What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-07 · 112 added, 85 removed, 231 unchanged (46% of the section changed)

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• changes in Federal, state and local governmental laws and regulations, including laws and regulations relating to taxes and real estate and related investments;

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• our failure to comply with laws, including those requiring access to our properties by disabled persons, which could result in substantial costs;

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• impact of climate change on our properties or operations;

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• risks associated with the stock ownership restrictions of the Internal Revenue Code of 1986, as amended (the "Code") for REITs and the stock ownership limit imposed by our charter;

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We are an internally managed real estate investment trust, also known as a REIT, that owns, operates and, to a lesser extent, holds interests in joint ventures that own and operate multi-family properties.

At June 30, 2025, we:

At September 30, 2025, we:

(i) wholly-own 21 multi-family properties with an aggregate of 5,420 units and a carrying value of $600.5 million;

(ii) have ownership interests, through unconsolidated entities, in eight multi-family properties with 2,527 units and a carrying value of $30.0 million;

(ii) have ownership interests, through unconsolidated entities, in ten multi-family properties with 2,891 units and a carrying value of $48.2 million;

(iii) have preferred equity interests in two multi-family properties with a carrying value of $17.7 million and (iii) own other assets, through consolidated and unconsolidated subsidiaries, with a carrying value of $1.6 million.

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most of these properties are located in the Southeast United States and Texas.

Acquisition subsequent to June 30, 2025

On July 10, 2025, a joint venture in which we have an 80% interest, acquired 1322 North, a 214-unit multi-family property located in Auburn, AL.

The Company acquired the property for $36.5 million, including a $24.4 million mortgage.

On July 15, 2025, a joint venture in which we have an 80% interest, acquired 1322 North, a 214-unit multi-family property located in Auburn, AL (the "Auburn Acquisition").

The venture acquired the property for $36.5 million, including a $24.4 million mortgage.

The mortgage matures in 2032, bears a 5.38% fixed interest rate, and is interest only through maturity.

We contributed $10.7 million to the joint venture for our equity interest.

We contributed $10.7 million to the joint venture for our equity interest and planned improvements.

In connection with this transaction, we borrowed $7 million from our credit facility.

On September 19, 2025, a joint venture in which we have an 80% interest, acquired Oaks at Victory, a 150-unit multi-family property located in Savannah, GA (the "Savannah Acquisition";

and together with the Auburn Acquisition, the "Acquisitions").

The venture acquired the property for $23 million, including a $15.7 million mortgage assumed as part of the acquisition.

The mortgage matures in 2031, bears a 2.71% fixed interest rate, and is interest only through maturity.

We contributed $8.4 million to the joint venture for our equity interest and planned improvements.

In connection with this transaction, we borrowed $8 million from our credit facility.

See Notes 9 and 10 to our consolidated financial statements.

During the quarter ended September 30, 2025, the Company sold a cooperative apartment unit located in New York, NY for a sales price of $995,000 and, after closing costs, recognized a gain of $755,000 on the sale.

Completed and Contemplated Re-financings

On September 26, 2025, we refinanced the maturing mortgage of $15.4 million (bearing an interest rate of 4.42%) on our Parkway Grande - San Marcos, TX property with a new mortgage of $15.8 million;

such mortgage debt matures on October 1,

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2032, bears an interest rate of 5.09% and is interest only for five years.

During the quarter ending March 31, 2026, we have three maturing mortgages in the aggregate amount of $42.5 million and bearing a weighted average interest rate of 4.36%.

We anticipate that we will refinance these maturing mortgages (the "Contemplated Re-financings") by year end by obtaining new mortgage debt in the aggregate amount of approximately $71.4 million.

We anticipate that the new debt will have a weighted average remaining term to maturity of approximately nine years and a weighted average interest rate ranging from 4.90% to 5.04%.

We will use a portion of the net proceeds from such re-financing to pay off the outstanding balance of the credit facility.

We can provide no assurance that these re-financings will be completed or if completed will be on the indicated terms.

Our Stono Oaks joint venture also has a construction loan in the amount of $37.2 million, bearing a 6.46% interest rate and maturing in March, 2026.

The joint venture is currently contemplating its refinancing options, which include, two one-year extension periods subject to meeting certain conditions as defined in the Loan Agreement.

The Contemplated Re-financings are expected to result in $28.9 million increase in mortgage debt and an increase in the respective weighted average interest rate from the current 4.36% to an estimated weighted average interest rate of 5.01%.

As a result, our quarterly interest expense is anticipated to increase by approximately $430,000 per quarter.

Challenges and Uncertainties

We face challenges due to the uncertain national economic environment (e.g., the possibility of inflation, recession and/or stagflation, the potential impact of tariffs and trade wars, and/or volatile interest rates), and uncertainties in the multifamily property market( e.g., limited acquisition opportunities due to the mispricing of assets ( i.e., cap rates that do not, in our belief, correlate appropriately to interest rates and other market factors) and oversupply of multifamily properties in several markets in which we compete (including Atlanta, GA, Huntsville, AL, Dallas, TX, San Antonio, TX, Nashville TN, LaGrange, GA and San Marcos, TX).

We face challenges due to the uncertain national economic environment (e.g., the possibility of inflation, recession and/or stagflation, the potential impact of tariffs and trade wars, and/or volatile interest rates), and the oversupply of multifamily properties in several markets in which we compete (including Atlanta, GA, Huntsville, AL, Dallas, TX, San Antonio, TX, Nashville TN, Pensacola, FL, LaGrange, GA and San Marcos, TX).

In addition, we use concessions (and in particular, in markets that are especially competitive) as a means to improve occupancy.

The use of concessions will reduce our rental income and may add to the variability of our operating results.

These challenges and uncertainties have, and we anticipate will continue to (i) adversely impact the rental and occupancy rates at our properties, which will adversely impact our operating results, and (ii) as further noted below, limit our ability or willingness to acquire properties, grow rental income and/or 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 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 equity 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.

The use of concessions reduces our rental income and may add to the variability of our operating results.

These challenges and uncertainties have, and we anticipate will continue to adversely impact (i) the rental and occupancy rates at our properties, and (ii) our ability to grow rental income and/or control our real estate operating expenses, some of which, such as real estate taxes, we have a very limited ability to control and frequently increase, with limited notice of the increase.

In light of the limited funds available to us to acquire properties (the cash and cash equivalents reflected on our consolidated balance sheet are earmarked for working capital purposes and generally not available for acquisitions or mortgage repayments), we are pursuing (i) alternative investments in the multi-family property arena, including preferred equity 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 anticipate that our mortgage interest expense will increase as we refinance the aggregate $196.3 million of principal balances of mortgage debt maturing through 2027 (including $84.0 million of such principal balances at unconsolidated subsidiaries) because current comparable mortgage interest rates are generally higher than the weighted average interest rate on such maturing mortgages ( i.e , the weighted average interest rate on the mortgages on our consolidated and unconsolidated properties maturing through December 31, 2027 is 4.51%).

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Results of Operations

Three months ended June 30, 2025 compared to three months ended June 30, 2024 .

Three months ended September 30, 2025 compared to three months ended September 30, 2024 .

As used herein, the term "same store properties" refers to multi-family properties that were wholly owned for the entirety of the periods presented.

For the three months ended June 30, 2025 and 2024, all of our multi-family properties in our consolidated portfolio are same store properties.

For the three months ended September 30, 2025 and 2024, all of our multi-family properties in our consolidated portfolio are same store properties.

The following table compares our revenues for the periods indicated:

Three Months Ended June 30,

Three Months Ended September 30,

(Dollars in thousands):

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Rental and other revenue from real estate properties

The change was due to an aggregate decrease of $166,000 due to a decline in ancillary income ( i.e, storage income, amenity fees, termination fees, etc.) and to a lesser extent, a decline in rental rates (which includes the effect of straight line rent adjustments related to rent concessions),The change was offset by an aggregate $117,000 increase due to a lease extension and tenant reimbursements at a commercial property and an improvement in occupancy.

The change was due to a $378,000 decrease in rental revenue resulting from straight-line rent adjustments associated with lease concessions, offset by increases in ancillary income ( e.g., cancellation fees and utility reimbursement) and improvements in occupancy and rental rates.

Loan interest and other income

The increase is due primarily to interest income (including fee amortization) of $315,000 earned from the preferred equity investments originated in the fourth quarter of 2024.

The increase is due to the interest income of $309,000 earned from the preferred equity investments offset by a $125,000 reduction in interest and other income due to the decrease in funds available for short-term investments.

The following table compares our expenses for the periods indicated:

Three Months Ended June 30,

Three Months Ended September 30,

(Dollars in thousands) 2025 2024 Increase

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Real estate operating expenses.

The change is due to a $295,000 increase in repair and maintenance expense, a portion of which was reimbursed from insurance proceeds.

There were also increases in payroll, real estate taxes and utilities expense, none of which were individually significant.

The change was offset by a $263,000 reduction in the premium on our master insurance policy.

The change is due primarily to an aggregate increase of $323,000 from real estate taxes, payroll and utilities, offset by a $247,000 reduction in the premium on our master insurance policy.

Interest expense

Interest expense increased primarily due to $393,000 of interest from the financing of our Woodland Trails - LaGrange, GA property which occurred in the third quarter of 2024, offset by a $98,000 decrease in interest on our subordinated debt due to a reduction in interest rates.

We anticipate that interest expense may increase in the short term as we borrowed $7.0 million from our credit facility in connection with the Auburn Acquisition.

The increase is primarily due to $228,000 of interest from the financing of our Woodland Trails - LaGrange, GA property which occurred in the third quarter of 2024 (the "Woodlands Refinancing"), offset primarily by a $93,000 decrease in interest on our subordinated debt due to a reduction in interest rates.

We anticipate that interest expense may increase by approximately $295,000 for the three months ending December 31, 2025 from the three months ended December 31, 2024, as we borrowed an aggregate $17.5 million from our credit facility during the quarter ended September 30, 2025 in connection with the acquisitions and working capital purposes.

Further increases in interest expense may occur if the Contemplated Re-financings are completed.

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General and administrative

The increase is due primarily to the net non-cash expense associated with the impact of the retirement of our Executive Vice President on his equity awards and equity incentive awards ( i.e., the accelerated vesting of restricted stock and cancellation of restricted stock units).

Equity in earnings of unconsolidated joint ventures

Equity in earnings decreased $90,000 from $389,000 in the three months ended June 30, 2024 to $299,000 in the three months ended June 30, 2025.

The decrease was the result of reduced revenues and increased real estate operating expense at many of our unconsolidated multi-family properties, offset by a reduced loss at our Stono Oaks property.

This property is in lease up and generated increased revenues as occupancy increased to 78% at June 30, 2025.

Insurance recovery of casualty loss

In the quarter ended June 30, 2025, the Company received a $189,000 insurance reimbursement (net of a $100,000 deductible) from a casualty event that occurred at our Silvana Oaks property.

There was no comparable recovery in the quarter ended June 30, 2024.

Income tax provision

The increase is due to the receipt, in the three months ended June 30, 2024, of a $164,000 Tennessee franchise refund due to a change in Tennessee law.

Equity in earnings decreased $444,000 from $369,000 in the three months ended September 30, 2024 to a loss of $75,000 in the three months ended September 30, 2025.

The decrease is primarily the result of $469,000 in amortization of lease intangibles acquired as part of the Auburn Acquisition.

We estimate that the amortization of lease intangibles will, with respect to the (i) Auburn Acquisition, be approximately $345,000 and $115,000 for the three months ending December 31, 2025 and March 31, 2026, respectively, and (ii) Savannah Acquisition, be approximately $458,000, $332,000, $209,000 and $92,000, for the three months ending December 31, 2025, March 31, 2026, June 30, 2026, and September 30, 2026, respectively.

Gain on sale of real estate

In the quarter ended September 30, 2025, the Company sold a cooperative apartment unit located in New York, NY for a sales price of $995,000 and, after closing costs, recognized a gain of $755,000 on the sale.

Provision for Federal and state tax

Provision for Federal and state tax changed from a $310,000 refund in the quarter ended September 30, 2024, to an expense of $2,000 in the quarter ended September 30, 2025.

This change was due primarily to the inclusion, in the three months ended September 30, 2024, of $370,000 refund from Tennessee following the repeal of its property based franchise tax.

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Results of Operations

Six Months Ended June 30, 2025 compared to six months ended June 30, 2024 .

Nine Months Ended September 30, 2025 compared to nine months ended September 30, 2024 .

As used herein, the term "same store properties" refers to multi-family properties that were wholly owned for the entirety of the periods presented.

For the six months ended June 30, 2025 and 2024, all of our properties in our consolidated portfolio are same store properties.

For the nine months ended September 30, 2025 and 2024, all of our properties in our consolidated portfolio are same store properties.

The following table compares our revenues for the periods indicated:

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in thousands):

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Rental and other revenue from real estate properties

The increase is due to a lease extension and tenant reimbursements at our commercial property and, to a lesser extent, an increase in rental rates (which includes the effect of straight line rent adjustments related to rent concessions).

The increase is due to increases in occupancy and rental rates (which includes the effect of straight line rent adjustments related to rent concessions).

Loan interest and other income

The increase is due primarily to interest income (including fee amortization) of $625,000 earned from the preferred equity investments originated in the fourth quarter of 2024.

The increase is due primarily to interest income of $903,000 earned from the preferred equity investments.

The following table compares our expenses for the periods indicated:

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in thousands) 2025 2024 Increase

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Real estate operating expense

The change is due primarily to increases of (i) $213,000 in repairs and maintenance a portion of which was reimbursed from insurance proceeds;

The change is due primarily to increases of (i) $297,000 in real estate taxes due primarily to increased assessments;

(ii) $267,000 in utilities, primarily water and sewer;

(iii) $164,000 in real estate taxes due primarily to increased assessments;

(iii) $258,000 in repairs and maintenance, a portion of which was reimbursed from insurance proceeds;

and (iv) $242,000, primarily due to leasing expense.

The increase was offset by $508,000 decrease in premium on our master insurance policy.

The increase was offset by $756,000 reduction in the premium on our master insurance policy.

Interest expense

The change is due primarily to the additional $782,000 related to the Woodlands Financing, offset by $204,000 due to the decrease on the interest rate on our junior subordinated notes.

The change is due primarily to the additional $1 million related to the Woodlands Financing, offset by decreases of $297,000 due to the decrease on the interest rate on our junior subordinated notes and $205,000 due to amortization of our mortgage debt.

General and administrative

Of the decrease, approximately (i) $145,000 is due to a temporary reduction in staffing and (ii) $114,000 is due to reduced amortization associated with RSUs that vest upon the achievement of specified levels of adjusted funds from operations;

we do not currently anticipate achieving the minimum performance level that would result in the vesting of such RSUs.

Contributing to the decrease was (i) $186,000 related to reduced amortization of our restricted stock units primarily as a result of changes in the assessment of the achievability of the performance metrics of such awards, (ii) $125,000 related to reduced amortization associated with restricted stock following the cessation of employment of certain of our executive officers

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was offset by a $150,000 increase primarily due to professional fees related to the 2024 audit.

We anticipate that during the quarter ending September 30, 2025, we will incur a $237,000 non-cash charge related to Mitchell Gould's, our former Executive Vice President, restricted stock awards.

in December 2024 and July 2025, and (iii) $124,000 due to a reduction in employee headcount.

The decrease was offset primarily by (i) $209,000 reflecting the net non-cash impact of the retirement of our Executive Vice President on his equity awards and equity incentive awards ( i.e.

, the accelerated vesting of restricted stock and cancellation of restricted stock units), and (ii) a $184,000 increase in professional fees related to 2025 internal and external audit services.

Equity in earnings of unconsolidated joint ventures

Equity in earnings from unconsolidated joint ventures increased to $712,000 for the six months ended June 30, 2025 from $617,000 for the six months ended June 30, 2024.

The increase is due primarily to continued leasing at our Stone Oaks property which is currently in lease up.

Equity in earnings from unconsolidated joint ventures decreased to $637,000 for the nine months ended September 30, 2025 from $986,000 for the nine months ended September 30, 2024.

The decrease is primarily due to $469,000 in amortization of lease intangibles acquired in the Auburn Acquisition.

This decrease is offset by $182,000 increase in occupancy at Stono Oaks.

Insurance recovery of casualty loss

In the six months ended June 30, 2025, the Company received and aggregate of $257,000 insurance reimbursements (net of an aggregate of $200,000 in deductibles) from casualty events that occurred at our Silvana Oaks and Avalon properties.

There was no comparable recovery in the six months ended June 30, 2024.

In the nine months ended September 30, 2025, we received an aggregate of $257,000 insurance reimbursements (net of an aggregate of $200,000 in deductibles) from casualty events that occurred at our Silvana Oaks and Avalon properties.

There was no comparable recovery in the nine months ended September 30, 2024.

Income tax provision

Income tax provision increased to $118,000 for the six months ended June 30, 2025 from $13,000 in the six months ended June 30, 2024.

The increase is due to the receipt, in the six months ended June 30, 2024, of a Tennessee franchise tax refund due to a change in Tennessee law.

Income tax provision increased to $120,000 for the nine months ended September 30, 2025 from a refund of $297,000 in the nine months ended September 30, 2024.

The change is primarily due to the receipt of $370,000 in the nine months ended September 30, 2024, following the repeal of Tennessee's property based franchise tax.

Liquidity and Capital Resources

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Generally, our primary sources of capital and liquidity are the operations of our multi-family properties (including distributions and/or income from the preferred equity investments and the operations of the unconsolidated multi-family properties), mortgage debt financings and re-financings, the issuance of shares of our common stock pursuant to our at-the-market distribution and dividend reinvestment programs, borrowings from our credit facility and our available cash.

At August 1, 2025, our available liquidity was approximately $49.0 million, including $16.0 million of cash and cash equivalents and $33 million available under our credit facility.

We anticipate that from July 1, 2025 through December 31, 2027, our operating expenses, $77.4 million of mortgage amortization and interest expense (including $27.6 million from unconsolidated joint ventures), $15.4 million, $130.4 million and $65.9 million of balloon payments with respect to mortgages maturing in 2025, 2026 and 2027, respectively (including $60.9 and $23.1 million maturing in 2026 and 2027, respectively, from unconsolidated joint ventures), interest expense on our junior subordinated notes, estimated cash dividend payments of at least $47.2 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 18.9 million shares outstanding), will be funded from cash generated from operations (including distributions from unconsolidated joint ventures).

At October 31, 2025, our available liquidity was approximately $37.1 million, including $14.6 million of cash and cash equivalents and $22.5 million available under our credit facility.

We anticipate that from October 1, 2025 through December 31, 2027, our operating expenses, $100.9 million of mortgage amortization and interest expense (including $29.7 million from unconsolidated joint ventures), $130.4 million and $65.9 million of balloon payments with respect to mortgages maturing in 2026 and 2027, respectively (including $60.9 and $23.1 million maturing in 2026 and 2027, respectively, from unconsolidated joint ventures), interest expense on our junior subordinated notes, estimated cash dividend payments of at least $42.8 million (assuming (i) the current quarterly dividend rate of $0.25 per share and (ii) 19.0 million shares outstanding), will be funded from cash generated from operations (including distributions from unconsolidated joint ventures).

Our operating cash flow and available cash is insufficient to fully fund the $196.3 million (including $84 million at unconsolidated joint ventures) of balloon payments due through 2027, 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 or invest in additional multi-family property opportunities 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 from lenders, and (iii) raise capital from the sale of our common stock.

At June 30, 2025, we had mortgage debt of $699.3 million (including $250.2 million of mortgage debt at of our unconsolidated subsidiaries).

At September 30, 2025, we had mortgage debt of $737.6 million (including $289.5 million of mortgage debt at of our unconsolidated subsidiaries).

The mortgage debt at our:

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Junior Subordinated Notes

As of June 30, 2025, $37.4 million (excluding deferred costs of $232,000) in principal amount of our junior subordinated notes is outstanding.

These notes mature in April 2036, contain limited covenants (including covenants prohibiting us from paying dividends or repurchasing capital stock if there is an event of default (as defined therein) on these notes), are redeemable at our option and bear an interest rate, which resets and is payable quarterly, at a rate of three-month term SOFR plus 250 basis points.

At June 30, 2025 and 2024, the interest rate on these notes was 6.54% and 7.59%, respectively.

As of September 30, 2025, $37.4 million (excluding deferred costs of $222,000) in principal amount of our junior subordinated notes is outstanding.

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notes), are redeemable at our option and bear an interest rate, which resets and is payable quarterly, at a rate of three-month term SOFR plus 250 basis points.

At September 30, 2025 and 2024, the interest rate on these notes was 6.57% and 7.52%, respectively.

Credit Facility

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Net proceeds received from the sale, financing or refinancing of our properties are generally required to be used to repay amounts outstanding on the facility.

The interest rate in effect at June 30, 2025 and August 1, 2025, was 6.95% and 6.83% respectively.

As of August 1, 2025, there was an outstanding balance of $7 million on the credit facility and $33 million is available to be borrowed thereunder.

The interest rate in effect at September 30, 2025 and October 31, 2025, was 6.77% and 6.63% respectively.

As of October 31, 2025, there was an outstanding balance of $17.5 million on the credit facility and $22.5 million is 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.

At June 30, 2025, we were in compliance in all material respects with the requirements of the facility.

At September 30, 2025, we were in compliance in all material respects with the requirements of the facility.

Other Financing Sources and Arrangements

At June 30, 2025, we are joint venture partners in unconsolidated joint ventures which own eight multi-family properties and the distributions to us from these joint venture properties of $603,000 during the quarter ended June 30, 2025 contributed to our liquidity and cash flow.

At September 30, 2025, we are joint venture partners in unconsolidated joint ventures which own ten multi-family properties and the distributions to us from these joint venture properties of $2.9 million during the nine months ended September 30, 2025 contributed to our liquidity and cash flow.

Further, we may be required to make significant capital contributions with respect to these properties.

At June 30, 2025, our investments in these joint venture properties had a net-equity carrying value of $30.0 million.

At September 30, 2025, our investments in these joint venture properties had a net-equity carrying value of $48.1 million.

The underlying properties are subject to mortgage debt, which is not reflected on our consolidated balance sheet, of $289.5 million.

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See note 9 to our consolidated financial statements.

At June 30, 2025, we had preferred equity investments in two multi-family properties and during the quarter ended June 30, 2025, we generated $301,000 of loan interest income from these investments.

At June 30, 2025, these investments had a carrying value of $17.7 million, are unsecured and are structurally subordinate to (including the payment of the returns thereon), to an aggregate of $51.2 million of mortgage debt (which is not reflected on our consolidated balance sheet) bearing a weighted average interest rate of 4.81% and a weighted average remaining term to maturity of 5.4 years.

At September 30, 2025, we had preferred equity investments in two multi-family properties and during the quarter ended September 30, 2025, we generated $309,000 of loan interest income from these investments.

At September 30, 2025, these investments had a carrying value of $17.7 million, are unsecured and are structurally subordinate to (including the payment of the returns thereon), an aggregate of $51.1 million of mortgage debt (which is not reflected on our consolidated balance sheet) bearing a weighted average interest rate of 4.81% and a weighted average remaining term to maturity of 5.1 years.

Although we are not the obligor with respect to such mortgage debt, the loss of any of these investments due to mortgage foreclosure or similar proceedings would have a material adverse effect on our results of operations and financial condition.

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If we fail to qualify as a REIT in any taxable year, we will be subject to Federal income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent tax years.

Even if we qualify for Federal taxation as a REIT, we are subject to certain state and local taxes on our income and to Federal income and excise taxes on undistributed taxable income ( i.e ., taxable income not distributed in the amounts and in the time frames prescribed by the Code).

On July 9, 2025, we paid a quarterly cash dividend of $0.25 per share to holders of record of our common stock as of the close of business on June 25, 2025.

Even if we qualify for Federal taxation as a REIT, we are subject to certain state and local taxes on our income and to Federal income and excise taxes on

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undistributed taxable income ( i.e ., taxable income not distributed in the amounts and in the time frames prescribed by the Code).

On October 6, 2025, we paid a quarterly cash dividend of $0.25 per share to holders of record of our common stock as of the close of business on September 24, 2025.

We anticipate that the dividends paid in 2025 will be treated as a return of capital for Federal income tax purposes.

We carefully monitor our discretionary spending.

Our largest recurring discretionary expenditure has been our quarterly dividend (which was $0.25 per share of common stock, or approximately $4.7 million, with respect to the dividend paid in July 2025).

Each quarter, our board of directors evaluates the timing and amount of our dividend based on its assessment of, among other things, our short and long term cash and liquidity requirements, prospects, debt maturities, projections of our REIT taxable income, net income, funds from operations, and adjusted funds from operations.

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The tables below provides a reconciliation of net loss determined in accordance with GAAP to FFO and AFFO on a dollar and per share basis for each of the indicated periods (dollars in thousands, except per share amounts):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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our share of depreciation in unconsolidated joint venture properties 2,062 1,379 5,031 4,119

gain on sale of real estate (755) — (755) —

Adjustments for non-controlling interests (4) (4) (12) (12)

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Adjusted funds from operations attributable to common stockholders $ 6,737 $ 6,769 $ 20,972 $ 19,771

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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our share of depreciation in unconsolidated joint venture properties 0.11 0.07 0.27 0.22

gain on sale of real estate (0.04) — (0.04) —

Adjustment for non-controlling interests — — — —

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Diluted shares outstanding for FFO and AFFO 18,951,324 18,758,435 18,921,440 18,679,558

Three Months Ended June 30, 2025 and 2024

FFO for the three months ended June 30, 2025 decreased on an absolute basis (but not a per share basis) from the corresponding quarter in the prior year primarily due to (i) increased interest expense, (ii) a decrease in rental income (which includes the effect of straight line rent adjustments related to concessions) and (iii) increased tax expense.

The decrease was offset primarily due to the increases in loan interest and other income and insurance proceeds from a casualty event, and a decline in general and administrative expense.

AFFO for the three months ended June 30, 2025 increased from the corresponding period in the prior year primarily due to the factors contributing to the changes in FFO, excluding the impact of the straight line rent adjustments.

See " Results of Operations - Three Months Ended June 30, 2025 compared to three months ended June 30, 2024 " for a discussion of these changes.

Six Months Ended June 30, 2025 and 2024

FFO for the six months ended June 30, 2025 increased from the corresponding period in the prior year primarily due to (i) an increase in loan interest and other income, (ii) an improvement in operating margins (including the impact of the lease extension at a commercial property) at consolidated and unconsolidated properties , (iii) an increase in insurance recoveries and (iv) a decrease in expense related to equity awards.

This increase was offset by (i) an increase in interest expense and (ii) an increase in income tax expense.

AFFO for the six months ended June 30, 2025 increased from the corresponding period in the prior year due to the factors contributing to the change in FFO, other than the changes in straight line rent adjustments and the expense related to equity awards.

See " Results of Operations - Six Months Ended June 30, 2025 compared to six months ended June 30, 2024 ", for a discussion of these changes.

Three Months Ended September 30, 2025 and 2024

FFO for the three months ended September 30, 2025 decreased from the corresponding quarter in the prior year primarily due to (i) a decrease in straight line rent adjustments related to concessions recognized as a component of rental revenue, (ii) increased interest expense, and (iii) increased tax expense.

The decrease was offset primarily due to an improvement in operating margins at our consolidated and unconsolidated properties and an increases in loan interest and other income.

AFFO for the three months ended September 30, 2025 decreased (on an absolute, but not a per share basis) from the corresponding period in the prior year primarily due to the factors contributing to the changes in FFO, excluding the impact of the straight line rent adjustments.

See " Results of Operations - Three Months Ended September 30, 2025 compared to three months ended September 30, 2024 " for a discussion of these changes.

Nine Months Ended September 30, 2025 and 2024

FFO for the nine months ended September 30, 2025 increased from the corresponding period in the prior year primarily due to (i) an improvement in operating margins at our consolidated and unconsolidated properties, (ii) an increase in loan interest and other income, (iii) a decrease in general and administrative expense related to the net impact of activity associated with equity awards, and (iv) an increase in insurance proceeds from a casualty event.

This increase was offset by (i) an increase in interest expense, (ii) an increase in income tax expense, and (iii) a decrease in straight line rent adjustments related to concessions recognized as a component of rental revenue.

AFFO for the nine months ended September 30, 2025 increased from the corresponding period in the prior year due to the factors contributing to the change in FFO, other than the changes in straight line rent adjustments and the expense related to equity awards.

See " Results of Operations - Nine Months Ended September 30, 2025 compared to nine months ended September 30, 2024 ", for a discussion of these changes.

Net Operating Income, or NOI, is a non-GAAP measure of performance.

9 unchanged sentences

The following table provides a reconciliation of net income attributable to common stockholders as computed in accordance with GAAP to NOI of our consolidated properties for the periods presented (dollars in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 Variance 2025 2024 Variance

5 unchanged sentences

Provision for taxes 2 (310) 312 120 (297) 417

Gain on sale of real estate (755) — (755) (755) — (755)

Insurance recovery — — — (257) — (257)

7 unchanged sentences

Same store Net Operating Income $ 12,415 $ 12,719 $ (304) $ 37,458 $ 37,849 $ (391)

For the three months ended June 30, 2025, NOI decreased from the corresponding period in 2024 primarily due to a $271,000 increase in real estate operating expenses.

See "Results of Operations - Three Months Ended June 30, 2025 Compared to the Three Months ended June 30, 2024" for a discussion of these changes.

For the six months ended June 30, 2025, NOI increased from the corresponding period in 2024 primarily to a $272,000 increase in rental revenue offset by a $242,000 increase in real estate operating expenses.

See " Results of Operations - Six months Ended June 30, 2025 compared to the Six Months ended June 30, 2024 " for a discussion of these changes.

For the three months ended September 30, 2025, NOI decreased from the corresponding period in 2024 primarily due to (i) a $155,000 increase in real estate operating expenses;

and (ii) a $146,000 decrease in rental revenue (including the effects of straight-line rent adjustments related to lease concessions).

See "Results of Operations - Three Months Ended September 30, 2025 Compared to the Three Months ended September 30, 2024" for a discussion of these changes.

For the nine months ended September 30, 2025, NOI decreased from the corresponding period in 2024 primarily due to a $381,000 increase in real estate operating expenses.

See " Results of Operations - Nine months Ended September 30, 2025 compared to the Nine Months ended September 30, 2024 " for a discussion of these changes.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis