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Item 2. Management’s Discussion and Analysis

2025-08-04 compared with 2025-05-01 · 176 added, 101 removed, 276 unchanged (50% of the section changed)

Management’s Discussion and Analysis of Financial Conditions and Results of Operations

The following discussion and analysis should be read in conjunction with the unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 (the “Report”), the audited financial statements for the year ended December 31, 2024, which are included in our Annual Report on Form 10-K filed with

the SEC on February 18, 2025, and the risk factors in Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2024.

The following discussion and analysis should be read in conjunction with the unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2025 (the “Report”), the audited financial statements for the year ended December 31, 2024, which are included in our Annual Report on Form 10-K filed with the SEC on February 18, 2025, and the risk factors in Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2024.

This discussion and analysis and other sections of this Report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to the expectations for future periods.

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These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements to be materially different from the results of operations, financial condition, or plans expressed or implied by the forward-looking statements.

Although we believe the expectations reflected in these forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be achieved.

Although we believe the expectations reflected in these forward-looking statements are based upon reasonable assumptions, we can give no assurance that our

expectations will be achieved.

Any statements contained herein that are not statements of historical fact should be deemed forward-looking statements.

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• inflation and price volatility in the global economy;

• uncertain global macro-economic and political conditions;

• uncertain global macro-economic and political conditions, the impact of conflicts in Ukraine and the Middle East, including sanctions imposed by the U.S.

and other countries, on inflation, trade, and general economic conditions;

• deteriorating economic conditions, including rising unemployment rates, energy costs, and inflation, in the markets where we own apartment communities or in which we may invest in the future;

• rental conditions in our markets, including occupancy levels and rental rates, our potential inability to renew residents or obtain new residents upon expiration of existing leases, our ability to identify and consummate attractive acquisitions and dispositions on favorable terms, our ability to reinvest sales proceeds successfully, our inability to accommodate any significant decline in the market value of real estate serving as collateral for our debt and mortgage obligations;

changes in tax and housing laws, including rent control laws, or other factors;

• timely access to material and labor required to renovate and maintain apartment communities;

• adverse changes in our markets, including future demand for apartment homes in those markets, barriers of entry into new markets, limitations on our ability to increase rental rates, our ability to identify and consummate attractive acquisitions and dispositions on favorable terms, our ability to reinvest sales proceeds successfully, and inability to accommodate any significant decline in the market value of real estate serving as collateral for our debt and mortgage obligations;

• pandemics or epidemics and any effects on our employees, residents and commercial tenants, third party vendors and suppliers, and apartment communities, as well as our cash flow, business, financial condition, and results of operations;

• the impact of conflicts in Ukraine and the Middle East, including sanctions imposed by the U.S.

and other countries, on inflation, trade, and general economic conditions;

• reliance on a single asset class (multifamily) and certain geographic areas (Midwest and Mountain West regions) of the U.S.;

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• inability to complete lease-up of our projects on schedule and on budget;

• inability to sell our non-core properties on terms that are acceptable;

• failure to reinvest proceeds from sales of properties into tax-deferred exchanges, which could necessitate special dividend and/or tax protection payments;

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Except as otherwise required by law, we undertake no obligation to publicly update or revise any forward-looking statements to reflect events, circumstances, or changes in expectations after the date on which this Report is filed.

Readers also should review the risks and uncertainties detailed from time to time in filings with the SEC, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2024.

Executive Summary

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We primarily focus on investing in markets characterized by stable and growing economies, strong employment, and an attractive quality of life that we believe, in combination, lead to higher demand for apartment homes and retention of our residents.

As of March 31, 2025, we owned interests in 71 apartment communities consisting of 13,012 apartment homes.

Property owned, as presented in our Condensed Consolidated Balance Sheets at historical cost, was $2.5 billion at March 31, 2025 and December 31, 2024.

As of June 30, 2025, we owned interests in 72 apartment communities consisting of 13,353 apartment homes.

Property owned, as presented in our Condensed Consolidated Balance Sheets at historical cost and excluding assets held for sale, was $2.4 billion at June 30, 2025 and $2.5 billion December 31, 2024.

Renting apartment homes is our primary source of revenue, and our business objective is to provide great homes.

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We have paid quarterly distributions continuously since our first distribution in 1971.

Overview of the Three Months Ended March 31, 2025

• For the three months ended March 31, 2025, revenue increased by $2.6 million or 4.0% to $67.1 million, compared to $64.5 million for the three months ended March 31, 2024, due to increased revenue from same-store and non-same-store communities, offset by decreased revenue from dispositions.

• Same-store revenues increased by 3.5% for the three months ended March 31, 2025, compared to the same period of the prior year, driving a 2.1% increase in same-store NOI compared to the same period of the prior year.

• Net loss was $0.22 per diluted share for the three months ended March 31, 2025, compared to net loss of $0.37 per diluted share for the same period of the prior year.

• Non-GAAP Core Funds from Operations (“Core FFO”) per diluted share decreased 1.6% to $1.21 for the three months ended March 31, 2025, compared to $1.23 for the three months ended March 31, 2024.

See the description of Core FFO on page 25 and the reconciliation of net loss available to common shareholders to FFO and Core FFO on page 26.

This decrease was primarily due to a one-time property tax refund that occurred in the prior year that did not occur in the current year.

Overview of the Three Months Ended June 30, 2025

• Acquired Sugarmont, our first apartment community in Salt Lake City, Utah, consisting of 341 homes for an aggregate purchase price of $149.0 million

• For the three months ended June 30, 2025, revenue increased by $3.5 million or 5.4% to $68.5 million, compared to $65.0 million for the three months ended June 30, 2024, primarily due to increased revenue from same-store and non-same-store communities.

• Same-store revenues increased by 2.7% for the three months ended June 30, 2025, compared to the same period of the prior year, driving a 2.9% increase in same-store NOI compared to the same period of the prior year.

• Net loss was $0.87 per diluted share for the three months ended June 30, 2025, compared to net loss of $0.19 per diluted share for the same period of the prior year.

• Non-GAAP Core Funds from Operations (“Core FFO”) per diluted share increased to $1.28 for the three months ended June 30, 2025, compared to $1.27 for the three months ended June 30, 2024.

See the description of Core FFO on pages 33 and 34 and the reconciliation of net loss available to common shareholders to FFO and Core FFO on page 35.

This increase was primarily due to dividends to preferred shareholders that occurred in the prior year that did not occur in the same period of the current year along with increased NOI, offset by increased interest expense.

The drivers of these changes are discussed in more detail in the “Results of Operations” section below.

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GAAP and Non-GAAP Financial Measures

Net operating income (“NOI”) is a non-GAAP financial measure, which we define as total real estate revenues less property operating expenses, including real estate taxes and is reconciled to operating income below.

We believe that NOI is an important supplemental measure of operating performance for real estate because it provides a measure of operations that is unaffected by sales of real estate and other investments, impairment, depreciation, amortization, financing costs, property management expenses, casualty gains (losses), loss on litigation settlement, and general and administrative expenses.

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The discussion below focuses on the main factors affecting real estate revenue and real estate expenses from same-store apartment communities because changes from one year to another in real estate revenue and expenses from non-same-store communities are generally due to the addition of those communities to our real estate portfolio, and accordingly provide less useful information for evaluating the ongoing operational performance of our real estate portfolio.

For the comparison of the three months ended March 31, 2025 and 2024, two apartment communities and one apartment community, respectively, were non-same-store.

Sold communities are included in “Dispositions,” for all periods presented, while “Other properties” includes non-multifamily properties and the non-multifamily components of mixed-use properties.

During the three months ended March 31, 2024, we disposed of two apartment communities, consisting of 205 apartment homes.

Reconciliation of Operating Income to Net Operating Income (non-GAAP)

The following table provides a reconciliation of operating income to NOI (non-GAAP), which is defined above.

For the comparison of the six months ended June 30, 2025 and 2024, three apartment communities and one apartment community, respectively, were non-same-store.

Sold communities and communities designated as held for sale are included in “Held for sale and dispositions,” for all periods presented, while “Other properties” includes non-multifamily properties and the non-multifamily components of mixed-use properties.

For the six months ended June 30, 2025 and 2024, 12 apartment communities were designated as held for sale and included in “Held for sale and dispositions.” During the six months ended June 30, 2024, we disposed of two apartment communities, consisting of 205 apartment homes.

Reconciliation of Operating Income (Loss) to Net Operating Income (non-GAAP)

The following table provides a reconciliation of operating income (loss) to NOI (non-GAAP), which is defined above.

(in thousands, except percentages)

Three Months Ended March 31,

2025 2024 $ Change % Change

Operating income

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

2025 2024 $ Change % Change 2025 2024 $ Change % Change

Operating income (loss)

$ (6,796) $ 7,192 $ (13,988) (194.5) % $ (2,050) $ 11,267 $ (13,317) (118.2) %

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Depreciation and amortization 27,097 25,714 1,383 5.4 % 54,751 52,726 2,025 3.8 %

Impairment of real estate investments 14,543 — 14,543 N/A 14,543 — 14,543 N/A

General and administrative expenses 4,382 4,216 166 3.9 % 9,379 8,839 540 6.1 %

Loss on sale of real estate and other investments

— 577 (577) (100.0) %

— — — N/A — 577 (577) (100.0) %

Net operating income $ 42,018 $ 39,854 $ 2,164 5.4 % $ 82,380 $ 79,291 $ 3,089 3.9 %

The following consolidated results of operations, including GAAP and non-GAAP metrics, cover the three months ended March 31, 2025 and 2024.

The following consolidated results of operations, including GAAP and non-GAAP metrics, cover the three and six months ended June 30, 2025 and 2024.

(in thousands, except percentages)

Three Months Ended March 31,

2025 2024 $ Change % Change

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

2025 2024 $ Change % Change 2025 2024 $ Change % Change

Same-store (1)

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792 546 246 45.1 % 1,608 1,152 456 39.6 %

Dispositions (1)

Held for sale and dispositions (1)

6,983 6,701 282 * 13,857 13,856 1 *

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242 229 13 5.7 % 573 403 170 42.2 %

Dispositions (1)

Held for sale and dispositions (1)

3,182 3,046 136 * 6,414 6,553 (139) *

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550 317 233 73.5 % 1,035 749 286 38.2 %

Dispositions (1)

Held for sale and dispositions (1)

3,801 3,655 146 * 7,443 7,303 140 *

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Depreciation and amortization (27,097) (25,714) 1,383 5.4 % (54,751) (52,726) 2,025 3.8 %

Impairment of real estate investments (14,543) — 14,543 N/A (14,543) — 14,543 N/A

General and administrative expenses (4,382) (4,216) 166 3.9 % (9,379) (8,839) 540 6.1 %

Loss on sale of real estate and other investments

— (577) 577 100.0 %

— — — N/A — (577) 577 100.0 %

Interest expense (10,724) (9,332) 1,392 14.9 % (20,359) (18,539) 1,820 9.8 %

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(1) This is a non-GAAP financial measure which is a component of NOI (non-GAAP), as defined above.

Refer to the Reconciliation of Operating Income to Net Operating Income above.

Refer to the Reconciliation of Operating Income (Loss) to Net Operating Income above.

Non-GAAP financial measures should not be considered an alternative to net income (loss), net income (loss) available for common shareholders, or cash flow from operating activities as a measure of financial performance.

* Not a meaningful percentage.

Three Months Ended March 31,

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

Weighted Average Occupancy (1)

2025 2024 2025 2024

Same-store 96.1 % 95.5 % 96.0 % 95.1 %

Non-same-store 85.9 % 94.4 % 87.1 % 94.3 %

Total 95.6 % 94.6 %

94.5 % 95.3 % 95.6 % 95.0 %

(1) Weighted average occupancy is defined as the percentage resulting from dividing actual rental revenue by scheduled rental revenue.

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Weighted average occupancy may not completely reflect short-term trends in physical occupancy, and the calculation of weighted average occupancy may not be comparable to that disclosed by other REITs and other real estate companies.

Number of Apartment Homes as of March 31, 2025 as of March 31, 2024

(2) Excludes apartment communities classified as held for sale.

Number of Apartment Homes as of June 30, 2025 as of June 30, 2024

Same-store 11,084 11,084

Non-same-store 758 288

Held for sale and dispositions

Total 13,353 12,883

Same-store analysis.

Revenue from same-store communities increased 3.5%, or $2.2 million, in the three months ended March 31, 2025, compared to the same period in the prior year.

The increase was attributable to 2.2% growth in average monthly revenue per occupied home for the three months ended March 31, 2025 and an increase of 1.2% in occupancy as weighted average occupancy increased from 94.6% for the three months ended March 31, 2024 to 95.8% for the three months ended March 31, 2025.

Property operating expenses, including real estate taxes, at same-store communities increased by 5.8% or $1.4 million in the three months ended March 31, 2025, compared to the same period in the prior year.

At same-store communities, controllable expenses (which exclude insurance and real estate taxes) increased by $316,000, primarily due to an increase in utilities, offset by decreases in repairs and maintenance and administrative and marketing expenses.

Non-controllable expenses at same-store communities increased by $1.1 million, due to real estate taxes, including a refund resulting from a tax appeal in the first quarter of 2024 that did not occur in the first quarter of 2025.

Same-store NOI increased by $781,000 to $38.9 million for the three months ended March 31, 2025, compared to $38.1 million in the same period of the prior year.

Revenue from same-store communities increased 2.7%, or $1.5 million, in the three months ended June 30, 2025, compared to the same period in the prior year.

The increase was attributable to 2.1% growth in average monthly revenue per occupied home for the three months ended June 30, 2025 and an increase of 0.6% in occupancy as weighted average occupancy increased from 95.5% for the three months ended June 30, 2024 to 96.1% for the three months ended June 30, 2025.

Property operating expenses, including real estate taxes, at same-store communities increased by 2.4% or $517,000 in the three months ended June 30, 2025, compared to the same period in the prior year.

At same-store communities, controllable expenses (which exclude insurance and real estate taxes) increased by $418,000, primarily due to an increase in compensation and utilities.

Non-controllable expenses at same-store communities increased by $99,000, due to real estate taxes and offset by a decrease in insurance-related costs.

Same-store NOI increased by $1.0 million to $36.2 million for the three months ended June 30, 2025, compared to $35.2 million in the same period of the prior year.

Revenue from same-store communities increased 3.1%, or $3.5 million, in the six months ended June 30, 2025, compared to the same period in the prior year.

The increase was attributable to 2.2% growth in average monthly revenue per occupied home for the six months ended June 30, 2025 and an increase of 0.9% in occupancy as weighted average occupancy increased from 95.1% for the six months ended June 30, 2024 to 96.0% for the six months ended June 30, 2025.

Property operating expenses, including real estate taxes, at same-store communities increased by 4.4% or $1.8 million in the six months ended June 30, 2025, compared to the same period in the prior year.

At same-store communities, controllable expenses (which exclude insurance and real estate taxes) increased by $706,000, primarily due to an increase in utilities and compensation.

Non-controllable expenses at same-store communities increased by $1.1 million, due to real estate taxes and offset by a decrease in insurance-related costs.

Same-store NOI increased by $1.6 million to $71.5 million for the six months ended June 30, 2025, compared to $69.8 million in the same period of the prior year.

Non-same-store analysis.

Revenue from non-same-store communities increased by $744,000 in the three months ended March 31, 2025, compared to the same period in the prior year.

Revenue from non-same-store communities increased by $1.4 million in the three months ended June 30, 2025, compared to the same period in the prior year.

Property operating expenses, including real estate taxes at non-same-store communities increased by $676,000.

NOI at non-same-store communities increased by $294,000 for the three months ended March 31, 2025, compared to the same period of the prior year.

The increase in revenue, property operating expenses, and NOI from non-same-store communities is due to the addition of an apartment community during the fourth quarter of the prior year, offset by a $104,000 decrease in NOI from a community going through repositioning with lower occupancy resulting from full unit upgrades requiring relocation of residents.

Other properties and dispositions analysis.

Revenue from other properties, which encompasses our commercial and mixed-use activity, increased by $211,000 while revenue from dispositions decreased by $529,000 in the three months ended March 31, 2025, compared to the same period in the prior year.

Property operating expenses, including real estate taxes, at other properties increased by $158,000 while such expenses decreased by $326,000 for dispositions, compared to the same period in the prior year.

NOI at other properties increased by $53,000 and NOI on dispositions decreased $203,000, compared to the same period in the prior year.

We disposed of two apartment communities in the first quarter of 2024.

NOI at non-same-store communities increased by $763,000 for the three months ended June 30, 2025, compared to the same period of the prior year.

The increase in revenue, property operating expenses, and NOI from non-same-store communities is due to the addition of two apartment communities, one during the fourth quarter of the prior year and the second during the second quarter of the current year, offset by a $214,000 decrease in NOI from repositioning a community by making full unit upgrades, resulting in lower occupancy and requiring relocation of residents.

Revenue from non-same-store communities increased by $2.2 million in the six months ended June 30, 2025, compared to the same period in the prior year.

Property operating expenses, including real estate taxes at non-same-store communities increased by $1.1 million.

NOI at non-same-store communities increased by $1.1 million for the six months ended June 30, 2025, compared to the same period of the prior year.

The increase in revenue, property operating expenses, and NOI from non-same-store communities is due to the addition of two apartment communities, one during the fourth quarter of the prior year and the second during the second quarter of the current year, offset by a $318,000 decrease in NOI from repositioning a community by making full unit upgrades, resulting in lower occupancy and requiring relocation of residents.

Other properties analysis.

Revenue from other properties, which encompasses our commercial and mixed-use activity, increased by $246,000 in the three months ended June 30, 2025, compared to the same period in the prior year.

Property operating expenses, including real estate taxes, at other properties increased by $13,000, compared to the same period in the prior year.

NOI at other properties increased by $233,000, compared to the same period in the prior year.

The increase in revenue, property operating expense, and NOI on other properties is due to the addition of an apartment community with commercial space during the fourth quarter of the prior year.

Revenue from other properties, which encompasses our commercial and mixed-use activity, increased by $456,000 in the six months ended June 30, 2025, compared to the same period in the prior year.

Property operating expenses, including real estate taxes, at other properties increased by $170,000, compared to the same period in the prior year.

NOI at other properties increased by $286,000, compared to the same period in the prior year.

The increase in revenue, property operating expense, and NOI on other properties is due to the addition of an apartment community with commercial space during the fourth quarter of the prior year

Held for sale and dispositions analysis.

Revenue from held for sale and dispositions increased by $282,000 in the three months ended June 30, 2025, compared to the same period in the prior year.

Property operating expenses, including real estate taxes, increased by $136,000 on held for sale and dispositions, compared to the same period in the prior year.

NOI on held for sale and dispositions increased $146,000, compared to the same period in the prior year.

We disposed of two apartment communities in the first quarter of 2024 and classified 12 properties as held for sale during the second quarter of 2025.

Revenue from held for sale and dispositions increased by $1,000 in the six months ended June 30, 2025, compared to the same period in the prior year.

Property operating expenses, including real estate taxes, on held for sale and dispositions decreased by $139,000, compared to the same period in the prior year.

NOI on held for sale and dispositions increased $140,000, compared to the same period in the prior year.

We disposed of two apartment communities in the first quarter of 2024 and classified 12 properties as held for sale during the second quarter of 2025.

Property management expenses .

Property management expense, consisting of property management overhead and property management fees paid to third parties, increased by 4.4% to $2.4 million in the three months ended March 31, 2025, compared to $2.3 million in the same period of the prior year.

The increase was primarily due to higher compensation costs resulting from new positions and increased pay rates compared to the same period of the prior year.

Property management expenses, consisting of property management overhead and property management fees paid to third parties, increased by 7.7% to $2.4 million in the three months ended June 30, 2025, compared to $2.2 million in the same period of the prior year.

The increase was primarily due to higher compensation related costs compared to the same period of the prior year and fees paid to third parties for management of an apartment community we acquired in the second quarter of 2025.

Property management expense, consisting of property management overhead and property management fees paid to third parties, increased by 6.0% to $4.8 million in the six months ended June 30, 2025, compared to $4.6 million in the same period of the prior year.

The increase was primarily due to higher compensation costs resulting from new positions and increased pay rates compared to the same period of the prior year, along with fees paid to third parties for management of an apartment community we acquired in the second quarter of 2025.

Casualty loss.

Casualty loss was $532,000 in the three months ended March 31, 2025, compared to $820,000 in the same period of the prior year.

The decrease is primarily due to less claim activity in the current period compared to the same period of the prior year.

Casualty loss was $399,000 in the three months ended June 30, 2025, compared to $510,000 in the same period of the prior year.

The decrease is primarily due to fewer large loss claims activity in the current period compared to the same period of the prior year.

See Note 2 of the Notes to the Condensed Consolidated Financial Statements in the report for more details.

Casualty loss was $931,000 in the six months ended June 30, 2025, compared to $1.3 million in the same period of the prior year.

The decrease is primarily due to fewer large loss claims activity in the current period compared to the same period of the prior year.

See Note 2 of the Notes to the Condensed Consolidated Financial Statements in the report for more details.

Depreciation and amortization.

Depreciation and amortization increased by 2.4% to $27.7 million in the three months ended March 31, 2025, compared to $27.0 million in the same period of the prior year, primarily attributable to an increase in depreciation on apartment communities driven by the addition of an apartment community in the fourth quarter of the prior year along with value add and acquisition capital projects, offset by a decrease in amortization of in-place leases and a decrease in depreciation from sold properties.

Depreciation and amortization increased by 5.4% to $27.1 million in the three months ended June 30, 2025, compared to $25.7 million in the same period of the prior year, primarily attributable to an increase in depreciation on apartment communities driven by the addition of two apartment communities, one in the fourth quarter of the prior year and one in the second quarter on the current year, along with value add and acquisition capital projects and amortization of in-place leases.

Depreciation and amortization increased by 3.8% to $54.8 million in the six months ended June 30, 2025, compared to $52.7 million in the same period of the prior year, primarily attributable to an increase in depreciation on apartment communities driven by the addition of two apartment communities, one in the fourth quarter of the prior year and one in the second quarter of the current year, along with value add and acquisition capital projects.

Impairment of real estate investments .

Impairment of real estate investments was $14.5 million in the three and six months ended June 30, 2025.

The impairment was the result of five apartment communities that were written down to estimated fair value in connection with their reclassification to assets held for sale.

General and administrative expenses.

General and administrative expenses increased by $374,000 to $5.0 million in the three months ended March 31, 2025, compared to $4.6 million in the same period of the prior year.

Compensation costs from higher share-based compensation and consulting fees increased in the three months ended March 31, 2025, compared to the same period of the prior year.

General and administrative expenses increased by $166,000 to $4.4 million in the three months ended June 30, 2025, compared to $4.2 million in the same period of the prior year.

The increase was primarily due to increased compensation costs from higher share-based compensation and other compensation related costs and legal fees, offset by a decrease in consulting fees in the three months ended June 30, 2025, compared to the same period of the prior year.

General and administrative expenses increased by $540,000 to $9.4 million in the six months ended June 30, 2025, compared to $8.8 million in the same period of the prior year.

The increase was primarily due to increased compensation costs from higher share-based compensation and other compensation related costs along with professional fees and administrative and office expenses in the six months ended June 30, 2025, compared to the same period of the prior year.

Loss on sale of real estate and other investments.

There was no gain or loss on the sale of real estate and other investments in the three months ended March 31, 2025, compared to a loss of $577,000 in the same period of the prior year.

There was no gain or loss on the sale of real estate and other investments in the six months ended June 30, 2025, compared to a loss of $577,000 in the same period of the prior year.

Refer to Note 8 in the Condensed Consolidated Financial Statements for more information.

Interest expense.

Interest expense increased by 4.6% to $9.6 million in the three months ended March 31, 2025, compared to $9.2 million in the same period of the prior year, primarily due to higher mortgage interest and amortization of debt discount resulting from the assumption of a mortgage in connection with an acquisition in the fourth quarter of the prior year.

Interest expense increased by 14.9% to $10.7 million in the three months ended June 30, 2025, compared to $9.3 million in the same period of the prior year, primarily due to a higher outstanding balance on our lines of credit resulting from the acquisition of an apartment community in the second quarter of the current year along with higher mortgage interest and amortization of debt discount resulting from the assumption of a mortgage in connection with an acquisition in the fourth quarter of the prior year.

Interest expense increased by 9.8% to $20.4 million in the six months ended June 30, 2025, compared to $18.5 million in the same period of the prior year, primarily due to a higher outstanding balance on our lines of credit resulting from the acquisition of an apartment community in the second quarter of the current year along with higher mortgage interest and amortization of debt discount resulting from the assumption of a mortgage in connection with an acquisition in the fourth quarter of the prior year.

Interest and other income.

Interest and other income increased to $708,000 in the three months ended March 31, 2025, compared to $340,000 in the same period of the prior year.

The increase was primarily due to interest income on a real estate related note receivable in the current period that was not fully funded by the end of first quarter of 2024.

Interest and other income increased to $735,000 in the three months ended June 30, 2025, compared to $477,000 in the same period of the prior year.

The increase was primarily due to interest income on a real estate related note receivable in the current period that was not fully funded by the end of second quarter of 2024 and a note receivable acquired in the fourth quarter of 2024.

Interest and other income increased to $1.4 million in the six months ended June 30, 2025, compared to $817,000 in the same period of the prior year.

Net loss available to common shareholders.

Net loss available to common shareholders was $3.7 million for the three months ended March 31, 2025, compared to a net loss of $5.5 million in the three months ended March 31, 2024.

Net loss available to common shareholders was $14.5 million for the three months ended June 30, 2025, compared to a net loss of $2.9 million in the three months ended June 30, 2024.

Net loss available to common shareholders was $18.2 million for the six months ended June 30, 2025, compared to a net loss of $8.4 million in the six months ended June 30, 2024.

Funds from Operations and Core Funds from Operations .

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Core FFO is a non-GAAP and non-standardized financial measure that may be calculated differently by other REITs and that should not be considered a substitute for operating results determined in accordance with GAAP.

Net loss available to common shareholders for the three months ended March 31, 2025, was $3.7 million compared to net loss of $5.5 million for the same period of the prior year.

FFO applicable to common shares and Units for the three months ended March 31, 2025, increased to $23.2 million compared to $20.9 million for the comparable period of the prior year, representing an increase of 10.9%.

This FFO increase was primarily due to dividends to preferred shareholders that occurred in the prior year that did not occur in the same period of the current year along with increased NOI from same-store communities and non-same-store communities, lower casualty loss activity, and an increase in interest in other income, offset by decreased NOI from dispositions and increased general and administrative expense and interest expense.

Net loss available to common shareholders for the three months ended June 30, 2025, was $14.5 million compared to net loss of $2.9 million for the same period of the prior year.

FFO applicable to common shares and Units for the three months ended June 30, 2025, increased to $24.5 million compared to $22.1 million for the comparable period of the prior year, representing an increase of 10.8%.

This FFO increase was primarily due to increased NOI along with dividends to preferred shareholders that occurred in the prior year that did not occur in the same period of the current year, offset by increased interest expense.

Net loss available to common shareholders for the six months ended June 30, 2025, was $18.2 million compared to net loss of $8.4 million for the same period of the prior year.

FFO applicable to common shares and Units for the six months ended June 30, 2025, increased to $47.7 million compared to $43.0 million for the comparable period of the prior year, representing an increase of 10.9%.

Reconciliation of Net Income (Loss) Available to Common Shareholders to Funds from Operations and Core Funds from Operations

(in thousands, except per share and unit amounts)

Three Months Ended March 31,

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

2025 2024 2025 2024

Funds from Operations:

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Less depreciation – partially owned entities (21) (25) (43) (49)

Impairment of real estate investments 14,543 — 14,543 —

Loss on sale of real estate

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Non-cash casualty loss

149 191 431 893

Interest rate swap amortization 174 173 349 370

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Other miscellaneous items (1)

19 31 (48) 26

Core FFO applicable to common shares and Units $ 25,297 $ 22,801 $ 49,276 $ 44,847

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Effect of redeemable operating partnership Units for FFO and Core FFO

971 835 975 845

Effect of Series D preferred units for FFO and Core FFO

228 228 228 228

Effect of Series E preferred units for FFO and Core FFO

1,905 2,062 1,906 2,070

Effect of dilutive restricted stock units and stock options for FFO and Core FFO

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(1) Consists of (gain) loss on investments and one-time professional fees.

(2) Refer to Note 3 of the Notes to the Condensed Consolidated Financial Statements for additional details on net income (loss) per share.

(2) Refer to Note 3 of the Notes to the Condensed Consolidated Financial Statements for additional details on net loss per share.

Acquisitions and Dispositions

We had no acquisitions or dispositions during the three months ended March 31, 2025.

We acquired $149.0 million of new real estate during the six months ended June 30, 2025.

We had no dispositions during the six months ended June 30, 2025.

Refer to Note 8 in the Condensed Consolidated Financial Statements for more information.

Distributions Declared

Distributions of $0.77 and $0.75 per common share and Unit were declared during the three months ended March 31, 2025 and 2024, respectively.

Distributions of $0.4140625 per Series C preferred share were declared during the three months ended March 31, 2024.

Distributions of $0.9655 per Series D preferred unit were declared during the three months ended March 31, 2025 and 2024.

Distributions of $0.96875 per Series E preferred unit were declared during the three months ended March 31, 2025 and 2024.

Distributions of $0.77 and $0.75 per common share and Unit were declared during the three months ended June 30, 2025 and 2024, respectively.

Distributions of $1.54 and $1.50 per common share and Unit were declared during the six months ended June 30, 2025 and 2024, respectively.

Distributions of $0.4140625 and $0.828125 per Series C preferred share were declared during the three and six months ended June 30, 2024, respectively.

Distributions of $0.9655 per Series D preferred unit were declared during the three months ended June 30, 2025 and 2024 and $1.931 per Series D preferred unit for the six months ended June 30, 2025 and 2024.

Distributions of $0.96875 per Series E preferred unit were declared during the three months ended June 30, 2025 and 2024 and $1.9375 per Series E preferred unit for the six months ended June 30, 2025 and 2024.

Liquidity and Capital Resources

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Our primary sources of liquidity are cash and cash equivalents on hand and cash flows generated from operations.

Other sources include availability under our unsecured lines of credit, proceeds from property dispositions, including restricted cash related to net tax deferred proceeds, offerings of preferred and common shares under our shelf registration statement, including offerings of common shares under our ATM Program, and long-term unsecured debt and secured mortgages.

Our primary liquidity demands are normally-recurring operating and overhead expenses, debt service and repayments, capital improvements to our communities, distributions to the holders of our preferred shares, common shares, Series D and Series E preferred units, and Units, value-add redevelopment, common and preferred share buybacks and Unit redemptions, funding of mezzanine loans or real estate related notes, and acquisitions of additional communities.

Other sources include availability under our unsecured lines of credit, proceeds from property dispositions, including restricted cash related to real estate deposits, offerings of preferred and common shares under our shelf registration statement, including offerings of common shares under our ATM Program, and long-term unsecured debt and secured mortgages.

Our primary liquidity demands are normally-recurring operating and overhead expenses, debt service and repayments, capital improvements to our communities, distributions to the holders of our common shares, Series D and Series E preferred units, and Units, value-add redevelopment, common and preferred share buybacks and Unit redemptions, funding of mezzanine loans or real estate related notes, and acquisitions of additional communities.

Although we believe that our financial condition and liquidity are sufficient to meet our reasonably anticipated liquidity demands, factors that could increase or decrease our future liquidity include, but are not limited to, changes in interest rates or sources of financing, general volatility in capital and credit markets, changes in minimum REIT dividend requirements, and our ability to access the capital markets on favorable terms, or at all.

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If we are unable to obtain capital from other sources, we may not be able to pay the distribution required to maintain our status as a REIT, make required principal and interest payments, make strategic acquisitions or make necessary routine capital improvements or undertake value add renovation opportunities with respect to our existing portfolio of operating assets.

As of March 31, 2025, we had total liquidity of approximately $223.2 million, which included $211.3 million available on the lines of credit based on the value of unencumbered properties and $11.9 million of cash and cash equivalents.

As of June 30, 2025, we had total liquidity of approximately $206.3 million, which included $194.0 million available on the lines of credit based on the value of unencumbered properties and $12.4 million of cash and cash equivalents.

As of December 31, 2024, we had total liquidity of approximately $224.6 million, which included $212.6 million available on the lines of credit based on the value of unencumbered properties and $12.0 million of cash and cash equivalents.

As of March 31, 2025, we had a multibank, revolving line of credit with total commitments and borrowing capacity of $250.0 million, based on the value of unencumbered properties, (the “Unsecured Credit Facility” or “Facility”).

As of March 31, 2025, there was $46.0 million outstanding on this line of credit and additional borrowing availability was $204.0 million.

As of June 30, 2025, we had a multibank, revolving line of credit with total commitments and borrowing capacity of $400.0 million, based on the value of unencumbered properties, (the “Unsecured Credit Facility” or “Facility”).

In May 2025, the Company exercised the accordion feature of the Facility, expanding the borrowing capacity by $150.0 million to $400.0 million.

Prior to the exercise of the accordion feature, the line of credit had total commitments and borrowing capacity of up to $250.0 million, based on the value of unencumbered properties.

As of June 30, 2025, there was $215.8 million outstanding on this line of credit and additional borrowing availability was $184.2 million.

At December 31, 2024, the line of credit borrowing capacity was $250.0 million based on the value of unencumbered properties, of which $44.0 million was outstanding and additional borrowing availability was $206.0 million.

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On July 26, 2024, the Unsecured Credit Facility was amended to extend maturity and to modify the leverage-based margin ratios applicable to borrowings.

As amended, this Facility matures in July 2028, with an option to extend maturity for up to two additional six-month periods and has an accordion option to increase borrowing capacity up to $400.0 million.

As amended, this Facility matures in July 2028, with an option to extend maturity for up to two additional six-month periods.

As amended, the interest rates on the line of credit are based on the consolidated leverage ratio, at our option, on either the lender’s base rate plus a margin, ranging from 20-80 basis points, or the daily or term Secured Overnight Financing Rate (“SOFR”), plus a margin that ranges from 120-180 basis points, with the consolidated leverage ratio described under the Third Amended and Restated Credit Agreement, as amended.

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This operating line of credit terminates in September 2025 and is designed to enhance treasury management activities and more effectively manage cash balances.

As of March 31, 2025 and December 31, 2024, there was $2.7 million and $3.4 million outstanding on this line of credit, respectively.

As of June 30, 2025 and December 31, 2024, there was $194,000 and $3.4 million outstanding on this line of credit, respectively.

We had a private shelf agreement with PGIM, Inc., an affiliate of Prudential Financial, Inc., and certain affiliates of PGIM, Inc.

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On October 28, 2024, the shelf agreement was amended to extend the period of time during which we may borrow money to October 2027 and to increase the borrowing capacity to $300.0 million.

We also had a separate private note purchase agreement with PGIM and certain other lenders for the issuance of $125.0 million of senior unsecured promissory notes (“Unsecured Club Notes”, and collectively with the Unsecured Shelf Notes, the “unsecured senior notes”), of which all $125.0

million was issued in September 2021.

The following table shows the notes issued under both agreements as of March 31, 2025 and December 31, 2024.

We also had a separate private note purchase

agreement with PGIM and certain other lenders for the issuance of $125.0 million of senior unsecured promissory notes (“Unsecured Club Notes”, and collectively with the Unsecured Shelf Notes, the “unsecured senior notes”), of which all $125.0 million was issued in September 2021.

The following table shows the notes issued under both agreements as of June 30, 2025 and December 31, 2024.

(in thousands)

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The notes are interest-only, with varying maturity dates of 7, 10, and 12 years, and a blended, weighted average fixed interest rate of 2.78%.

As of March 31, 2025 and December 31, 2024, the FMCF had a balance of $198.9 million.

As of June 30, 2025 and December 31, 2024, the FMCF had a balance of $198.9 million.

The FMCF is included within mortgages payable on the Condensed Consolidated Balance Sheets.

Mortgage loan indebtedness, excluding unamortized premiums and discounts and the FMCF, was $418.5 million and $420.4 million at March 31, 2025 and December 31, 2024, respectively, on 15 apartment communities.

Mortgage loan indebtedness, excluding unamortized premiums and discounts and the FMCF, was $406.4 million on 14 apartment communities at June 30, 2025 and $420.4 million on 15 apartment communities at December 31, 2024.

All of our mortgage debt is collateralized by apartment communities and is non-recourse at fixed rates of interest, with staggered maturities.

This reduces the exposure to changes in interest rates, which minimizes the effect of interest rate fluctuations on our results of operations and cash flows.

As of March 31, 2025 and December 31, 2024, the weighted average interest rate on mortgage debt was 4.02%.

As of June 30, 2025 and December 31, 2024, the weighted average interest rate on mortgage debt was 4.03% and 4.02%, respectively.

Further information can be found in Note 5 - Debt in the Condensed Consolidated notes.

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The proceeds from the sale of common shares under the ATM Program may be used for general corporate purposes, including the funding of acquisitions, construction or mezzanine loans, community renovations, and the repayment of indebtedness.

There were no sales of common shares under the ATM program during the three months ended March 31, 2025.

As of March 31, 2025, common shares having an aggregate offering price of up to $262.9 million remained available under the ATM Program.

There were no sales of common shares under the ATM program during the three and six months ended June 30, 2025.

The table below provides details on the sale of common shares during the three and six months ended June 30, 2024 under the ATM Program.

As of June 30, 2025, common shares having an aggregate offering price of up to $262.9 million remained available under the ATM Program.

Further information can be found in Note 4 - Mezzanine Equity and Equity in the Condensed Consolidated notes.

(in thousands, except per share amounts)

Three and Six Months Ended June 30,

Number of Common Shares

Net Consideration (1)

Average Net Price Per Share

2024 110 $ 7,561 $ 68.77

(1) Total consideration is net of $115,000 in commissions during the three and six months ended June 30, 2024.

We had a share repurchase program (the “Share Repurchase Program”), providing for the repurchase of up to an aggregate of $50.0 million of our outstanding common shares which expired on March 10, 2025.

1 unchanged sentence

The specific timing and amount of repurchases varied based on available capital resources or other financial and operational performance, market conditions, securities law limitations, and other factors.

There were no common shares repurchased during the three months ended March 31, 2025.

The table below provides details on the common shares repurchased under this program during the three months ended March 31, 2024.

There were no common shares repurchased during the three and six months ended June 30, 2025.

The table below provides details on the common shares repurchased under this program during the three and six months ended June 30, 2024.

(in thousands, except per share amounts)

Three Months Ended March 31, Number of Common Shares Aggregate Cost (1)

Three Months Ended June 30, Number of Common Shares Aggregate Cost (1)

Average Price Per Share (1)

Six Months Ended June 30,

2024 88 $ 4,703 $ 53.62

(1) Amount includes commissions.

We had 1.6 million Series E preferred units outstanding on March 31, 2025 and December 31, 2024.

We had 1.6 million Series E preferred units (noncontrolling interests) outstanding on June 30, 2025 and December 31, 2024.

Each Series E preferred unit has a par value of $100.

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The holders of the Series E preferred units do not have voting rights.

We had 113,100 and 165,600 Series D preferred units outstanding on June 30, 2025 and December 31, 2024, respectively.

The Series D preferred units have a par value of $100 per preferred unit.

The Series D preferred unit holders receive a preferred distribution at the rate of 3.862% per year and have a put option which allows the holder to redeem any or all of the Series D preferred units for cash equal to the issuance price.

On June 30, 2025, we redeemed 52,500 Series D preferred units for an aggregate redemption price of $5.3 million.

Each Series D preferred unit is convertible, at the holder’s option, into 1.37931 Units.

The Series D preferred units had an aggregate liquidation value of $11.3 million and $16.6 million at June 30, 2025 and December 31, 2024, respectively.

Changes in Cash, Cash Equivalents, and Restricted Cash

As of March 31, 2025, we had cash and cash equivalents of $11.9 million and restricted cash consisting of $6.1 million of real estate deposits and escrows held by lenders for real estate taxes, insurance, and capital additions.

As of June 30, 2025, we had cash and cash equivalents of $12.4 million and restricted cash consisting of $5.8 million of real estate deposits and escrows held by lenders for real estate taxes, insurance, and capital additions.

As of December 31, 2024, we had cash and cash equivalents of $12.0 million and restricted cash consisting of $1.1 million of escrows held by lenders for real estate taxes, insurance, and capital additions.

The following discussion relates to changes in consolidated cash, cash equivalents, and restricted cash which are presented in the Condensed Consolidated Statements of Cash Flows in Part I, Item 1 above.

In addition to cash flows from operations, during the three months ended March 31, 2025, we generated capital from various activities, including:

In addition to cash flows from operations of $50.7 million, during the six months ended June 30, 2025, we generated capital from various activities, including:

• Receiving $168.7 million in net draws on the lines of credit.

During the three months ended March 31, 2025, we used capital for various activities, including:

During the six months ended June 30, 2025, we used capital for various activities, including:

• Acquiring an apartment community in Salt Lake City, Utah for $150.1 million in cash, including transaction costs;

• Funding capital improvements for apartment communities of approximately $14.8 million;

• Repaying $14.0 million of mortgage principal;

• Redeeming 52,500 Series D preferred units for $5.3 million;

• Paying distributions on common shares, Series E preferred units, and Units of $29.9 million.

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Our apartment leases generally have terms of one year or less, which means that, in an inflationary environment, we would have the ability, subject to market conditions, to increase rents upon the commencement of new leases or renewal of existing leases to manage the impact of inflation on our business.

However, the cost to operate and maintain communities could increase at a rate greater than our ability to increase rents, which could adversely affect our results of operations.

However, the cost to operate and maintain communities could increase

at a rate greater than our ability to increase rents, which could adversely affect our results of operations.

High inflation could have a negative impact on our residents and their ability to absorb rent increases.

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Off-Balance Sheet Arrangements

As of March 31, 2025, we had no significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

As of June 30, 2025, we had no significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Critical Accounting Policies

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A summary of critical accounting policies is included in our Form 10-K for the year ended December 31, 2024, filed with the SEC on February 18, 2025, under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Refer to Note 2 of the Notes to Condensed Consolidated Financial Statements in this report for additional information.

There have been no other significant changes to the critical accounting policies during the three months ended March 31, 2025.

There have been no other significant changes to the critical accounting policies during the six months ended June 30, 2025.

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