NexPoint Residential Trust, Inc.

Previous wording

The following is a discussion and analysis of our financial condition and our historical results of operations. The following should be read in conjunction with our financial statements and accompanying notes included herein and with our annual report on Form 10-K for the year ended December 31, 2024 (our “Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2025. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted, or expected in these forward-looking statements as a result of various factors, including, but not limited to, those discussed below and elsewhere in this quarterly report. See “Cautionary Statement Regarding Forward-Looking Statements” in this report, and “Risk Factors” in Part I, Item 1A, “Risk Factors” of our Annual Report.

Current wording

The following is a discussion and analysis of our financial condition and our historical results of operations. The following should be read in conjunction with our financial statements and accompanying notes included herein and with our 2024 Annual Report, filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2025. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted, or expected in these forward-looking statements as a result of various factors, including, but not limited to, those discussed below and elsewhere in this quarterly report. See “Cautionary Statement Regarding Forward-Looking Statements” in this report, and “Risk Factors” in Part I, Item 1A, “Risk Factors” of our 2024 Annual Report.

Previous wording

As of March 31, 2025, our Portfolio consisted of 35 multifamily properties primarily located in the Southeastern and Southwestern United States encompassing 12,984 units of apartment space that was approximately 94.4% leased with a weighted average monthly effective rent per occupied apartment unit of $1,495. Substantially all of our business is conducted through the OP. We own the Portfolio through the OP and our TRS. The OP owns approximately 99.9% of the Portfolio; our TRS owns approximately 0.1% of the Portfolio. The OP GP is the sole general partner of the OP. As of March 31, 2025, there were 26,053,988 OP Units outstanding, of which 25,951,154, or 99.6%, were owned by us, and 102,834, or 0.4%, were owned by unaffiliated limited partners (see Note 8 to our consolidated financial statements).

Current wording

As of June 30, 2025, our Portfolio consisted of 35 multifamily properties primarily located in the Southeastern and Southwestern United States encompassing 12,984 units of apartment space that was approximately 93.3% leased with a weighted average monthly effective rent per occupied apartment unit of $1,500. Substantially all of our business is conducted through the OP. We own the Portfolio through the OP and our TRS. The OP owns approximately 99.9% of the Portfolio; our TRS owns approximately 0.1% of the Portfolio. The OP GP is the sole general partner of the OP. As of June 30, 2025, there were 26,053,988 OP Units outstanding, of which 25,951,154, or 99.6%, were owned by us, and 102,834, or 0.4%, were owned by unaffiliated limited partners (see Note 8 to our consolidated financial statements).

Previous wording

We have elected to be taxed as a REIT under Sections 856 through 860 of the Code, and expect to continue to qualify as a REIT. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income to our stockholders. As a REIT, we will be subject to U.S. federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years. We believe we qualify for taxation as a REIT under the Code, and we intend to continue to operate in such a manner, but no assurance can be given that we will operate in a manner so as to qualify as a REIT. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. We had no significant taxes associated with our TRS for the three months ended March 31, 2025 and 2024.

Current wording

We have elected to be taxed as a REIT under Sections 856 through 860 of the Code, and expect to continue to qualify as a REIT. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income to our stockholders. As a REIT, we will be subject to U.S. federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years. We believe we qualify for taxation as a REIT under the Code, and we intend to continue to operate in such a manner, but no assurance can be given that we will operate in a manner so as to qualify as a REIT. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. We had no significant taxes associated with our TRS for the six months ended June 30, 2025 and 2024.

Previous wording

The macroeconomic environment remains challenging. Less available and more expensive debt capital has had pronounced effects on the capital markets, making property acquisitions and other investments harder to finance. Similar factors also impact the timing of and proceeds generated from asset sales and our ability to obtain debt capital. Further, the United States government has recently announced a comprehensive set of tariffs. The United States government has paused the implementation of certain of these tariffs, and the timing and scope of such tariffs is currently uncertain. Such tariffs could impact our results of operations by increasing the costs of various inputs, including construction materials. The impact of such tariffs is subject to uncertainties regarding the timing of their implementation, the magnitude of such tariffs and possible exemptions for certain goods, among other uncertainties.

Current wording

The macroeconomic environment remains challenging. Less available and more expensive debt capital has had pronounced effects on the capital markets, making property acquisitions and other investments harder to finance. Similar factors also impact the timing of and proceeds generated from asset sales and our ability to obtain debt capital. Additionally, the U.S. government recently announced a comprehensive set of tariffs. Since then, the U.S. government has paused implementation for some of these tariffs. In addition, the U.S. government has announced additional tariffs on major trading partners of the U.S., which are expected to become effective on August 1. Although certain tariffs have gone into effect, the timing and scope of other tariffs is still currently uncertain. Such tariffs could impact our results of operations by increasing the costs of various goods, including construction materials. The impact of such tariffs is subject to uncertainties regarding the timing of their implementation, the magnitude of such tariffs and possible exemption for certain goods, among other unknowns.

Previous wording

On October 16, 2019, Highland, a former affiliate of our Sponsor, filed for Chapter 11 bankruptcy protection with the United States Bankruptcy Court for the District of Delaware (the “Highland Bankruptcy”). On October 15, 2021, Marc S. Kirschner, as litigation trustee of a litigation subtrust formed pursuant to Highland’s plan of reorganization and disclosure statement which became effective on August 11, 2021, filed a lawsuit (the “Bankruptcy Trust Lawsuit”) against various persons and entities, including our Sponsor and James Dondero. On March 24, 2023, the litigation trustee filed a motion for leave to stay the Bankruptcy Trust Lawsuit, which was granted by the bankruptcy court on April 4, 2023. Per the court’s order, the Bankruptcy Trust Lawsuit is stayed until any party provides 30 days’ notice of the intent to resume the adversary proceeding, with all pending deadlines extended for a period of time commensurate with the length of the stay. As of the date of this filing, the Bankruptcy Trust Lawsuit continues to be stayed. In addition, on February 8, 2023, UBS Securities LLC and UBS AG London (collectively, “UBS”) filed a lawsuit in the Supreme Court of the State of New York, County of New York related to a default that occurred in 2009 on a warehouse facility between UBS and funds affiliated with Highland. The lawsuit makes claims against several persons and entities, including Mr. Dondero, the President of the Adviser, seeking to collect on $1.3 billion in judgments UBS obtained against entities that were managed indirectly by Highland (the “UBS Lawsuit”). On March 7, 2023, the matter was removed to the United States District Court for the Southern District of New York. On April 6, 2023, UBS moved to have the case remanded to New York state court. The federal court remanded the state-law causes of action and retained and stayed the federal cause of action. On February 26, 2024, several of the respondents, including Mr. Dondero, filed motions in state court to dismiss the UBS Lawsuit on various grounds. A hearing was held on July 8, 2024. The court dismissed the claims against one respondent, CLO HoldCo, Ltd., for lack of personal jurisdiction in a July 12, 2024 order. On March 26, 2025, the court entered an order denying the remaining motions to dismiss and directed the respondents to file an answer to the UBS Lawsuit within 20 days, which they did. Mr.

Current wording

On October 16, 2019, Highland, a former affiliate of our Sponsor, filed for Chapter 11 bankruptcy protection with the United States Bankruptcy Court for the District of Delaware (the “Highland Bankruptcy”). On October 15, 2021, Marc S. Kirschner, as litigation trustee of a litigation subtrust formed pursuant to Highland’s plan of reorganization and disclosure statement which became effective on August 11, 2021, filed a lawsuit (the “Bankruptcy Trust Lawsuit”) against various persons and entities, including our Sponsor and James Dondero. On March 24, 2023, the litigation trustee filed a motion for leave to stay the Bankruptcy Trust Lawsuit, which was granted by the bankruptcy court on April 4, 2023. Per the court’s order, the Bankruptcy Trust Lawsuit is stayed until any party provides 30 days’ notice of the intent to resume the adversary proceeding, with all pending deadlines extended for a period of time commensurate with the length of the stay. As of the date of this filing, the Bankruptcy Trust Lawsuit continues to be stayed. In addition, on February 8, 2023, UBS Securities LLC and UBS AG London (collectively, “UBS”) filed a lawsuit in the Supreme Court of the State of New York, County of New York related to a default that occurred in 2009 on a warehouse facility between UBS and funds affiliated with Highland. The lawsuit makes claims against several persons and entities seeking to collect on $1.3 billion in judgments UBS obtained against entities that were managed indirectly by Highland (the “UBS Lawsuit”). On March 7, 2023, the matter was removed to the United States District Court for the Southern District of New York. On April 6, 2023, UBS moved to have the case remanded to New York state court. The federal court remanded the state-law causes of action and retained and stayed the federal cause of action. On February 26, 2024, several of the respondents, including Mr.Dondero, filed motions in state court to dismiss the UBS Lawsuit on various grounds. A hearing was held on July 8, 2024. The court dismissed the claims against one respondent, CLO HoldCo, Ltd., for lack of personal jurisdiction in a

Previous wording

Dondero is appealing the denial of the motion to dismiss to the Appellate Division of the Supreme Court of the State of New York. Neither the Bankruptcy Trust Lawsuit nor the UBS Lawsuit include claims related to our business or our assets. Our Sponsor and Mr. Dondero have informed us they believe the Bankruptcy Trust Lawsuit has no merit, and Mr. Dondero has informed us he believes the UBS Lawsuit has no merit; we have been advised that the defendants named in each of the lawsuits intend to vigorously defend against the claims. We do not expect the Bankruptcy Trust Lawsuit or the UBS Lawsuit will have a material effect on our business, results of operations or financial condition.

Current wording

July 12, 2024 order. On March 26, 2025, the court entered an order denying the remaining motions to dismiss and directed the respondents to file an answer to the UBS Lawsuit within 20 days, which they did. Mr. Dondero is appealing the denial of the motion to dismiss to the Appellate Division of the Supreme Court of the State of New York. Neither the Bankruptcy Trust Lawsuit nor the UBS Lawsuit include claims related to our business or our assets. Our Sponsor and Mr. Dondero have informed us they believe the Bankruptcy Trust Lawsuit has no merit, and Mr. Dondero has informed us he believes the UBS Lawsuit has no merit; we have been advised that the defendants named in each of the lawsuits intend to vigorously defend against the claims. We do not expect the Bankruptcy Trust Lawsuit or the UBS Lawsuit will have a material effect on our business, results of operations or financial condition.

Previous wording

Corporate general and administrative expenses. Corporate general and administrative expenses include, but are not limited to, audit fees, legal fees, listing fees, board of director fees, equity-based compensation expense, investor relations costs and payments of reimbursements to our Adviser for operating expenses. Corporate general and administrative expenses and the advisory and administrative fees paid to our Adviser (including advisory and administrative fees on properties defined in the Advisory Agreement as New Assets) will not exceed 1.5% of Average Real Estate Assets per calendar year (or part thereof that the Advisory Agreement is in effect), calculated in accordance with the Advisory Agreement, or the Expense Cap. The Expense Cap does not limit the reimbursement by us of expenses related to securities offerings paid by our Adviser. The Expense Cap also does not apply to legal, accounting, financial, due diligence, and other service fees incurred in connection with mergers and acquisitions, extraordinary litigation, or other events outside our ordinary course of business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets. Additionally, in the sole discretion of the Adviser, the Adviser may elect to waive certain advisory and administrative fees otherwise due. If advisory and administrative fees are waived in a period, the waived fees for that period are considered to be waived permanently and the Adviser may not be reimbursed in the future. On April 4, 2025, the compensation committee of the Board recommended that the Board approve the 2025 Long Term Incentive Plan (the “2025 LTIP”), and the Board unanimously approved and determined that the 2025 LTIP was advisable and in the best interests of the Company and the Company’s stockholders. The Board subsequently directed that approval of the 2025 LTIP be submitted for consideration by our stockholders at our annual meeting.

Current wording

Corporate general and administrative expenses. Corporate general and administrative expenses include, but are not limited to, audit fees, legal fees, listing fees, board of director fees, equity-based compensation expense, investor relations costs and payments of reimbursements to our Adviser for operating expenses. Corporate general and administrative expenses and the advisory and administrative fees paid to our Adviser (including advisory and administrative fees on properties defined in the Advisory Agreement as New Assets) will not exceed 1.5% of Average Real Estate Assets per calendar year (or part thereof that the Advisory Agreement is in effect), calculated in accordance with the Advisory Agreement, or the Expense Cap. The Expense Cap does not limit the reimbursement by us of expenses related to securities offerings paid by our Adviser. The Expense Cap also does not apply to legal, accounting, financial, due diligence, and other service fees incurred in connection with mergers and acquisitions, extraordinary litigation, or other events outside our ordinary course of business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets. Additionally, in the sole discretion of the Adviser, the Adviser may elect to waive certain advisory and administrative fees otherwise due. If advisory and administrative fees are waived in a period, the waived fees for that period are considered to be waived permanently and the Adviser may not be reimbursed in the future. . On April 4, 2025, the compensation committee of the Board recommended that the Board approve the 2025 LTIP, and the Board unanimously approved and determined that the 2025 LTIP was advisable and in the best interests of the Company and the Company’s stockholders. The Board subsequently directed that approval of the 2025 LTIP be submitted for consideration by our stockholders at our annual meeting. On May 20, 2025, the Company’s stockholders approved the 2025 LTIP at our annual meeting of stockholders.

Previous wording

Loss on extinguishment of debt and modification costs. Gain (loss) on extinguishment of debt and modification costs includes prepayment penalties and defeasance costs, the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt related to the early repayment of debt, costs incurred in a debt modification that are not capitalized as deferred financing costs and other costs incurred in a debt extinguishment.

Current wording

Loss on extinguishment of debt and modification costs. Loss on extinguishment of debt and modification costs includes prepayment penalties and defeasance costs, the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt related to the early repayment of debt, costs incurred in a debt modification that are not capitalized as deferred financing costs and other costs incurred in a debt extinguishment.

Previous wording

Casualty gain (loss). Casualty gain (loss) include expenses resulting from damages from an unexpected and unusual event such as a natural disaster. Expenses can include additional payments on insurance premiums, impairment recognized on a property, and other abnormal expenses arising from the related event.

Current wording

Casualty loss. Casualty loss include expenses resulting from damages from an unexpected and unusual event such as a natural disaster. Expenses can include additional payments on insurance premiums, impairment recognized on a property, and other abnormal expenses arising from the related event.

Previous wording

The change in our net loss for the three months ended March 31, 2025 as compared to our net income for the three months ended March 31, 2024 primarily relates to a decrease in gain on sales of real estate of $31.7 million.

Current wording

The change in our net loss for the three months ended June 30, 2025 as compared to our net income for the three months ended June 30, 2024 primarily relates to the change in gain on sales of real estate of $18.7 million.

Previous wording

Real estate taxes and insurance. Real estate taxes and insurance costs were $9.0 million for the three months ended March 31, 2025 compared to $9.3 million for the three months ended March 31, 2024, which was a decrease of approximately $0.3 million. The decrease between the periods was primarily due our disposition activity in 2024.

Current wording

Rental income. Rental income was $61.2 million for the three months ended June 30, 2025 compared to $62.4 million for the three months ended June 30, 2024, which was a decrease of approximately $1.2 million. The decrease between the periods was primarily due our disposition activity in 2024.

Previous wording

Property operating expenses. Property operating expenses were $12.5 million for the three months ended March 31, 2025 compared to $13.8 million for the three months ended March 31, 2024, which was a decrease of approximately $1.3 million. The decrease between the periods was primarily due to our disposition activity in 2024.

Current wording

Property operating expenses. Property operating expenses were $12.5 million for the three months ended June 30, 2025 compared to $13.8 million for the three months ended June 30, 2024, which was a decrease of approximately $1.3 million. The decrease between the periods was primarily due to a decrease in casualty-related expenses of $1.0 million.

Previous wording

Property management fees. Property management fees were $1.8 million for the three months ended March 31, 2025 and $2.0 million for the three months ended March 31, 2024, which was a decrease of approximately $0.2 million. Property management fees are primarily based on total revenues, which decreased between periods.

Current wording

Property management fees. Property management fees were $1.8 million for the three months ended June 30, 2025 compared to $1.9 million for the three months ended June 30, 2024 which was a decrease of $0.1 million. Property management fees are primarily based on total revenues which decreased between periods.

Previous wording

Advisory and administrative fees. Advisory and administrative fees were $1.7 million for the three months ended March 31, 2025 and $1.7 million for the three months ended March 31, 2024 which was flat. For the three months ended March 31, 2025 and 2024, our Adviser elected to voluntarily waive the advisory and administrative fees of approximately $5.3 million and $5.5 million, respectively, and are considered permanently waived. Our Adviser is not contractually obligated to waive fees on New Assets in the future and may cease waiving fees on New Assets at its discretion. Advisory and administrative fees may increase in future periods as we acquire additional properties, which will be classified as New Assets.

Current wording

Advisory and administrative fees. Advisory and administrative fees were $1.7 million for the three months ended June 30, 2025 and $1.7 million for the three months ended June 30, 2024. For the three months ended June 30, 2025 and 2024, our Adviser elected to voluntarily waive advisory and administrative fees of approximately $5.3 million and $5.2 million, respectively, and are considered permanently waived. Our Adviser is not contractually obligated to waive fees on New Assets in the future and may cease waiving fees on New Assets at its discretion. Advisory and administrative fees may increase in future periods as we acquire additional properties, which will be classified as New Assets.

Previous wording

Corporate general and administrative expenses. Corporate general and administrative expenses were $4.5 million for the three months ended March 31, 2025 compared to $4.9 million for the three months ended March 31, 2024, which was a decrease of approximately $0.4 million. The decrease was primarily due to decreases in professional fees and stock compensation expense for a total of $0.4 million.

Current wording

Corporate general and administrative expenses. Corporate general and administrative expenses were $4.5 million for the three months ended June 30, 2025 compared to $4.8 million for the three months ended June 30, 2024, which was a decrease of approximately $0.3 million. The decrease was primarily due to decreases in professional fees and stock compensation expense for a total of $0.4 million.

Previous wording

Property general and administrative expenses. Property general and administrative expenses were $2.0 million for the three months ended March 31, 2025 compared to $2.3 million for the three months ended March 31, 2024, which was a decrease of $0.3 million. The decrease between periods was primarily due to a decrease of $0.1 million in centralized services and a decrease in all other property general and administrative expenses of $0.2 million.

Current wording

Property general and administrative expenses. Property general and administrative expenses were $2.1 million for the three months ended June 30, 2025 compared to $2.7 million for the three months ended June 30, 2024, which was a decrease of $0.6 million. The decrease between the periods was primarily due to a decrease of $0.1 million in centralized services and a decrease in all other property general and administrative expenses of $0.5 million.

Previous wording

Depreciation and amortization. Depreciation and amortization costs were $24.4 million for the three months ended March 31, 2025 compared to $24.3 million for the three months ended March 31, 2024, which was an increase of approximately $0.1 million, which was attributable to our value-add activities in 2024.

Current wording

Depreciation and amortization. Depreciation and amortization costs were $24.1 million for the three months ended June 30, 2025 compared to $24.4 million for the three months ended June 30, 2024, which was a decrease of approximately $0.3 million, which was attributable to a decrease in our value-add activities over the prior periods.

Previous wording

Interest expense. Interest expense was $14.4 million for the three months ended March 31, 2025 compared to $14.4 million for the three months ended March 31, 2024, which was flat. The following table details the various costs included in interest expense for the three months ended March 31, 2025 and 2024 (in thousands):

Current wording

Interest expense. Interest expense was $15.2 million for the three months ended June 30, 2025 compared to $14.0 million for the three months ended June 30, 2024, which was an increase of approximately $1.2 million. The increase in interest expense between the periods is primarily attributable to a decrease in interest on debt of approximately $5.5 million, offset by increases in effective interest rate swap expense and amortization of deferred financing costs of $5.5 million and $0.9 million, respectively. The following table details the various costs included in interest expense for the three months ended June 30, 2025 and 2024 (in thousands):

Previous wording

Casualty gain (loss). Casualty loss was $0.2 million gain compared to a $0.8 million loss for the three months ended March 31, 2025 and 2024, respectively. The increase in casualty gain between periods of $1.0 million is attributable to the Company's casualty events and the timing.

Current wording

Casualty loss. Casualty loss was a $0.0 million loss compared to $0.7 million loss for the three months ended June 30, 2025 and 2024, respectively. The decrease in casualty loss between periods of $0.7 million is attributable to the Company's casualty events and the timing.

Previous wording

Miscellaneous income. Miscellaneous income was $0.1 million compared to $0.1 million for the three months ended March 31, 2024.

Current wording

Miscellaneous income. Miscellaneous income was $0.1 million compared to $0.1 million for the three months ended June 30, 2025 and 2024, respectively, which was flat.

Previous wording

Gain on sales of real estate. Gain on sales of real estate was $0.0 million compared to $31.7 million for the three months ended March 31, 2024. The decrease between periods is attributable to our sale of one property during the three months ended March 31, 2024 compared to no disposition activity for the three months ended March 31, 2025.

Current wording

Gain on sale of real estate. Gain on sale of real estate was $0.0 million compared to $18.7 million for the three months ended June 30, 2025 and 2024, respectively. The decrease between periods is attributable to no dispositions during the three months ended June 30, 2025 compared to one disposition during the three months ended June 30, 2024.

Previous wording

The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital, which may have changed or may change in the future. Advisory and administrative fees and corporate and administrative expenses are eliminated because they do not reflect continuing operating costs of the property owner. Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale, which will usually change from period to period. Casualty-related expenses and recoveries casualty gains and losses, and losses on the extinguishment of debt and modification costs are excluded because they do not reflect continuing operating costs of the property owner. Entity level general and administrative expenses incurred at the properties are eliminated as they are specific to the way in which we have chosen to hold our properties and are the result of our ownership structuring. Equity in earnings of affiliates is excluded as its not part of our core operations for the properties. These items can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these items from net income (loss) is useful because the resulting measure captures the actual ongoing revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

Current wording

The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital, which may have changed or may change in the future. Advisory and administrative fees and corporate general and administrative expenses are eliminated because they do not reflect continuing operating costs of the property owner. Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale, which will usually change from period to period. Casualty-related expenses and recoveries, casualty losses, and losses on the extinguishment of debt and modification costs are excluded because they do not reflect continuing operating costs of the property owner. Entity level general and administrative expenses incurred at the properties are eliminated as they are specific to the way in which we have chosen to hold our properties and are the result of our ownership structuring. Equity in earnings of affiliates is excluded as its not part of our core operations for the properties. These items can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these items from net income (loss) is useful because the resulting measure captures the actual ongoing revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

Previous wording

However, the usefulness of NOI is limited because it excludes corporate general and administrative expenses, interest expense, loss on extinguishment of debt and modification costs, certain fees to affiliates such as advisory and administrative fees, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as determined under GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income, which further limits its usefulness.

Current wording

However, the usefulness of NOI is limited because it excludes the items noted above, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income, which further limits its usefulness.

Previous wording

NOI and Same Store NOI for the Three Months Ended March 31, 2025 and 2024

Current wording

NOI and Same Store NOI for the Three and Six Months Ended June 30, 2025 and 2024

Previous wording

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and our Same Store NOI for the three months ended March 31, 2025 and 2024 to net income (loss), the most directly comparable GAAP financial measure (in thousands):

Current wording

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and our Same Store NOI for the three and six months ended June 30, 2025 and 2024 to net income (loss), the most directly comparable GAAP financial measure (in thousands):

Previous wording

$31.7 million with a related party for the three months ended March 31, 2024.

Current wording

$31.5 million with a related party for the six months ended June 30, 2024.

Previous wording

There are 35 properties encompassing 12,948 units of apartment space in our same store pool for the three months ended March 31, 2025 and 2024 (our “Q1 Same Store” properties). Our Q1 Same Store properties exclude the 36 units that are currently down (see Note 3).

Current wording

There are 35 properties encompassing 12,946 units of apartment space in our same store pool for the three months ended June 30, 2025 and 2024 (our “Q2 Same Store” properties). Our Q2 Same Store properties exclude the 38 units that are currently down (see Note 3).

Previous wording

Fees incurred to an affiliate of the noncontrolling limited partners of the OP.

Current wording

Fees incurred to an affiliate of the noncontrolling limited partner of the OP.

Previous wording

See reconciliation of net income (loss) to NOI above under “NOI and Same Store NOI for the Three Months Ended March 31, 2025 and 2024.”

Current wording

See reconciliation of net income (loss) to NOI above under “NOI and Same Store NOI for the Three and Six Months Ended June 30, 2025 and 2024.”

Previous wording

Same Store Results of Operations for the Three Months Ended March 31, 2025 and 2024

Current wording

Q2 Same Store Results of Operations for the Three Months Ended June 30, 2025 and 2024

Previous wording

As of March 31, 2025, our Q1 Same Store properties were approximately 94.4% leased with a weighted average monthly effective rent per occupied apartment unit of $1,495. As of March 31, 2024, our Q1 Same Store properties were approximately 94.7% leased with a weighted average monthly effective rent per occupied apartment unit of $1,514. For our Q1 Same Store properties, we recorded the following operating results for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024:

Current wording

As of June 30, 2025, our Q2 Same Store properties were approximately 93.3% leased with a weighted average monthly effective rent per occupied apartment unit of $1,500. As of June 30, 2024, our Q2 Same Store properties were approximately 94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $1,520. For our Q2 Same Store properties, we recorded the following operating results for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024:

Previous wording

Other income. Other income was $1.3 million for the three months ended March 31, 2025 compared to $1.5 million for the three months ended March 31, 2024, which was a decrease of approximately $0.2 million. The majority of the decrease is related to a $0.1 million decrease in cable tv income.

Current wording

Other income. Other income was $1.5 million for the three months ended June 30, 2025, compared to $1.3 million for the three months ended June 30, 2024, which was an increase of $0.2 million. The majority of the increase is related to a $0.1 million increase in interest income.

Previous wording

For the three months ended March 31, 2025 and 2024, excludes approximately $- and $1,000, respectively, of casualty-related expenses.

Current wording

For the six months ended June 30, 2025 and 2024, excludes approximately $2,000 and $1,000, respectively, of casualty-related expenses.

Previous wording

Core FFO makes certain adjustments to FFO, which are either not likely to occur on a regular basis or are otherwise not representative of the ongoing operating performance of our Portfolio. Core FFO adjusts FFO to remove items such casualty-related expenses and recoveries and gains or losses, gain (loss) on extinguishment of debt and modification costs that are not reflective of continuing operations of the properties, the amortization of deferred financing costs, mark-to-market gains or losses related to interest rate cap agreements not designated as hedges for accounting purposes, and the noncontrolling interests (as described above) related to these items. We believe Core FFO is useful to investors as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other REITs that are not as involved in the aforementioned activities. Starting in the third quarter of 2024, the Company has adjusted Core FFO to remove (1) the amortization of all deferred financing costs instead of those solely related to short-term debt financing and (2) mark-to-market gains or losses related to interest rate cap agreements not designated as hedges for accounting purposes. Prior periods have been recast to conform to the current presentation.

Current wording

Core FFO makes certain adjustments to FFO, not representative of the ongoing operating performance of our Portfolio. Core FFO adjusts FFO to remove items such casualty-related expenses and recoveries and gains or losses, gain (loss) on extinguishment of debt and modification costs that are not reflective of continuing operations of the properties, the amortization of deferred financing costs, mark-to-market gains or losses related to interest rate cap agreements not designated as hedges for accounting purposes, and the noncontrolling interests (as described above) related to these items. We believe Core FFO is useful to investors as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other REITs that are not as involved in the aforementioned activities. Starting in the third quarter of 2024, the Company adjusted Core FFO to remove (1) the amortization of all deferred financing costs instead of those solely related to short-term debt financing and (2) mark-to-market gains or losses related to interest rate cap agreements not designated as hedges for accounting purposes. Prior periods have been recast to conform to the current presentation.

Previous wording

The following table reconciles our calculations of FFO, Core FFO and AFFO to net loss, the most directly comparable GAAP financial measure, for the three months ended March 31, 2025 and 2024 (in thousands, except per share amounts):

Current wording

The following table reconciles our calculations of FFO, Core FFO and AFFO to net loss, the most directly comparable GAAP financial measure, for the three and six months ended June 30, 2025 and 2024 (in thousands, except per share amounts):

Previous wording

Core FFO was $19.1 million for the three months ended March 31, 2025 compared to $19.4 million for the three months ended March 31, 2024, which was a decrease of approximately $0.3 million. The change in our Core FFO between the periods primarily relates to a decrease in FFO, partially offset by the change in mark-to-market adjustments of interest rate caps of $1.2 million.

Current wording

Core FFO was $18.0 million for the three months ended June 30, 2025 compared to $18.1 million for the three months ended June 30, 2024, which was a decrease of $0.1 million. The change in Core FFO was attributable to an increase in FFO and a decrease in casualty-related expenses of $1.0 million offset by an increase in mark-to-market adjustments related to interest rate caps and amortization of deferred financing costs of $0.3 million and $0.9 million, respectively.

Previous wording

AFFO was $21.6 million for the three months ended March 31, 2025 compared to $22.0 million for the three months ended March 31, 2024, which was a decrease of approximately $0.4 million. The change in our AFFO between the periods primarily relates to a decrease in Core FFO and equity-based compensation expense of $0.1 million.

Current wording

AFFO was $20.3 million for the three months ended June 30, 2025 compared to $20.8 million for the three months ended June 30, 2024, which was a decrease of $0.5 million. The change in our AFFO between the periods primarily relates to a decrease in Core FFO and a decrease in equity based compensation expense of $0.3 million.

Previous wording

FFO was $17.4 million for the three months ended March 31, 2025 compared to $18.9 million for the three months ended March 31, 2024, which was a decrease of approximately $1.5 million. The change in our FFO between the periods primarily relates to a decrease in total revenues of $4.4 million, partially offset by an increase in casualty-related recoveries of $0.7 million.

Current wording

Core FFO was $37.0 million for the six months ended June 30, 2025 compared to $37.5 million for the six months ended June 30, 2024, which was a decrease of approximately $0.5 million. The change in our Core FFO between the periods primarily relates to a decrease in FFO and an increase in casualty-related recoveries of $1.7 million, partially offset by an increase in amortization of deferred financing costs of $1.9 million.

Previous wording

We expect to meet our short-term liquidity requirements generally through net cash provided by operations and existing cash balances and any unused capacity on the Corporate Credit Facility. As of March 31, 2025, we had approximately $3.7 million of renovation value-add reserves for our planned capital expenditures to implement our value-add program. Renovation value-add reserves are not required to be held in escrow by a third party. We may reallocate these funds, at our discretion, to pursue other investment opportunities or meet our short-term liquidity requirements.

Current wording

We expect to meet our short-term liquidity requirements generally through net cash provided by operations and existing cash balances and any unused capacity on the Credit Facility. As of June 30, 2025, we had approximately $3.3 million of renovation value-add reserves for our planned capital expenditures to implement our value-add program. Renovation value-add reserves are not required to be held in escrow by a third party. We may reallocate these funds, at our discretion, to pursue other investment opportunities or meet our short-term liquidity requirements.

Previous wording

The following table presents selected data from our consolidated statements of cash flows for the three months ended March 31, 2025 and 2024 (in thousands):

Current wording

The following table presents selected data from our consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 (in thousands):