December 31, 2023
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| PART I |
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| Item 1. | Business | 7 |
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| Item 1A. | Risk Factors | 13 |
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| Item 1B. | Unresolved Staff Comments | 56 |
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| Item 1C. | Cybersecurity | 56 |
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| Item 2. | Investments | 58 |
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| Item 3. | Legal Proceedings | 59 |
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| Item 4. | Mining Safety Disclosures | 59 |
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| PART II | | |
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| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 60 |
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| Item 6. | [Reserved] | 61 |
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| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 61 |
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| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 80 |
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| Item 8. | Financial Statements and Supplementary Data | 80 |
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| Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 80 |
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| Item 9A. | Controls and Procedures | 81 |
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| Item 9B. | Other Information | 81 |
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| Item 9C. | Disclosure Regarding Foreign Jurisdictions That Prevent Inspections | 81 |
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| PART III | | |
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| Item 10. | Directors, Executive Officers and Corporate Governance | 82 |
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| Item 11. | Executive Compensation | 82 |
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| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 82 |
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| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 82 |
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| Item 14. | Principal Accountant Fees and Services | 82 |
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| PART IV | | |
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| Item 15. | Exhibits and Financial Statement Schedules | 82 |
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| SIGNATURES | 83 | |
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Forward-Looking Statements
All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws and may be identified by words such as “will,” “expect,” “believe,” “plan,” “anticipate,” “intend,” “goal,” “future,” “outlook,” “guidance,” “target,” “estimate” and similar words or expressions, including the negative version of such words and expressions. These forward-looking statements are based upon our present expectations, estimates and projections about the industry and markets in which we operate and beliefs of and assumptions made by our management, involve uncertainty that could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements and are not guaranteed to occur. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon these forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in these forward-looking statements due to numerous factors.
Additional factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:
| ● | use of proceeds of our securities offerings; |
| ● | changes in national, regional and local economic conditions, which may be negatively impacted by concerns about inflation, deflation, government deficits, high unemployment rates, decreased consumer confidence and liquidity concerns, particularly in markets in which we have a high concentration of properties; |
| ● | fluctuations and relative increases in interest rates, which could adversely affect our ability to obtain financing on favorable terms or at all; |
| ● | the inability of tenants to pay rent; |
| ● | the existence and quality of the competition, such as the attractiveness of our properties as compared to our competitors’ properties based on considerations such as convenience of location, rental rates and safety record; |
| ● | increased operating costs, including increased real property taxes, HOA fees, maintenance, insurance and utilities costs; |
| ● | weather conditions that may increase or decrease energy costs and other weather-related expenses; |
| ● | oversupply of single-family housing or a reduction in demand for real estate in the markets in which our properties are located; |
| ● | costs and time period required to convert acquisitions to rental homes; |
| ● | a favorable interest rate environment that may result in a significant number of potential residents of our properties deciding to purchase homes instead of renting; |
| ● | rules, regulations and/or policy initiatives by government and private actors, including HOAs, to discourage or deter the purchase of single-family properties by entities owned or controlled by institutional investors; |
| ● | our ability to lease newly acquired or newly constructed single-family properties; |
| ● | changes in, or increased costs of compliance with, laws and/or governmental regulations, including those governing usage, zoning, the environment and taxes; |
| ● | rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating costs; |
| ● | the board of directors’ determination as to timing and payment of dividends, and our ability to pay future distributions at the dividend rates we have paid historically (if any); |
| ● | our ability to maintain our qualification as a REIT; |
| ● | litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and |
| ● | The impact of epidemics, pandemics, or other outbreaks of illness, disease or virus (including the novel coronavirus (“COVID-19”) and its variants) and the actions taken by government authorities and other factors related thereto, including the ability of our company, our properties and our tenants to operate. |
Forward-looking statements are found throughout this Annual Report on Form 10-K, including under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Annual Report on Form 10-K. We caution investors not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date of this Annual Report on Form 10-K. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.
Cautionary Note
The representations, warranties, and covenants made by us in any agreement filed as an exhibit to this Annual Report on Form 10-K are made solely for the benefit of the parties to the agreement, including, in some cases, for the purpose of allocating risk among the parties to the agreement, and should not be deemed to be representations, warranties, or covenants to or with any other parties. Moreover, these representations, warranties, or covenants should not be relied upon as accurately describing or reflecting the current state of our affairs.
Risk Factor Summary
An investment in our securities involves various risks. Some of the material risks include those set forth below. You should consider carefully these risks, and those discussed under “Risk Factors,” before purchasing our securities.
| ● | Our current portfolio consists primarily of single-family residential homes concentrated in certain markets, and we expect that our portfolio going forward will consist primarily of the same. Any adverse developments in local economic conditions or the demand for single-family units in these markets may negatively impact our operating results. |
| ● | If we are unable to identify suitable investments, then we may not be able to achieve our investment objectives or pay distributions. |
| ● | Adverse economic conditions may negatively affect our returns and profitability, and, as a result, our ability to make distributions to our stockholders. |
| ● | We have limited sources of capital other than proceeds from future mortgage debt financings for acquisition and/or development projects, cash from property operations, our $150 million revolving credit facility, and the proceeds of offerings of our securities to meet our primary liquidity requirements. As a result, we may not be able to pay our short-term debt upon maturity or other liabilities and obligations when they come due other than with the net proceeds of an offering, which may limit our ability to fully consummate our business plan and diversify our portfolio. |
| ● | We may be limited in our ability to diversify our investments. |
| ● | We have used and will continue to use mortgage and other indebtedness to partially finance our company, which increases the risk to our business. Our leverage policy has been adopted by our board of directors (the “Board”) and is therefore subject to change without stockholder consent. |
| ● | During certain periods of our operations, we may have to fund distributions from offering proceeds, borrowings, and the sale of assets to the extent distributions exceed our earnings or cash flows from operations and may do so in the future if we are unable to make distributions with our cash flows from our operations. There is no limit on the amount of offering proceeds we may use to fund distributions. Distributions paid from sources other than cash flow or funds from operations may constitute a return of capital to our stockholders. Rates of distribution may not be indicative of our operating results. |
| ● | The impact of epidemics, pandemics, or other outbreaks of illness, disease or virus (such as COVID-19, and its variants) and the actions taken by government authorities and other factors related thereto, could materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance. |
| ● | We depend on the senior officers and key personnel of our external manager, Bluerock Homes Manager, LLC (the “Manager”), a Delaware limited liability company organized in 2022, and its affiliates. In particular, our success depends to a significant degree upon the contributions of Messrs. Kamfar, Babb, MacDonald, Ruddy, Vohs, and DiFranco, as well as Mr. Emala, all of whom are senior officers of our Manager. We do not have employment agreements with any of these key personnel and do not have key man life insurance on any of them. The departure or the loss of the services of any such key personnel could have a material adverse effect on our business, financial condition, results of operations and ability to effectively operate our business. |
| ● | While we expect to maintain control over our properties, we will rely on members of our network for the day-to-day management and development of our real estate investments. |
| ● | Stockholders will have limited control over changes in our policies and day-to-day operations, which increases the uncertainty and risks you face as a stockholder. In addition, our Board may approve changes to our policies without your approval. |
| ● | The market price and trading volume of our Class A common stock may fluctuate widely as a result of a number of factors, many of which are outside of our control. In addition, the stock market is subject to fluctuations in share prices and trading volumes that affect the market prices of the shares of many companies. These fluctuations in the stock market may materially and adversely affect the market price of our Class A common stock. |
| ● | There is no public market for our 6.0% Series A Redeemable Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), and we currently have no plan to list the Series A Preferred Stock on a securities exchange. If holders are able to sell the Series A Preferred Stock, they may have to be sold at a substantial discount. |
| ● | Holders of Series A Preferred Stock should not expect us to redeem all or any such shares on the date they first become redeemable or on any particular date after they become redeemable. Any decision to propose a redemption will depend upon, among other things, our evaluation of our capital position and general market conditions at the time. We would likely choose to exercise our optional redemption right only when prevailing interest rates have declined, which would adversely affect the ability of holders of shares of the applicable series of preferred stock to reinvest proceeds from the redemption in a comparable investment with an equal or greater yield to the yield on such series of preferred stock had their shares not been redeemed. |
| ● | There are numerous conflicts of interest between the interests of stockholders and our interests or the interests of our Manager, Bluerock and their respective affiliates, including conflicts arising out of (a) allocation of personnel to our activities, (b) allocation of investment opportunities between us and investment vehicles affiliated with Bluerock, (c) purchase or sale of single-family properties, including from or to Bluerock or its affiliates, and (d) fee arrangements with our Manager that might induce our Manager to make investment decisions that are not in our best interests. |
| ● | We have invested and anticipate that we will continue to invest in the redevelopment of existing properties and the development of new properties. These investments involve risks beyond those presented by stabilized, income-producing properties. These risks may diminish the return to our stockholders. |
| ● | We have a limited operating history as a REIT and an independent publicly traded company, which makes our future performance difficult to predict. |
| ● | We may fail to maintain our qualification as a REIT for federal income tax purposes. We would then be subject to corporate level taxation, and we would not be required to pay any distributions to our stockholders. |
If we are unable to effectively manage the impact of these and other risks, our ability to meet our investment objectives would be substantially impaired. In turn, the value of our securities and our ability to make distributions would be materially reduced.
