Item 1. Business
Item 1. Business
Organization
Bluerock Homes Trust, Inc. (“Bluerock Homes,” “the Company,” “we,” “us,” or “our”) was incorporated on December 16, 2021 under the laws of the state of Maryland.
We have elected to be taxed and have qualified as a real estate investment trust (“REIT”) for federal income tax purposes beginning with our taxable year ended December 31, 2022. As a REIT, we generally are not subject to corporate-level income taxes. In order 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 maintain our qualification 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 we lost our qualification. We intend to continue to organize and operate in such a manner as to remain qualified as a REIT.
Unless otherwise indicated or the context requires otherwise, all references to “the Company,” “we,” “us” and “our” mean Bluerock Homes Trust, Inc., a Maryland corporation, together with its consolidated subsidiaries, including, without limitation, Bluerock Residential Holdings, L.P., a Delaware limited partnership (our “Operating Partnership”), of which we are the sole general partner. References to our shares of Class A common stock on a “fully diluted basis” includes all outstanding shares of our Class A common stock, shares of our Class C common stock, units of limited partnership interest in our Operating Partnership (“OP Units”), and long-term incentive plan units in our Operating Partnership, (“LTIP Units”), whether vested or unvested.
We have no employees and are supported by a related-party service agreement with Bluerock Homes Manager, LLC (the “Manager”), a Delaware limited liability company organized in 2022. We are externally managed by the Manager, which manages our day-to-day operations under a Management Agreement (the “Management Agreement”). The current term of our Management Agreement expires October 6, 2025 and will be automatically renewed for a one-year term each year on October 6, unless previously terminated in accordance with the terms of the Management Agreement. The Manager is responsible for managing our affairs on a day-to-day basis and for identifying and making real estate investments on our behalf. Substantially all our business is conducted through our Operating Partnership, of which we are the sole general partner.
The principal executive offices of our Company and the Manager are located at 919 Third Avenue, 40 th Floor, New York, New York 10022. Our telephone number is (212) 843-1601.
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Investments in Real Estate
As of December 31, 2024, we held twenty-three real estate investments, consisting of fourteen consolidated investments and nine preferred equity and loan investments. The twenty-three investments represent an aggregate of 5,087 residential units, comprised of 3,453 consolidated units, of which 170 units are under development, and 1,634 units through preferred equity and loan investments, which includes planned units and those under development. As of December 31, 2024, our consolidated operating investments were approximately 91.6% occupied; excluding units classified as held for sale and down/renovation units, our consolidated operating investments were approximately 94.0% occupied. For more information regarding our investments, see “Item 2. Investments”.
Business and Growth Strategies
Our principal business objective is to generate attractive risk-adjusted investment returns by assembling a portfolio of institutional residential properties including single-family homes, build-to-rent communities, and other residential communities, located across a diverse group of growth markets. By implementing our investment strategies and our institutional-quality management, we expect to be able to achieve sustainable long-term growth in both our funds from operations (“FFO”) and net asset value (“NAV”).
Value Creation Execution. We acquire residential rental properties with potential for long-term value creation for our stockholders. We utilize the following internal and external growth strategies to drive growth in FFO and NAV for our investors:
● Value-Add Renovation . We see significant potential for capital appreciation through renovation of existing assets. Our value-add strategy focuses on working with our local experts to reposition residential rental communities and drive rent growth and expand margins, increasing net operating income (“NOI”) and maximizing our return on investment.
● Income and Appreciation. We invest in well-located institutional residential properties with strong and stable cash flows in demographically attractive knowledge economy growth markets where we believe there exists significant potential for medium-term capital appreciation through renovation or redevelopment, to reposition the asset and drive future rental growth.
● Invest-to Own. We selectively invest in the development of build-to rent and other residential properties in target markets where we believe we can capture significant development premiums upon completion. We generally make common equity investments or use a preferred equity structure which provides income during the development stage and/or the ability to capture development premiums at completion by exercising our conversion rights to take ownership.
● Institutional Property Management / NOI Margin Expansion . We expect to improve margins at our operating properties by deploying institutional management approaches across the portfolio - including professional management, investment in technology platforms, and leveraging economies of scale - to best position the portfolio for optimal rental growth. Through the aggregation of multiple scattered homes, we seek to address operational inefficiencies, revenue management and deferred capital maintenance at scale and to grow underlying cash flow through substantial NOI margin expansion at stabilized properties. We will also provide an aggressive asset management presence, working alongside our network partners to ensure optimal execution of the asset management plan, enabling us to drive rent growth and values.
● Technology-Aided Platform . We have implemented a data warehouse, which provides us with real-time visibility into leasing, inventory, maintenance and renovation metrics, allowing us to quickly react to changes in current operational performance and monitor trends across our portfolio. Further, we believe we will be able to utilize our data warehouse technology as a building block in the design and implementation of a portfolio-wide revenue management system to further drive NOI and margin expansion. In addition, we utilize various PropTech solutions to both acquire and maximize operational efficiency. Operational PropTech solutions include focus on streamlining value-add initiatives, integrating smart-home technology, automating the lease process and providing robust and coordinated maintenance services.
Invest in Institutional Residential Properties. We intend to continue to acquire institutional residential properties targeting the high disposable income renter by choice, where we believe we can create long-term value growth for our stockholders.
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Focus on Growth Markets. We intend to continue to focus on demographically attractive growth markets, which we define as markets with strong employment drivers in industries creating high disposable income jobs over the long term. Employment growth is highly correlated with institutional property demand; therefore, we believe that selecting markets with job growth significantly above the national average will provide high potential for increased rental demand leading to revenue growth and attractive risk-adjusted returns.
Implement our Value Creation Strategies. We intend to continue to focus on creating value at our properties utilizing our Value-Add, Opportunistic and Invest-to-Own investment strategies in order to maximize our return on investment. We work with each member of our network to evaluate property needs along with value-creation opportunities and create an asset-specific business plan to best position or reposition each property to drive rental growth and asset values. We then provide an aggressive asset management presence to manage our network partner and ensure execution of the plan, with the goal of driving rental growth and values.
Implement our Live/Work/Play Initiatives. We intend to continue to implement our amenities and attributes to transform the residential community from a purely functional product (i.e., as solely a place to live), to a lifestyle product (i.e., as a place to live, interact, and socialize). Our Live/Work/Play initiatives are property specific, and generally consist of attributes that go beyond traditional features, including highly amenitized common areas, cosmetic and architectural improvements, technology, music and other community-oriented activities to appeal to our residents’ desire for a “sense of community” by creating places to gather, socialize and interact in an amenity-rich environment. We believe this creates an enhanced perception of value among residents, allowing for premium rental rates and improved resident retention.
Diversify Across Markets, Strategies and Investment Size. We will seek to grow our institutional portfolio of residential properties diversified by geography and by investment strategy and by size to manage concentration risk, while driving both current income and capital appreciation throughout the portfolio. Our network enables us to diversify across multiple markets and multiple strategies efficiently, without the logistical burden and time delay of building operating infrastructure in multiple markets and across multiple investment strategies.
Harvest and Redeploy Capital Selectively. On an opportunistic basis and subject to compliance with REIT restrictions, we intend to sell properties when we have executed our value creation plans and when we believe the investment has limited additional upside relative to other opportunities. This allows us to harvest profits and reinvest proceeds to maximize stockholder value.
Summary of Investments and Dispositions
The following table presents a summary of our real estate investments during the years ended December 31, 2024 and 2023:
Investment Name
Location / Market
Date of Investment
Ownership
Interest
Number
of Units
2023
Savannah-84
Savannah, GA
February 23, 2023
100
%
18
Willow Park (1)
Willow Park, TX
October 26, 2023
—
58
Chandler (2)
Chandler, AZ
November 15, 2023
—
208
Abode Wendell Falls (3)
Wendell, NC
December 20, 2023
100
%
170
The Woods at Forest Hill (4)
Forest Hill, TX
December 28, 2023
—
76
2024
Wayford at Pringle (5)
Charlotte, NC
January 10, 2024
—
102
Villas at Huffmeister
Houston, TX
March 25, 2024
95
%
294
Indigo Cove (2)
Bluffton, SC
June 27, 2024
—
82
Avenue at Timberlin Park
Jacksonville, FL
July 31, 2024
100
%
200
Amira at Westly (6)
Tampa, FL
October 31, 2024
93
%
408
Allure at Southpark
Charlotte, NC
December 6, 2024
98
%
350
River Ford (2)
Brunswick, GA
December 6, 2024
—
170
Canvas at Wildwood (2)
Wildwood, FL
December 11, 2024
—
224
(1) Our investment in Willow Park is through a loan provided to an unaffiliated third party. Refer to Note 6 of our consolidated financial statements for further information.
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(2) Our investment in the property is through a preferred equity investment with an unaffiliated third party. Refer to Note 7 of our consolidated financial statements for further information.
(3) Abode Wendell Falls is a build-to-rent development project that commenced construction in 2024. Abode Wendell Falls is classified as a consolidated investment.
(4) Our investment in The Woods at Forest Hill, which was through a loan provided to an unaffiliated third party, was fully paid off in 2024. Refer to the table below.
(5) Our investments in Wayford at Pringle are through a debt security investment and a loan investment, both made with an unaffiliated third party. Refer to Note 6 and Note 7 of our consolidated financial statements for further information.
(6) Our investment in Amira at Westly is through a Delaware statutory trust. At December 31, 2024, we hold a 93% ownership interest in the property. Refer to Note 3 of our consolidated financial statements for further information.
The following table presents a summary of our loan payoff, real estate sales, and redemptions of preferred equity investments during the years ended December 31, 2024 and 2023:
Ownership
Date of Payoff, Sale
Interest in
Number
Investment Name
Location / Market
or Redemption (1)
Property
of Units
2023
Golden Pacific
IN / MO
Various
97
%
2
Peak Housing (2)
IN / MO / TX
Various
—
196
Peak JV 2
Various / TX
Various
80
%
12
Peak JV 3
Dallas-Fort Worth, TX
Various
56
%
39
Willow Park (3)
Willow Park, TX
October 26, 2023
—
46
The Cottages at Warner Robins (3)
Warner Robins, GA
December 15, 2023
—
251
2024
ILE
TX / SE US
Various
95
%
4
Indy-Springfield
IN / MO
Various
100
%
11
Peak Housing (2)
IN / MO / TX
Various
—
452
Peak JV 2
Various / TX
Various
80
%
23
Peak JV 3
Dallas-Fort Worth, TX
Various
56
%
60
The Woods at Forest Hill (4)
Forest Hill, TX
Various
—
76
Navigator Villas (5)
Pasco, WA
August 7, 2024
100
%
176
(1) For those dates where “Various” is listed, units were sold from the respective portfolios on various dates throughout that specified year.
(2) Our investment in the portfolio, which was through a preferred equity investment with an unaffiliated third party, was fully redeemed in 2024 as units collateralizing our investment (such units collectively known as “Peak Housing”) were sold. Refer to Note 7 of our consolidated financial statements for further information.
(3) Our investment in the property, which was through a preferred equity investment with an unaffiliated third party, was redeemed.
(4) We held both a loan investment and a preferred equity investment with unaffiliated third parties in The Woods at Forest Hill. We received the final loan payoff amount in August 2024, and we received our final preferred equity redemption payment in November 2024. Refer to Note 6 and Note 7 of our consolidated financial statements for further information.
(5) Prior to the sale of Navigator Villas, we purchased our unaffiliated joint venture partner ’ s interest in the property, increasing our interest from 90% to 100%.
Distribution Policy
We intend to maintain our qualification as a REIT for federal income tax purposes. The Code generally requires that a REIT annually distribute at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gain, and imposes tax on any taxable income retained by a REIT, including capital gains.
To satisfy the requirements for qualification as a REIT and generally not be subject to federal income and excise tax, we intend to make regular distributions of all or substantially all our REIT taxable income, determined without regard to dividends paid, to our stockholders out of assets legally available for such purposes. All future distributions will be determined at the sole discretion of our Board on a quarterly basis. When determining the amount of future distributions, we expect that our Board will consider, among other factors, (i) the amount of cash generated from our operating activities, (ii) our expectations of future operating cash flows, (iii) our determination of near-term cash needs for acquisitions of new properties, development investments, general property capital improvements and debt repayments, (iv) our ability to continue to access additional sources of capital, (v) the requirements of Maryland law, (vi) the amount required to be distributed to maintain our qualification as a REIT and to reduce any income and excise taxes that we otherwise would be required to pay and (vii) any limitations on our distributions contained in our credit or other agreements.
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Holders of shares of the Series A Preferred Stock will be entitled to receive, when and as authorized by our Board and declared by us out of legally available funds, cumulative cash dividends on each share of Series A Preferred Stock at an annual rate of six percent (6.0%) of the $25.00 liquidation preference per share (equivalent to the fixed annual amount of $1.50 per share) (the “Series A Preferred Regular Dividends”). In addition, for each month for which the Board declares the Series A Preferred Regular Dividends, holders of shares of the Series A Preferred Stock will be entitled to receive an enhanced special dividend, which will be aggregated with the Series A Preferred Regular Dividends so as to effect a dividend rate of the average one month Term Secured Overnight Financing Rate (“SOFR”) plus 2.0%, subject to a 6.5% minimum and 8.5% maximum annual rate, calculated and paid monthly. Cash dividends on each share of Series A Preferred Stock will begin accruing on, and will be cumulative from, the date of original issuance or the end of the most recent dividend period for which cash dividends on the Series A Preferred Stock have been paid on each such share, payable monthly in arrears on the 5 th day of each month to holders of record on the 25 th day of the prior month; provided, however, that any such cash dividend may vary among holders of Series A Preferred Stock and may be prorated with respect to any shares of Series A Preferred Stock that were outstanding less than the total number of days in the dividend period immediately preceding the applicable dividend payment date, with the amount of any such prorated dividend being computed on the basis of the actual number of days in such dividend period during which such shares of Series A Preferred Stock were outstanding.
Holders of shares of Class A common stock, $0.01 par value per share (the “Class A common stock”), and Class C common stock $0.01 par value per share (the “Class C common stock”), will be entitled to receive cash dividends when, as and if authorized by our Board and declared by us. On March 11, 2025, we declared quarterly cash dividends of $0.125 per share, or $0.50 per share annually, for our Class A common stock and Class C common stock for each quarter of fiscal year 2025. The common share dividends will be paid on a quarterly basis.
We cannot assure you that we will generate sufficient cash flows to make distributions to our stockholders, or that we will be able to sustain those distributions. If our operations do not generate sufficient cash flow to allow us to satisfy the REIT distribution requirements, we may be required to fund distributions from working capital, offering proceeds, proceeds from our DST Program, borrowing funds, selling assets, making a taxable distribution of our equity or debt securities, or reducing such distributions. Our distribution policy enables us to review the alternative funding sources available to us from time to time. Our actual results of operations will be affected by a number of factors, including the revenues we receive from our properties and other investments, our operating expenses, interest expense, the ability of our tenants to meet their obligations and unanticipated expenditures. For more information regarding risk factors that could materially adversely affect our actual results of operations, please see “Item 1A – Risk Factors.”
Regulations
Our investments are subject to various federal, state and local laws, ordinances and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution and indirect environmental impacts such as increased motor vehicle activity. We believe that we have all permits and approvals necessary under current law to operate our investments.
Environmental
As an owner of real estate, we are subject to various environmental laws of federal, state and local governments. Compliance with existing laws has not had a material adverse effect on our financial condition or results of operations, and management does not believe it will have such an impact in the future. However, we cannot predict the impact of unforeseen environmental contingencies or new or changed laws or regulations on properties in which we hold an interest, or on properties that may be acquired directly or indirectly in the future.
Human Capital
We have no employees and we rely on the employees of our Manager and its affiliates to conduct our operations. In order to attract and retain high performing individuals, our Manager and its affiliates are committed to partnering with its employees to provide opportunities for their professional development and promote their well-being. To that end, our Manager or its affiliates have undertaken various initiatives, including the following:
● implementing an Environmental, Social, and Corporate Governance Initiative to codify and disclose its commitment to good corporate citizenship, including the appointment of an internal corporate responsibility committee in support of its ongoing
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commitment to sustainability, health and safety, corporate social responsibility, corporate governance, and other public policy matters;
● providing department-specific training, access to online training seminars and opportunities to participate in industry conferences;
● providing annual reviews and regular feedback to assist in employee development and providing opportunities for employees to provide suggestions to management and safely register complaints;
● providing family leave, for example, for the birth or adoption of a child, as well as sick leave;
● focusing on creating a workplace that values employee health and safety;
● committing to the full inclusion of all qualified employees and applicants and providing equal employment opportunities to all persons, in accordance with the principles and requirements of the Equal Employment Opportunities Commission and the principles and requirements of the Americans with Disabilities Act; and
● recognizing the importance and contributions of a diverse workforce, with an appreciation for the unique perspectives and insights offered by diverse backgrounds.
Industry Segments
We own and operate residential real estate assets that generate rental and other property-related income through the leasing of residential units to a diverse base of tenants. We view our residential real estate assets as two reportable segments, consisting of (i) scattered single-family homes, and (ii) residential communities. Our Chief Operating Decision Makers, which are our Chief Executive Officer, Chief Investment Officer and Chief Financial Officer, do not distinguish or group operations on a geographic, tenant or other basis when assessing the financial performance of our portfolio of properties/investments.
Scattered single-family homes segment includes the acquisition, ownership, management, and renovation of scattered single-family homes, which are, generally, detached homes with no onsite property management.
Residential communities segment includes the acquisition, ownership, management, renovation, construction, and development of residential communities, which include both detached single-family home communities and attached unit communities such as apartments, townhouses, and duplexes. Each residential community is, generally, located on a single, contiguous land parcel and has amenities including clubhouses, gyms, pools and common areas. In addition, these residential communities typically have onsite property management.
Available Information
We electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports with the SEC. We also have filed with the SEC registration statements on Form S-11 (File No. 333-269415) and Form S-8 (File No. 333-267764). Copies of our filings with the SEC may be obtained from the SEC’s website at www.sec.gov , or downloaded from our website at www.bluerockhomes.com, as soon as reasonably practicable after such material has been filed with, or furnished to, the SEC. Access to these filings is free of charge.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.