What changed in this filing

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Item 1A. Risk Factors

2025-03-12 compared with 2024-03-14 · 44 added, 27 removed, 270 unchanged (21% of the section changed)

5 unchanged sentences

General economic conditions in the U.S.

have fluctuated significantly in recent quarters with the U.S.

experiencing negative macroeconomic conditions such as increasing inflationary and labor market concerns.

have fluctuated significantly in recent quarters.

Unfavorable market and economic conditions may significantly affect our occupancy levels, our rental rates and collections, the value of our properties and our ability to acquire or dispose of multifamily properties on economically favorable terms.

Our ability to lease our multifamily properties at favorable rates is adversely affected by the increase in supply in the multifamily and other rental markets and is dependent upon the overall level in the economy, which may continue to be adversely affected by, among other things, inflationary conditions, job losses and unemployment levels, personal debt levels, a downturn in the housing market, stock market volatility, and uncertainty about the future.

Our ability to lease units at our multifamily properties at favorable rates is adversely affected by the increase in supply in the multifamily and other rental markets and other housing alternatives, and is dependent upon the overall level in the economy, which may continue to be adversely affected by, among other things, inflationary conditions, job losses and unemployment levels, personal debt levels, a downturn in the housing market, stock market volatility, and uncertainty about the future.

Some of our major expenses generally do not decline when related rents decline.

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These expenses are subject to significant increases and fluctuations, including the impact of inflation, which we may be unable to control.

For example, our real estate taxes have increased and will continue to increase as our properties are reassessed by

taxing authorities and as property tax rates increase.

For example, our real estate taxes have increased and will continue to increase as our properties are reassessed by taxing authorities and as property tax rates increase.

Further, our real estate taxes have fluctuated and may not be comparable year-over-year because of, among other things, (i) the timing difference as to when we accrue real estate taxes and the results of any tax appeals with respect to such accrued taxes and (ii) determinations, over which we have no control, by governmental authorities to increase tax rates, assessments or procedures.

We anticipate that our insurance costs will continue to increase because of our implementation, in 2022, of a master insurance program that directly covers our wholly-owned properties (as opposed to coverage obtained by our property managers), the casualty losses that we have sustained the past several years and general increases in the cost of insurance coverage for multi-family properties.

In addition, our share of the insurance premiums at joint venture properties is determined by our joint venture partner at such properties.

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As of December 31, 2024:

(i) our wholly-owned properties generated approximately 75% and 10% of our 2023 revenues from properties located in the Southeast and Texas, respectively, and (ii) the properties owned by unconsolidated joint ventures at December 31, 2023, generated 53% and 47% of our 2023 JV Rental and Other Revenues at properties located in Texas and the Southeast, respectively.

(i) our wholly-owned properties generated approximately 75% and 10% of our 2024 revenues from properties located in the Southeast and Texas, respectively, and (ii) the properties owned by unconsolidated joint ventures at December 31, 2024, generated 54% and 46% of our 2024 JV Rental and Other Revenues at properties located in the Southeast and Texas, respectively.

Accordingly, adverse developments in such markets, including economic developments, pandemics, or natural or man-made disasters, could adversely impact the cash flow and value of these properties.

The concentration of our properties in the Southeast United States and Texas exposes us to risks of adverse developments which are greater than the risks of owning properties with a more geographically diverse portfolio.

The concentration of our properties in the Southeast United States

and Texas exposes us to risks of adverse developments which are greater than the risks of owning properties with a more geographically diverse portfolio.

The failure of property management companies to properly manage our properties could adversely impact our results of operations.

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If these property management companies do not perform their duties properly, or, in the case of unconsolidated properties, we and/or our joint venture partners do not effectively supervise the activities of these managers, the occupancy rates and rental rates at the properties managed by such property managers may decline and the expenses at such properties may increase.

At December 31, 2023, one property manager manages ten properties, a second property manager manages seven properties, and five other property managers manage four or fewer properties.

Four properties are managed by a management company owned by or affiliated with a joint venture partner.

At December 31, 2024, one property manager manages 11 properties, a second property manager manages eight properties, and four other property managers manage three or fewer properties.

Three properties are managed by a management company owned by or affiliated with a joint venture partner.

The loss of our property managers, and in particular, the managers that manage multiple properties, could result in a decrease in occupancy rates, rental rates or both or an increase in expenses.

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Risks involved in conducting real estate activity through joint ventures.

Seven of our multi-family properties are owned through joint ventures with other persons or entities.

Eight of our multi-family properties are owned through joint ventures with other persons or entities.

Joint venture investments involve risks not otherwise present when acquiring real estate directly, including the following:

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Our operating results are significantly influenced by demand for multi-family 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 on multi-family properties, and we expect that going forward we will continue to focus on the acquisition, disposition and operation of such properties.

Our current portfolio is focused on multi-family properties, and we expect that going forward we will continue to focus on the acquisition (including alternative investments such as bridge loans and preferred equity), disposition and operation of such properties.

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

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Risks Related to Our Financing Activities, Indebtedness and Capital Resources

If we are unable to refinance $138.5 million in balloon payments on mortgage debt maturing through 2026, we may be forced to sell properties on disadvantageous terms.

As of December 31, 2023, we have balloon payments of $138.5 million on mortgage debt (including $53.5 million of mortgage debt on properties owned by unconsolidated joint ventures) due in 2025 and 2026 ( i.e., $15.3 million and $123.0 million due in 2025 and 2026, respectively).

The weighted average interest rate of this debt is 4.85%.

If we are unable to refinance our mortgage debt at maturity on acceptable terms, we may be forced to sell properties on disadvantageous terms.

The following table sets forth, as of December 31,2024, the principal balance of the mortgage payments due at maturity on our wholly owned and unconsolidated joint venture properties and the weighted average interest rate thereon (dollars in thousands):

Consolidated Properties Unconsolidated Properties

Year Principal Balances Due at Maturity Weighed Average Interest Rate Principal Balances Due at Maturity (1) Weighed Average Interest Rate

2025 $ 15,375 4.42 % $ — — %

2026 69,531 4.12 60,835 5.64

2027 42,795 3.96 23,108 4.15

2028 37,951 4.47 67,631 4.26

2029 53,817 3.94 — —

2030 and thereafter 193,266 4.10 86,132 3.46

Total $ 412,735 $ 237,706

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(1) Includes our joint venture partner's "share" of such debt.

We have a significant amount of mortgage debt maturing over the next several years.

Our operating cash flow and funds available under our credit facility will be insufficient to discharge all of this debt when due.

Accordingly, we will seek to refinance this debt or sell the related property prior to the maturity of such debt.

Increases in interest rates, or reduced access to credit markets due, among other things, to more stringent lending requirements or our high level of leverage, may make it difficult for us to refinance this mortgage debt on terms as favorable as the current debt.

If we are unsuccessful in refinancing such debt, or if the terms of the refinanced debt are less favorable than the current debt, we may be forced to

dispose of properties on disadvantageous terms or convey properties secured by such mortgages to the mortgagees, which would reduce our income and impair the value of our portfolio.

Accordingly, we will seek to refinance this debt prior to its maturity.

Because current interest rates are significantly higher than the interest rates on the maturing mortgage debt (or if our access to credit markets is reduced due, among other things, to more stringent lending requirements due to our level of leverage), we may be unable to refinance this mortgage debt on acceptable terms or at all.

If we are unsuccessful in refinancing such debt, or if the terms of the refinanced debt are less favorable than the current debt, we may be forced to (i) refinance such mortgage debt on unfavorable terms or (ii) dispose of properties on unfavorable terms or convey properties secured by such mortgages to the mortgagees, which would, in each case, reduce our income and impair the value of our portfolio.

Our acquisition, development and value-add activities are limited by the funds available to us.

Our ability to acquire additional multi-family properties, develop new properties and improve the properties in our portfolio is limited by the funds available to us (including funds available pursuant to our credit facility) and our ability to obtain, on acceptable terms, mortgage debt.

At March 1, 2024, we had approximately $ 21.2 million of cash and cash equivalents (of which a significant portion is at the property level for day-to-day operating expenses) and up to $60 million available to us under our credit facility.

At February 28, 2025, we had approximately $62.7 million of cash and cash equivalents (of which a significant portion is at the property level for day-to-day operating expenses) and up to $40 million available to us under our credit facility.

Our multi-family acquisition and value-add activities are constrained by funds available to us which will limit growth in our revenues and operating results.

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There have been ongoing discussion by the government and other interested parties with regard to the long term structure and viability of Fannie Mae and Freddie Mac, which could result in adjustments to guidelines for their loan products.

Should these agencies have their mandates changed or reduced, lose key personnel, be disbanded or reorganized by the government or otherwise discontinue providing liquidity for the multi-family sector, our ability to obtain financing through loan programs sponsored by

the agencies could be negatively impacted.

In addition, changes in our relationships with Fannie Mae and Freddie Mac, and the lenders that participate in these loan programs, with respect to our existing mortgage financing could impact our ability to obtain comparable financing for new acquisitions or refinancing for our existing multi-family real estate investments.

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federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively.

We and our stockholders could be adversely affected by any such change in the U.S.

stockholders could be adversely affected by any such change in the U.S.

federal income tax laws, regulations or administrative interpretations.

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We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that will affect our cash flow and results of operations.

Provisions for credit losses are difficult to estimate

Our provision for credit losses is evaluated on a quarterly basis in accordance with current accounting guidance which uses the Current Expected Credit Loss model, or CECL.

Under CECL, we are required to present certain financial assets such as loans held for investment, at the net amount expected to be collected.

The determination of our provision for credit losses requires us to make highly subjective estimates and judgments.

Our estimates and judgments are based on a number of factors, including projected cash flow from the collateral securing our loans, debt structure, including the availability of reserves and recourse guarantees, likelihood of repayment in full at the maturity of a loan, potential for refinancing and expected market discount rates for varying property types, and other macro economic data, all of which are uncertain and highly subjective.

If our estimates and judgments are incorrect, our results of operations and financial condition could be materially and adversely impacted.

The adoption of CECL affects how we determine our allowance for loan losses and requires us to recognize provisions for credit losses earlier in the lending cycle, including at the time we enter into the transaction.

Moreover, CECL may create more volatility in the level of our allowance for credit losses.

If we are required to materially increase our level of allowance for credit losses for any reason, such increase could adversely affect our business, financial condition and results of operations.

Risks Associated with the Real Estate Industry and REITs.

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If we do not continue to pay cash dividends, the price of our common stock may decline .

REIT's are generally required to distribute annually at least 90% of their ordinary taxable income to maintain our REIT status under the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, which we refer to as the Code.

REITs are generally required to distribute annually at least 90% of their ordinary taxable income to maintain our REIT status under the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, which we refer to as the Code.

Because we continue to generate operating losses primarily due to the impact of depreciation, we are not currently required, and may not be required in the future, to pay dividends to maintain our REIT status.

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In addition to Jeffrey A.

Gould, only three other executive officers, Mitchell Gould, our executive vice president, Ryan Baltimore, chief operating officer, and George Zweier, vice president and chief financial officer, devote all or substantially all of their business time to us.

Gould, only two other executive officers, Mitchell Gould, our executive vice president, and George Zweier, vice president and chief financial officer, devote all or substantially all of their business time to us.

Beginning January 2025, Mitchell Gould is working for us four days per week and George Zweier has advised that he intends to relocate to North Carolina by June 2026 and resign.

Many of our executives (i) also provide the Services (see " Item 1.

Business-Human Capital Resources ") and (ii) provide their services on a part-time basis pursuant to the shared services agreement.

We rely on part-time executive officers to provide certain services to us, including legal and certain accounting services, since we do not employ full-time executive officers to handle all of these services.

We rely on part-time executive officers to provide certain services to us, including legal and certain financial reporting services, since we do not employ full-time executive officers to handle all of these services.

If the shared services agreement is terminated or the executives performing Services are unwilling to continue to do so, we will have to obtain such services from other sources or hire employees to perform them.

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Although our common stock is quoted on the New York Stock Exchange, the volume of trades on any given day has been limited historically, as a result of which stockholders might not have been able to sell or purchase our common stock at the volume, price or time desired.

In June 2018, our common stock was added to the Russell 3000® Index.

Our common stock is a component of the Russell 3000® Index.

If our common stock is removed from the Russell 3000® Index because it does not meet the criteria for continued inclusion in such index, index funds, institutional investors, or other holders attempting to track the composition of that index may be required to sell our common stock, which would adversely impact the price and frequency at which it trades.

7 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