What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-12 compared with 2024-03-14 · 152 added, 168 removed, 231 unchanged (58% of the section changed)

2 unchanged sentences

At December 31, 2024, we:

(i) wholly-own 21 multi-family properties with an aggregate of 5,420 units and a carrying value of $634.0 million, (ii) have ownership interests, through unconsolidated entities, in seven multi-family properties with an aggregate of 2,287 units, with a carrying value of $30.4 million and (iii) own other assets, through consolidated and unconsolidated entities, with a carrying value of $5.6 million.

(i) wholly-own 21 multi-family properties with an aggregate of 5,420 units and a carrying value of $614.2 million, (ii) have ownership interests, through unconsolidated entities, in eight multi-family properties with an aggregate of 2,527 units, with a carrying value of $31.3 million;

(iii) have preferred equity investments in two multi-family properties with a carrying value of $17.7 million and (iv) own other assets, through consolidated and unconsolidated entities, with a carrying value of $1.7 million.

The 29 multi-family properties are located in 11 states;

primarily in the Southeast United States and Texas.

• The unconsolidated joint venture that owned Chatham Court and Reflections, a 494 unit multi-family property located in Dallas, TX, and in which we had a 50% interest, sold such property.

Our share of the (i) gain from this sale was $14.7 million, (ii) the related early extinguishment of debt charge was $212,000, and (iii) proceeds from the sale were $19.4 million.

In 2023 and 2022, this property accounted for $54,000 and $753,000, respectively, of equity in earnings from unconsolidated joint ventures.

• We paid off our credit facility debt of $19.0 million - we accomplished this by using the proceeds of new mortgage debt of $21.2 million placed on our Silvana Oaks - North Charleston, SC multi-family property;

such mortgage debt matures in March 2033, bears an interest rate of 4.45% and is interest only for the term of the mortgage.

• We repurchased 779,423 shares of our common stock for an aggregate purchase price of approximately $14.4 million ( i.e ., an average price per share of $18.47).

• Entered into an amendment (the "Amendment") to our amended and restated credit facility (the "Facility") with VNB New York, LLC, an affiliate of Valley National Bank (“VNB”), which converted the Facility's interest rate to one-month term SOFR plus 250 basis points, and increased the interest rate floor to 6%.

Immediately prior to the amendment, the interest rate on the facility was 8.5%;

immediately thereafter, the interest rate was 7.82%

From January 1, 2024 through March 1, 2024, we purchased 123,061 shares of our common stock for an aggregate purchase price of approximately $2.3 million ( i.e., an average price of $18.43per share).

Challenges and Uncertainties as a Result of the Volatile Economic Environment;

Impact of Development Property

During the past two years, there has been a significant economic uncertainty due, among other things, to volatile interest rates and the challenges presented by an inflationary/potential recessionary environment.

Due to this uncertainty and our belief that pricing for acquisition opportunities did not appropriately reflect market conditions, we were especially cautious in pursuing acquisition opportunities in 2023 and may continue to be cautious in pursuing such opportunities in the near future.

Further, the competitive environment in several of our markets as well as anticipated expense increases create uncertainty as to our ability to improve income from continuing operations.

We have a 17.45% interest in a 240-unit development property located in Johns Island, SC.

As of December 31, 2023, this project is substantially complete and lease-up has begun.

We estimate that for 2024, we will record approximately $350,000 to $500,000 of equity in loss from unconsolidated ventures related to this property because the venture will begin recognizing revenue and expenses (and in particular depreciation and interest which had been capitalized during the development phase).

• We invested, in two separate and unrelated transactions, an aggregate of $18.3 million (with a carrying value of $17.7 million at December 31, 2024, after giving effect to deferred loan fees and allowance for credit loss) in joint ventures that purchased a 204-unit multi-family property in Wilmington, North Carolina and a 184-unit multi-family property in Kennesaw, Georgia.

These investments are unsecured and are subordinate, including the payment of the returns thereon, to an aggregate of $51.3 million of mortgage debt on these properties.

We estimate that in 2025, we will generate approximately $1.2 million of interest income on these investments.

For financial statement reporting purposes, these investments are treated as loans and are included in "Loan receivables, net of deferred loan fees and allowance for credit loss"on our consolidated balance sheet at December 31, 2024.

See "Item 1 Business - Preferred Equity Investments" and Notes 1 and 5 to our consolidated financial statements.

• We obtained a $27.4 million mortgage on our Woodland Trails-LaGrange, GA property (the "Woodlands Financing").

The debt matures in September 2031, bears interest at a fixed rate of interest of 5.22% and is interest only until maturity.

• We and an affiliate of Valley National Bank ("VNB") amended our credit facility to, among other things, reduce the borrowing capacity from $60 million to $40 million, extend the maturity from September 2025 to September 2027 and revise certain financial and other covenents.

VNB required these changes as a condition to our obtaining the Woodlands Financing.

• We sold a cooperative apartment unit in New York, NY for a sales price of approximately $1.1 million and recognized a gain of $806,000.

• We repurchased 193,529 shares of our common stock for an aggregate purchase price of approximately $3.50 million ( i.e ., an average price of $18.07 per share).

From January 1, 2025 through February 28, 2025, we purchased 65,018 shares of our common stock for an aggregate purchase price of approximately $1.1 million ( i.e., an average price of $17.49 per share).

In March 2025, our board of directors increased the value of the shares that we can repurchase to up to $10 million and extended the repurchase program through December 31, 2026.

Challenges and Uncertainties as a Result of the Uncertain Economic Environment;

Pursuit of Joint Venture Acquisition and Alternative Investment Opportunities

As more fully described below, we face challenges ( e.g ., inflation, volatile interest rates, over-supply in certain markets, rental rates decreases, mispriced ( i.e.

,cap rates that do not, in our belief, correlate appropriately to interest rates and other market factors), and limited acquisition opportunities) due to the uncertain economic environment, which limits our ability or willingness to (i) acquire properties, (ii) grow rental income or (iii) control our real estate operating expenses, some of which, such as real estate taxes and insurance expense, we have a very limited ability to control.

In addition, several properties, (in particular, Bells Bluff and Crossings), face increasing competition due to additional supply in such markets which have and may continue to adversely impact rental rates and occupancy rates.

In light of the challenging acquisition environment and the limited funds available to us to acquire properties, we are pursuing (i) alternative investments in the multi-family property arena, including preferred loan investments ( e.g.

, an investment entitling us to a fixed rate of return prior to distributions to more junior investors) or bridge loans (e.g., a loan secured by a first mortgage on the subject property) and/or (ii) the acquisition of multi-family properties through joint ventures.

We do not anticipate that in the near term, these type of investments (other than joint ventures already included in our portfolio), will constitute a significant part of our portfolio, and can provide no assurance that such investments will be profitable.

Nashville/West Nashville, TN Properties - Bells Bluff and Crossings

These properties (“Bells Bluff” and "Crossings") have experienced, and continue to experience, competitive pressure due to the completion of construction of similar or higher-quality multi-family properties in Nashville and West Nashville, TN.

To maintain occupancy levels, we have offered, and anticipate that we will continue to offer, short-term rent concessions and/or reduced rental rates.

As a result, Bells Bluff's and Crossing's operating results have been and will continue to be, adversely impacted.

We believe that due, among other things, to its vibrant economy, that over-time, the Nashville market will absorb the excess rental capacity, although we can provide no assurance in this regard.

Results of Operations

Comparison of Years Ended December 31, 2024 and 2023

The term "same store properties" refers to ten multi-family properties with an aggregate of 2,576 units that were owned for all of 2023 and 2022.

The term "unconsolidated same store properties" with an aggregate of 2,287 units refers to seven properties that were owned for all of 2023 and 2022.

As used in the comparison of the year ended December 31, 2023 and 2022, the term "Partner Buyouts" refers to our purchase in 2022 of the interests of our joint venture partners at 11 properties.

The term "same store properties" refers to 21 multi-family properties with an aggregate of 5,420 units that were owned for all of 2024 and 2023.

The following table compares our revenues for the years indicated:

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Rental and other revenue from real estate properties $ 94,773 $ 93,069 $ 1,704 1.8 %

Other income 548 12 536 N/M

Loan interest and other income 857 548 309 56.4 %

Total revenues $ 95,630 $ 93,617 $ 2,013 2.2 %

1 unchanged sentence

The components of the increase include:

• $20.8 million from the Partner Buyouts;

• $2.6 million from same store properties, substantially all of which is due to higher average rental rates.

Offsetting the increase is a $1.0 million decrease due to a decline in occupancy from 96.4% to 93.6% at same store properties, including $343,000 at Bells Bluff-West Nashville, TN, which experienced a decline in occupancy due to increased supply in the market and change in demand for certain unit types.

The increase is due primarily to increased earnings on our cash balances due to higher interest rates.

• a $1.0 million increase due to a 1.3% increase in average rental rates year-over-year in the

• an $855,000 increase in straight line of rent concessions,net of amortization, with approximately 50% of such concessions from Bells Bluff and Crossings;

• a $112,000 increase at our commercial property in Yonkers due to a lease extension.

The increase was offset by a $344,000 decrease in average occupancy year-over-year at the multi-family portfolio from 94.2% to 93.7%.

Loan interest and other income

The increase is due primarily to interest income of $197,000 received from the preferred equity investments which were originated in the fourth quarter of 2024.

We estimate that these investments will generate an aggregate of $1.2 million of interest income in 2025.

The following table compares our expenses for the periods indicated:

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General and administrative 15,595 15,433 162 1.0 %

Provision for credit loss 270 — 270 N/A

Depreciation and amortization 25,926 28,484 (2,558) (9.0) %

2 unchanged sentences

The components of the increase include:

• $9.4 million from the Partner Buyouts;

• $1.8 million from same store properties, including:

– $880,000 due to the master insurance program implemented in December 2022 and increases in insurance costs overall.;

– $295,000 in real estate taxes due to increases primarily at four properties;

– general cost increases, including $228,000 in property level payroll costs, $201,000 in utilities costs and $211,000 across other expense categories.

• $669,000 in real estate taxes, including $413,000 at our Newbridge Commons-Columbus, OH property due to a reassessment, and smaller increases at several other properties;

• $641,000 in insurance costs, including $380,000 due to increases in our insurance premiums under our master policy and $260,000 from two properties that are not part of our master policy;

• $293,000 in utility costs (primarily water/sewer charges) at many properties;

• $189,000 primarily related to increased replacement costs at several properties.

We estimate that in 2025, assuming no material changes to our current multi-family portfolio, that our insurance expense will decrease by approximately $750,000 to $1.0 million due primarily to more favorable premiums.

Interest expense

The components of the increase include:

• $5.2 million due to the Partner Buyouts;

• $1.3 million due to the increase in the interest rate on our floating rate junior subordinated notes;

• $372,000 of interest expense on the Silvana Oaks mortgage which was obtained in February 2023.

The increase was offset by a $139,000 decrease in interest expense on our credit facility primarily due to the payoff of the facility in February 2023 in connection with the receipt of proceeds from the Silvana Oaks mortgage.

The increase is due primarily to the additional $566,000 of interest expense related to the Woodlands Financing which took place in 2024, $155,000 from the Silvana Oaks financing which took place in 2023 and $91,000 due to an increased interest rate on our junior subordinated notes.

The increase was offset by a $208,000 decrease in credit facility interest expense as we did not use the facility in 2024 and a $169,000 decrease due to reduced mortgage balances from amortization.

General and administrative.

The components of the increase include:

• $379,000 due to the amortization expense related to the restricted stock granted in January 2023 (as a result of the higher fair value of the shares granted in 2023 in comparison to the restricted stock granted in 2018);

• $232,000 of cash compensation and related payroll expense due to higher levels of compensation and increased employee headcount.

• $319,000 increase in non-cash restricted stock amortization, including $171,000 due to the higher price of the restricted stock awarded in 2024 in comparison to awards granted in prior years, and $147,000 due to the accelerated vesting of restricted stock awards of Ryan Baltimore, our former chief operating officer, who resigned in December 2024 to pursue another employment opportunity;

• $223,000 in cash compensation costs due to higher levels of compensation.

The increase was offset by a:

• $169,000 due to reduced amortization associated with RSUs that vest upon satisfaction of performance metrics based on adjusted funds from operations, as we do not currently anticipate achieving the minimum level required for the vesting of such awards;

• $120,000 related to the reversal of a non-cash amortization expense on restricted stock awards forfeited by Mr.

• $120,000 decrease due to a reduction in our investor relations activities;

• $127,000 decrease due primarily to the inclusion, in 2023, of the write off of a deposit related to a terminated transaction.

Provision for credit loss

In 2024, we recorded a non-cash provision of $270,000 related to the preferred equity investments.

There was no comparable expense in 2023.

Depreciation and amortization

The increase is due $5.8 million from the Partner Buyouts, offset by a $2.1 million decrease due to reduced depreciation related to lease intangibles resulting from such buyouts.

Equity in earnings (loss) of unconsolidated joint ventures and equity in earnings from sale of unconsolidated joint venture properties .

Please see a detailed explanation of these categories in the next section entitled "Unconsolidated Joint Ventures - Results of Operations".

The change is due primarily to the decrease in depreciation related to lease intangibles from properties where we purchased our partners' interests in 2022.

Equity in earnings of unconsolidated joint ventures

Equity in earnings from unconsolidated joint ventures declined $649,000 to $1.6 million in the year ended December 31, 2024 from $2.3 million for the 2023.

The components of the decline include:

• $712,000, representing our proportionate share of the net loss from Stono Oaks - Johns Island, SC ("Stono Oaks") which was in development through 2023, but which was placed in service in 2024.

Accordingly, interest and certain other expenses (which prior to 2024 were capitalized) and depreciation, are now being expensed;

• the inclusion, in 2023, of our $399,000 proportionate share of the net income from Chatham Court and Reflections, which was sold in May 2023 (the "Chatham Sale").

The decrease was offset primarily by:

• the inclusion, in 2023, of our $212,000 proportionate share of an early extinguishment of debt charge related to the Chatham Sale;

• $170,000 primarily due to improved rental rates.

Equity in earnings from sale of unconsolidated joint venture properties

In 2023, we recognized a gain of $14.7 million from the Chatham Sale.

There was no corresponding gain in 2024.

Casualty loss ;

During the year ended December 31, 2023, we settled the Takakura Lawsuit for $323,000.

During the year ended December 31, 2022, we settled a personal injury lawsuit for $850,000

Insurance recovery of casualty loss

During 2023, we received insurance proceeds of (i) $323,000 in connection with the settlement of the Takakura Lawsuit and (ii) $470,000 as reimbursement for expenses incurred related to a winter storm in December 2022.

During 2022, we received $850,000 in insurance proceeds upon the settlement of a personal injury lawsuit.

In 2023, we settled a wrongful death action (the "Lawsuit") for $323,000.

As noted in the paragraph immediately below, we were reimbursed for all of such expense by our insurance carriers.

During 2023, we received insurance proceeds (i) $470,000 as reimbursement for expenses incurred related to a winter storm in December 2022 and (ii) $323,000 in connection with the settlement of the Lawsuit.

Gain on sale of real estate

In 2023, we sold a cooperative apartment in New York for a sales price of $785,000 and recognized a gain of $604,000.

Loss on extinguishment of debt

In 2022, we incurred $563,000 of loss on extinguishment of debt related to the mortgage refinancing affected in connection with the buyout of our joint venture partner's interest in Brixworth at Bridge Street - Huntsville, AL.

Income tax provision

Income tax provision in the year ended December 31, 2023, decreased $767,000 (i.e.

, from $821,000 in 2022 to $54,000 in 2023).

The decrease reflects the inclusion, in 2022 of increased tax provision related to gains from the sale of properties by several joint ventures and the reversal, in 2023, of approximately $200,000 due to the over-accrual of taxes.

Unconsolidated Joint Ventures - Results of Operations.

Equity in (loss) earnings of unconsolidated joint venture s

The table below reflects the condensed income statements of our unconsolidated properties included in note 6 of our consolidated financial statements.

In accordance with US generally accepted accounting principles, each of the line items in the chart below is presented as if these properties are wholly owned by us, although as reflected under " Item 1.

Business - Our Multi- Family Properties ", our equity interests in these properties range from 32% to 80% (dollars in thousands):

2023 2022 Increase

(Decrease) % change

Rental revenues from unconsolidated joint ventures $ 44,785 $ 72,873 $ (28,088) (38.5) %

Real estate operating expense from unconsolidated joint ventures 20,577 33,086 (12,509) (37.8) %

Interest expense from unconsolidated joint ventures 9,268 16,269 (7,001) (43.0) %

Depreciation from unconsolidated joint ventures 10,403 17,798 (7,395) (41.5) %

Total expenses from unconsolidated joint ventures 40,248 67,153 (26,905) (40.1) %

Total revenues less total expenses from unconsolidated joint ventures 4,537 5,720 (1,183) (20.7) %

Other equity in earnings from unconsolidated joint ventures 126 121 5 4.1 %

Impairment of assets — ( 8,553 ) 8,553 N/A

Insurance recoveries from unconsolidated joint ventures — 8,553 (8,553) N/A

Gain on insurance proceeds from unconsolidated joint ventures 65 567 (502) (88.5) %

Gain on sale of real estate from unconsolidated joint ventures 38,418 118,270 (79,852) (67.5) %

Loss on extinguishment of debt from unconsolidated joint ventures ( 561 ) ( 3,491 ) 2,930 (83.9) %

Net income $ 42,585 $ 121,187 $ (78,602) (64.9) %

Equity in earnings (loss) and gain on sale of real estate of unconsolidated joint ventures $ 17,037 $ 66,426

Set forth below is on explanation of the most significant changes in the components of the equity in earnings of unconsolidated joint ventures and equity in earnings from sale of unconsolidated joint venture properties.

Same store properties at Unconsolidated Properties represent seven properties that were owned for the entirety of the periods being compared.

Rental revenue from unconsolidated joint ventures

The decrease is due to:

• $18.4 million from the Partner Buyouts;

• $7.5 million primarily from the sale, in 2022, of Verandas at Shavano-San Antonio, TX, Cinco Ranch-Katy, TX, Vive at Kellswater-Kannapolis, NC and Water's Edge-Columbia, SC (collectively, the "2022 Sales");

• $4.4 million from the Chatham Sale.

The decrease was offset by a $2.7 million increase in rental revenue from unconsolidated same store properties, primarily due an increase in rental rates offset by a $729,000 decrease due to reduced occupancy.

Real estate operating expenses from unconsolidated joint ventures

The components of the decrease include:

• $7.8 million from the Partner Buyouts;

• $4.2 million from the 2022 Sales;

• $1.8 million from the Chatham Sale.

The decrease was offset by an aggregate $1.2 million increase in such expenses including increases of $279,000 in utility costs, $260,000 in insurance costs, $245,000 in payroll and leasing commissions, and $191,000 in real estate taxes.

Interest expense from unconsolidated joint ventures.

The components of the decrease are:

• $4.5 million due to the Partner Buyouts;

• $1.8 million from the 2022 Sales;

• $631,000 from the Chatham Sale.

Depreciation from unconsolidated joint ventures .

The components of the decrease are:

• $5.1 million due to the Partner Buyouts;

• $1.2 million from the 2022 Sales;

• $878,000 from the Chatham Sale.

Impairment of assets from unconsolidated joint ventures.

During 2022, the venture recognized $8.6 million of impairment charges related to a fire at Stono Oaks, a development project located in Johns Island, SC.

Insurance recoveries from unconsolidated joint ventures.

During 2022, the venture recognized $8.6 million of insurance recoveries related to the Stono Oaks fire.

Gain on insurance recoveries from unconsolidated joint ventures

During 2022, we recognized $567,000 in gains primarily due to our receipt of insurance recoveries from claims on two properties located in Texas that were damaged in a February 2021 ice storm, which receipts exceeded the assets previously written off.

Gain on sale of real estate from unconsolidated joint ventures

During 2023, we recognized a gain on the sale of real estate of $38.4 million from the Chatham Sale.

During 2022, we recognized gains on the sale of real estate of $118.3 million from the 2022 Sales.

Loss on extinguishment of debt from unconsolidated joint ventures

During 2023 and 2022, we recognized loss on the early extinguishment of debt in connection with the Chatham Sale and the 2022 Sales, respectively.

In 2024, we sold a cooperative apartment in NY for a sales price of approximately $1.1 million and a gain of $806,000.

In 2023, we sold a cooperative apartment in New York for a sales price of $785,000 and a gain of $604,000.

(Benefit) provision for taxes

Income tax (benefit) provision for 2024 was ($226,000), a decrease from the $54,000 provision recorded in 2023.

The benefit recorded in 2024 is the result of a $534,000 refund of Tennessee franchise tax received as a result of a change in Tennessee law offset by the 2024 estimated state tax expense of $318,000.

The 2023 tax expense of $54,000 includes a reversal of a prior year over-accrual.

Comparison of Years Ended December 31, 2023 and 2022

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In view of our multi-family property activities, we disclose funds from operations ("FFO") ,adjusted funds from operations ("AFFO") and net operating income ("NOI") because we believe that such metrics are a widely recognized and appropriate measure of the performance of a multi-family REIT.

We compute FFO in accordance with the "White Paper on Funds From Operations" issued by the National Association of Real Estate Investment Trusts ("NAREIT") and NAREIT's related guidance.

We compute FFO in accordance with the "White Paper on Funds From Operations" issued by the National Association of Real Estate Investment Trusts ("NAREIT") and NAREITs related guidance.

FFO is defined in the White Paper as net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, impairment write-downs of certain real estate assets and investments in entities where the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.

20 unchanged sentences

our share of depreciation in unconsolidated joint venture properties 5,545 5,292

our share of impairment charge in unconsolidated joint venture properties — 1,493

provision for credit loss 270 —

casualty loss — 323

gain on sales of real estate and partnership interests (604) (6)

gain on sales of real estate (806) (604)

our share of earnings in earnings from sale of unconsolidated joint

2 unchanged sentences

Funds from operations 20,919 22,608

straight-line rent accruals 93 24

loss on extinguishment of debt — 563

straight line rent concession, net of amortization (801) 93

our share of straight-line rent concessionn, net of amortization from unconsolidated joint ventures (147) —

our share of loss on extinguishment of debt from unconsolidated joint

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insurance recovery of casualty loss — (323)

our share of insurance recovery from unconsolidated joint ventures — (1,493)

gain on insurance recovery — (240)

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The table below provides a reconciliation of net income per common share (on a diluted basis) determined in accordance with GAAP to FFO and AFFO.

Net income attributable to common stockholders $ 0.20 $ 2.66

Net (loss) income attributable to common stockholders $ (0.52) $ 0.20

depreciation of properties 1.38 1.50

our share of depreciation from unconsolidated joint venture properties 0.30 0.28

our share of impairment charge in unconsolidated joint ventures — 0.08

provision for credit loss 0.01 —

casualty loss — 0.02

gain on sales of real estate and partnership interest (0.03) —

gain on sales of real estate (0.04) (0.03)

our share of earnings from sale of unconsolidated joint venture properties (0.01) (0.78)

1 unchanged sentence

Funds from operations 1.12 1.19

Adjustment for:

straight-line rent accruals — —

loss on extinguishment of debt — 0.03

straight line rent concessions, net of amortization (0.04) —

our share of straight-line rent concessionn, net of amortization from unconsolidated joint ventures — —

our share of loss on extinguishment of debt from unconsolidated joint ventures — 0.01

5 unchanged sentences

insurance recovery of casualty loss — (0.02)

our share of insurance recovery from unconsolidated joint ventures — (0.08)

gain on insurance recovery — (0.01)

3 unchanged sentences

Diluted shares outstanding for FFO and AFFO 18,710,615 18,931,026

FFO for 2023 decreased $626,000, or 2.7%, to $22.6 million from $23.2 million in 2022.

Contributing to the change was a:

• $1.5 million decrease in insurance recovery from a casualty loss at an unconsolidated joint venture;

• $1.2 million increase in interest expense (including $465,000 of amortization of mortgage fair value costs);

• $499,000 increase in general and administrative expense (excluding non cash-amortization of restricted stock

and RSU expense);

• $402,000 decrease in gains from insurance proceeds.

FFO for 2024 decreased $1.7 million, or 7%, to $20.9 million in 2024 from $22.6 million in 2023.

Contributing to the decline was a:

• $1.7 million decrease in operating margins ( i.e., revenues less real estate operating expenses) across our portfolio ( i.e.

consolidated and unconsolidated multi-family properties);

• $793,000 decrease due to the inclusion, in 2023, of an insurance recovery from a casualty loss at an unconsolidated joint venture;

• $586,000 increase in interest expense;

• $240,000 decrease due to the inclusion, in 2023, of a gain on insurance proceeds

The decrease was offset by a:

• $2.2 million decrease in early extinguishment of debt;

• $767,000 decrease in income tax expense;

• $536,000 increase in other income.

AFFO increased $514,000 or 1.8%, to $28.9 million in 2023 from $28.4 million in 2022.

Contributing to this increase was a:

• $767,000 decrease in income tax expense;

• $1.0 million increase in straight line rent concessions, net of amortization;

• $309,000 increase in other income;

• $470,000 of insurance recoveries

The increase was offset by a:

• $725,000 increase in interest expense;

• $499,000 increase in general and administrative expense .

• $280,000 decline in income tax expense;

• $212,000 decline due to the inclusion, in 2023, of early extinguishment of debt charges.

AFFO decreased $2.2 million or 7.6%, to $26.7 million in 2024 from $28.9 million in 2023.

The decrease is primarily due to the factors impacting the changes in FFO other than the changes to:

gain on insurance proceeds, net deferred concessions and early extinguishment of debt.

See “—Comparison of Years Ended December 31, 2024 and 2023” for further information regarding these changes.

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Same store NOI reflects the operations of seven of our ten wholly-owned properties.

We compute NOI by adjusting net income (loss) to (a) add back (1) interest expense, (2) general and administrative expenses, (3) depreciation expense, (4) impairment charges, (5) provision for taxes, (6) loss on extinguishment of debt, (7) equity in loss of unconsolidated joint ventures, (8) casualty loss and (9) the impact of non-controlling interests, and (b) deduct (1) other income, (2) gain on sale of real estate (3) gain on sale of partnership interest, (4) equity in earnings from sale of consolidated joint venture properties, (5) insurance recovery of casualty loss and (6) gain on insurance recoveries.

Other REIT’s may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REIT’s.

We compute NOI by adjusting net income (loss) to (a) add back (1) interest expense, (2) general and administrative expenses, (3) depreciation expense, (4) provision for credit loss, (5) provision for taxes, (6) loss on extinguishment of debt, (7) equity in earning (loss) of unconsolidated joint ventures, (8) casualty loss and (9) the impact of non-controlling interests, and (b) deduct (1) other income, (2) gain on sale of real estate, (3) equity in earnings from sale of consolidated joint venture properties, (4) insurance recovery of casualty loss and (5) gain on insurance recoveries.

Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs.

We believe NOI provides an operating perspective not immediately apparent from GAAP operating income or net income (loss).

3 unchanged sentences

For the year ended December 31,

GAAP Net income attributable to common stockholders $ 3,873 $ 49,955

Other Income (548) (12)

GAAP Net (loss) income attributable to common stockholders $ (9,791) $ 3,873

Loan interest and other income (857) (548)

Interest expense 22,596 22,161

1 unchanged sentence

Depreciation 25,926 28,484

Provision for taxes 54 821

Provision for credit loss 270 —

(Benefit) provision for taxes (226) 54

Gain on sale of real estate (806) (604)

Loss on extinguishment of debt — 563

Equity in (earnings) loss of unconsolidated joint venture properties (2,293) (1,895)

Casualty loss — 323

Equity in earnings loss of unconsolidated joint venture properties (1,644) (2,293)

Equity in earnings from sale of unconsolidated joint

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Operating Expenses 460 479

$ 25,555 $ 14,219

Non-same store NOI 1,134 $ 1,001

Same Store Net Operating Income $ 50,084 $ 50,247

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and the prior year.

In 2023, NOI increased by $11.3 million from 2022 primarily due to a $20.8 million increase in rental revenues resulting from the Partner Buyouts.

The increase was offset by a $9.4 million increase, primarily due to the Partner Buyouts, in real estate operating expenses.

Same store NOI remained flat in 2023 from 2022 due to a $1.8 million increase in rental revenues (and in particular, the increase in average rental rates) offset by a $1.8 million increase in real estate operating expenses.

See "-Results of Operations - Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022" for a discussion of these changes.

In 2024, NOI decreased by $30,000 from 2023 primarily due to a $1.8 million increase in operating expenses and a $344,000 decrease due to reduced occupancy.

This was offset by a $1.1 million increase in rental revenues (including a $112,000 increase due to the Yonkers' lease extension) and an $855,000 increase in deferred rent concessions.

Same store NOI decreased $163,000 in 2024 from 2023 due to the factors impacting NOI, other than the Yonkers' lease extension.

See "-Results

of Operations -Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023" for a discussion of these changes.

Liquidity and Capital Resources

We require funds to pay operating expenses and debt service obligations, acquire properties, make capital and other improvements, fund capital contributions, pay dividends and repurchase shares of our common stock.

Generally, in 2023, our primary sources of capital and liquidity were the operations of our multi-family properties (including distributions of $6.3 million from the operations of our unconsolidated joint ventures), our $19.4 million share of the net proceeds from the Chatham Sale, and our available cash.

Excluding funds held at our unconsolidated subsidiaries, at December 31, 2023 and March 1, 2024, our available liquidity was approximately $83.5 million and $81.2 million, respectively, including $23.5 million and $21.2 million, respectively, of cash and cash equivalents, and subject to compliance with borrowing base and other requirements, up to $60 million and $60 million, respectively, available under our credit facility.

Generally, in 2024, our primary sources of capital and liquidity were the operations of our multi-family properties (including distributions of $4.7 million from the operations of our unconsolidated joint ventures), $27.4 million from the Woodland Trails Financing, and our available cash.

Excluding funds held at our unconsolidated subsidiaries, at December 31, 2024 and February 28, 2025, our available liquidity was approximately $67.9 million and $62.7 million, respectively, including $27.9 million and $22.7 million, respectively, of cash and cash equivalents, and subject to compliance with borrowing base and other requirements, up to $40 million available under our credit facility.

A significant amount of our cash and cash equivalents is maintained at our properties for general working capital purposes.

We anticipate that for the four years beginning January 1, 2024, our operating expenses, $127.8 million of mortgage amortization and interest expense (including $50.4 million from unconsolidated joint ventures) and $204.4 million of balloon payments due with respect to mortgages maturing through 2027 (including $76.7 million from unconsolidated joint ventures), anticipated capital expenditures (for 2024 only) of $10.1 million for both consolidated and unconsolidated properties (including an estimated $2.7 million for our value add program), estimated cash dividend payments of at least $74.0 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 18.5 million shares outstanding) will be funded from cash generated from operations (including distributions from unconsolidated joint ventures), mortgage financings and re-financings, sales of properties, the issuance of additional equity and, if available, our $60 million credit facility.

We anticipate that for the four years beginning January 1, 2025, our operating expenses, $118.2 million of mortgage amortization and interest expense (including $42.4 million from unconsolidated joint ventures) and $317.2 million of balloon payments due with respect to mortgages maturing through 2028 (including $151.6 million from unconsolidated joint ventures), anticipated capital expenditures (for 2025 only) of an aggregate of $11.1 million for consolidated and unconsolidated properties, estimated cash dividend payments of at least $75.1 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 18.8 million shares outstanding), will be funded from cash generated from operations (including distributions from unconsolidated joint ventures), mortgage financings and re-financings, sales of properties, the issuance of additional equity and, if available, our $40 million credit facility.

Our operating cash flow and available cash is insufficient to fully fund the $317.2 million of balloon payments, and if we are unable to refinance such debt on acceptable terms, we may need to issue additional equity or dispose of properties, in each case on potentially unfavorable terms.

Our ability to acquire multi-family properties and implement value-add projects is limited by our available cash and our ability to (i) draw on our credit facility, (ii) obtain, on acceptable terms, mortgage debt and (iii) raise capital from the sale of our common stock.

Our ability to acquire multi-family properties (including making alternative investments such as preferred equity investments), and implement value-add projects is limited by our available cash and our ability to (i) draw on our credit facility, (ii) obtain, on acceptable terms, mortgage debt and (iii) raise capital from the sale of our common stock.

Further, if and to the extent we generate ordinary taxable income, we will be required to make distributions to stockholders to maintain our REIT status and as a result, will be limited in our ability to use gains, if any, from property sales, as a source of funds for operating expenses, debt service and property acquisitions.

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Assumes that the interest rate on the junior subordinated notes will be 6.85% per annum, which was the rate in effect at December 31, 2024.

(2) Assumes that $966,000 will be paid annually for the next five years pursuant to the shared services agreement and $1.6 million will be paid annually through December 31, 2027 for the Services.

(2) Assumes that $948,000 and $1.7 million will be paid annually through December 31, 2029 pursuant to the shared services agreement and for the Services, respectively.

Business—Our Structure."

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No amount has been reflected as payable pursuant thereto after five years as such amount is not determinable.

Excludes $10.1 million of anticipated capital expenditures in 2024,including $2.7 million in connection with our value add program.

Such expenditures subsequent to 2024 are not determinable.

The following table sets forth as of December 31, 2024 information regarding the components of our long-term debt obligations:

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(1) Includes payments of principal (including amortization payments), and interest, and excludes deferred financing costs.

(2) Assumes that the interest rate on the junior subordinated notes will be 7.65% per annum.

(2) Assumes that the interest rate on the junior subordinated notes will be 6.85% per annum and that no amounts are outstanding under the credit facility.

Corporate Level Financing Arrangements

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The credit facility bears an annual interest rate, which resets monthly, equal to one-month term SOFR plus 250 basis points, with a floor of 6.00%.

The interest rate at December 31, 2023 and March 1, 2024, was 7.85% and 7.82% respectively.

The interest rate at December 31, 2024 and February 28, 2025, was 6.96% and 6.83% respectively.

There is an annual fee of 0.25% on the total amount committed by VNB and unused by us.

The credit facility matures in September 2027.

As of March 1, 2024, there was no balance outstanding and up to $60 million was available to be borrowed thereunder.

The terms of the credit facility include certain restrictions and covenants which, among other things, limit the incurrence of liens, require that we maintain and include in the collateral securing the facility at least three unencumbered properties with an aggregate value(as calculated pursuant to the facility) of at least $75 million, and require compliance with financial ratios relating to, among other things maintaining a minimum tangible net worth of $140 million, the minimum amount of debt service coverage with respect to the properties (and amounts drawn on the credit facility) used in calculating the borrowing base.

As of February 28, 2025, there was no balance outstanding and up to $40 million was available to be borrowed thereunder.

The terms of the credit facility include certain restrictions and covenants which, among other things, limit the incurrence of liens, require that we maintain and include in the collateral securing the facility at least two unencumbered properties with an aggregate value(as calculated pursuant to the facility) of at least $50 million, and require compliance with financial ratios relating to, among other things maintaining a minimum tangible net worth of $140 million, the minimum amount of debt service coverage with respect to the properties (and amounts drawn on the credit facility) used in calculating the borrowing base.

Net proceeds received from the sale, financing or refinancing of wholly-owned properties are generally required to be used to repay amounts outstanding under the credit facility.

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Other Financing Sources and Arrangements

At December 31, 2023, we are joint venture partners in unconsolidated joint ventures which own seven multi-family properties which distributed $5.2 million to us in 2023.

At December 31, 2024, we are joint venture partners in unconsolidated joint ventures which own eight multi-family properties which distributed $4.4 million to us in 2024.

We may be required to make capital contributions with respect to these properties.

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See note 6 to our consolidated financial statements.

At December 31, 2024, we had preferred equity investments in joint ventures that own multi-family properties.

These joint ventures paid us $196,000 in 2024 and we anticipate that, subject to the underlying property generating sufficient cash flow,

that such joint ventures will pay us of $1.2 million in 2025.

At December 31, 2024, the carrying value of these investments was $17.7 million and these investments are subordinate to mortgage debt of $51.3 million, which debt is not reflected on our consolidated balance sheet.

See " Item 1.

Business-Mortgage Debt " for information regarding our mortgage debt at consolidated and unconsolidated subsidiaries.

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The short-term nature of these leases generally serves to reduce our risk to adverse effects of inflation on our revenue.

During 2023, we experienced inflationary pressures that drove higher operating expenses, primarily in personnel, repairs and maintenance, insurance and real estate taxes;

During 2024, we continued to experience inflationary pressures that drove higher operating expenses, primarily in personnel, repairs and maintenance, insurance and real estate taxes;

such increases may continue in 2025 and thereafter, which would adversely affect our operating results.

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We mitigate the risks presented by inflation through the use of long-term fixed interest rate debt and interest rate hedges and by paying down, when we deem appropriate, our credit facility debt.

However, increasing interest rates, which generally correlates to increasing inflation, increases the interest expense on our junior subordinated notes and may make it less attractive to obtain mortgage debt or use our credit facility in connection with acquisition, refinancing and value add activities.

However, increasing interest rates, which generally correlates to increasing inflation, increases the interest expense on our junior subordinated notes and makes it less attractive to obtain mortgage debt (including the refinancing of an aggregate of $130.4 million of mortgage debt (including $60.8 million of mortgage debt at unconsolidated joint ventures, that matures in 2026) or use our credit facility in connection with acquisition and value add activities.

Cash Distribution Policy

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Our significant accounting policies are discussed in Note 1 of our consolidated financial statements in this report.

We believe the accounting estimates listed below are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

We believe the accounting estimates listed below are the most critical to aid in

fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

Equity method investments

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Any impairment taken with respect to our real estate assets reduces our net income, assets and stockholders' equity to the extent of the amount of the allowance, but it will not affect our cash flow until such time as the property is sold.

Allowance for credit losses

We estimate the allowance for credit losses in accordance with the Current Expected Credit Loss (CECL) model under Accounting Standards Codification ("ASC") Topic 326.

This model requires us to estimate expected lifetime credit losses for our loan portfolio ( i.e., our preferred equity investments) by considering historical loss experience, current economic conditions, and reasonable and supportable forecasts of future economic trends.

The estimate is highly subjective and involves significant judgment in the following areas:

• Historical Loss Data:

We segment our loan portfolio based on risk characteristics such as borrower type, loan term, and collateral.

We will use historical loss experience when available, as a basis for expected credit losses.

• Macroeconomic Forecasts:

We incorporate forward-looking macroeconomic indicators, such as GDP growth, unemployment rates, and interest rate trends, to adjust historical loss trends.

• Qualitative Adjustments:

We apply management judgments to adjust the allowance for factors that may not be fully captured in the quantitative model, including changes in emerging risks such as regulatory, geopolitical, or credit risks.

• The estimate of expected credit losses is inherently uncertain and sensitive to changes in economic conditions.

For example, a 100-basis-point increase in unemployment rates or a prolonged downturn in the real estate market could result in a higher allowance for credit losses, negatively impacting our financial results.

Conversely, improvements in economic conditions could result in a lower allowance.

• We continually evaluate the adequacy of our allowance for credit losses and adjust it as necessary.

However, actual losses may differ from our estimates due to unforeseen changes in economic conditions or borrower behavior.

Purchase Price Allocations

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In making estimates of fair values for purposes of allocating purchase price, we use a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data.

We also consider information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.

We also consider information obtained about each

property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets acquired.

Equity-Based Compensation

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The value of such awards is recognized as compensation expense in general and administrative expenses in the accompanying consolidated statements of operations over the applicable service periods.

Grant date fair value is determined with respect to the (i) the restricted stock awards, by the closing stock price on the date of grant, (ii) TSR Awards, by using a Monte Carlo simulation relying upon various assumptions and (iii) AFFO Awards, by using the closing stock price on the grant date, subject to quarterly adjustment based upon management’s projection as to the achievability of the specified metrics related to the AFFO Awards.

Grant date fair value is determined with respect to the (i) the restricted stock awards, by the closing stock price on the date of grant, (ii) TSR Awards, by using a Monte Carlo simulation relying upon various assumptions and (iii) AFFO Awards, by using the closing stock price on the grant date, subject to quarterly adjustment based upon management’s subjective projections as to the achievability of the specified metrics related to the AFFO Awards;

changes in the projections related to the AFFO awards may have a significant impact on the expense we recognize on such awards.

See Note 11 to our consolidated financial statements.

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 7. Management’s Discussion and Analysis