Bluerock Homes Trust Inc

Previous wording

As of March 31, 2024, we held twenty real estate investments, consisting of twelve consolidated investments and eight preferred equity and loan investments. The twenty investments represent an aggregate of 4,366 residential units, comprised of 2,745 consolidated units, of which 170 units are under development, and 1,621 units through preferred equity and loan investments. As of March 31, 2024, our consolidated operating investments were approximately 94.8% occupied.

Current wording

As of June 30, 2024, we held twenty-one real estate investments, consisting of twelve consolidated investments and nine preferred equity and loan investments. The twenty-one investments represent an aggregate of 4,362 residential units, comprised of 2,732 consolidated units, of which 170 units are under development, and 1,630 units through preferred equity and loan investments. As of June 30, 2024, our consolidated operating investments were approximately 92.2% occupied; excluding units classified as held for sale and down/renovation units, our consolidated operating investments were approximately 95.4% occupied.

Previous wording

During the first quarter 2024, we closed on the following sales: one unit in the Indy-Springfield portfolio, four units in the Peak JV 2 portfolio, and nineteen units in the Peak JV 3 portfolio, pursuant to the terms and conditions of multiple separate purchase and sales agreements. The twenty-four units were sold for an aggregate of approximately $3.9 million, subject to certain prorations and adjustments typical in such real estate transactions, and generated net proceeds of approximately $3.7 million and a gain on sales of approximately $0.3 million.

Current wording

We closed on the following sales: one unit in the ILE portfolio, two units in the Indy-Springfield portfolio, seven units in the Peak JV 2 portfolio, and twenty-seven units in the Peak JV 3 portfolio, pursuant to the terms and conditions of multiple separate purchase and sales agreements. The thirty-seven units were sold for an aggregate of approximately $6.5 million, subject to certain prorations and adjustments typical in such real estate transactions, and generated net proceeds of approximately $6.2 million and a gain on sales of approximately $0.7 million.

Previous wording

During the first quarter 2024, we (i) provided funding in the aggregate amount of $9.6 million for the Wayford at Pringle loan investment, with a remaining commitment of $20.5 million to be funded, and (ii) received paydowns on The Woods at Forest Hill loan investment in the aggregate amount of $4.1 million, which included principal investment of $4.0 million and accrued interest of $0.1 million, reducing the outstanding principal balance to $4.3 million at March 31, 2024.

Current wording

We (i) provided funding in the aggregate amount of $16.3 million for the Wayford at Pringle loan investment, with a remaining commitment of $13.8 million to be funded, and (ii) received paydowns on The Woods at Forest Hill loan investment in the aggregate amount of $7.3 million, which included principal investment of $7.1 million and accrued interest of $0.2 million, reducing the outstanding principal balance to $1.2 million at June 30, 2024.

Previous wording

During the first quarter 2024, our preferred equity investment in the operating partnership of Peak Housing REIT (the “Peak REIT OP”) was partially redeemed in the aggregate amount of $2.0 million, which included principal investment of $1.8 million and accrued preferred return of $0.2 million. At March 31, 2024, our remaining preferred equity investment in the Peak REIT OP was $8.8 million, with a remaining 407 units as collateral underlying our investment.

Current wording

Our preferred equity investment in the operating partnership of Peak Housing REIT (the “Peak REIT OP”) was partially redeemed in the aggregate amount of $3.9 million, which included principal investment of $3.5 million and accrued preferred return of $0.4 million. At June 30, 2024, our remaining preferred equity investment in the Peak REIT OP was $7.1 million, with a remaining 349 units as collateral underlying our investment.

Previous wording

At March 31, 2024, we classified an aggregate of 96 units as held for sale in our consolidated balance sheets, and for the three months ended March 31, 2024, we recorded an impairment of $0.1 million related to held for sale units which is included in gain on sale and impairment of real estate investments, net in our consolidated statements of operations. The units are included in the following portfolios: 34 units of Indy-Springfield, 11 units of Peak JV 2, and 51 units of Peak JV 3. These units were identified based on submarket analysis and individual unit-level operational review.

Current wording

At June 30, 2024, we classified an aggregate of 391 units as held for sale in our consolidated balance sheets, and for the three and six months ended June 30, 2024, we recorded an impairment of $1.1 million and $1.2 million, respectively, related to held for sale units which is included in impairment and gain on sale of real estate investments, net in our consolidated statements of operations. The 391 units classified as held for sale are included in the following portfolios: 44 units of Indy-Springfield, 48 units of Peak JV 2, all 123 units of Peak JV 3, and all 176 units of Navigator Villas. These units were identified based on submarket analysis and individual unit-level operational review. Real estate assets classified as held for sale are reported at the lower of their carrying value or estimated fair value less costs to sell and are presented separately within operating real estate held for sale, net on our consolidated balance sheets.

Previous wording

During the three months ended March 31, 2024, we issued 395,628 shares of 6.0% Series A Redeemable Preferred Stock (the “Series A Preferred Stock”) at $25.00 per share (the “Stated Value”) under a continuous registered offering with net proceeds of approximately $8.6 million after (i) commissions, dealer manager fees and sales discounts of approximately $1.0 million, and (ii) costs related to establishing the offering of Series A Preferred Stock of approximately $0.3 million. As of March 31, 2024, we had issued a total of 832,303 shares of Series A Preferred Stock with total net proceeds of approximately $17.3 million after commissions, dealer manager fees, sales discounts and offering costs.

Current wording

During the six months ended June 30, 2024, we issued 1,761,120 shares of 6.0% Series A Redeemable Preferred Stock (the “Series A Preferred Stock”) at $25.00 per share (the “Stated Value”) under a continuous registered offering with net proceeds of approximately $38.8 million after (i) commissions, dealer manager fees and sales discounts of approximately $4.4 million, and (ii) costs related to establishing the offering of Series A Preferred Stock of approximately $0.8 million. As of June 30, 2024, we had issued a total of 2,197,795 shares of Series A Preferred Stock with total net proceeds of approximately $47.1 million after commissions, dealer manager fees, sales discounts and offering costs. During the six months ended June 30, 2024, we, at the request of holders, redeemed 1,000 shares of Series A Preferred Stock through the issuance of 1,346 shares of Class A common stock.

Previous wording

Our total stockholders’ equity decreased $2.9 million from $147.4 million as of December 31, 2023 to $144.5 million as of March 31, 2024. The decrease in our total stockholders’ equity is primarily attributable to an adjustment of $1.9 million for noncontrolling interest ownership in the Operating Partnership, a net loss of $0.8 million, and preferred dividends declared of $0.3 million.

Current wording

Our total stockholders’ equity decreased $4.9 million from $147.4 million as of December 31, 2023 to $142.5 million as of June 30, 2024. The decrease in our total stockholders’ equity is primarily attributable to an adjustment of $2.3 million for noncontrolling interest ownership in the Operating Partnership, a net loss of $1.7 million, preferred dividends declared of $0.8 million, and preferred stock accretion of $0.2 million.

Previous wording

The following is a summary of our consolidated operational results for the three months ended March 31, 2024 and 2023 ($ in thousands, except average rental rates):

Current wording

The following is a summary of our consolidated operational results for the three and six months ended June 30, 2024 and 2023 ($ in thousands, except average rental rates):

Previous wording

Rental and other property revenues increased $0.7 million, or 7%, to $10.8 million for the three months ended March 31, 2024 as compared to $10.1 million for the same prior year period. The increase was primarily due to $0.3 million in operational improvements from our active management and organic market rent growth and a $0.3 million increase in ancillary income (such as late fees, term fees, and damage fees).

Current wording

Rental and other property revenues increased $1.6 million, or 16%, to $11.9 million for the three months ended June 30, 2024 as compared to $10.3 million for the same prior year period. The increase was primarily due to: (i) acquisition of Villas at Huffmeister during the first quarter 2024 and (ii) operational improvements from our active management and organic market rent growth. The increase was partially offset by the sale of 90 homes in our portfolio since April 1, 2023.

Previous wording

Our average rent per occupied unit increased $58, or 3.8%, to $1,600 as compared to $1,542 during the prior year period. Average occupancy increased 30 basis points from 94.2% to 94.5% on a year over year basis. The improvements were partially driven by: (i) stabilization of units under renovation within our value-enhancement strategy, and (ii) stabilization of units that are sometimes purchased from owner occupants which can create modest frictional vacancy for a brief period of time after acquisition.

Current wording

Our average rent per occupied unit increased $58, or 3.7%, to $1,615 as compared to $1,557 during the prior year period. Average occupancy increased 30 basis points from 92.0% to 92.3% on a year over year basis.

Previous wording

Interest income from loan investments amounted to $0.4 million for the three months ended March 31, 2024 as compared to zero for the same prior year period due to three new loan investments since the fourth quarter 2023. We did not have any loan investments during the three months ended March 31, 2023.

Current wording

Interest income from loan investments amounted to $0.6 million for the three months ended June 30, 2024 as compared to zero for the same prior year period due to three new loan investments since the fourth quarter 2023. We did not have any loan investments during the three months ended June 30, 2023.

Previous wording

Property operating expensesincreased $0.4 million, or 10%, to $5.0 million for the three months ended March 31, 2024 as compared to $4.6 million for the same prior year period. The increase was primarily due to: (i) a $0.3 million increase in expenses (primarily repairs and maintenance) incurred as part of our lease up stabilization strategy and (ii) a $0.1 million or 4% increase in insurance and real estate taxes. Property operating expenses consist of controllable (payroll, repairs and maintenance, turnover, administrative, advertising, and utilities) and non-controllable (real estate taxes and insurance) expenses. Controllable expenses were $2.5 million and $2.2 million, and non-controllable expenses were $2.5 million and $2.4 million, for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Property operating expensesincreased $1.4 million, or 30%, to $6.0 million for the three months ended June 30, 2024 as compared to $4.6 million for the same prior year period. The increase was primarily due to: (i) acquisition of Villas at Huffmeister during the first quarter 2024 and (ii) increase in expenses (primarily repairs and maintenance) incurred as part of our lease up stabilization strategy. The increase was partially offset by the sale of 90 homes in our portfolio since April 1, 2023. Property operating expenses consist of controllable (payroll, repairs and maintenance, turnover, administrative, advertising, and utilities) and non-controllable (real estate taxes and insurance) expenses. Controllable expenses were $3.2 million and $2.1 million, and non-controllable expenses were $2.8 million and $2.5 million, for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Property management and asset management fee expenseswere $1.1 million for the three months ended March 31, 2024, consistent with the prior year period. Property management fees are based on a stated percentage of property revenues and asset management fees are based on a stated percentage of capital contributions or assets under management, where applicable. Although property revenues increased 6% compared to the prior year period, the negotiation of management fees with two property managers in 2023 resulted in property management fees remaining consistent with the prior year period.

Current wording

Property management and asset management fee expenses were $1.2 million for the three months ended June 30, 2024 as compared to $1.1 million for the same prior year period. Property management fees are based on a stated percentage of property revenues and asset management fees are based on a stated percentage of capital contributions or assets under management, where applicable.

Previous wording

General and administrative expensesamounted to $2.9 million for the three months ended March 31, 2024 as compared to $2.0 million for the same prior year period. Of the $2.9 million total expense in the first quarter 2024, $1.7 million related to direct costs incurred by us, while the remaining $1.2 million related to the operating expense reimbursement to our Manager, which includes rent, utilities, and IT expenses. The expense reimbursement to our Manager also included a $0.8 million reimbursement for accounting and legal services. Prior to the fourth quarter 2023, the Manager elected to not seek reimbursement for legal and accounting services during our first year of operations. For the first quarter 2024, we will pay the full operating expense reimbursement of $1.2 million to the Manager in cash; for the same prior year period, we paid the full operating expense reimbursement of $0.3 million to the Manager through the issuance of C-LTIP Units.

Current wording

General and administrative expenses amounted to $2.4 million for the three months ended June 30, 2024 as compared to $1.8 million for the same prior year period. Of the $2.4 million total expense for the three months ended June 30, 2024, $1.3 million related to direct costs incurred by us, while the remaining $1.1 million related to the operating expense reimbursement to our Manager, which includes rent, utilities, and IT expenses. The expense reimbursement to our Manager also included a $0.7 million reimbursement for accounting and legal services. Prior to the fourth quarter 2023, the Manager elected to not seek reimbursement for legal and accounting services during our first year of operations. For the second quarter 2024, we will pay the full operating expense reimbursement of $1.1 million to the Manager in cash; for the same prior year period, we paid the full operating expense reimbursement of $0.4 million to the Manager through the issuance of C-LTIP Units.

Previous wording

Management fees to related party amounted to $2.1 million for the three months ended March 31, 2024 as compared to $1.9 million for the same prior year period. The increase was due to an increase in equity primarily from our continuous registered offering of Series A Preferred Stock, which began in the third quarter of 2023. For the first quarter 2024, we will pay the base management fee of $2.1 million to the Manager as one half (50%) in C-LTIP Units and the remainder in cash; for the same prior year period, we paid the full base management fee of $1.9 million to the Manager through the issuance of C-LTIP Units.

Current wording

Management fees to related party amounted to $2.2 million for the three months ended June 30, 2024 as compared to $2.0 million for the same prior year period. The increase was due to an increase in equity primarily from our continuous registered offering of Series A Preferred Stock, which began in the third quarter of 2023. For the second quarter 2024, we will pay the base management fee of $2.2 million to the Manager as one half (50)% in C-LTIP Units and the remainder in cash; for the same prior year period, we paid the full base management fee of $2.0 million to the Manager through the issuance of C-LTIP Units.

Previous wording

Acquisition and other transaction costsamounted to zero for the three months ended March 31, 2024 as compared to $1.5 million for the same prior year period. Acquisition costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods. The 2023 expense primarily relates to the transition of property management services for over 1,000 homes.

Current wording

Acquisition and other transaction costs amounted to zero for the three months ended June 30, 2024 as compared to $0.3 million for the same prior year period. Acquisition costs can vary greatly, and the costs incurred in any given period may be significantly different in future periods. The 2023 expense primarily relates to the transition of property management services for over 1,000 homes.

Previous wording

Other income and expenseamounted to income of $0.7 million for the three months ended March 31, 2024 as compared to expense of $0.4 million for the same prior year period. This was primarily due to a $1.1 million increase in interest income from our short-term investments and a $0.3 million gain on sales of real estate investments from the sale of 24 homes during the three months ended March 31, 2024, partially offset by a $0.1 million net increase in interest expense, a $0.1 million impairment on real estate, and a $0.1 million increase in provision for credit losses.

Current wording

Other income and expense amounted to expense of $1.2 million for the three months ended June 30, 2024 as compared to income of $2.3 million for the same prior year period. This was due to a $2.2 million net increase in interest expense primarily attributable to an increase in the outstanding debt to $228.0 million at June 30, 2024 as compared to $167.5 million at June 30, 2023 and a decrease in the fair value of the interest rate caps and swaps, a $1.1 million impairment on real estate, a $0.3 million decrease in gain on sales of real estate investments, and $0.4 million in other expenses. These expense sources were partially offset by a $0.5 million increase in interest income from our short-term cash investments.

Previous wording

Our ability to access capital on favorable terms as well as to use cash from operations to continue to meet our short-term liquidity needs could be affected by various risks and uncertainties, including the risks detailed in Part I, Item 1A titled “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on March 12, 2024. While consolidated occupancy remains strong at 94.8% as of March 31, 2024, in future periods we may experience reduced levels of tenant retention, and reduced foot traffic and lease applications from prospective tenants.

Current wording

Our ability to access capital on favorable terms as well as to use cash from operations to continue to meet our short-term liquidity needs could be affected by various risks and uncertainties, including the risks detailed in Part I, Item 1A titled “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on March 12, 2024. While consolidated occupancy excluding units classified as held for sale and down/renovation units remains strong at 95.4% as of June 30, 2024, in future periods we may experience reduced levels of tenant retention, and reduced foot traffic and lease applications from prospective tenants.

Previous wording

At March 31, 2024, the aggregate amount of our contractual commitments to fund future cash obligations in certain of our loan and consolidated real estate investments was $20.7 million.

Current wording

At June 30, 2024, the aggregate amount of our contractual commitments to fund future cash obligations in certain of our loan, preferred equity and consolidated real estate investments was $17.4 million.

Previous wording

Our primary long-term liquidity requirements relate to (i) costs for additional single-family residential investments, including build-to-rent development properties, (ii) repayment of long-term debt and our revolving credit facilities, (iii) capital expenditures, (iv) cash redemption requirements related to our Series A Preferred Stock, and (v) Class A common stock repurchases under our stock repurchase plan.

Current wording

Our primary long-term liquidity requirements relate to (i) costs for additional single-family residential investments, including build-to-rent development projects, (ii) repayment of long-term debt and our revolving credit facilities, (iii) capital expenditures, (iv) cash redemption requirements related to our Series A Preferred Stock, and (v) Class A common stock repurchases under our stock repurchase plan.

Previous wording

We intend to finance our long-term liquidity requirements with net proceeds of additional issuances of common and preferred stock, including issuances in connection with the continuous registered offering of our Series A Preferred Stock, our revolving credit facilities, as well as future acquisition or project-based borrowings. Our success in meeting these requirements will therefore depend upon our ability to access capital. Further, our ability to access equity capital is dependent upon, among other things, general market conditions for REITs and the capital markets generally, market perceptions about us and our asset class, and current trading prices of our securities.

Current wording

We intend to finance our long-term liquidity requirements with net proceeds of additional issuances of common and preferred stock, including issuances in connection with the continuous registered offering of our Series A Preferred Stock, our revolving credit facilities, as well as future acquisition or project-based borrowings. Our success in meeting these requirements will therefore depend upon our ability to access capital. Further, our ability to access equity capital is dependent upon, among other things, general market conditions for REITs and the capital markets in general, market perceptions about us and our asset class, and current trading prices of our securities.

Previous wording

As we did in the three months ended March 31, 2024, we may also selectively sell consolidated operating assets at appropriate times, which would be expected to generate cash sources for both our short-term and long-term liquidity needs.

Current wording

As we did in the six months ended June 30, 2024, we may also selectively sell consolidated operating assets at appropriate times, which would be expected to generate cash sources for both our short-term and long-term liquidity needs.

Previous wording

We have notes receivable in conjunction with properties that are in various stages of development and in lease-up. To date, these investments have been structured as senior loans, and in the future, we may also provide mezzanine financing to these types of projects. The notes receivable provide a current stated return and require repayment based on a fixed maturity date. If the property does not repay the notes receivable upon maturity, our income, FFO, CFFO and cash flows could be reduced below the stated returns currently being recognized if the property does not produce sufficient cash flow to pay its operating expenses and debt service, or to refinance its debt obligations.

Current wording

We have notes receivable in conjunction with properties that are in lease-up. To date, these investments have been structured as senior loans, and in the future, we may also provide mezzanine financing to these types of projects. The notes receivable provide a current stated return and require repayment based on a fixed maturity date. If the property does not repay the notes receivable upon maturity, our income, FFO, CFFO and cash flows could be reduced below the stated returns currently being recognized if the property does not produce sufficient cash flow to pay its operating expenses and debt service, or to refinance its debt obligations.

Previous wording

As of March 31, 2024, we have off-balance sheet arrangements that may have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures. At March 31, 2024, we own interests in six joint ventures that are accounted for as held to maturity debt securities.

Current wording

As of June 30, 2024, we have off-balance sheet arrangements that may have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures. At June 30, 2024, we own interests in seven joint ventures that are accounted for as held to maturity debt securities.

Previous wording

As of March 31, 2024, we held twenty real estate investments, consisting of twelve consolidated investments and eight preferred equity and loan investments, with the twenty investments representing an aggregate of 4,366 residential units. During the three months ended March 31, 2024, net cash provided by operating activities was $1.1 million after net loss of $3.2 million was adjusted for the following:

Current wording

As of June 30, 2024, we held twenty-one real estate investments, consisting of twelve consolidated investments and nine preferred equity and loan investments, with the twenty-one investments representing an aggregate of 4,362 residential units. During the six months ended June 30, 2024, net cash provided by operating activities was $2.4 million after net loss of $8.3 million was adjusted for the following:

Previous wording

During the three months ended March 31, 2024, net cash used in investing activities was $19.3 million, due to the following:

Current wording

During the six months ended June 30, 2024, net cash used in investing activities was $25.2 million, due to the following:

Previous wording

During the three months ended March 31, 2024, net cash provided by financing activities was $30.9 million, primarily due to the following:

Current wording

During the six months ended June 30, 2024, net cash provided by financing activities was $60.0 million, due to the following:

Previous wording

The following table summarizes our total capital expenditures for the three months ended March 31, 2024 and 2023 (amounts in thousands):

Current wording

The following table summarizes our total capital expenditures for the six months ended June 30, 2024 and 2023 (amounts in thousands):

Previous wording

Our calculation of CFFO differs from the methodology used for calculating CFFO by certain other REITs and, accordingly, our CFFO may not be comparable to CFFO reported by other REITs. Our management utilizes FFO and CFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition and pursuit costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO and CFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and CFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs.

Current wording

Our calculation of CFFO differs from the methodology used for calculating CFFO by certain other REITs and, accordingly, our CFFO may not be comparable to CFFO reported by other REITs. Our management utilizes FFO and CFFO as measures of our operating performance after adjustment for certain non-cash items, such as depreciation and amortization expenses, and acquisition and other transaction costs that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO and CFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and CFFO may provide us and our stockholders with an additional useful measure to compare our financial performance to certain other REITs.

Previous wording

The table below presents our calculation of FFO and CFFO for the three months ended March 31, 2024 and 2023 ($ in thousands):

Current wording

The table below presents our calculation of FFO and CFFO for the three and six months ended June 30, 2024 and 2023 ($ in thousands):