reduce the demand for rental homes;

● the rate of household formation or population growth in our target markets or a continued or exacerbated economic slow-down experienced by the local economies where our properties are located or by the real estate industry generally may result in changes in supply of or demand for our homes;

In addition, such downturns could result in reduced demand for residential rental properties, which may reduce home prices and make home purchases more affordable as an alternative to renting, which also may materially adversely reduce the demand for residential rental properties;

● the failure of the real estate market to attract the same level of capital investment in the future that it attracted at the time of our purchases or a reduction in the number of companies seeking to acquire properties may result in the value of our investments not appreciating or decreasing, possibly significantly, below the amount we pay for these investments.

1 unchanged sentence

Our operations and, as a result, our ability to make distributions to our stockholders and/or our ability to realize appreciation in the value of our properties could be materially and adversely affected to the extent that an economic slow-down or downturn is prolonged or becomes severe.

Our revenues are significantly influenced by demand for single-family home rental properties generally, and a decrease in such demand will likely have a greater adverse effect on our revenues than if we owned a more diversified real estate portfolio.

Our current portfolio is focused predominately on single-family home properties, and we expect that our portfolio going forward will focus predominately on the same.

As a result, we are subject to risks inherent in investments in a single industry, and a decrease in the demand for single-family home rentals would likely have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio.

Our revenues are significantly influenced by demand for residential rental properties generally, and a decrease in such demand will likely have a greater adverse effect on our revenues than if we owned a more diversified real estate portfolio.

Our current portfolio is focused predominately on residential rental properties, and we expect that our portfolio going forward will focus predominately on the same.

As a result, we are subject to risks inherent in investments in a single industry, and a decrease in the demand for residential rentals would likely have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio.

The properties in our investment pipeline are subject to contingencies that could delay or prevent acquisition or investment in those properties.

4 unchanged sentences

Our expenses may remain constant or increase, even if our revenues decrease, causing our results of operations to be adversely affected.

Costs associated with our business, such as mortgage payments, real estate taxes, insurance premiums and maintenance costs, are relatively inflexible and generally do not decrease, and may increase, when homes are not occupied, rental rates decrease, tenants fail to pay rent or other circumstances cause a reduction in property revenues.

Costs associated with our business, such as mortgage payments, real estate taxes, insurance premiums and maintenance costs, are relatively inflexible and generally do not decrease, and may increase, when residential properties are not occupied, rental rates decrease, tenants fail to pay rent or other circumstances cause a reduction in property revenues.

As a result, if revenues drop, we may not be able to commensurately reduce our expenses, which would adversely affect our financial condition and results of operations.

4 unchanged sentences

Some competitors may have a lower cost of funds and access to funding sources that may not be available to us.

In addition, any potential competitor may have higher risk tolerances or different risk assessments and may not be subject to the operating constraints associated with qualifying and maintaining qualification for taxation as a REIT, which could allow them to consider a wider variety of investments.

In addition, any potential competitor may have higher risk tolerances or different risk assessments and may not be subject to the operating constraints associated with maintaining qualification for taxation as a REIT, which could allow them to consider a wider variety of investments.

Competition may result in fewer investments, higher prices, a broadly dispersed portfolio of properties that does not lend itself to efficiencies of concentration, acceptance of greater risk, lower yields and a narrower spread of yields over our financing costs.

10 unchanged sentences

Our operating results and distributable cash flow depend on our ability to generate revenue from leasing our properties to tenants on terms favorable to us.

Our operating results depend, in large part, on revenues derived from leasing our single-family properties.

Our operating results depend, in large part, on revenues derived from leasing our residential properties.

We are subject to the credit risk of our tenants, and to the extent our tenants default on their leases or fail to make their required rental payments we may suffer a decrease in our revenue.

In addition, if a tenant does not fully pay its rent, we may not be able to enforce our rights as landlord without delays and we may incur substantial legal costs.

We are also subject to the risk that, upon the expiration of leases, leases may not be renewed, the homes may not be re-leased or the terms of renewal or re-leasing (including the cost of required renovations or concessions to tenants) may be less favorable to us than current lease terms.

We are also subject to the risk that, upon the expiration of leases, leases may not be renewed, the properties may not be re-leased or the terms of renewal or re-leasing (including the cost of required renovations or concessions to tenants) may be less favorable to us than current lease terms.

If vacancies continue for a long period of time, we may suffer reduced revenues resulting in decreased distributions to our stockholders.

18 unchanged sentences

A change in the United States government policy with regard to Fannie Mae and Freddie Mac could impact our financial condition.

Fannie Mae and Freddie Mac are a major source of financing for the single-family real estate sector.

We and other companies in the single-family real estate sector depend frequently on Fannie Mae and Freddie Mac to finance growth by purchasing or guarantying single-family real estate loans.

Fannie Mae and Freddie Mac are a major source of financing for the residential real estate sector.

We and other companies in the residential real estate sector depend frequently on Fannie Mae and Freddie Mac to finance growth by purchasing or guarantying residential real estate loans.

Prior initiatives in the recent past, including proposed legislation, have sought to wind down Fannie Mae and Freddie Mac.

Any decision by the government to eliminate or downscale Fannie Mae or Freddie Mac, to reduce their acquisitions or guarantees of single-family real estate mortgage loans, or to reduce government support for single-family housing more generally, may adversely affect interest rates, capital availability, development of single-family communities and our ability to refinance our existing mortgage obligations as they come due and to obtain additional long-term financing for the acquisition of additional single-family communities on favorable terms or at all.

Any decision by the government to eliminate or downscale Fannie Mae or Freddie Mac, to reduce their acquisitions or guarantees of residential real estate mortgage loans, or to reduce government support for residential housing more generally, may adversely affect interest rates, capital availability, development of residential communities and our ability to refinance our existing mortgage obligations as they come due and to obtain additional long-term financing for the acquisition of additional residential communities on favorable terms or at all.

If we are not able to cost-effectively maximize the life of our properties, we may incur greater than anticipated capital expenditure costs, which may adversely affect our ability to make distributions to our stockholders.

43 unchanged sentences

● the possibility that we may incur liabilities as a result of an action or omission taken by our co-venturer, co-owner or partner;

● that such co-venturer, co-owner or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives, including our policy with respect to qualifying and maintaining our qualification as a REIT;

● disputes between us and our joint venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business and result in subjecting the properties owned by the applicable joint venture to additional risk;

58 unchanged sentences

If we do not attain and maintain effective internal control over financial reporting or implement controls sufficient to provide reasonable assurance with respect to the preparation and fair presentation of our financial statements, we could be unable to file accurate financial reports on a timely basis, and our reputation, results of operations and stock price could be materially adversely affected.

We have limited sources of capital other than proceeds from future mortgage debt financings for acquisition and/or development projects, cash generated from operating activities, our $150 million revolving credit facility, and the net proceeds of offerings of our securities.

We have limited sources of capital other than proceeds from future mortgage debt financings for acquisition and/or development projects, cash generated from operating activities, our $200 million revolving credit facilities, the net proceeds of offerings of our securities, and the proceeds from our DST Program.

We have limited sources of capital other than proceeds from future mortgage debt financings for acquisition and/or development projects, cash generated from operating activities, our $200 million revolving credit facilities, the net proceeds of offerings of our securities, and the proceeds from our DST Program to meet our primary liquidity requirements.

As a result, we may not be able to pay our liabilities and obligations when they come due other than with the net proceeds of an offering.

12 unchanged sentences

As such, our actual portfolio composition may vary substantially from the target portfolio described in the applicable prospectus or prospectus supplement.

Our Manager will manage our portfolio pursuant to very broad investment guidelines approved by our Board, which does not approve each investment and financing decision made by our management unless required by our investment guidelines.

Our Manager will be authorized to follow very broad investment guidelines established by our Board.

Our Board will periodically review our investment guidelines and our portfolio of assets but will not, and will not be required to, review all of our proposed investments, except in limited circumstances as set forth in our investment guidelines.

In addition, in conducting periodic reviews, our Board may rely primarily on information provided to them by our Manager.

Furthermore, transactions entered into by our Manager may be costly, difficult or impossible to unwind by the time they are reviewed by our Board.

Our Manager has great latitude within the broad parameters of our investment guidelines in determining the types and amounts of assets in which to invest on our behalf, including making investments that may result in returns that are substantially below expectations or result in losses, which would materially and adversely affect our business and results of operations, or may otherwise not be in the best interests of our stockholders.

We are highly dependent on information systems and therefore systems failures, cybersecurity incidents or other technology disruptions could negatively impact our business.

55 unchanged sentences

In addition, if we are unable to service our debt payments, our lenders may foreclose on our interests in the real property that secures the loans we have entered into.

As of December 31, 2023, we had approximately $83 million of mortgages payable and revolving credit facilities outstanding that are indexed to the Secured Overnight Financing Rate (“SOFR”), and our future variable rate debt may bear interest at a rate derived from SOFR.

As of December 31, 2024, we had approximately $177 million of mortgages payable and revolving credit facilities outstanding that are indexed to SOFR, and our future variable rate debt may bear interest at a rate derived from SOFR.

SOFR is a relatively new reference rate.

95 unchanged sentences

The market and economic challenges created by any future local, regional, national or international outbreaks of infectious disease, which may include COVID-19 and its variants, MERS, SARS, H1N1 influenza virus, avian flu or any other similar illness, and measures taken by governmental authorities and private actors to limit the spread or mitigate the impact thereof, may adversely impact our business, results of operations, financial condition, and cash flows.

We depend on rental revenues and other property income from residents for substantially all of our revenues.

Future outbreaks of highly infectious or contagious diseases may interfere with the ability of our residents to meet their lease obligations and make their rent payments on time or at all, and may also result in decreased overall demand for single-family rental properties and/or occupancy thereof.

The occurrence of such events may also result in a general decline in business activity and demand for real estate transactions could adversely affect (1) our ability to acquire or dispose of single-family homes on terms that are attractive or at all and (2) the value of our homes and our business such that we may recognize impairment on the carrying value of our investments in single-family residential properties and other assets subject to impairment review, including, but not limited to, goodwill.

We depend on rental revenues and other property income from residents for substantially all our revenues.

Future outbreaks of highly infectious or contagious diseases may interfere with the ability of our residents to meet their lease obligations and make their rent payments on time or at all, and may also result in decreased overall demand for residential rental properties and/or occupancy thereof.

The occurrence of such events may also result in a general decline in business activity and demand for real estate transactions could adversely affect (1) our ability to acquire or dispose of residential rental properties on terms that are attractive or at all, and (2) the value of our residential properties and our business such that we may recognize impairment on the carrying value of our investments in residential rental properties and other assets subject to impairment review, including, but not limited to, goodwill.

While we have taken steps to mitigate the potential impact of any future outbreaks of highly infectious diseases on our results of operations, there can be no assurance that these efforts will be successful.

We may acquire co-ownership interests in property that are subject to certain co-ownership agreements which may have an adverse effect on our results of operations, relative to if the co-ownership agreements did not exist.

We may acquire co-ownership interests, especially in connection with the Operating Partnership’s potential private placements, such as tenancy-in-common interests in property, interests in Delaware statutory trusts that own property and/or similar interests, which are subject to certain co-ownership agreements.

The co-ownership agreements may limit our ability to encumber, lease, or dispose of our co-ownership interest.

Such agreements could affect our ability to turn our investments into cash and could affect cash available for distributions to you.

The co-ownership agreements could also impair our ability to take actions that would otherwise be in the best interest of our stockholders and, therefore, may have an adverse effect on our results of operations, relative to if the co-ownership agreements did not exist.

The terms of the Master Leases entered into by subsidiaries of our Operating Partnership in connection with the DST Program may subject us to risk.

Pursuant to our DST Program, we, through subsidiaries of our Operating Partnership, will hold long-term leasehold interests in properties held by Delaware statutory trusts, the beneficial interests of which are sold to investors, pursuant to a Master Lease (each such property, a “DST Property”).

In connection with each Master Lease, our Operating Partnership has entered into a demand note with the subsidiary of our Operating Partnership that acts as the Master Tenant for such DST Property.

Under each Master Lease, we will be responsible for subleasing the relevant DST Property to occupying tenants, which means that the Master Tenant under the Master Lease bears the risk that the underlying cash flow from a DST Property may be less than the Master Lease payments.

As a result, if a DST Property experiences negative performance, the applicable Master Tenant could demand funding pursuant to the demand note if the net operating cash flow is insufficient to pay the rent required under the Master Lease (subject to limited deferral rights) or to satisfy its other obligations under the Master Lease, which could affect cash available for distributions to our stockholders and could have an adverse effect on our results of operations.

For additional information, see the Liquidity and Capital Resources section under Item 7.

– Management’s Discussion and Analysis of Financial Conditions and Results of Operations of this report.

The Operating Partnership’s private placements of beneficial interests in specific Delaware statutory trusts under our DST Program could subject us to liabilities from litigation or otherwise.

We, through the Operating Partnership, have commenced a program to raise capital in private placements exempt from registration under Section 506(c) of the Securities Act through the sale of beneficial interests in specific Delaware statutory trusts, or DSTs, holding real properties, which may include properties currently indirectly owned by the Operating Partnership.

These interests may serve as replacement properties for investors seeking to complete like-kind exchange transactions under Section 1031 of the Code.

Properties in which underlying interests are sold to investors pursuant to such private placements will be leased-back by the Operating Partnership or a wholly owned subsidiary thereof, as applicable, and fully guaranteed by the Operating Partnership, although there can be no assurance that the Operating Partnership can or will fulfill these guarantee obligations.

Additionally, the Operating Partnership will be given the FMV Option with respect to each DST in the DST Program, giving it the right, but not the obligation, to acquire the interests in the DST from the investors at a later time in exchange for OP Units.

Investors who acquired interests pursuant to such private placements may have been seeking certain tax benefits that depend on the interpretation of, and compliance with, federal and state income tax laws and regulations.

As the general partner of the Operating Partnership, we may become subject to liability, from litigation or otherwise, as a result of such transactions, including in the event an investor fails to qualify for any desired tax benefits.

The Operating Partnership’s private placements of beneficial interests in specific Delaware statutory trusts under our DST Program will not shield us from risks related to the performance of the real properties held through such structures.

Pursuant to the DST Program, the Operating Partnership intends to place certain of its existing real properties and/or acquire new properties to place into specific DSTs and then sell interests, via its TRS, in such trusts to third party investors.

We will hold long-term leasehold interests in the property pursuant to master leases that are fully guaranteed by our Operating Partnership, while the third-party investors indirectly hold some or all of the interests in the real estate.

There can be no assurance that the Operating Partnership can or will fulfill these guarantee obligations.

Although we will hold the FMV Option to reacquire the real estate through a purchase of interests in the DST, the purchase price will be based on the then current fair market value of the third-party investor’s interest in the real estate, which will be greatly impacted by the rental terms fixed by the long-term master lease.

Under the lease we are responsible for subleasing the property to occupying customers until the earlier of the expiration of the master lease or our exercise of the FMV Option, which means that we bear the risk that the underlying cash flow from the property and all capital expenditures may be less than the master lease payments at such time.

Therefore, even though we will no longer own the underlying real estate, because of the fixed terms of the long-term master lease guaranteed by our Operating Partnership, negative performance by the underlying properties could affect cash available for distributions to our stockholders and will likely have an adverse effect on our results of operations and NAV.

We may own beneficial interests in DSTs owning real property that will be subject to the agreements under our DST Program, which may have an adverse effect on our results of operations, relative to if the DST Program agreements did not exist.

In connection with our DST Program, we may own beneficial interests in DSTs owning real property that are subject to the terms of the agreements governing our DST Program.

The DST Program agreements limit our ability to encumber, lease or dispose of our beneficial interests.

Such agreements could affect our ability to turn our beneficial interests into cash and could affect cash available for distributions to our stockholders.

The DST Program agreements could also impair our ability to take actions that would otherwise be in the best interests of our stockholders and, therefore, may have an adverse effect on our results of operations and NAV, relative to if the DST Program agreements did not exist.

Properties that are placed into the DST Program and later reacquired may be less liquid than other assets, which could impair our ability to utilize cash proceeds from sales of such properties for other purposes such as paying down debt, distributions, or additional investments.

DST Properties may later be reacquired through exercise of the FMV Option granted to our Operating Partnership.

In such cases, the investors who become limited partners in the Operating Partnership (the “DST Investors”) will generally remain tied to the applicable DST Property in terms of basis and built in gain.

As a result, if the applicable DST Property is subsequently sold, unless we effectuate a like kind exchange under Section 1031 of the Code, then tax will be triggered on the DST Investors’ built in gain.

Although we are not contractually obligated to do so, we may seek to execute a 1031 exchange in such situations rather than trigger gain.

Any replacement property acquired in connection with a 1031 exchange will similarly be tied to the DST Investors with similar considerations if such replacement property ever is sold.

As a result of these factors, placing properties into the DST Program may limit our ability to access liquidity from such properties or replacement properties through sale without triggering taxes due to the built in gain tied to DST Investors.

Such reduced liquidity could impair our ability to utilize cash proceeds from sales for other purposes such as paying down debt, paying distributions, funding redemptions or making additional investments.

Risks Related to Our Management and Relationships with Our Manager

47 unchanged sentences

Our executive officers, including one of our five directors, are executives of our Manager or its affiliates.

Although the Bluerock Residential board of directors received an opinion from Robert A.

Although the Bluerock Residential Growth REIT, Inc.

(“Bluerock Residential”) board of directors received an opinion from Robert A.

Stanger & Company, Inc.

37 unchanged sentences

Risks Related to the Separation and Distribution

Bluerock Residential may fail to perform under various transaction agreements executed as part of the Separation, or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.

Bluerock Residential may fail to perform under various transaction agreements executed as part of the Separation.

In connection with the Separation and prior to the Distribution, we, Bluerock Residential, and certain other parties entered into the Separation and Distribution Agreement and various other agreements, including the Tax Matters Agreement.

2 unchanged sentences

If Bluerock Residential is unable or unwilling to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties and/or losses.

If we do not have in place our own systems and services, or if we do not have agreements with other providers of these services once certain transaction agreements expire, we may not be able to operate our business effectively, and our profitability may decline.

We continue the process of creating our own, or engaging third parties to provide, systems and services to replace many of the systems and services that Bluerock Residential formerly provided to us.

However, we may not be successful in implementing these systems and services in a timely manner or at all, we may incur additional costs in connection with, or following, the implementation of these systems and services, and we may not be successful in transitioning data from Bluerock Residential’s systems to ours.

Potential indemnification obligations owed to Bluerock Residential pursuant to the Separation and Distribution Agreement may have a material adverse effect on our business, financial condition and results of operations.

109 unchanged sentences

This would reduce our ability to make additional investments and limit the diversification of our portfolio.

To the extent that our distributions represent a return of capital for tax purposes, stockholders may recognize an increased gain or a reduced loss upon subsequent sales (including cash redemptions) of their shares of Series A Preferred Stock.

The dividends payable by us on the Series A Preferred Stock may exceed our current and accumulated earnings and profits as determined for U.S.

federal income tax purposes.

If that were to occur, it would result in the amount of distributions that exceed our earnings and profits being treated first as a return of capital to the extent of the stockholder’s adjusted tax basis in the stockholder’s Series A Preferred Stock and then, to the extent of any excess over the stockholder’s adjusted tax basis in the stockholder’s Series A Preferred Stock, as capital gain.

Any distribution that is treated as a return of capital will reduce the stockholder’s adjusted tax basis in the stockholder’s Series A Preferred Stock, and subsequent sales (including cash redemptions) of such stockholder’s Series A Preferred Stock will result in recognition of an increased taxable gain or reduced taxable loss due to the reduction in such adjusted tax basis.

There is currently no public trading market for our Series A Preferred Stock, and one may never exist;

7 unchanged sentences

You must rely on the Manager and our Board to implement our investment policies, to evaluate our investment opportunities and to structure the terms of our investments.

We may invest in any asset class, including those that present greater risk than single-family residential assets.

We may invest in any asset class, including those that present greater risk than residential assets.

Because you cannot evaluate our future investments in advance of purchasing shares of our Series A Preferred Stock, an offering of our Series A Preferred Stock may entail more risk than other types of offerings.

This additional risk may hinder your ability to achieve your own personal investment objectives related to portfolio diversification, risk-adjusted investment returns and other objectives.

The payment of fees and expenses to the Manager and its affiliates and the Dealer Manager reduces the cash available for distribution and increases the risk that you will not be able to recover the amount of your investment in shares of our stock.

The payment of fees and expenses to the Manager and its affiliates and Bluerock Capital Markets, LLC (the “Dealer Manager”) reduces the cash available for distribution and increases the risk that you will not be able to recover the amount of your investment in shares of our stock.

The Manager and the Dealer Manager perform services for us, including, among other things, the selection and acquisition of our investments, the management of our assets, the disposition of our assets, the financing of our assets and certain administrative services.

70 unchanged sentences

Any such issuance could result in dilution of the equity of our stockholders.

Our Board may, in its sole discretion, authorize us to issue common stock or other equity or debt securities to persons from whom we purchase single-family residential properties, as part or all of the purchase price of the community.

Our Board, in its sole discretion, may determine the value of any common stock or other equity or debt securities issued in consideration of single-family residential properties or services provided, or to be provided, to us.

Our Board may, in its sole discretion, authorize us to issue common stock or other equity or debt securities to persons from whom we purchase residential properties, as part or all of the purchase price of the community.

Our Board, in its sole discretion, may determine the value of any common stock or other equity or debt securities issued in consideration of residential properties or services provided, or to be provided, to us.

Our charter also authorizes our Board, without stockholder approval, to designate and issue one or more classes or series of preferred stock in addition to the Series A Preferred Stock (including equity or debt securities convertible into preferred stock) and to set or change the voting, conversion or other rights, preferences, restrictions, limitations as to dividends or other distributions and qualifications or terms or conditions of redemption of each class or series of shares so issued.

131 unchanged sentences

Legislative or other actions affecting REITs could have a negative effect on us or our investors.

In recent years, numerous legislative, judicial and administrative changes have been made to the U.S.

federal income tax laws applicable to investments in real estate and REITs.

President Joe Biden has set forth several tax proposals that would, if enacted, make significant changes to U.S.

tax laws (including provisions enacted pursuant to the Tax Cuts and Jobs Act).

Congress is considering, and could include, some or all of these proposals in connection with tax reform to be undertaken by the current administration.

It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could take effect.

In addition, there can be no assurance that any other future changes to the U.S.

There can be no assurance that any future changes to the U.S.

federal income tax laws or regulatory changes will not be proposed or enacted that could impact our business and financial results.

3 unchanged sentences

Stockholders are urged to consult their tax advisors regarding the effect of potential future changes to the U.S.

federal income tax laws on an investment in our common stock.

federal income tax laws on an investment in our stock.

Distributions to tax-exempt investors may be classified as unrelated business taxable income and, in certain circumstances, tax-exempt investors would be required to pay tax on the unrelated business taxable income and to file income tax returns.

9 unchanged sentences

The stock ownership restrictions of the Code for REITs and the 9.8% stock ownership limits in our charter may inhibit market activity in our capital stock and restrict our business combination opportunities.

In order to qualify and maintain our qualification as a REIT, five or fewer individuals, as defined in the Code to include specified private foundations, employee benefit plans and trusts, and charitable trusts, may not own, beneficially or constructively, more than 50% in value of our issued and outstanding stock at any time during the last half of a taxable year.

In order to maintain our qualification as a REIT, five or fewer individuals, as defined in the Code to include specified private foundations, employee benefit plans and trusts, and charitable trusts, may not own, beneficially or constructively, more than 50% in value of our issued and outstanding stock at any time during the last half of a taxable year.

Attribution rules in the Code determine if any individual or entity beneficially or constructively owns our capital stock under this requirement.

Additionally, at least 100 persons must beneficially own our capital stock during at least 335 days of a taxable year.

To help insure that we meet these tests, among other purposes, our charter restricts the acquisition and ownership of shares of our capital stock.

To help ensure that we meet these tests, among other purposes, our charter restricts the acquisition and ownership of shares of our capital stock.

Our charter, with certain exceptions, authorizes our Board to take such actions as are necessary and desirable to preserve our qualification as a REIT.

58 unchanged sentences

If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.

We will, however, be immediately subject to Section 404(a) of the Sarbanes-Oxley Act and, as of the expiration of our emerging growth company status, we will be broadly subject to enhanced reporting and other requirements under the Exchange Act and Sarbanes-Oxley Act.

This will require, among other things, annual management assessments of the effectiveness of our internal control over financial reporting beginning in our second annual report filed after the Distribution and a report by our independent registered public accounting firm addressing these assessments.

We will, however, be immediately subject to Section 404(a) of the Sarbanes-Oxley Act, which will require, among other things, annual management assessments of the effectiveness of our internal control over financial reporting beginning in our second annual report filed after the Distribution.

In addition, as of the expiration of our emerging growth company status, we will be broadly subject to enhanced reporting and other requirements under the Exchange Act and Sarbanes-Oxley Act, which will require, among other things, a report by our independent registered public accounting firm addressing such annual management assessments.

These and other obligations will place significant demands on our management, administrative and operational resources, including accounting and information technology resources.

6 unchanged sentences

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-K

Item 1A. Risk Factors