Bluerock Homes Trust(US:BHM)2023-03-21 16:00Real Estate Investments - The company has a current portfolio primarily consisting of single-family residential homes concentrated in specific markets, with expectations to maintain this focus going forward [24]. - As of December 31, 2022, the company held 17 real estate investments, including 10 consolidated operating investments and 7 preferred equity investments, totaling 2,340 units [325]. - The company sold six multifamily consolidated operating investments in 2021, marking a strategic shift towards single-family residential units [378]. Financial Performance - The company recorded a loss on the sale of Plantation Park amounting to $1.1 million, with net proceeds of approximately $4.9 million from the sale [316]. - The sale of The District at Scottsdale generated net proceeds of approximately $74.8 million and a gain on sale of approximately $29.6 million [319]. - The sale of ARIUM Grandewood generated net proceeds of approximately $25.1 million and a gain on sale of approximately $27.7 million [382]. - The sale of James at South First resulted in net proceeds of approximately $21.1 million and a gain on sale of approximately $17.4 million [383]. - The sale of Marquis at The Cascades properties generated net proceeds of approximately $37.3 million and a gain on sale of approximately $23.7 million [385]. - The company recorded a loss on extinguishment of debt of $2.6 million related to the sale of James at South First [383]. - The company recorded a loss on extinguishment of debt of $0.3 million related to the sale of Marquis at The Cascades [385]. Capital and Financing - The company has limited sources of capital, primarily relying on future mortgage debt financings, cash from property operations, and a $150 million revolving credit facility [26]. - The company may face challenges in fully funding distributions from cash flows generated by operating activities, potentially relying on financing activities, borrowings, and other sources [360]. - The company has not established a cap on the amount of distributions that may be paid from financing sources, which could lead to future liabilities and impact cash available for operations and investments [363]. Interest Rate and Risk Management - A 100 basis point increase or decrease in interest rates on variable rate debt would result in an annual increase or decrease in future interest expense of approximately $0.2 million [314]. - The company’s interest rate risk is monitored using various techniques, with a focus on the variability of future interest rates [311]. Depreciation and Expenses - The company incurred depreciation expenses of $12.9 million and $3.6 million for the years ended December 31, 2022, and 2021, respectively [327]. Tenant and Lease Information - As of December 31, 2022, security deposits related to tenant leases totaled $2.1 million, up from $1.5 million in 2021, indicating a 40% increase year-over-year [331]. - The Company has a total of 122 lease-up units planned, with actual occupancy expected to begin in Q4 2022 for The Woods at Forest Hill and Q2 2022 for Willow Park [332]. - The Cottages at Myrtle Beach, with 294 units, is expected to reach initial occupancy in Q2 2023, while construction completion is anticipated in Q4 2023 [332]. Preferred Stock and Shareholder Considerations - The Company may redeem Series A Redeemable Preferred Stock voluntarily after two years from issuance, which could expose holders to reinvestment risk if market conditions change [333]. - The liquidation preference for Series A Redeemable Preferred Stock is fixed at $25.00 per share, plus accrued and unpaid dividends [342]. - The Company is subject to Maryland law, which limits its ability to pay dividends or redeem shares if it cannot meet its debt obligations [346]. - Holders of Series A Redeemable Preferred Stock face inflation risk, as the real value of their investment may decline due to rising prices [339]. - There is currently no public trading market for Series A Redeemable Preferred Stock, which may limit holders' ability to sell their shares [352]. - The Manager and its affiliates will receive fees and expense reimbursements that reduce the cash available for distribution to stockholders [359]. - The Company has restrictions on ownership of Series A Redeemable Preferred Stock to maintain its qualification as a REIT, limiting any single holder to a maximum of 9.8% [345]. Personnel and Management - The company’s success is significantly dependent on key personnel, and the loss of any of these individuals could materially affect its business [30]. Credit Losses and Collateral Evaluation - The company estimates its provision for credit losses using a collective approach based on expected credit losses for the life of the investment [374]. - The company evaluates the value of underlying collateral to determine if a loan or preferred equity investment is fully recoverable, considering future cash flows and market conditions [377].