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, 2025 (our “Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2026. 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. Our management believes the assumptions underlying the Company’s financial statements and accompanying notes are reasonable. However, the Company’s financial statements and accompanying notes may not be an indication of our financial condition and results of operations in the future.

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 2025 Annual Report, filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2026. 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 2025 Annual Report. Our management believes the assumptions underlying the Company’s financial statements and accompanying notes are reasonable. However, the Company’s financial statements and accompanying notes may not be an indication of our financial condition and results of operations in the future.

Previous wording

As of March 31, 2026, our Portfolio consisted of 36 multifamily properties primarily located in the Southeastern and Southwestern United States encompassing 13,305 units of apartment space that was approximately 93.5% leased with a weighted average monthly effective rent per occupied apartment unit of $1,485. 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, 2026, 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, 2026, our Portfolio consisted of 36 multifamily properties primarily located in the Southeastern and Southwestern United States encompassing 13,305 units of apartment space that was approximately 93.5% leased with a weighted average monthly effective rent per occupied apartment unit of $1,490. 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, 2026, 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, 2026 and 2025.

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, 2026 and 2025.

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”), which was subsequently transferred to the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”). 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 and was subsequently amended, filed a lawsuit (the “Bankruptcy Trust Lawsuit”) against various persons and entities, including our Sponsor and James Dondero. The Bankruptcy Trust Lawsuit does not include claims related to our business or our assets or operations. On March 24, 2023, the litigation trustee filed a motion seeking to voluntarily stay the Bankruptcy Trust Lawsuit, which was granted by the Bankruptcy Court on April 4, 2023. On June 30, 2025, the Bankruptcy Court approved a settlement agreement between Highland and Hunter Mountain Investment Trust (“HMIT”) pursuant to which the claims asserted in the Bankruptcy Trust Lawsuit were assigned to HMIT. HMIT subsequently filed a motion to lift the stay of the Bankruptcy Trust Lawsuit, which was granted and became effective on October 3, 2025. On December 18, 2025, the presiding judge in the Bankruptcy Trust Lawsuit recused herself, and the case was reassigned to a new bankruptcy judge. A status conference for the case is currently scheduled for April 30, 2026. In addition, on February 8, 2023, UBS Securities LLC and its affiliate (collectively, “UBS”) filed a lawsuit in the Supreme Court of the State of New York, County of New York against Mr. Dondero and a number of other 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 February 26, 2024, the respondents, including Mr. Dondero, filed motions to dismiss the UBS Lawsuit. 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 August 24, 2024, UBS filed a notice of appeal for that dismissal order, but withdrew its appeal on December 31, 2025. 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 and the other remaining respondents are appealing the denial of the motion to dismiss to the Appellate Division of the Supreme Court of the State of New York. The appeal was argued on April 8, 2026. The Supreme Court rescheduled a status conference in the UBS Lawsuit previously set for April 14, 2026 to July 14, 2026. Neither the Bankruptcy Trust Lawsuit nor the UBS Lawsuit include claims related to our business or our assets. Our Sponsor and Mr. Do…

Excerpt shortened here; the source contains the full paragraph.

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”), which was subsequently transferred to the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”). 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 and was subsequently amended, filed a lawsuit (the “Bankruptcy Trust Lawsuit”) against various persons and entities, including our Sponsor and James Dondero. The Bankruptcy Trust Lawsuit does not include claims related to our business or assets or operations. On March 24, 2023, the litigation trustee filed a motion seeking to voluntarily stay the Bankruptcy Trust Lawsuit, which was granted by the Bankruptcy Court on April 4, 2023. On June 30, 2025, the Bankruptcy Court approved a settlement agreement between Highland and Hunter Mountain Investment Trust (“HMIT”) pursuant to which the claims asserted in the Bankruptcy Trust Lawsuit were assigned to HMIT. HMIT subsequently filed a motion to lift the stay of the Bankruptcy Trust Lawsuit, which was granted and became effective on July 15, 2026. In addition, on February 8, 2023, UBS Securities LLC and its affiliate (collectively, “UBS”) filed a lawsuit in the Supreme Court of the State of New York, County of New York against Mr. Dondero and a number of other 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 February 26, 2024, the respondents, including Mr. Dondero, filed motions to dismiss the UBS Lawsuit. 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 August 24, 2024, UBS filed a notice of appeal for that dismissal order, but withdrew its appeal on December 31, 2025. 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 and the other remaining respondents are appealing the denial of the motion to dismiss to the Appellate Division of the Supreme Court of the State of New York. The appeal was argued on April 8, 2026. The Supreme Court rescheduled a status conference in the UBS Lawsuit previously set for July 14, 2026 to September 15, 2026. 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 …

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Other income. Other income includes ancillary income earned from tenants such as non-refundable fees, application fees, laundry fees, cable TV income, and other miscellaneous fees charged to tenants.

Current wording

Other income. Other income includes ancillary income earned from tenants such as non-refundable fees, application fees, laundry fees, cable TV income, and other miscellaneous fees charged to tenants, as well as interest income from the Waterford Loan.

Previous wording

The change in our net loss for the three months ended March 31, 2026 as compared to our net loss for the three months ended March 31, 2025 primarily relates to an increase in operating income of $1.1 million and a decrease in miscellaneous income of $0.1 million, offset by increase in interest expense of $1.1 million.

Current wording

The change in our net loss for the three months ended June 30, 2026 as compared to our net loss for the three months ended June 30, 2025 primarily relates to an increase in total operating expenses and interest expense of $2.1 million and $0.7 million, respectively, offset by an increase in total revenues of $1.5 million.

Previous wording

Property operating expenses. Property operating expenses were $13.8 million for the three months ended March 31, 2026 compared to $13.1 million for the three months ended March 31, 2025, which was an increase of approximately $0.7 million, or 5.3%. The majority of the increase is related to increases in bulk internet costs, resurfacing expense, and utilities expense of $0.4 million, $0.1 million and $0.1 million, respectively.

Current wording

Other income. Other income was $2.8 million for the three months ended June 30, 2026 compared to $1.9 million for the three months ended June 30, 2025, which was an increase of approximately $0.9 million. The increase between the periods was primarily due to an increase in internet income and deposit insurance of $0.5 million and $0.1 million, respectively.

Previous wording

Property operating expenses. Property operating expenses were $12.3 million for the three months ended March 31, 2026 compared to $12.5 million for the three months ended March 31, 2025, which was a decrease of approximately $0.2 million. The decrease between the periods was due to a decrease of $0.1 million in miscellaneous general and administrative expense.

Current wording

Property operating expenses. Property operating expenses were $14.6 million for the three months ended June 30, 2026 compared to $12.5 million for the three months ended June 30, 2025, which was an increase of approximately $2.1 million. The increase between the periods was primarily due to our acquisition activity in the fourth quarter of 2025 and increases in internet expense and water/sewer expenses of $0.5 million and $0.2 million, respectively.

Previous wording

Real estate taxes and insurance. Real estate taxes and insurance costs were $8.1 million for the three months ended March 31, 2026 compared to $9.0 million for the three months ended March 31, 2025, which was a decrease of approximately $0.9 million. The decrease between the periods was primarily due to decreases of $0.5 million and $0.2 million in property taxes and property/liability insurance expense, respectively.

Current wording

Real estate taxes and insurance. Real estate taxes and insurance costs were $8.2 million for the three months ended June 30, 2026 compared to $8.5 million for the three months ended June 30, 2025, which was a decrease of approximately $0.3 million. The decrease between the periods was primarily due to a decreases of property taxes and property liability insurance of $0.1 million and $0.2 million, respectively.

Previous wording

Advisory and administrative fees. Advisory and administrative fees were $1.8 million for the three months ended March 31, 2026 and $1.7 million for the three months ended March 31, 2025 which was an increase of approximately $0.1 million. For the three months ended March 31, 2026 and 2025, our Adviser elected to voluntarily waive the advisory and administrative fees of approximately $5.4 million and $5.3 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 $1.8 million for the three months ended June 30, 2026 and $1.7 million for the three months ended June 30, 2025, which was an increase of approximately $0.1 million. For the three months ended June 30, 2026 and 2025, our Adviser elected to voluntarily waive advisory and administrative fees of approximately $5.5 million and $5.3 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, 2026 compared to $4.5 million for the three months ended March 31, 2025, which was flat.

Current wording

Corporate general and administrative expenses. Corporate general and administrative expenses were $4.7 million for the three months ended June 30, 2026 compared to $4.5 million for the three months ended June 30, 2025, which was an increase of approximately $0.2 million. The increase was primarily due to an increase in equity-based compensation expense of $0.4 million.

Previous wording

Property general and administrative expenses. Property general and administrative expenses were $2.3 million for the three months ended March 31, 2026 compared to $2.0 million for the three months ended March 31, 2025, which was an increase of approximately $0.3 million. The increase between periods was primarily due to an increase of $0.2 million in centralized services expense.

Current wording

Property general and administrative expenses. Property general and administrative expenses were $2.5 million for the three months ended June 30, 2026 compared to $2.1 million for the three months ended June 30, 2025, which was an increase of $0.4 million. The increase between periods was primarily due to an increase in centralized services of $0.1 million and an increase in all other property general and administrative expenses of $0.3 million.

Previous wording

Interest expense. Interest expense was $15.4 million for the three months ended March 31, 2026 compared to $14.4 million for the three months ended March 31, 2025, which was an increase of approximately $1.0 million. The increase between periods was primarily due to a decrease in benefit from swaps. The following table details the various costs included in interest expense for the three months ended March 31, 2026 and 2025 (in thousands):

Current wording

Interest expense. Interest expense was $15.8 million for the three months ended June 30, 2026 compared to $15.2 million for the three months ended June 30, 2025, which was an increase of approximately $0.6 million. The increase in interest expense between the periods is primarily attributable to a decreased benefit from interest rate swaps of $1.9 million, offset by a decrease of $1.1 million in interest on debt. The following table details the various costs included in interest expense for the three months ended June 30, 2026 and 2025 (in thousands):

Previous wording

Miscellaneous income. Miscellaneous income was $0.1 million for the three months ended March 31, 2026 compared to $0.1 million for the three months ended March 31, 2025, which was flat.

Current wording

Miscellaneous income. Miscellaneous income was $0.0 million compared to $0.1 million for the three months ended June 30, 2026 and 2025, respectively, which was a decrease of $0.1 million. The decrease between periods is attributable to a decrease of business interruption proceeds of $0.1 million.

Previous wording

Other income. Other income was $2.5 million for the three months ended March 31, 2026 compared to $1.8 million for the three months ended March 31, 2025, which was an increase of approximately $0.7 million. The increase between the periods was primarily due to increases of $0.4 million and $0.2 million in internet/tech income and deposit insurance proceeds, respectively.

Current wording

Other income. Other income was $5.3 million for the six months ended June 30, 2026 compared to $3.7 million for the six months ended June 30, 2025, which was an increase of approximately $1.6 million. The increase between the periods was primarily due to an increase in internet/tech income and deposit insurance proceeds of $0.9 million and $0.4 million, respectively.

Previous wording

Depreciation and amortization. Depreciation and amortization costs were $24.3 million for the three months ended March 31, 2026 compared to $24.4 million for the three months ended March 31, 2025, which was a decrease of approximately $0.1 million. The decrease between periods was primarily due to a decrease in depreciation expense of $0.6 million, offset by an increase in amortization expense of $0.5 million.

Current wording

Depreciation and amortization. Depreciation and amortization costs were $48.2 million for the six months ended June 30, 2026 compared to $48.4 million for the six months ended June 30, 2025, which was a decrease of approximately $0.2 million. The decrease between the periods was primarily due to a decrease of $1.2 million in depreciation expense, offset by an increase in amortization expense of $0.9 million.

Previous wording

Casualty loss. Casualty loss was $0.0 million compared to a $0.2 million loss for the three months ended March 31, 2026 and 2025, respectively. The decrease in casualty loss between periods of $0.2 million is attributable to the Company's casualty events and the timing thereof.

Current wording

Casualty loss. Casualty loss was $0.0 million and $0.2 million for the six months ended June 30, 2026 and 2025, respectively. The decrease in casualty loss between periods of $0.2 million is attributable to the Company's casualty events and the timing thereof.

Previous wording

NOI is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties to other comparable properties, to determine trends in earnings and to compute the fair value of our properties as NOI is calculated by adjusting net income (loss) to add back (1) interest expense, (2) advisory and administrative fees, (3) depreciation and amortization expenses, (4) corporate income and corporate general and administrative expenses that are not reflective of operations of the properties, (5) casualty-related expenses/(recoveries) and casualty loss, (6) property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on behalf of the Company at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees and (7) equity in earnings of affiliates.

Current wording

NOI is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties to other comparable properties, to determine trends in earnings and to compute the fair value of our properties as NOI is calculated by adjusting net income (loss) to add back (1) interest expense, (2) advisory and administrative fees, (3) depreciation and amortization expenses, (4) corporate income and corporate general and administrative expenses that are not reflective of operations of the properties, (5) casualty-related expenses/(recoveries) and casualty loss, (6) property general and administrative expenses that are not reflective of the continuing operations of the properties or are incurred on behalf of the Company at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees and (7) equity in earnings of affiliate.

Previous wording

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 loss is useful for investors and management 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

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 for investors and management 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 the items listed above, 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 listed above. 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, 2026 and 2025

Current wording

NOI and Same Store NOI for the Three and Six Months Ended June 30, 2026 and 2025

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, 2026 and 2025 to net 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, 2026 and 2025 to net income (loss), the most directly comparable GAAP financial measure (in thousands):

Previous wording

NOI for Our Q1 Same Store and Non-Same Store Properties for the Three Months Ended March 31, 2026 and 2025

Current wording

Net Operating Income for Our Q2 Same Store and Non-Same Store Properties for the Three Months Ended June 30, 2026 and 2025

Previous wording

There are 35 properties encompassing 12,984 units of apartment space in our same store pool for the three months ended March 31, 2026 and 2025 (our “Q1 Same Store” properties). Our Q1 Same Store properties exclude the 1 unit that is currently down (see Note 3). We consider a property to be a same store property if we held the property during the entirety of both periods.

Current wording

There are 35 properties encompassing 12,984 units of apartment space in our same store pool for the three months ended June 30, 2026 and 2025 (our “Q2 Same Store” properties). Our Q2 Same Store properties exclude the following property in our Portfolio as of June 30, 2026: Sedona at Lone Mountain. We consider a property to be a same store property if we held the property during the entirety of both periods.

Previous wording

See reconciliation of net loss to NOI above under “NOI and Same Store NOI for the Three Months Ended March 31, 2026 and 2025.”

Current wording

See reconciliation of net loss to NOI above under “NOI and Same Store NOI for the Three and Six Months Ended June 30, 2026 and 2025.”

Previous wording

Same Store Results of Operations for the Three Months Ended March 31, 2026 and 2025

Current wording

Q2 Same Store Results of Operations for the Three Months Ended June 30, 2026 and 2025

Previous wording

As of March 31, 2026, our Q1 Same Store properties were approximately 93.6% leased with a weighted average monthly effective rent per occupied apartment unit of $1,482. 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. For our Q1 Same Store properties, we recorded the following operating results for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025:

Current wording

As of June 30, 2026, our Q2 Same Store properties were approximately 93.6% leased with a weighted average monthly effective rent per occupied apartment unit of $1,487. 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. For our Q2 Same Store properties, we recorded the following operating results for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025.

Previous wording

Property general and administrative expenses. Property general and administrative expenses were $1.4 million for the three months ended March 31, 2026 compared to $1.2 million for the three months ended March 31, 2025, which was an increase of approximately $0.2 million or 13.6%. The majority of the increase is related to an increase in centralized services of $0.1 million.

Current wording

Property general and administrative expenses. Property general and administrative expenses were $1.4 million for the three months ended June 30, 2026 compared to $1.3 million for the three months ended June 30, 2025, which was an increase of $0.1 million, or 9.0%. The majority of the increase is related to marketing portal expense increases of $0.1 million.

Previous wording

Real estate taxes and insurance. Real estate taxes and insurance costs were $7.8 million for the three months ended March 31, 2026 compared to $9.0 million for the three months ended March 31, 2025, which was a decrease of approximately $1.2 million or 13.5%. The majority of the decrease is related to decreases in property tax expense and insurance expense of $0.6 million and $0.4 million, respectively.

Current wording

Real estate taxes and insurance. Real estate taxes and insurance costs were $15.9 million for the six months ended June 30, 2026 compared to $17.5 million for the six months ended June 30, 2025, which was a decrease of approximately $1.6 million, or 9.2%. The majority of the decrease is related to a decrease in real estate taxes and property insurance expenses of $0.4 million and $0.4 million, respectively, and an increase in property tax refunds of $0.6 million.

Previous wording

We believe that net loss, as defined by GAAP, is the most appropriate earnings measure. We also believe that funds from operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), core funds from operations (“Core FFO”) and adjusted funds from operations (“AFFO”) are important non-GAAP supplemental measures of operating performance for a REIT.

Current wording

We believe that net income (loss), as defined by GAAP, is the most appropriate earnings measure. We also believe that funds from operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), core funds from operations (“Core FFO”) and adjusted funds from operations (“AFFO”) are important non-GAAP supplemental measures of operating performance for a REIT.

Previous wording

Core FFO makes certain adjustments to FFO, which are 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, 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.

Current wording

Core FFO makes certain adjustments to FFO, which are not representative of the ongoing operating performance of our Portfolio. Core FFO adjusts FFO to remove items such as casualty-related expenses and recoveries and gains or losses, 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.

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, 2026 and 2025 (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, 2026 and 2025 (in thousands, except per share amounts):

Previous wording

AFFO was $19.6 million for the three months ended March 31, 2026 compared to $21.6 million for the three months ended March 31, 2025, which was a decrease of approximately $2.0 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 $19.7 million for the three months ended June 30, 2026 compared to $20.3 million for the three months ended June 30, 2025, which was a decrease of approximately $0.6 million. The change in our AFFO between the periods primarily relates to a decrease in Core FFO and an increase in equity-based compensation expense of $0.4 million.

Previous wording

Core FFO was $17.3 million for the three months ended March 31, 2026 compared to $19.1 million for the three months ended March 31, 2025, which was a decrease of approximately $1.8 million. The change in our Core FFO between the periods primarily relates to a decrease in mark to market adjustments of interest rate caps of $0.7 million.

Current wording

Core FFO was $34.2 million for the six months ended June 30, 2026 compared to $37.0 million for the six months ended June 30, 2025, which was a decrease of approximately $2.8 million. The change in our Core FFO between the periods primarily relates to a decrease in FFO, offset by a decrease in mark-to-market adjustments of interest rate caps.

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 Credit Facility. As of March 31, 2026, we had approximately $8.1 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, 2026, we had approximately $6.6 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

On March 4, 2020, the Company, the OP and the Adviser entered into separate equity distribution agreements with each of the ATM Sales Agents, pursuant to which the Company could issue and sell from time to time shares of the Company’s common stock having an aggregate sales price of up to $225,000,000 under the ATM Program. On March 20, 2025, the equity distribution agreements with each of KeyBanc and SunTrust were terminated. The ATM Program may be terminated by the Company at any time and expires automatically once aggregate sales under the ATM Program reach $225,000,000 (see Note 6 to our consolidated financial statements).

Current wording

On March 4, 2020, the Company, the OP and the Adviser entered into separate equity distribution agreements with each of the ATM Sales Agents, pursuant to which the Company could issue and sell from time to time when an effective registration statement was available shares of the Company’s common stock, par value $0.01 per share, having an aggregate sales price of up to $225,000,000 (the “ATM Program”). On March 20, 2025, the equity distribution agreements with each of KeyBanc and SunTrust were terminated. The ATM Program may be terminated by the Company at any time and expires automatically once aggregate sales under the ATM Program reach $225,000,000 (see Note 6 to our consolidated financial statements).

Previous wording

The following table presents selected data from our consolidated statements of cash flows for the three months ended March 31, 2026 and 2025 (in thousands):

Current wording

The following table presents selected data from our consolidated statements of cash flows for the six months ended June 30, 2026 and 2025 (in thousands):

Previous wording

Cash flows from operating activities. During the three months ended March 31, 2026, net cash provided by operating activities was $23.3 million compared to net cash provided by operating activities of $28.3 million for the three months ended March 31, 2025. The change in cash flows from operating activities was mainly due to a decrease in net cash received on derivative settlements of $4.1 million and a decrease in real estate taxes of $1.2 million.

Current wording

Cash flows from operating activities. During the six months ended June 30, 2026, net cash provided by operating activities was $47.8 million compared to net cash provided by operating activities of $48.2 million for the six months ended June 30, 2025. The change in cash flows from operating activities was mainly due to a decrease in the net cash received on derivative settlements of $5.8 million, offset by a decrease in fair value on derivative instruments included in interest expense of $5.8 million and an increase in casualty gains of $1.7 million.

Previous wording

Cash flows from investing activities. During the three months ended March 31, 2026, net cash used in investing activities was $7.6 million compared to net cash used in investing activities of $8.9 million for the three months ended March 31, 2025. The change in cash flows from investing activities was mainly due to a decrease in additions to real estate investments of $1.3 million.

Current wording

Cash flows from investing activities. During the six months ended June 30, 2026, net cash used in investing activities was $38.8 million compared to net cash used in investing activities of $18.7 million for the six months ended June 30, 2025. The change in cash flows from investing activities was mainly due to an increase in originations of loans, held-for-investment of $22.1 million, offset by a decrease in additions to real estate investments of $2.0 million.

Previous wording

Cash flows from financing activities. During the three months ended March 31, 2026, net cash used in financing activities was $8.1 million compared to net cash used in financing activities of $14.5 million for the three months ended March 31, 2025. The change in cash flows from financing activities was mainly due to an increase in mortgage proceeds received of $39.7 million, offset by an increase in credit facility payments of $33.0 million.

Current wording

Cash flows from financing activities. During the six months ended June 30, 2026, net cash used in financing activities was $1.5 million compared to net cash used in financing activities of $35.4 million for the six months ended June 30, 2025. The change in cash flows from financing activities was mainly due to an increase in mortgage proceeds received, credit facilities proceeds received, and a decrease in repurchase of common stock of $39.7 million, $22.1 million, and $7.7 million, respectively, offset by an increase in credit facility payments of $33.0 million and payments for taxes related net share settlement of stock-based compensation of $1.6 million.