10q10k10q10k.net

What changed in NexPoint Residential Trust, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of NexPoint Residential Trust, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+393 added−405 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-24)

Top changes in NexPoint Residential Trust, Inc.'s 2023 10-K

393 paragraphs added · 405 removed · 340 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

54 edited+2 added−20 removed115 unchanged
Biggest change(2) Average effective monthly rent per unit is equal to the average of the contractual rent for commenced leases as of December 31 for the respective year minus any tenant concessions over the term of the lease, divided by the number of units under commenced leases as of December 31 for the respective year. 7 • Amended and Restated Corporate Credit Facility: On June 30, 2021, the Company, through the OP, entered into a secured $250.0 million credit facility with Truist Bank (“Truist Bank”), as administrative agent, and the lenders from time to time party thereto (the “Amended and Restated Corporate Credit Facility”). $225 million of the Amended and Restated Corporate Credit Facility was a revolving credit facility and $25 million of the Amended and Restated Corporate Credit Facility was a term loan.
Biggest change(2) Average effective monthly rent per unit is equal to the average of the contractual rent for commenced leases as of December 31 for the respective year minus any tenant concessions over the term of the lease, divided by the number of units under commenced leases as of December 31 for the respective year. 6 • Corporate Credit Facility: On February 2, 2023, the Company made a $17.5 million principal payment on the Corporate Credit Facility.
This cap is intended to limit the fees paid to our Adviser on the Contributed Assets following the Spin-Off to the fees that would have been paid by NHF to its adviser had the Spin-Off not occurred. The advisory fee on New Assets is not subject to this limitation but is subject to the expense cap mentioned below.
This cap is intended to limit the fees paid to our Adviser on the Contributed Assets following our Spin-Off (the "Spin-Off") to the fees that would have been paid by NHF to its adviser had the Spin-Off not occurred. The advisory fee on New Assets is not subject to this limitation but is subject to the expense cap mentioned below.
See “Risk Factors—If we internalize our management functions, the percentage of our outstanding common stock owned by our other stockholders could be reduced, and we could incur other significant costs associated with being self-managed.” Our Property Manager The entities through which we own the properties in our portfolio have entered into management agreements with BH.
See “Risk Factors—If we internalize our management functions, the percentage of our outstanding common stock owned by our other stockholders could be reduced, and we could incur other significant costs associated with being self-managed.” Our Property Manager The entities through which we own the properties in our portfolio have entered into management agreements with BH (the "Management Agreements").
The agreement requires our Adviser to provide us with all services necessary or appropriate to conduct our business, including the following: • locating, presenting and recommending to us real estate investment opportunities consistent with our investment policies, acquisition and disposition strategies and objectives, including our conflicts of interest policies; • structuring the terms and conditions of transactions pursuant to which acquisitions and dispositions of properties will be made; • acquiring and disposing properties on our behalf in compliance with our investment objectives, strategies and applicable tax regulations; • arranging for the financing and refinancing of properties; • administering our bookkeeping and accounting functions; • serving as our consultant in connection with policy decisions to be made by our Board, managing our properties or causing our properties to be managed by another party; • monitoring our compliance with regulatory requirements, including the Securities Act of 1933, as amended, (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, New York Stock Exchange (“NYSE”) rules and regulations of the Code to maintain our status as a REIT; • performing administrative services; and • rendering other services as our Board deems appropriate.
The agreement requires our Adviser to provide us with all services necessary or appropriate to conduct our business, including the following: • locating, presenting and recommending to us real estate investment opportunities consistent with our investment policies, acquisition and disposition strategies and objectives, including our conflicts of interest policies; 10 • structuring the terms and conditions of transactions pursuant to which acquisitions and dispositions of properties will be made; • acquiring and disposing properties on our behalf in compliance with our investment objectives, strategies and applicable tax regulations; • arranging for the financing and refinancing of properties; • administering our bookkeeping and accounting functions; • serving as our consultant in connection with policy decisions to be made by our Board, managing our properties or causing our properties to be managed by another party; • monitoring our compliance with regulatory requirements, including the Securities Act of 1933, as amended, (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, the New York Stock Exchange (“NYSE”) rules and regulations of the Code to maintain our status as a REIT; • performing administrative services; and • rendering other services as our Board deems appropriate.
We believe that there are no compliance issues with laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, that have adversely affected, or are reasonably expected to adversely affect, our business, financial condition and results of operations, and we do not currently 18 anticipate material capital expenditures arising from environmental regulation.
We believe that there are no compliance issues with laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, that have adversely affected, or are reasonably expected to adversely affect, our business, financial condition and results of operations, and we do not currently anticipate material capital expenditures arising from environmental regulation.
“Average Real Estate Assets” means the average of the aggregate book value of Real Estate Assets (see below) before reserves for depreciation or other non-cash reserves, computed by taking the average of the book value of real estate assets at the end of each month (1) for which any fee under the Advisory Agreement is calculated or (2) during the year for which any expense reimbursement 13 under the Advisory Agreement is calculated.
“Average Real Estate Assets” means the average of the aggregate book value of Real Estate Assets (see below) before reserves for depreciation or other non-cash reserves, computed by taking the average of the book value of real estate assets at the end of each month (1) for which any fee under the Advisory Agreement is calculated or (2) during the year for which any expense reimbursement under the Advisory Agreement is calculated.
There are certain losses (including, but not limited to, losses arising from environmental conditions, acts of war or certain kinds of terrorist attacks) that are not insured, in full or in part, because they are either uninsurable or the cost of insurance makes it, in our belief, economically impractical to maintain such coverage.
There are certain losses (including, but not 16 limited to, losses arising from environmental conditions, acts of war or certain kinds of terrorist attacks) that are not insured, in full or in part, because they are either uninsurable or the cost of insurance makes it, in our belief, economically impractical to maintain such coverage.
We expect we will only have accounting employees while the Advisory Agreement is in effect. 19 Corporate Information Our Adviser’s offices are located at 300 Crescent Court, Suite 700, Dallas, Texas 75201. Our Adviser’s telephone number is (214) 276-6300. We maintain a website at nxrt.nexpoint.com.
We expect we will only have accounting employees while the Advisory Agreement is in effect. Corporate Information Our Adviser’s offices are located at 300 Crescent Court, Suite 700, Dallas, Texas 75201. Our Adviser’s telephone number is (214) 276-6300. We maintain a website at nxrt.nexpoint.com.
Such damages will be equal to the management fee earned by BH for the calendar month immediately preceding the month in which the notice of termination is given, multiplied by the number of months and/or portions thereof remaining from the termination date until the end of the initial term or term year in which the termination occurred.
Such damages will be equal to the management fee earned by BH for the calendar month immediately 14 preceding the month in which the notice of termination is given, multiplied by the number of months and/or portions thereof remaining from the termination date until the end of the initial term or term year in which the termination occurred.
In addition, the presence of contamination or the failure to remediate contamination at our properties may expose us to third-party liability for costs of remediation and/or personal or property damage or materially adversely affect our ability to sell, lease or develop our properties or to borrow using the properties as collateral.
In addition, the presence of contamination or the failure to remediate contamination at our properties may expose us to third-party liability for costs of remediation and/or personal or property damage or materially adversely affect our ability to sell, lease 15 or develop our properties or to borrow using the properties as collateral.
Pursuant to these agreements, BH operates and leases the underlying properties in our portfolio. In addition to property management and leasing services, BH also provides us with market research, acquisition advice, a pipeline of investment opportunities and construction 15 management services.
Pursuant to these agreements, BH operates and leases the underlying properties in our portfolio. In addition to property management and leasing services, BH also provides us with market research, acquisition advice, a pipeline of investment opportunities and construction management services.
Additionally, BH also acts as a paymaster for the properties and is reimbursed at cost for various operating expenses it pays on behalf of the properties. 16 Termination .
Additionally, BH also acts as a paymaster for the properties and is reimbursed at cost for various operating expenses it pays on behalf of the properties. Termination .
Human Capital Disclosure As of December 31, 2022, we had three employees. We endeavor to maintain workplaces that are free from discrimination or harassment on the basis of color, race, sex, national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression or any other status protected by applicable law.
Human Capital Disclosure As of December 31, 2023, we had three employees. We endeavor to maintain workplaces that are free from discrimination or harassment on the basis of color, race, sex, national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression or any other status protected by applicable law.
We believe BH provides the following benefits: • manages approximately 106,000 multifamily units in 27 states and has managed multifamily communities for 30 years; • brings a scale of operations we could not otherwise achieve for approximately 3% of gross income, which is the contracted amount we pay for its property management services; • has operations in all of our current and desired markets, allowing us greater scale when entering new markets or make investments in non-core markets without making substantial investments in management infrastructure in those markets; • has a construction management operation and substantial experience in renovating Class B multifamily units; • its scale allows it to obtain highly competitive pricing as it pertains to the costs of our value-add program, increasing our return on investment for renovations; • helps us source and underwrite opportunities as well as assist in due diligence of properties prior to closing; • assists in locating potential buyers for our properties; • its size, scale and experience allows it to keep costs low and maximize rents and occupancy; and • has proved successful in driving other revenue growth at properties it manages. 11 Our Structure The following chart shows our ownership structure. * An affiliate of BH Equities, LLC is the property manager for all of our properties.
We believe BH provides the following benefits: • manages approximately 104,000 multifamily units in 27 states and has managed multifamily communities for 31 years; • brings a scale of operations we could not otherwise achieve for approximately 3% of gross income, which is the contracted amount we pay for its property management services; • has operations in all of our current and desired markets, allowing us greater scale when entering new markets or make investments in non-core markets without making substantial investments in management infrastructure in those markets; • has a construction management operation and substantial experience in renovating Class B multifamily units; • its scale allows it to obtain highly competitive pricing as it pertains to the costs of our value-add program, increasing our return on investment for renovations; • helps us source and underwrite opportunities as well as assist in due diligence of properties prior to closing; • assists in locating potential buyers for our properties; • its size, scale and experience allows it to keep costs low and maximize rents and occupancy; and • has proved successful in driving other revenue growth at properties it manages. 9 Our Structure The following chart shows our ownership structure. An affiliate of BH Equities, LLC is the property manager for all of our properties.
Our Adviser may, at its discretion and at any time, waive its right to reimbursement for eligible out-of-pocket 14 expenses paid on our behalf. Once waived, these expenses are considered permanently waived and become non-recoupable in the future. Expense Cap.
Our Adviser may, at its discretion and at any time, waive its right to reimbursement for eligible out-of-pocket expenses paid on our behalf. Once waived, these expenses are considered permanently waived and become non-recoupable in the future. 12 Expense Cap.
ITEM 1. BUSINESS General NexPoint Residential Trust, Inc. (the “Company,” “we,” “our”) was incorporated in Maryland on September 19, 2014, and has elected to be taxed as a REIT. The Company is focused on “value-add” multifamily investments primarily located in the Southeastern and Southwestern United States.
ITEM 1. B USINESS General NexPoint Residential Trust, Inc. (the “Company,” “we,” “our”) was incorporated in Maryland on September 19, 2014, and has elected to be taxed as a REIT. The Company is focused on “value-add” multifamily investments primarily located in the Southeastern and Southwestern United States.
Information contained on, or accessible through our website, is not incorporated by reference into and does not constitute a part of this annual report or any other report or documents we file with or furnish to the SEC. These documents may also be found on the SEC’s website at www.sec.gov.
Information contained on, or accessible through our website, is not incorporated by reference into and does not constitute a part of this Annual Report or any other report or documents we file with or furnish to the Securities and Exchange Commission ("SEC"). These documents may also be found on the SEC’s website at www.sec.gov.
Renovations to the exteriors and common areas include structural improvements that enhance the physical condition, value and/or useful life of our properties, as well as aesthetic improvements to, among others, landscap e and signage. We also seek to improve our competitive positioning by adding to, redecorating or otherwise enhancing our common areas and amenity offerings.
Renovations to the exteriors and common areas include structural improvements that enhance the physical condition, value and/or useful life of our properties, as well as aesthetic improvements to, among others, landscape and signage. We also seek to improve our competitive positioning by adding to, redecorating or otherwise enhancing our common areas and amenity offerings.
The members of our Adviser’s management team are Jim Dondero, Brian Mitts, Matt McGraner, D.C. Sauter and Matthew Goetz, all of whom are employed by our Adviser or its affiliates. 12 Our Advisory Agreement Below is a summary of the terms of our Advisory Agreement: Duties of Our Adviser .
The members of our Adviser’s management team are Jim Dondero, Brian Mitts, Matt McGraner and D.C. Sauter, all of whom are employed by our Adviser or its affiliates. Our Advisory Agreement Below is a summary of the terms of our Advisory Agreement: Duties of Our Adviser .
The Company is externally managed by the Adviser, through an agreement dated March 16, 2015, as amended, and renewed on February 22, 2023 for a one-year term (the “Advisory Agreement”), by and among the Company, the OP and the Adviser. The Adviser conducts substantially all of the Company’s operations and provides asset management services for its real estate investments.
The Company is externally managed by the Adviser, through an agreement dated March 16, 2015, as amended, and renewed on February 26, 2024 for a one-year term (the “Advisory Agreement”), by and among the Company, the OP and the Adviser. The Adviser conducts substantially all of the Company’s operations and provides asset management services for its real estate investments.
Our Business Objectives and Strategies Our primary business objectives are to: • deliver stable, attractive yields and long-term capital appreciation to our stockholders; • acquire multifamily properties in markets with attractive job growth and household formation fundamentals primarily in the Southeastern and Southwestern United States; • acquire assets at discounts to replacement cost; • implement a value-add program to increase returns to our stockholders; • own assets that provide lifestyle amenities and upgraded living spaces for low and moderate income renters; and • recycle capital from dispositions when economic and market conditions present opportunities that we believe are in the best interest of our stockholders. 8 We intend to accomplish these objectives by: • Focusing on Acquiring Class B Properties in Our Core Markets.
Our Business Objectives and Strategies Our primary business objectives are to: • deliver stable, attractive yields and long-term capital appreciation to our stockholders; • acquire multifamily properties in markets with attractive job growth and household formation fundamentals primarily in the Southeastern and Southwestern United States; • acquire assets at discounts to replacement cost; • implement a value-add program to increase returns to our stockholders; • own assets that provide lifestyle amenities and upgraded living spaces for low and moderate income renters; and • recycle capital from dispositions when economic and market conditions present opportunities that we believe are in the best interest of our stockholders.
On February 22, 2023, our Board, including the independent directors, unanimously approved the renewal of the Advisory Agreement with the Adviser for a one-year term.
On February 26, 2024, our Board, including the independent directors, unanimously approved the renewal of the Advisory Agreement with the Adviser for a one-year term.
(3) Prior year NOI was updated to include current year NOI add backs. • Same Store Growth: There are 31 properties encompassing 12,210 units of apartment space in our same store pool for the years ended December 31, 2022 and 2021 (our “2021-2022 Same Store” properties).
(3) Prior year NOI was updated to include current year NOI add backs. • Same Store Growth: There are 33 properties encompassing 12,378 units of apartment space in our same store pool for the years ended December 31, 2023 and 2022 (our “2022-2023 Same Store” properties).
As of December 31, 2022 , with the exception of the properties we acquired in 2022 , we have renovated the exteriors and common areas at a majority of the properties in our p ortfolio. We expect interior renovations, along with organic growth in rents, to be the primary drivers of rent and NOI growth at our properties.
As of December 31, 2023, we have renovated the exteriors and common areas at a majority of the properties in our portfolio. We expect interior renovations, along with organic growth in rents, to be the primary drivers of rent and NOI growth at our properties.
Since inception, for the properties in our portfolio as of December 31, 2022, we have completed full and partial renovations on 7,633 units at an average cost of $8,151 per renovated unit that has been leased as of December 31, 2022.
Since inception, for the properties in our portfolio as of December 31, 2023, we have completed full and partial renovations on 8,534 units at an average cost of $9,715 per renovated unit that has been leased as of December 31, 2023.
As of December 31, 2022, there were 26,050,945 common units in the OP (“OP Units”) outstanding, of which 25,951,154, or 99.6%, were owned by the Company and 99,791, or 0.4%, were owned by noncontrolling limited partners (see Note 10 to our consolidated financial statements).
As of December 31, 2023, there were 26,053,988 common units in the OP (“OP Units”) outstanding, of which 25,951,154, or 99.6%, were owned by the Company and 102,834, or 0.4%, were owned by noncontrolling limited partners (see Note 9 to our consolidated financial statements).
We will continue to seek opportunities to acquire primarily Class B multifamily properties at prices that we believe represent discounts to replacement cost, provide the potential for significant long-term value appreciation and that we expect will generate attractive yields for our stockholders.
We intend to accomplish these objectives by: • Focusing on Acquiring Class B Properties in Our Core Markets. We will continue to seek opportunities to acquire primarily Class B multifamily properties at prices that we believe represent discounts to replacement cost, provide the potential for significant long-term value appreciation and that we expect will generate attractive yields for our stockholders.
(2) Represents sales price, net of closing costs. 6 • Renovations: For the properties in our portfolio as of December 31, 2022, we completed full and partial renovations on 2,409 units at an average cost of $10,888 per renovated unit.
(2) Represents sales price, net of closing costs. 5 • Renovations: For the properties in our portfolio as of December 31, 2023, we completed full and partial renovations on 2,073 units at an average cost of $12,303 per renovated unit.
During the fourth quarter of 2022, we increased our quarterly dividend for the sixth time since the Spin-Off to $0.42 per share, which was an increase of $0.04 per share, or a 10.5% increase, over our previous quarterly dividends declared in 2022.
During the fourth quarter of 2023, we increased our quarterly dividend for the sixth time since the Spin-Off (as defined below) to $0.46242 per share, which was an increase of $0.04242 per share, or a 10.1% increase, over our previous quarterly dividends declared in 2023.
Since inception, for the properties in our portfolio as of December 31, 2022, we have completed full and partial renovations on 7,633 units out of our 15,127 total units with an average monthly rental increase per unit of $149 and an average cost of $8,151 per renovated unit that has been leased as of December 31, 2022.
Since inception, for the properties in our portfolio as of December 31, 2023, we have completed full and partial renovations on 8,534 units out of our 14,133 total units with an average monthly rental increase per unit of $169 and an average cost of $9,715 per renovated unit that has been leased as of December 31, 2023.
The increase in our quarterly dividend to $0.42 per share is an increase of $0.21 per share, or a 103.9% increase, over our quarterly dividends declared from the Spin-Off.
The increase in our quarterly dividend to $0.46242 per share is an increase of $0.26 per share, or a 124.5% increase, over our quarterly dividends declared from the Spin-Off.
Our value-add program has three components: 1) improvement of exteriors and common areas, 2) improvement of interiors and 3) management and cost improvements. 9 We invest in exterior and common areas improvements at our properties in an effort to enhance asset quality, to improve “curb appeal”/market positioning, and expand or enhance our amenity offerings, all of which we believe will improve tenant retention and modestly drive rent and NOI growth.
We invest in exterior and common areas improvements at our properties in an effort to enhance asset quality, to improve “curb appeal”/market positioning, and expand or enhance our amenity offerings, all of which we believe will improve tenant retention and modestly drive rent and NOI growth.
We have achieved average rent growth of 13.8%, or a $149 average monthly rental increase per unit, on all units renovated and leased as of December 31, 2022, resulting in a return on investment on capital expended for interior renovations of 22.0%. • Dividends: We declared dividends totaling $40.8 million, or $1.560 per share for the year ended December 31, 2022.
We have achieved average rent growth of 14.5%, or a $169 average monthly rental increase per unit, on all units renovated and leased as of December 31, 2023, resulting in a return on investment on capital expended for interior renovations of 20.9%. • Dividends: We declared dividends totaling $45.2 million, or $1.722 per share for the year ended December 31, 2023.
We utilize BH for property and construction management services and leasing, paying BH a management fee of approximately 3% of the monthly gross income from each property managed, as well as construction supervision fees and certain other fees described under “ — Property Management Agreements” below.
We utilize BH for property and construction management services and leasing, paying BH a management fee of approximately 3% of the monthly gross income from each property managed, as well as construction supervision fees and certain other fees described under “—Property Management Agreements” below. 13 Property Management Agreements Under these agreements, BH operates, coordinates and supervises the ordinary and usual business and affairs pertaining to the operation, maintenance, leasing, licensing, and management of each property.
Our Adviser’s investment approach combines its management team’s experience with a structure that emphasizes thorough market research, local market knowledge, underwriting discipline and risk management in evaluating potential investments with a goal of maximizing long-term stockholder value and a philosophy of thoughtful capital allocation and balance sheet management.
Our Adviser’s investment approach combines its management team’s experience with a structure that emphasizes thorough market research, local market knowledge, underwriting discipline and risk management in evaluating potential investments with a goal of maximizing long-term stockholder value and a philosophy of thoughtful capital allocation and balance sheet management. 7 Acquisition and Operating Strategy We seek primarily Class B multifamily properties that are priced at a discount to replacement cost.
Fixed rate financing is typically more expensive and less flexible since there are typically high prepayment penalties, yield maintenance payments and/or defeasance penalties when refinancing the debt prior to maturity.
Fixed rate financing is typically more expensive and less flexible since there are typically high prepayment penalties, yield maintenance payments and/or defeasance penalties when refinancing the debt prior to maturity. To the extent we intend to hold a property long-term, we will reassess the use of refinancing with fixed rate debt.
The terms of the management agreements will continue until the last day of the calendar month following the second anniversary of the agreement. Upon the expiration of the original term, the agreements will automatically renew on a month-to-month basis until terminated. The agreements may be terminated at any time with 60 days written notice. Proposed Management Plans .
The following summarizes the terms of the Management Agreements. Term . The terms of the Management Agreements will continue until the last day of the calendar month following the second anniversary of the Management Agreement. Upon the expiration of the original term, the Management Agreements will automatically renew on a month-to-month basis until terminated.
Our fourth quarter dividend equates to a 3.9% annualized yield based on our closing share price of $43.52 on December 31, 2022. • Results of Operations and Non-GAAP Measures: We reported the following net income, net operating income (“NOI”), funds from operations (“FFO”), core funds from operations (“Core FFO”) and adjusted funds from operations (“AFFO”) for the year ended December 31, 2022 as compared to the year ended December 31, 2021 (dollars in thousands): For the Year Ended December 31, 2022 2021 $ Change % Change Net income (loss) $ (9,291 ) $ 23,106 $ (32,397 ) (1) -140.2 % NOI (2) 157,424 (3) 128,763 28,661 22.3 % FFO attributable to common stockholders (2) 73,397 63,579 9,818 15.4 % Core FFO attributable to common stockholders (2) 81,800 62,487 19,313 30.9 % AFFO attributable to common stockholders (2) 91,370 70,919 20,451 28.8 % (1) The change in our net income (loss) between the periods primarily relates to a decrease in gain on sales of real estate of $31.5 million and increases in property operating expenses of $10.5 million and depreciation and amortization expense of $10.7 million, partially offset by an increase in total revenues of $44.8 million.
Our fourth quarter dividend equates to a 5.4% annualized yield based on our closing share price of $34.43 on December 31, 2023. • Results of Operations and Non-GAAP Measures: We reported the following net income (loss), net operating income (“NOI”), funds from operations (“FFO”), core funds from operations (“Core FFO”) and adjusted funds from operations (“AFFO”) for the year ended December 31, 2023 as compared to the year ended December 31, 2022 (dollars in thousands): For the Year Ended December 31, 2023 2022 $ Change % Change Net income (loss) $ 44,433 $ (9,291 ) $ 53,724 (1) -578.2 % NOI (2) 167,404 (3) 157,424 9,980 6.3 % FFO attributable to common stockholders (2) 71,420 73,397 (1,977 ) -2.7 % Core FFO attributable to common stockholders (2) 73,534 81,796 (8,262 ) -10.1 % AFFO attributable to common stockholders (2) 84,404 91,366 (6,962 ) -7.6 % (1) The change in our net income (loss) between the periods primarily relates to an increase in gain on sales of real estate of $53.2 million and increases in property operating expenses of $0.4 million and depreciation and amortization expense of $2.4 million, partially offset by an increase in total revenues of $13.5 million.
Our 2021-2022 Same Store properties exclude the following 9 properties in our portfolio as of December 31, 2022: Cutter’s Point, Old Farm, Stone Creek at Old Farm, The Verandas at Lake Norman, Creekside at Matthews, Six Forks Station, High House at Cary, The Adair, and Estates on Maryland as well as the 106 units that are currently down (see Note 5 to our consolidated financial statements).
Our 2022-2023 Same Store properties exclude the following 5 properties in our portfolio as of December 31, 2023: Old Farm, Stone Creek at Old Farm, The Adair, Estates on Maryland and Radbourne Lake as well as the 45 units that are currently down (see Note 4 to our consolidated financial statements).
Value-Add Strategy We will continue to implement our value-add strategy at our properties where we believe we can achieve a significant increase in rents above what would otherwise be the case with purely organic market increases.
Value-Add Strategy We will continue to implement our value-add strategy at our properties where we believe we can achieve a significant increase in rents above what would otherwise be the case with purely organic market increases. Our value-add program has three components: 1) improvement of exteriors and common areas, 2) improvement of interiors and 3) management and cost improvements.
For our 2021-2022 Same Store properties, we recorded the following operating metrics for the year ended December 31, 2022 as compared to the year ended December 31, 2021: Operating Metric 2022 2021 % Change Occupancy (1) 94.1 % 94.3 % -0.2 % Average Effective Monthly Rent Per Unit (2) $ 1,493 $ 1,267 17.8 % Rental income (in thousands) $ 210,179 $ 183,696 14.4 % Other income (in thousands) $ 5,455 $ 5,428 0.5 % NOI (in thousands) $ 129,279 $ 111,265 16.2 % (1) Occupancy is calculated as the number of units occupied as of December 31 for the respective year, divided by the total number of units, expressed as a percentage.
For our 2022-2023 Same Store properties, we recorded the following operating metrics for the year ended December 31, 2023 as compared to the year ended December 31, 2022: Operating Metric 2023 2022 % Change Occupancy (1) 94.7 % 94.1 % 0.6 % Average Effective Monthly Rent Per Unit (2) $ 1,509 $ 1,508 0.1 % Rental income (in thousands) $ 229,801 $ 214,664 7.1 % Other income (in thousands) $ 5,661 $ 5,271 7.4 % NOI (in thousands) $ 144,999 $ 134,020 8.2 % (1) Occupancy is calculated as the number of units occupied as of December 31 for the respective year, divided by the total number of units, expressed as a percentage.
Each management agreement requires that BH prepare and submit a proposed management plan and operating budget for the marketing, operation, repair and maintenance, and renovation of the property for the year the agreement is entered into. BH must submit subsequent proposed management plans 45 days prior to the beginning of the next year. Amounts Payable under the Management Agreements .
The Management Agreements may be terminated at any time with 60 days written notice. Proposed Management Plans . Each Management Agreement requires that BH prepare and submit a proposed management plan and operating budget for the marketing, operation, repair and maintenance, and renovation of the property for the year the Management Agreement is entered into.
For additional information regarding our portfolio, see Item 2, “Properties” and Notes 3, 4 and 5 to our consolidated financial statements. We evaluate our operating performance on an individual property level and view our real estate assets as one industry segment and, accordingly, our properties are aggregated into one reportable segment.
We evaluate our operating performance on an individual property level and view our real estate assets as one industry segment and, accordingly, our properties are aggregated into one reportable segment.
As of December 31, 2022, we had reserved approximately $11.9 million for our planned capital expenditures and other expenses to implement our value-add program, which will complete approximately 14,203 planned interior rehabs, eliminating the need for us to raise additional capital in order to carry out our currently planned value-add program.
As of December 31, 2023, we had reserved approximately $2.9 million for our planned capital expenditures and other expenses to implement our value-add program, which will complete approximately 13,209 planned interior rehabs, eliminating the need for us to raise additional capital in order to carry out our currently planned value-add program. 8 Disposition Strategy In general, we intend to hold our multifamily properties for production of rental income for a period of at least three years from the date of acquisition.
In calculating the advisory fee, we categorize our Average Real Estate Assets into either “Contributed Assets” or “New Assets.” The advisory fee on Contributed Assets may not exceed $4.5 million in any calendar year.
“Real Estate Assets” is defined broadly in the Advisory Agreement to include, among other things, investments in real estate-related securities and mortgages and reserves for capital expenditures (the value-add program). 11 In calculating the advisory fee, we categorize our Average Real Estate Assets into either “Contributed Assets” or “New Assets.” The advisory fee on Contributed Assets may not exceed $4.5 million in any calendar year.
Our Real Estate Portfolio As of December 31, 2022, we owned 40 properties representing 15,127 units that we lease in seven states that were approximately 94.1% occupied with a weighted average monthly effective rent per occupied apartment unit of $1,480.
Our Real Estate Portfolio As of December 31, 2023, we owned 38 properties representing 14,133 units that we lease in seven states that were approximately 94.7% occupied with a weighted average monthly effective rent per occupied apartment unit of $1,502. For additional information regarding our portfolio, see Item 2, “Properties” and Notes 3 and 4 to our consolidated financial statements.
In order to align our property manager’s interests with those of our stockholders, BH (through an affiliate) is a noncontrolling limited partner of the OP.
Property Management Strategy We seek to achieve long-term earnings growth through superior property management. To achieve this, we have partnered with BH to manage all of our properties as an external manager. In order to align our property manager’s interests with those of our stockholders, BH (through an affiliate) is a noncontrolling limited partner of the OP.
The entities that own the properties pay BH monthly for its services. Pursuant to the management agreements, BH may pay itself out of each property’s operating account. Any sums not paid within 10 days after becoming due bear interest at the rate of 18% per annum. Compensation under the management agreements consists of the following components: • Management Fee .
Any sums not paid within 10 days after becoming due bear interest at the rate of 18% per annum. Compensation under the Management Agreements consists of the following components: • Management Fee . The management fee is approximately 3% of the monthly gross income from each property.
As of December 31, 2022, the Company, through the OP and the wholly owned TRS, owned 40 properties representing 15,127 units in seven states, as further described under Item 2, “Properties” and Notes 3, 4 and 5 to our consolidated financial statements. 5 2022 Highlights Key highlights and transactions completed in 2022 include the following: • 2020 ATM Program: On March 4, 2020, the Company, the OP and the Adviser entered into separate equity distribution agreements with each of Jefferies LLC (“Jefferies”), Raymond James & Associates, Inc.
As of December 31, 2023, the Company, through the OP and the wholly owned TRS, owned 38 properties representing 14,133 units in seven states, as further described under Item 2, “Properties” and Notes 3 and 4 to our consolidated financial statements. 2023 Highlights Key highlights and transactions completed in 2023 include the following: • Dispositions: We sold two properties totaling 994 units in 2023.
However, noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants.
However, noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants. The obligation to make readily accessible accommodations is an ongoing one, and we will continue to assess our properties and make alterations as appropriate in this respect.
Details of the dispositions are in the table below (in thousands): Property Name Location Date of Sale Sales Price Outstanding Principal (1) Net Cash Proceeds (2) Gain on Sale of Real Estate Hollister Place Houston, Texas December 29, 2022 $ 36,750 $ 14,811 $ 21,496 $ 14,684 (1) Represents the outstanding principal balance when the loan was repaid.
Details of the dispositions are in the table below (in thousands): Property Name Location Date of Sale Sales Price Outstanding Principal (1) Net Cash Proceeds (2) Gain on Sale of Real Estate Silverbrook Grand Prairie, Texas September 22, 2023 $ 70,000 $ 46,088 $ 69,431 $ 43,107 Timber Creek Charlotte, North Carolina December 13, 2023 49,000 24,100 48,348 24,819 $ 119,000 $ 70,188 $ 117,779 $ 67,926 (1) Represents the outstanding principal balance when the loan was repaid.
Disposition Strategy In general, we intend to hold our multifamily properties for production of rental income for a period of at least three years from the date of acquisition. Economic and market conditions may influence us to hold our investments for different periods of time.
Economic and market conditions may influence us to hold our investments for different periods of time.
The increase in maturity dates averaged over 7.5 years for the 19 refinanced properties. • Cash Position: At December 31, 2022, we had $51.8 million of cash on our balance sheet, of which $11.9 million was reserved for future renovations, and $23.1million was reserved for lender-required escrows and security deposits.
On December 15, 2023, the Company made a $17.0 million principal payment on the Corporate Credit Facility, reducing the outstanding principal balance to $24.0 million as of December 31, 2023. • Cash Position: At December 31, 2023, we had $45.3 million of cash on our balance sheet, of which $2.9 million was reserved for future renovations, and $30.0 million was reserved for lender-required escrows and security deposits.
The obligation to make readily accessible accommodations is an ongoing one, and we will continue to assess our properties and make alterations as appropriate in this respect. 17 Fair Housing Act The Fair Housing Act (the “FHA”), its state law counterparts and the regulations promulgated by the U.S.
Fair Housing Act The Fair Housing Act (the “FHA”), its state law counterparts and the regulations promulgated by the U.S.
Removed
(“Raymond James”), KeyBanc Capital Markets Inc. (“KeyBanc”) and Truist Securities, Inc. f/k/a SunTrust Robinson Humphrey, Inc.
Added
On September 25, 2023, the Company made a $16.0 million principal payment on the Corporate Credit Facility.
Removed
(“Truist”, and together with Jefferies, Raymond James and KeyBanc, the “2020 ATM Sales Agents”), pursuant to which the Company may issue and sell from time to time 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 “2020 ATM Program”).
Added
BH must submit subsequent proposed management plans 45 days prior to the beginning of the next year. Amounts Payable under the Management Agreements . The entities that own the properties pay BH monthly for its services. Pursuant to the Management Agreements, BH may pay itself out of each property’s operating account.
Removed
Sales of shares of common stock, if any, may be made in transactions that are deemed to be “at the market” offerings, as defined in Rule 415 under the Securities Act, including, without limitation, sales made by means of ordinary brokers’ transactions on the New York Stock Exchange, to or through a market maker at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices based on prevailing market prices.
Removed
In addition to the issuance and sale of shares of common stock, the Company may enter into forward sale agreements with each of Jefferies, KeyBanc and Raymond James, Truist, or their respective affiliates, through the 2020 ATM Program.
Removed
During the year ended December 31, 2022, the Company issued 52,091 shares of common stock at an average price of $83.16 per share for gross proceeds of $4.3 million under the 2020 ATM Program.
Removed
The Company paid approximately $0.1 million in fees to the 2020 ATM Sales Agents with respect to such sales and incurred other issuance costs of approximately $0.3 million, both of which were netted against the gross proceeds and recorded in additional paid in capital.
Removed
The following table contains summary information of the 2020 ATM Program since inception: Gross proceeds $ 62,310,967 Common shares issued 1,120,910 Gross average sale price per share $ 55.59 Sales commissions $ 934,665 Offering costs 1,353,015 Net proceeds 60,023,287 Average price per share, net $ 53.55 • Acquisitions: We completed two acquisitions in 2022.
Removed
Details of the acquisition are in the table below (dollars in thousands): Property Name Location Date of Acquisition Purchase Price Mortgage Debt (1) # Units Effective Ownership The Adair Sandy Springs, Georgia April 1, 2022 $ 65,500 $ 35,115 232 100 % Estates on Maryland Phoenix, Arizona April 1, 2022 77,900 43,157 330 100 % $ 143,400 $ 78,272 562 (1) For additional information regarding our debt, see Note 6 to our consolidated financial statements. • Dispositions: We sold one property totaling 260 units in 2022.
Removed
In addition, on June 30, 2021, in connection with entering into the Amended and Restated Corporate Credit Facility, the Company, through the OP, terminated its prior $225.0 million revolving credit facility with Truist Bank, as administrative agent, and the lenders from time to time party thereto, prior to the maturity date of January 28, 2022.
Removed
Subject to conditions provided in the Amended and Restated Corporate Credit Facility, the Amended and Restated Corporate Credit Facility may be increased up to an additional $100.0 million (the “Accordion Feature”) if the lenders agree to increase their commitments or if the lenders agree for the increase to be funded by any additional lender proposed by the Company, through the OP.
Removed
The Amended and Restated Corporate Credit Facility will mature on June 30, 2025 with respect to the revolving commitments, unless the Company exercises its option to voluntarily and permanently reduce all of the revolving commitments before the maturity date or elects to exercise its right and option to extend the facility with respect to the revolving commitments for a single one-year term.
Removed
On December 30, 2022, the Company used proceeds from the sale of Hollister Place and the 19-property mortgage debt refinance to pay down $25.5 million of the Corporate Credit Facility.
Removed
See Note 6 to our consolidated financial statements. • Refinance of 19 Properties in the Fourth Quarter of 2022: During the fourth quarter of 2022, the Company completed a cash out refinance on 19 of its properties.
Removed
The refinance decreased the spread on 17 of the refinanced properties that were previously variable rates by an average spread of approximately 14 basis points, and transitioned two properties that were previously fixed rate mortgages to floating rate mortgages with a spread of 1.55%.
Removed
The Company secured a spread rate of 1.55% on 18 of the properties, and 2.09% for one property. For all 19 of the refinanced properties, the Company transitioned from one-month LIBOR or fixed rates to one-month Term SOFR as the reference rate and pushed the maturity dates to December of 2032.
Removed
Acquisition and Operating Strategy We seek primarily Class B multifamily properties that are priced at a discount to replacement cost.
Removed
To the extent we intend to hold a property long-term, we will reassess the use of refinancing with fixed rate debt. 10 Property Management Strategy We seek to achieve long-term earnings growth through superior property management. To achieve this, we have partnered with BH to manage all of our properties as an external manager.
Removed
“Real Estate Assets” is defined broadly in the Advisory Agreement to include, among other things, investments in real estate-related securities and mortgages and reserves for capital expenditures (the value-add program).
Removed
Property Management Agreements Under these agreements, BH operates, coordinates and supervises the ordinary and usual business and affairs pertaining to the operation, maintenance, leasing, licensing, and management of each property. The following summarizes the terms of the management agreements. Term .
Removed
The management fee is approximately 3% of the monthly gross income from each property.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

94 edited+37 added−26 removed289 unchanged
Biggest changeYou should read this summary together with the more detailed description of each risk factor contained below. • unfavorable changes in market and economic conditions in the United States and globally and in the specific markets where our properties are located; • macroeconomic trends including inflation and rising interest rates may adversely affect our financial conditions and results of operations; • risks associated with the COVID-19 pandemic, including unpredictable variants and the future outbreak of other highly infectious or contagious diseases; • risks associated with the ownership of real estate; • limited ability to dispose of assets because of the relative illiquidity of real estate investments; • our multifamily properties are concentrated in certain geographic markets in the Southeastern and Southwestern United States, which makes us more susceptible to adverse developments in those markets; • increased risks associated with our strategy of acquiring value enhancement multifamily properties rather than more conservative investment strategies; • failure to succeed in new markets may have adverse consequences on our performance; • competition for attractive investment opportunity and any increased affordability of residential homes could limit our ability to lease our apartments or increase or maintain rents; • high costs associated with the compliance with various accessibility, environmental, building and health and safety laws and regulations; • risks associated with buying owning and selling apartment communities, including contingent or unknown liabilities related to the properties and the risk that we may not be able to yield anticipated results or sell certain properties; • risks associated with operating through joint ventures and funds; • our dependence on information systems; • risks associated with breaches of our data security; • costs associated with being a public company, including compliance with securities laws; • the risk that our business could be adversely impacted if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting; • risks associated with our substantial current indebtedness and indebtedness we may incur in the future; • risks associated with derivatives or hedging activity; 20 • risks associated with representations and warranties made by us in connection with sales of our properties may subject us to liability that could result in losses and could harm our operating results and, therefore, distributions we make to our stockholders; • loss of key personnel of our Sponsor, our Adviser and our property manager; • the risk that we may not replicate the historical results achieved by other entities managed or sponsored by affiliates of our Adviser, members of our Adviser’s management team or by our Sponsor or its affiliates; • risks associated with our Adviser’s ability to terminate the Advisory Agreement (as defined below); • our ability to change our major policies, operations and targeted investments without stockholder consent; • the substantial fees and expenses we pay to our Adviser and its affiliates; • risks associated with any potential internalization of our management functions; • conflicts of interest and competing demands for time faced by our Adviser, our Sponsor and their officers and employees; • the risk that we may compete with other entities affiliated with our Sponsor or property manager for properties and tenants; • failure to maintain our status as a REIT; • failure of our operating partnership to be taxable as a partnership for U.S. federal income tax purposes, possibly causing us to fail to qualify for or to maintain REIT status; • c ompliance with REIT requirements, which may limit our ability to hedge our liabilities effectively and cause us to forgo otherwise attractive opportunities, liquidate certain of our investments or incur tax liabilities; • risks associated with our ownership of interests in TRSs; • the recognition of taxable gains from the sale of properties as a result of the inability to complete certain like-kind exchanges in accordance with Section 1031 of the Code • the risk that the IRS may consider certain sales of properties to be prohibited transactions, resulting in a 100% penalty tax on any taxable gain; • the ineligibility of dividends payable by REITs for the reduced tax rates available for some dividends; • risks associated with the stock ownership restrictions of the Code for REITs and the stock ownership limit imposed by our charter; • the ability of our board of directors to revoke our REIT qualification without stockholder approval; • recent and potential legislative or regulatory tax changes or other actions affecting REITs; • risks associated with the market for our common stock and the general volatility of the capital and credit markets; • failure to generate sufficient cash flows to service our outstanding indebtedness or pay distributions at expected levels; • risks associated with limitations of liability for and our indemnification of our directors and officers; • the risk that legal proceedings we become involved in from time to time could adversely affect our business; and • the risk that acts of violence could decrease the value of our assets and have an adverse effect on our business and results of operations. 21 Risks Related to Our Business and Industry Unfavorable market and economic conditions in the United States and globally and in the specific markets or submarkets where our properties are located could adversely affect occupancy levels, rental rates, rent collections, operating expenses and the overall market value of our assets, and impair our ability to sell, recapitalize or refinance our assets.
Biggest changeYou should read this summary together with the more detailed description of each risk factor contained below. • unfavorable changes in market and economic conditions in the United States and globally and in the specific markets where our properties are located; 17 • macroeconomic trends including inflation and high interest rates may adversely affect our financial conditions and results of operations; • risks associated with the ownership of real estate; • limited ability to dispose of assets because of the relative illiquidity of real estate investments; • our multifamily properties are concentrated in certain geographic markets in the Southeastern and Southwestern United States, which makes us more susceptible to adverse developments in those markets; • increased risks associated with our strategy of acquiring value enhancement multifamily properties rather than more conservative investment strategies; • failure to succeed in new markets may have adverse consequences on our performance; • competition for attractive investment opportunity and any increased affordability of residential homes could limit our ability to lease our apartments or increase or maintain rents; • high costs associated with the compliance with various accessibility, environmental, building and health and safety laws and regulations; • risks associated with buying owning and selling apartment communities, including contingent or unknown liabilities related to the properties and the risk that we may not be able to yield anticipated results or sell certain properties; • risks associated with operating through joint ventures and funds; • our dependence on information systems; • risks associated with breaches of our data security; • costs associated with being a public company, including compliance with securities laws; • the risk that our business could be adversely impacted if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting; • risks associated with our substantial current indebtedness and indebtedness we may incur in the future; • risks associated with derivatives or hedging activity; • risks associated with representations and warranties made by us in connection with sales of our properties may subject us to liability that could result in losses and could harm our operating results and, therefore, distributions we make to our stockholders; • loss of key personnel of our Sponsor, our Adviser and our property manager; • the risk that we may not replicate the historical results achieved by other entities managed or sponsored by affiliates of our Adviser, members of our Adviser’s management team or by our Sponsor or its affiliates; • risks associated with our Adviser’s ability to terminate the Advisory Agreement (as defined below); • our ability to change our major policies, operations and targeted investments without stockholder consent; • the substantial fees and expenses we pay to our Adviser and its affiliates; • risks associated with any potential internalization of our management functions; • conflicts of interest and competing demands for time faced by our Adviser, our Sponsor and their officers and employees; • the risk that we may compete with other entities affiliated with our Sponsor or property manager for properties and residents; • failure to maintain our status as a REIT; • failure of our operating partnership to be taxable as a partnership for U.S. federal income tax purposes, possibly causing us to fail to qualify for or to maintain REIT status; • compliance with REIT requirements, which may limit our ability to hedge our liabilities effectively and cause us to forgo otherwise attractive opportunities, liquidate certain of our investments or incur tax liabilities; • risks associated with our ownership of interests in TRSs; 18 • the recognition of taxable gains from the sale of properties as a result of the inability to complete certain like-kind exchanges in accordance with Section 1031 of the Code • the risk that the IRS may consider certain sales of properties to be prohibited transactions, resulting in a 100% penalty tax on any taxable gain; • the risk that we may be subject to other tax liabilities that may reduce our cash flows and distributions on our shares; • the ineligibility of dividends payable by REITs for the reduced tax rates available for some dividends; • risks associated with the stock ownership restrictions of the Code for REITs and the stock ownership limit imposed by our charter; • the ability of our board of directors to revoke our REIT qualification without stockholder approval; • recent and potential legislative or regulatory tax changes or other actions affecting REITs; • foreign investors may be subject to U.S. federal income tax or withholding tax on distributions received from us or on proceeds and the disposition of our current common stock; • risks associated with the market for our common stock and the general volatility of the capital and credit markets; • failure to generate sufficient cash flows to service our outstanding indebtedness or pay distributions at expected levels; • risks associated with limitations of liability for and our indemnification of our directors and officers; • the risk that legal proceedings we become involved in from time to time could adversely affect our business; and • the risk that acts of violence could decrease the value of our assets and have an adverse effect on our business and results of operations.
Certain provisions of the MGCL may have the effect of inhibiting a third party from acquiring us or of impeding a change of control under circumstances that otherwise could provide our common stockholders with the opportunity to realize a premium over the then-prevailing market price of such shares, including: • “business combination” provisions that, subject to limitations, prohibit certain business combinations between an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding shares of voting stock or an affiliate or associate of the corporation who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation) or an affiliate of any interested stockholder and us for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes two super-majority stockholder voting requirements on these combinations; and • “control share” provisions that provide that holders of “control shares” of us (defined as voting shares of stock that, if aggregated with all other shares of stock owned or controlled by the acquirer, would entitle the acquirer to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of issued and outstanding “control shares”) have no voting rights except to the extent 42 approved by our stockholders by the affirmative vote of at least two-thirds of all of the votes entitled to be cast on the matter, excluding all interested shares.
Certain provisions of the MGCL may have the effect of inhibiting a third party from acquiring us or of impeding a change of control under circumstances that otherwise could provide our common stockholders with the opportunity to realize a premium over the then-prevailing market price of such shares, including: • “business combination” provisions that, subject to limitations, prohibit certain business combinations between an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding shares of voting stock or an affiliate or associate of the corporation who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding stock of the corporation) or an affiliate of any interested stockholder and us for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes two super-majority stockholder voting requirements on these combinations; and • “control share” provisions that provide that holders of “control shares” of us (defined as voting shares of stock that, if aggregated with all other shares of stock owned or controlled by the acquirer, would entitle the acquirer to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of issued and outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all of the votes entitled to be cast on the matter, excluding all interested shares.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have subject matter jurisdiction, any state court located within the state of Maryland, or, if all such state courts do not have subject matter jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for (a) any Internal Corporate Claim, as such term is defined in the MGCL, or any successor provision thereof, (b) any derivative action or proceeding brought on behalf of the Corporation, (c) any action asserting a claim of breach of any duty owed by any director or officer or other employee of the Company to the Company or to the stockholders of the Company, (d) any action asserting a claim against the Company or any director or officer or other employee of the Company arising pursuant to any provision of the MGCL, the Charter or the Bylaws, (e) any action or proceeding to interpret, apply, enforce or determine the validity of the Charter or the Bylaws of the Company (including any right, obligation, or remedy thereunder), (f) any action or proceeding as to which the MGCL confers jurisdiction on the Circuit Court for Baltimore City, Maryland, or (g) any action asserting a claim against the Company or any director or officer or other employee of the Company that is governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants, except that the foregoing does not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have subject matter jurisdiction, any state court located within the state of Maryland, or, if all such state courts do not have subject matter jurisdiction, the United States District Court for the District of Maryland will be the sole and exclusive forum for (a) any Internal Corporate Claim, as such term is defined in the MGCL, or any successor provision thereof, (b) any derivative action or proceeding brought on behalf of the Corporation, (c) any action asserting a claim of breach of any duty owed by any director or officer or other employee of the Company to the Company or to the stockholders of the Company, (d) any action asserting a claim against the Company or any director or officer or other employee of the Company arising pursuant to any provision of the MGCL, the Charter or the Bylaws, (e) any action or proceeding to interpret, apply, enforce or determine the validity of the Charter or the Bylaws of the Company (including any right, obligation, or remedy thereunder), (f) any action or proceeding as to which the MGCL confers jurisdiction on the Circuit Court for Baltimore City, Maryland, or (g) any action asserting a claim against the Company or any director or officer or other employee of the Company that is governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants, except that the foregoing does not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
For example, tenants may default on rent payments, make unreasonable and repeated demands for service or improvements, make unsupported or unjustified complaints to regulatory or political authorities, use our properties for illegal purposes, damage or make unauthorized structural changes to our properties that are not covered by security deposits, refuse to leave the property upon termination of the lease, engage in domestic violence or similar disturbances, disturb nearby residents with noise, trash, odors or eyesores, fail to comply with HOA regulations, sublet to less desirable individuals in violation of our lease or permit unauthorized persons to live with them.
For example, residents may default on rent payments, make unreasonable and repeated demands for service or improvements, make unsupported or unjustified complaints to regulatory or political authorities, use our properties for illegal purposes, damage or make unauthorized structural changes to our properties that are not covered by security deposits, refuse to leave the property upon termination of the lease, engage in domestic violence or similar disturbances, disturb nearby residents with noise, trash, odors or eyesores, fail to comply with HOA regulations, sublet to less desirable individuals in violation of our lease or permit unauthorized persons to live with them.
Under various federal, state and local environmental and public health laws, regulations and ordinances, we may be required, regardless of knowledge or responsibility, to investigate and remediate the effects of hazardous or toxic substances or petroleum product releases at our properties (including in some cases natural substances such as methane and radon gas) and may be held liable under these laws or common law to a governmental entity or to third parties for property, personal injury or natural resources damages and for investigation and remediation costs incurred as a result of the contamination.
Under various federal, state and local environmental and public health laws, regulations and ordinances, we may be required, regardless of knowledge or responsibility, to investigate and remediate the effects of hazardous or toxic substances or petroleum product releases at our properties (including in some cases natural substances such as methane and radon gas) and may be held liable under these laws or 25 common law to a governmental entity or to third parties for property, personal injury or natural resources damages and for investigation and remediation costs incurred as a result of the contamination.
Under applicable provisions of the Code regarding prohibited transactions by REITs, while we qualify as a REIT, we will be subject to a 100% penalty tax on any gain recognized on the sale or other disposition of any property (other than foreclosure property) that we own or hold an interest in, directly or indirectly through any subsidiary entity, including our operating partnership, but generally excluding TRSs, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of a trade or business.
Under applicable provisions of the Code regarding prohibited transactions by REITs, while we qualify as a REIT, we will be subject to a 100% penalty tax on any gain recognized on the sale or other disposition of any property (other than foreclosure property) that we own or hold an interest in, directly or indirectly through any 34 subsidiary entity, including our operating partnership, but generally excluding TRSs, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of a trade or business.
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 will also 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.
Any convertible preferred units would have, and any series or class of our preferred stock would likely have, a preference on distribution payments, periodically or upon liquidation, which could eliminate or otherwise limit our ability to make distributions to common stockholders. Existing stockholders do not have preemptive rights to any shares we issue in the future.
Any convertible preferred units would have, and any series or class of our 38 preferred stock would likely have, a preference on distribution payments, periodically or upon liquidation, which could eliminate or otherwise limit our ability to make distributions to common stockholders. Existing stockholders do not have preemptive rights to any shares we issue in the future.
A change in our targeted investments or investment guidelines, which may occur without notice to you or without your consent, may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our common stock and our ability to make distributions to you.
A change in our targeted investments or investment guidelines, which may occur without notice to you or without your consent, may increase our exposure to interest rate risk, default risk and real 30 estate market fluctuations, all of which could adversely affect the value of our common stock and our ability to make distributions to you.
To help ensure that we meet these tests, among other purposes, our charter restricts the acquisition and ownership of shares of our common stock. Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT while we so qualify.
To help ensure that we meet these tests, among other purposes, our charter restricts the acquisition, ownership and transfer of shares of our common stock. Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT while we so qualify.
In addition, the adverse effects that actual or threatened terrorist attacks could have on national economic conditions, as well as economic conditions in the markets in which we operate, could similarly have a material adverse effect on our business and results of operations. The direct and indirect impacts of climate change may adversely affect our business.
In addition, the adverse effects that actual or threatened terrorist attacks could have on national economic conditions, as well as economic conditions in the markets in which we operate, could similarly have a material adverse effect on our business and results of operations. 41 The direct and indirect impacts of climate change may adversely affect our business.
Representations and warranties made by us in connection with sales of our properties may subject us to liability that could result in losses and could harm our operating results and, therefore, distributions we make to our stockholders. 27 When we sell a property, we may be required to make representations and warranties regarding the property and other customary items.
Representations and warranties made by us in connection with sales of our properties may subject us to liability that could result in losses and could harm our operating results and, therefore, distributions we make to our stockholders. When we sell a property, we may be required to make representations and warranties regarding the property and other customary items.
In the event such a claim were made against us under a “bad boy” carve out guarantee, following foreclosure on mortgages or related loans, and such claim were successful, our business and financial results could be materially adversely affected. Derivatives and hedging activity could adversely affect cash flow.
In the event such a claim were made against us under a “bad boy” carve out guarantee, following foreclosure on mortgages or related loans, and such claim were successful, our business and financial results could be materially adversely affected. 28 Derivatives and hedging activity could adversely affect cash flow.
In order to qualify as a REIT, we must distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and 37 excluding net capital gain.
In order to qualify as a REIT, we must distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding net capital gain.
Unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Unless the Company consents in writing to the selection of an alternative forum, the 40 federal district courts of the United States of America will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Our inability to sell our properties on favorable terms or at all could have a material adverse effect on our sources of working capital and our ability to satisfy our debt obligations. In addition, real estate can at times be difficult to sell quickly at prices we find acceptable.
Our inability to sell our properties on favorable terms or at all could have a material adverse effect on our sources of working capital and our 20 ability to satisfy our debt obligations. In addition, real estate can at times be difficult to sell quickly at prices we find acceptable.
However, because our Adviser is entitled to receive substantial compensation regardless of performance, our Adviser’s interests are not wholly aligned with those of our stockholders. In that regard, our Adviser could be motivated to recommend riskier or more speculative investments that would entitle our Adviser to the highest fees.
However, because our 31 Adviser is entitled to receive substantial compensation regardless of performance, our Adviser’s interests are not wholly aligned with those of our stockholders. In that regard, our Adviser could be motivated to recommend riskier or more speculative investments that would entitle our Adviser to the highest fees.
If we cannot maintain effective procedures or internal control over financial reporting, or our independent registered public accounting firm cannot provide an 43 unqualified attestation report on the effectiveness of our internal control over financial reporting, investor confidence and, in turn, the market price of our common stock could decline.
If we cannot maintain effective procedures or internal control over financial reporting, or our independent registered public accounting firm cannot provide an unqualified attestation report on the effectiveness of our internal control over financial reporting, investor confidence and, in turn, the market price of our common stock could decline.
We may be exposed to a variety of risks if we choose to enter new markets, including an inability to accurately evaluate local market conditions, to identify appropriate acquisition opportunities, to hire and retain key personnel and a lack of familiarity with local 24 governmental and permitting procedures.
We may be exposed to a variety of risks if we choose to enter new markets, including an inability to accurately evaluate local market conditions, to identify appropriate acquisition opportunities, to hire and retain key personnel and a lack of familiarity with local governmental and permitting procedures.
We may not be in a position or have the opportunity in the future to make suitable property acquisitions on favorable terms. We are subject to certain risks associated with selling apartment communities, which could limit our operational and financial flexibility.
We may not be in a position or have the opportunity in the future to make suitable property acquisitions on favorable terms. 22 We are subject to certain risks associated with selling apartment communities, which could limit our operational and financial flexibility.
As part of our due diligence procedures in connection with the acquisition of a property, we typically conduct an investigation of the property’s compliance with known laws and regulatory requirements with which we must comply once we acquire a property, including a review of compliance with the ADA and local zoning regulations.
As part of our due diligence procedures in connection with the acquisition of a property, we typically conduct an investigation of the 23 property’s compliance with known laws and regulatory requirements with which we must comply once we acquire a property, including a review of compliance with the ADA and local zoning regulations.
These damages and costs may be substantial and may 28 exceed any insurance coverage we have for such events. The presence of such substances, or the failure to properly remediate the contamination, may adversely affect our ability to borrow against, sell or rent the affected property.
These damages and costs may be substantial and may exceed any insurance coverage we have for such events. The presence of such substances, or the failure to properly remediate the contamination, may adversely affect our ability to borrow against, sell or rent the affected property.
This competition could increase prices for properties of the type we would likely pursue and adversely affect our profitability and impede our growth. Competition and any increased affordability of residential homes could limit our ability to lease our apartments or increase or maintain rents.
This competition could increase prices for properties of the type we would likely pursue and adversely affect our profitability and impede our growth. 21 Competition and any increased affordability of residential homes could limit our ability to lease our apartments or increase or maintain rents.
If our operating partnership failed to qualify as a partnership or is not otherwise disregarded for U.S. federal income tax purposes, we would cease to qualify as a REIT. Our OP intends to qualify as a partnership for U.S. federal income tax purposes, and intends to take that position for all income tax reporting purposes.
If our operating partnership failed to qualify as a partnership or is not otherwise disregarded for U.S. federal income tax purposes, we would cease to qualify as a REIT. Our operating partnership intends to qualify as a partnership for U.S. federal income tax purposes, and intends to take that position for all income tax reporting purposes.
At the current maximum ordinary income tax rate of 37% applicable for taxable years beginning before January 1, 2026, the maximum tax rate on ordinary REIT dividends for non-corporate stockholders is 29.6%.
At the current maximum ordinary income tax rate of 37% applicable for taxable 35 years beginning before January 1, 2026, the maximum tax rate on ordinary REIT dividends for non-corporate stockholders is 29.6%.
Our Board granted a waiver from the ownership limits applicable to holders of our common stock to Jim Dondero and certain of his affiliates and may grant additional waivers in the future.
Our Board granted a waiver from the ownership limits applicable to holders of our common stock 39 to Jim Dondero and certain of his affiliates and may grant additional waivers in the future.
Our ability to lease our properties at favorable rates is adversely affected by increases in supply of multifamily communities in our markets and is dependent upon overall economic conditions, which are adversely affected by, among other things, COVID-19 inflation, interest rates, a recession, personal debt levels, a downturn in the housing market, stock market volatility and uncertainty about the future.
Our ability to lease our properties at favorable rates is adversely affected by increases in supply of multifamily communities in our markets and is dependent upon overall economic conditions, which are adversely affected by, among other things, inflation, interest rates, a recession, personal debt levels, a downturn in the housing market, stock market volatility and uncertainty about the future.
Damage to our properties may delay re-leasing after eviction, necessitate expensive repairs or impair the rental income or value of the property resulting in a lower than expected rate of return. Increases in unemployment levels and other adverse changes in the economic conditions in our markets could result in substantial tenant defaults.
Damage to our properties may delay re-leasing after eviction, necessitate expensive repairs or impair the rental income or value of the property resulting in a lower than expected rate of return. Increases in unemployment levels and other adverse changes in the economic conditions in our markets could result in substantial resident defaults.
In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord at that property and will incur costs in protecting our investment and re-leasing the property. In addition, we rely on information supplied by prospective residents in making tenant selections, which may in some cases be false.
In the event of a resident default or bankruptcy, we may experience delays in enforcing our rights as landlord at that property and will incur costs in protecting our investment and re-leasing the property. In addition, we rely on information supplied by prospective residents in making resident selections, which may in some cases be false.
To the extent our exposure to increases in interest rates on any of our debt is not eliminated through interest rate swaps and interest rate protection agreements that we may utilize for hedging purposes, such increases will result in higher debt service costs which will adversely affect our cash flows.
To the extent our exposure to increases in or high interest rates on any of our debt is not eliminated through interest rate swaps and interest rate protection agreements that we may utilize for hedging purposes, such increases will result in higher debt service costs which will adversely affect our cash flows.
A decrease in residential mortgage interest rates and government-sponsored programs to promote home ownership may encourage potential renters to purchase residences rather than lease them, thereby causing a decline in the occupancy rates of our properties. We depend on our tenants for substantially all of our revenues.
A decrease in residential mortgage interest rates and government-sponsored programs to promote home ownership may encourage potential renters to purchase residences rather than lease them, thereby causing a decline in the occupancy rates of our properties. We depend on our residents for substantially all of our revenues.
Our level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following: • require us to dedicate a substantial portion of cash flow from operations to the payment of principal, and interest on, indebtedness, thereby reducing the funds available for other purposes; • make it more difficult for us to borrow additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability to meet operational needs; • force us to dispose of one or more of our properties, possibly on unfavorable terms (including the possible application of the 100% tax on income from prohibited transactions, discussed below in “—Risks Related to Our Structure”) or in violation of certain covenants to which we may be subject; 30 • subject us to increased sensitivity to interest rate increases; • make us more vulnerable to economic downturns, adverse industry conditions or catastrophic external events; • limit our ability to withstand competitive pressures; • limit our ability to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness; • reduce our flexibility in planning for or responding to changing business, industry and economic conditions; and/or • place us at a competitive disadvantage to competitors that have relatively less debt than we have.
Our 27 level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following: • require us to dedicate a substantial portion of cash flow from operations to the payment of principal, and interest on, indebtedness, thereby reducing the funds available for other purposes; • make it more difficult for us to borrow additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability to meet operational needs; • force us to dispose of one or more of our properties, possibly on unfavorable terms (including the possible application of the 100% tax on income from prohibited transactions, discussed below in “—Risks Related to Our Structure”) or in violation of certain covenants to which we may be subject; • subject us to increased sensitivity to an increase in or high interest rate; • make us more vulnerable to economic downturns, adverse industry conditions or catastrophic external events; • limit our ability to withstand competitive pressures; • limit our ability to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness; • reduce our flexibility in planning for or responding to changing business, industry and economic conditions; and/or • place us at a competitive disadvantage to competitors that have relatively less debt than we have.
In addition, any TRS we form in the future will be subject to corporate U.S. federal, state and local taxes. State, local and non-U.S. income tax laws may differ substantially from the corresponding U.S. federal income tax laws. Any of these taxes would decrease cash available for distributions to stockholders.
In addition, our TRS and any TRS we form in the future will be 33 subject to corporate U.S. federal, state and local taxes. State, local and non-U.S. income tax laws may differ substantially from the corresponding U.S. federal income tax laws. Any of these taxes would decrease cash available for distributions to stockholders.
We will be required to pay a 100% tax on any “redetermined rents,” “redetermined deductions,” “excess interest” or “redetermined TRS service income.” In general, redetermined rents are rents from real property that are overstated as a result of services furnished to any of our tenants by a TRS of ours.
We will be required to pay a 100% tax on any “redetermined rents,” “redetermined deductions,” “excess interest” or “redetermined TRS service income.” In general, redetermined rents are rents from real property that are overstated as a result of services furnished to any of our residents by a TRS of ours.
We have a substantial amount of indebtedness, which may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund future needs. As of December 31, 2022, there was $1.6 billion of mortgage debt outstanding related to our portfolio.
We have a substantial amount of indebtedness, which may limit our financial and operating activities and may adversely affect our ability to incur additional debt to fund future needs. As of December 31, 2023, there was $1.6 billion of mortgage debt outstanding related to our portfolio.
We cannot assure you, however, that the IRS will not challenge the status of our OP or any other subsidiary partnership in which we own an interest as a partnership for U.S. federal income tax purposes, or that a court would not sustain such a challenge.
We cannot assure you, however, that the IRS will not challenge the status of our operating partnership or any other subsidiary partnership in which we own an interest as a partnership for U.S. federal income tax purposes, or that a court would not sustain such a challenge.
This, in turn, could have a material adverse effect on our operating results and negatively affect our ability to pay dividends to our stockholders. Breaches of our data security could materially harm our business and reputation. We collect and retain certain personal information provided by our tenants.
This, in turn, could have a material adverse effect on our operating results and negatively affect our ability to pay dividends to our stockholders. Breaches of our data security could materially harm our business and reputation. We collect and retain certain personal information provided by our residents.
Our Sponsor and/or its affiliates and BH and its affiliates may own and/or manage properties in the same geographical areas in which we currently own and expect to acquire real estate assets. Therefore, our properties may compete for tenants with other properties owned and/or managed by our Sponsor and its affiliates and BH and its affiliates.
Our Sponsor and/or its affiliates and BH and its affiliates may own and/or manage properties in the same geographical areas in which we currently own and expect to acquire real estate assets. Therefore, our properties may compete for residents with other properties owned and/or managed by our Sponsor and its affiliates and BH and its affiliates.
However, our OP would be treated as a corporation for U.S. federal income tax purposes if it was a “publicly traded partnership,” unless at least 90% of its income was qualifying income as defined in the Code.
However, our operating partnership would be treated as a corporation for U.S. federal income tax purposes if it was a “publicly traded partnership,” unless at least 90% of its income was qualifying income as defined in the Code.
The war in Ukraine adds, and other international tensions or escalations of conflict may add, instability to the uncertainty driving socioeconomic forces, which may continue to have an impact on global trade and result in inflation or economic instability.
The war in Ukraine and the Israel-Hamas war adds, and other international tensions or escalations of conflict may add, instability to the uncertainty driving socioeconomic forces, which may continue to have an impact on global trade and result in inflation or economic instability.
Inflationary pressures have also increased or may have the effect of increasing our costs related to property management, third-party contractors and vendors, insurance, transportation and taxes, and our residents 22 may also be adversely impacted by higher cost of living expenses, including food, energy and transportation, which may increase our rate of tenant defaults and harm our operating results.
Inflationary pressures have also increased or may have the effect of increasing our costs related to property management, third-party contractors and vendors, insurance, transportation and taxes, and our residents may also be adversely impacted by higher cost of living expenses, including food, energy and transportation, which may increase our rate of resident defaults and harm our operating results.
U.S. f ederal, state and local corporate income tax rates may be increased in the future, and any such increase would reduce the amount of the net proceeds available for distribution by us to our stockholders from the sale of property or other income earned through a TRS after the effective date of any increase in such tax rates.
U.S. federal, state and local corporate income tax rates may be increased in the future, and any such increase would reduce the amount of the net proceeds available for distribution by us to our stockholders from the sale of property or other income earned through a TRS after the effective date of any increase in such tax rates.
As of December 31, 2022, we had approximately $1.5 billion and $119.5 million of outstanding consolidated indebtedness under our Freddie Mac and Fannie Mae mortgage loans, respectively. We rely on national and regional institutions, including Freddie Mac and Fannie Mae, to provide financing for our acquisitions and permanent financing on properties we may develop in the future.
As of December 31, 2023, we had approximately $1.4 billion and $119.5 million of outstanding consolidated indebtedness under our Freddie Mac and Fannie Mae mortgage loans, respectively. We rely on national and regional institutions, including Freddie Mac and Fannie Mae, to provide financing for our acquisitions and permanent financing on properties we may develop in the future.
Our reputation, financial performance and ability to make distributions to our shareholders would be adversely affected if a significant number of our tenants fail to meet their lease obligations or fail to renew their leases.
Our reputation, financial performance and ability to make distributions to our shareholders would be adversely affected if a significant number of our residents fail to meet their lease obligations or fail to renew their leases.
In addition, losses in a TRS generally will not provide any tax benefit, except for being carried forward against future taxable income of such TRS. Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.
In addition, losses from hedges held in a TRS generally will not provide any tax benefit, except for being carried forward against future taxable income of such TRS. Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.
Other than some activities relating to lodging and health care facilities, a TRS may generally engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT. A TRS is subject to income tax as a regular C corporation.
Other than some activities relating to lodging and health care facilities, a TRS may generally engage in any business, including the provision of customary or non-customary services to residents of its parent REIT. A TRS is subject to income tax as a C corporation.
Factors that may affect our occupancy levels, our revenues, our NOI and/or the value of our properties include the following, among others: • downturns in global, national, regional and local economic conditions; • declines in the financial condition of our residents, which may make it more difficult for us to collect rents from these residents; • the inability or unwillingness of our residents to pay rent increases; • a decline in household formation; • a decline in employment or lack of employment growth; • an oversupply of, or a reduced demand for, apartment homes; • changes in market rental rates in our core markets; • our ability to renew leases or re-lease space on favorable terms; • the timing and costs associated with property improvements, repairs and renovations, including supply chain issues, inflation and labor shortages; • declines in mortgage interest rates, making home and condominium ownership more affordable; • changes in home loan lending practices, including the easing of credit underwriting standards, increasing the availability of home loans and thereby reducing demand for apartment homes; • government or builder incentives which enable first-time homebuyers to put little or no money down, making alternative housing options more attractive; • rent control or rent stabilization laws, or other laws regulating housing, that could prevent us from raising rents to offset increases in operating costs; and • economic conditions that could cause an increase in our operating expenses, such as increases in property taxes (particularly as a result of increased local, state and national government budget deficits and debt and potentially reduced federal aid to state and local governments), utilities, insurance, compensation of on-site associates and routine maintenance. • the COVID-19 pandemic and the effectiveness of actions taken, or actions that may be taken, by governmental authorities to contain the outbreak or treat its impact of COVID-19.
Factors that may affect our occupancy levels, our revenues, our NOI and/or the value of our properties include the following, among others: • downturns in global, national, regional and local economic conditions; • declines in the financial condition of our residents, which may make it more difficult for us to collect rents from these residents; • the inability or unwillingness of our residents to pay rent increases; • a decline in household formation; • a decline in employment or lack of employment growth; • an oversupply of, or a reduced demand for, apartment homes; • changes in market rental rates in our core markets; • our ability to renew leases or re-lease space on favorable terms; 19 • the timing and costs associated with property improvements, repairs and renovations, including supply chain issues, inflation and labor shortages; • declines in mortgage interest rates, making home and condominium ownership more affordable; • changes in home loan lending practices, including the easing of credit underwriting standards, increasing the availability of home loans and thereby reducing demand for apartment homes; • government or builder incentives which enable first-time homebuyers to put little or no money down, making alternative housing options more attractive; • rent control or rent stabilization laws, or other laws regulating housing, that could prevent us from raising rents to offset increases in operating costs; and • economic conditions that could cause an increase in our operating expenses, such as increases in property taxes (particularly as a result of increased local, state and national government budget deficits and debt and potentially reduced federal aid to state and local governments), utilities, insurance, compensation of on-site associates and routine maintenance.
Qualifying income for the 90% test generally includes passive income, such as real property rents, dividends and interest. The income requirements applicable to REITs and the definition of qualifying income for purposes of this 90% test are similar in most respects. Our OP may not meet this qualifying income test.
Qualifying income for the 90% test generally includes passive income, such as real property rents, dividends and interest. The income requirements applicable to REITs and the definition of qualifying income for purposes of this 90% test are similar in most respects. Our operating partnership may not meet this qualifying income test.
Macroeconomic trends including inflation, rising interest rates or recession may adversely affect our financial condition and results of operations. Macroeconomic trends, including increases in inflation and rising interest rates, may adversely impact our business, financial condition and results of operations.
Macroeconomic trends including inflation, high interest rates or recession may adversely affect our financial condition and results of operations. Macroeconomic trends, including increases in or high inflation and high interest rates, may adversely impact our business, financial condition and results of operations.
Some of the factors that could affect our stock price or result in fluctuations in the price or trading volume of our common stock include: • actual or anticipated variations in our quarterly operating results; 39 • changes in our operations or earnings estimates or publication of research reports about us or the real estate industry; • changes in market valuations of similar companies; • increases in market interest rates that lead purchasers of our shares to demand a higher yield; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key management personnel; • actions by institutional stockholders; • speculation in the press or investment community; • the realization of any of the other risk factors presented in this annual report; • the extent of investor interest in our securities; • the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies; • our underlying asset value; • investor confidence in the stock and bond markets, generally; • changes in tax laws; • future equity issuances; • failure to meet income estimates; • failure to meet and maintain REIT qualifications; and • general market and economic conditions, including inflation, rising interest rates and the COVID-19 pandemic.
Some of the factors that could affect our stock price or result in fluctuations in the price or trading volume of our common stock include: • actual or anticipated variations in our quarterly operating results; • changes in our operations or earnings estimates or publication of research reports about us or the real estate industry; • changes in market valuations of similar companies; • increases in or high interest rates that lead purchasers of our shares to demand a higher yield; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of key management personnel; • actions by institutional stockholders; • speculation in the press or investment community; • the realization of any of the other risk factors presented in this Annual Report; • the extent of investor interest in our securities; • the general reputation of REITs and the attractiveness of our equity securities in comparison to other equity securities, including securities issued by other real estate-based companies; 37 • our underlying asset value; • investor confidence in the stock and bond markets, generally; • changes in tax laws; • future equity issuances; • failure to meet income estimates; and • failure to meet and maintain REIT qualifications.
If our OP were to be taxed as a corporation, it would incur substantial tax liabilities, and we would then fail to qualify as a REIT for U.S. federal income 35 tax purposes, unless we qualified for relief under certain statutory savings provisions, and our ability to raise additional capital and pay distributions to our stockholders would be impaired.
If our operating partnership were to be taxed as a corporation, it would incur substantial tax liabilities, and we would then fail to qualify as a REIT for U.S. federal income tax purposes, unless we qualified for relief under certain statutory savings provisions, and our ability to raise additional capital and pay distributions to our stockholders would be impaired.
For U.S. federal income tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage.
For U.S. federal income tax purposes, a foreclosure of any of our properties subject to a nonrecourse mortgage loan would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage.
If a significant mold problem arises at one of our communities, we could be required to undertake a costly remediation program to contain or remove the mold from the affected community and could be exposed to other liabilities that may exceed any applicable insurance coverage.
If a significant mold problem arises at one of our communities, we could be required to undertake a costly remediation program to contain or remove the mold from the affected community and could be exposed to other liabilities that may exceed any applicable insurance coverage. Risk of Pandemics or Other Health Crises.
As of December 31, 2022, the interest rate cap agreements we have entered into effectively cap the applicable reference rate on $1.3 billion of our floating rate mortgage debt outstanding at a weighted average rate of 5.81% for the term of the agreements, which is generally 3-4 years.
As of December 31, 2023, the interest rate cap agreements we have entered into effectively cap the applicable reference rate on $1.3 billion of our floating rate mortgage debt outstanding at a weighted average rate of 5.90% for the term of the agreements, which is generally 3-4 years.
Although our OP’s partnership units are not traded on an established securities market, the OP’s units could be viewed as readily tradable on a secondary market (or the substantial equivalent thereof), and our OP may not qualify for one of the “safe harbors” under the applicable tax regulations.
Although our operating partnership’s partnership units are not traded on an established securities market, the operating partnership’s units could be viewed as readily tradable on a secondary market (or the substantial equivalent thereof), and our operating partnership may not qualify for one of the “safe harbors” under the applicable tax regulations.
Poor tenant selection and defaults and nonrenewals by our tenants may adversely affect our reputation, financial performance and ability to make distributions. 25 We depend on rental income from tenants for substantially all of our revenues. As a result, our success depends in large part upon our ability to attract and retain qualified tenants for our properties.
Poor resident selection and defaults and nonrenewals by our residents may adversely affect our reputation, financial performance and ability to make distributions. We depend on rental income from residents for substantially all of our revenues. As a result, our success depends in large part upon our ability to attract and retain qualified residents for our properties.
Our Sponsor and BH may face conflicts of interest when evaluating tenant opportunities for our properties and other properties owned and/or managed by our Sponsor and its affiliates and BH and its affiliates, and these conflicts of interest may have a negative impact on our ability to attract and retain tenants.
Our Sponsor and BH may face conflicts of interest when evaluating resident opportunities for our properties and other properties owned and/or managed by our Sponsor and its affiliates and BH and its affiliates, and these conflicts of interest may have a negative impact on our ability to attract and retain residents.
There can be no assurance that we will be able to prevail in, or achieve a favorable settlement of, any pending or future legal proceedings to which we become subject. Item 1B. Unresolved Staff Comments None. 44
There can be no assurance that we will be able to prevail in, or achieve a favorable settlement of, any pending or future legal proceedings to which we become subject. Item 1B. Unresolv ed Staff Comments None.
Item 1A. Risk Factors You should carefully consider the following risks and other information in this annual report in evaluating us and our capital stock.
Item 1A. Ri sk Factors You should carefully consider the following risks and other information in this Annual Report in evaluating us and our capital stock.
As of December 31, 2022, approximately $1.6 billion of our total debt outstanding bears interest at variable rates, and we may also borrow additional money at variable interest rates in the future.
As of December 31, 2023, approximately $1.5 billion of our total debt outstanding bears interest at variable rates, and we may also borrow additional money at variable interest rates in the future.
Kirschner, as litigation trustee of a litigation subtrust formed pursuant to the Plan, 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.
Kirschner, as litigation trustee of a litigation subtrust formed pursuant to the Plan, 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 27, 2023, Marc S.
The ability of the Board to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders. Our charter provides that our Board may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT.
Our charter provides that our Board may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT.
While the Company has taken steps to prepare for a potential downturn in the economy, should a recession occur there can be no guaranty that the Company’s efforts will prevent any negative impacts to the value of the Company’s investments.
While the Company has taken steps to prepare for a potential downturn in the economy, should a recession occur there can be no guaranty that the Company’s efforts will prevent any negative impacts to the value of the Company’s investments. We are subject to risks inherent in ownership of real estate.
As of December 31, 2022, eleven interest rate swap agreements, with a combined notional amount of $1.2 billion and terms expiring in 2024, 2025 and 2026, effectively fix the interest rate on $1.2 billion, or 71%, of our $1.6 billion of floating rate debt outstanding.
As of December 31, 2023, 10 interest rate swap agreements, with a combined notional amount of $1.2 billion and terms expiring in 2024, 2025 and 2026, effectively fix the interest rate on $1.2 billion, or 76%, of our $1.5 billion of floating rate debt outstanding.
We may not replicate the historical results achieved by other entities managed or sponsored by affiliates of our Adviser, members of our Adviser’s management team or by Highland or its affiliates. 32 Our primary focus in making investments generally differs from that of existing investment funds, accounts or other investment vehicles that are or have been managed by affiliates of our Adviser, members of our Adviser’s management team or sponsored by our former affiliate Highland or its affiliates.
Our primary focus in making investments generally differs from that of existing investment funds, accounts or other investment vehicles that are or have been managed by affiliates of our Adviser, members of our Adviser’s management team or sponsored by our former affiliate Highland or its affiliates.
Hedging arrangements, which can include a number of counterparties, may expose us to additional risks, including failure of any of our counterparties to perform under these contracts, and may involve extensive costs, such as transaction fees or, if we terminate them, breakage costs.
Hedging arrangements, which can include a number of counterparties, may expose us to additional risks, including failure of any of our counterparties to perform under these contracts, and may involve extensive costs, such as transaction fees or, if we terminate them, breakage costs. No strategy can completely insulate us from the risks associated with interest rate fluctuations.
Attribution rules in the Code determine if any individual or entity actually or constructively owns shares of our common stock under this requirement.
Attribution rules in the Code determine if any individual or entity actually or constructively owns shares of our common stock for purposes of this ownership limitation.
Because these persons have competing demands on their time and resources, they may have conflicts of interest in allocating their time between our business and these other activities. If this occurs, the returns on our investments may suffer.
Because these persons have competing demands on their time and resources, they may have conflicts of interest in allocating their time between our business and these other activities. If this occurs, the returns on our investments may suffer. We may compete with other entities affiliated with our Sponsor and property manager for residents.
These requirements could cause us to distribute amounts that otherwise would be spent on investments in real estate assets and it is possible that we might be required to borrow funds, possibly at unfavorable rates, or sell assets to fund these distributions. Certain types of assets generate substantial mismatches between REIT taxable income and available cash.
These requirements could cause us to distribute amounts that otherwise would be spent on investments in real estate assets and it is possible that we might be required to borrow funds, possibly at unfavorable rates, or sell assets to fund these distributions.
As a result, our cash flow and our ability to service our indebtedness and to make distributions to our stockholders would be adversely affected, which could adversely affect the market price of our common stock. Changes to, or the elimination of, LIBOR may adversely affect interest expense related to our loans and investments.
As a result, our cash flow and our ability to service our indebtedness and to make distributions to our stockholders would be adversely affected, which could adversely affect the market price of our common stock.
Such assets include rental real estate that has been financed through financing structures which require some or all of available cash flows to be used to service borrowings.
Certain types of assets generate substantial mismatches between REIT taxable income and available cash. Such assets include rental real estate that has been financed through financing structures which require some or all of available cash flows to be used to service borrowings.
We may compete with other entities affiliated with our Sponsor and property manager for tenants. 34 Neither our Sponsor and its affiliates nor BH and its affiliates is prohibited from engaging, directly or indirectly, in any other business or from possessing interests in any other business venture, including ventures involved in the acquisition, development, ownership, management, leasing or sale of real estate, including properties in the vicinity of the properties in our p ortfolio.
Neither our Sponsor and its affiliates nor BH and its affiliates is prohibited from engaging, directly or indirectly, in any other business or from possessing interests in any other business venture, including ventures involved in the acquisition, development, ownership, management, leasing or sale of real estate, including properties in the vicinity of the properties in our portfolio.
As a result, we may not have immediate access to all of the cash proceeds generated from our property sales; and • U.S. federal income tax laws limit our ability to profit on the sale of communities that we have owned for less than two years, and this limitation may prevent us from selling communities when market conditions are favorable. 26 We may be subject to contingent or unknown liabilities related to properties or business es that we have acquired or may acquire for which we may have limited or no recourse against the sellers.
As a result, we may not have immediate access to all of the cash proceeds generated from our property sales; and • U.S. federal income tax laws limit our ability to profit on the sale of communities that we have owned for less than two years, and this limitation may prevent us from selling communities when market conditions are favorable.
As permitted by the Maryland General Corporation Law (the “MGCL”), our charter limits the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from: • actual receipt of an improper benefit or profit in money, property or services; or • a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated. 41 In addition, our charter authorizes us, and our bylaws require us, to indemnify our directors and officers for actions taken by them in those capacities and to pay or reimburse their reasonable expenses in advance of final disposition of a proceeding to the maximum extent permitted by Maryland law.
As permitted by the Maryland General Corporation Law (the “MGCL”), our charter limits the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from: • actual receipt of an improper benefit or profit in money, property or services; or • a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated.
No strategy can completely insulate us from the risks associated with interest rate fluctuations. 31 Risks Related to Our Structure The Chapter 11 bankruptcy filing by Highland Capital Management, L.P. (“Highland”) may have materially adverse consequences on our business, financial condition and results of operations.
Risks Related to Our Structure The Chapter 11 bankruptcy filing by Highland Capital Management, L.P. (“Highland”) may have materially adverse consequences on our business, financial condition and results of operations.
Even with these measures, we may be subject to unauthorized access of digital data with the intent to misappropriate information, corrupt data or cause operational disruptions.
Even with these measures, we may be subject to unauthorized access of digital data, which risk may be heightened by the increased prevalence and use of artificial intelligence, with the intent to misappropriate information, corrupt data or cause operational disruptions.
As a result, we may be required to liquidate otherwise attractive investments from our portfolio. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders. Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to incur tax liabilities.
These actions could have the effect of reducing our income and amounts available for distribution to our stockholders. Complying with REIT requirements may limit our ability to hedge our liabilities effectively and may cause us to incur tax liabilities. The REIT provisions of the Code may limit our ability to hedge our liabilities.
We may not be able to make distributions in the future, and our inability to make distributions, or to make distributions at expected levels, could result in a decrease in the market price of our common stock. 40 Our charter permits the Board to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could otherwise result in a premium price to our stockholders.
Our charter permits the Board to issue stock with terms that may subordinate the rights of our common stockholders or discourage a third party from acquiring us in a manner that could otherwise result in a premium price to our stockholders.
These restrictions on transferability and ownership will not apply, however, if our Board determines that it is no longer in our best interest to qualify as a REIT or that compliance with the restrictions is no longer required in order for us to so qualify as a REIT. 38 These ownership limits could delay or prevent a transaction or a change in control that might involve a premium price for our common stock or otherwise be in the best interest of the stockholders.
These restrictions on transferability and ownership will not apply, however, if our Board determines that it is no longer in our best interest to qualify as a REIT or that compliance with the restrictions is no longer required in order for us to so qualify as a REIT.
These restrictive provisions and third-party rights would potentially preclude us from achieving full value of the properties because of our inability to obtain the necessary consents to sell or transfer the interests. Risks Related to Health and the Environment Our environmental assessments may not identify all potential environmental liabilities and our remediation actions may be insufficient.
These restrictive provisions and third-party rights would potentially preclude us from achieving full value of the properties because of our inability to obtain the necessary consents to sell or transfer the interests.

… 77 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

4 edited+0 added−0 removed0 unchanged
Biggest changeThe following table provides a summary of the properties in our portfolio as of December 31, 2022: As of December 31, 2022 Properties by State Location Number of Units Date Acquired Purchase Price (in thousands) Average Effective Monthly Rent Per Unit (1) % Occupied (2) Number of Units Rehabbed (3) Rehab Expenditures per Unit (4) 2021-2022 Same Store Properties Texas Arbors on Forest Ridge Bedford, Texas 210 1/31/2014 $ 12,805 $ 1,191 92.4 % 274 $ 2,631 Silverbrook Grand Prairie, Texas 642 1/31/2014 30,400 1,216 90.5 % 830 2,521 Versailles Dallas, Texas 388 2/26/2015 26,165 1,236 92.8 % 584 3,374 Venue at 8651 Fort Worth, Texas 333 10/30/2015 19,250 1,142 91.9 % 488 4,010 Old Farm Houston, Texas 734 12/29/2016 84,721 1,315 95.0 % — — Stone Creek at Old Farm Houston, Texas 190 12/29/2016 23,332 1,378 92.1 % — — Atera Apartments Dallas, Texas 380 10/25/2017 59,200 1,502 96.1 % 532 1,610 Crestmont Reserve Dallas, Texas 242 9/26/2018 24,680 1,194 95.0 % 171 2,111 Summers Landing Fort Worth, Texas 196 6/7/2019 19,396 1,188 93.4 % 94 2,133 Florida The Summit at Sabal Park Tampa, Florida 252 8/20/2014 19,050 1,479 94.0 % 436 3,039 Courtney Cove Tampa, Florida 324 8/20/2014 18,950 1,395 94.4 % 201 4,868 Sabal Palm at Lake Buena Vista Orlando, Florida 400 11/5/2014 49,500 1,717 95.3 % 656 723 Cornerstone Orlando, Florida 430 1/15/2015 31,550 1,436 90.2 % 369 5,140 Seasons 704 Apartments West Palm Beach, Florida 222 4/15/2015 21,000 1,790 94.1 % 188 5,746 Parc500 West Palm Beach, Florida 217 7/27/2016 22,421 1,835 95.9 % 178 14,640 Avant at Pembroke Pines Pembroke Pines, Florida 1,520 8/30/2019 322,000 2,050 94.9 % 352 11,886 Residences at West Place Orlando, Florida 342 7/17/2019 55,000 1,550 93.0 % 50 5,828 Nevada Bella Solara Las Vegas, Nevada 320 11/22/2019 66,500 1,446 88.8 % 71 9,635 Bloom Las Vegas, Nevada 528 11/22/2019 106,500 1,390 89.8 % 45 11,303 Torreyana Apartments Las Vegas, Nevada 316 11/22/2019 68,000 1,567 93.4 % 22 11,631 Georgia The Preserve at Terrell Mill Marietta, Georgia 752 2/6/2015 58,000 1,312 91.9 % 590 9,882 Rockledge Apartments Marietta, Georgia 708 6/30/2017 113,500 1,593 92.8 % 827 3,731 Tennessee Brandywine I & II Nashville, Tennessee 632 9/26/2018 79,800 1,237 94.5 % 300 7,684 Arbors of Brentwood Nashville, Tennessee 346 9/10/2019 62,250 1,495 89.6 % 330 2,094 Residences at Glenview Reserve Nashville, Tennessee 360 7/17/2019 45,000 1,280 96.4 % 82 10,954 Arizona Madera Point Mesa, Arizona 256 8/5/2015 22,525 1,339 95.7 % 385 2,888 The Venue on Camelback Phoenix, Arizona 415 10/11/2016 44,600 1,090 91.8 % 183 10,263 Bella Vista Phoenix, Arizona 248 1/28/2019 48,400 1,724 98.0 % 126 11,059 The Enclave Tempe, Arizona 204 1/28/2019 41,800 1,795 96.6 % 117 9,826 The Heritage Phoenix, Arizona 204 1/28/2019 41,900 1,641 95.1 % 108 10,975 Fairways at San Marcos Chandler, Arizona 352 11/2/2020 84,480 1,623 93.8 % 52 12,145 North Carolina Radbourne Lake Charlotte, North Carolina 225 9/30/2014 24,250 1,388 93.3 % 535 868 Timber Creek Charlotte, North Carolina 352 9/30/2014 22,750 1,203 91.2 % 341 4,701 Total 2021-2022 Same Store Properties (5) 13,240 $ 1,769,675 $ 1,481 93.3 % 9,517 $ 4,849 Non-Same Store Properties Texas Cutter's Point Richardson, Texas 196 1/31/2014 15,845 1,437 305.0 % 269 3,059 Arizona Estates on Maryland Phoenix, Arizona 330 4/1/2022 77,900 1,439 92.4 % — — North Carolina The Verandas at Lake Norman Charlotte, North Carolina 264 6/30/2021 63,500 1,343 94.3 % 30 1,408 Creekside at Matthews Charlotte, North Carolina 240 6/30/2021 58,000 1,432 94.6 % 15 4,083 Six Forks Station Raleigh, North Carolina 323 9/10/2021 74,760 1,371 92.3 % 83 1,281 High House at Cary Cary, North Carolina 302 12/7/2021 93,250 1,486 95.7 % — — Georgia The Adair Sandy Springs, Georgia 232 4/1/2022 65,500 1,849 94.4 % — — Total Non-Same Store Properties 1,887 448,755 10,356 101.1 % 397 $ 2,606 Total 15,127 $ 2,218,430 $ 1,480 94.2 % 9,914 $ 4,759 (1) Average effective monthly rent per unit is equal to the average of the contractual rent for commenced leases as of December 31, 2022 minus any tenant concessions over the term of the lease, divided by the number of units under commenced leases as of December 31, 2022.
Biggest changeThe following table provides a summary of the properties in our portfolio as of December 31, 2023: (44 ) As of December 31, 2023 Properties by State Location Number of Units Date Acquired Purchase Price (in thousands) Average Effective Monthly Rent Per Unit (1) % Occupied (2) Number of Units Rehabbed (3) Rehab Expenditures per Unit (4) 2022-2023 Same Store Properties Texas Arbors on Forest Ridge Bedford, Texas 210 1/31/2014 $ 12,805 $ 1,187 94.3 % 155 $ 4,388 Cutter's Point Richardson, Texas 196 1/31/2014 15,845 1,442 93.9 % 269 3,059 Versailles Dallas, Texas 388 2/26/2015 26,165 1,262 92.3 % 296 6,164 Venue at 8651 Fort Worth, Texas 333 10/30/2015 19,250 1,175 91.0 % 284 6,982 Atera Apartments Dallas, Texas 380 10/25/2017 59,200 1,476 96.3 % 214 3,420 Versailles II Dallas, Texas 242 9/26/2018 24,680 1,181 90.6 % 56 5,632 Summers Landing Fort Worth, Texas 196 6/7/2019 19,396 1,223 93.4 % 53 11,075 Florida The Summit at Sabal Park Tampa, Florida 252 8/20/2014 19,050 1,460 95.2 % 207 5,854 Courtney Cove Tampa, Florida 324 8/20/2014 18,950 1,327 95.4 % 249 4,974 Sabal Palm at Lake Buena Vista Orlando, Florida 400 11/5/2014 49,500 1,753 94.5 % 69 12,984 Cornerstone Orlando, Florida 430 1/15/2015 31,550 1,445 96.0 % 448 4,905 Seasons 704 Apartments West Palm Beach, Florida 222 4/15/2015 21,000 1,828 96.4 % 188 7,836 Parc500 West Palm Beach, Florida 217 7/27/2016 22,421 1,914 93.1 % 209 14,668 Avant at Pembroke Pines Pembroke Pines, Florida 1,520 8/30/2019 322,000 2,150 95.6 % 539 17,453 Residences at West Place Orlando, Florida 342 7/17/2019 55,000 1,559 92.1 % 117 11,892 Nevada Bella Solara Las Vegas, Nevada 320 11/22/2019 66,500 1,337 92.6 % 113 11,232 Bloom Las Vegas, Nevada 528 11/22/2019 106,500 1,298 94.9 % 141 14,199 Torreyana Apartments Las Vegas, Nevada 316 11/22/2019 68,000 1,461 95.9 % 52 13,435 Georgia The Preserve at Terrell Mill Marietta, Georgia 752 2/6/2015 58,000 1,271 96.7 % 717 11,376 Rockledge Apartments Marietta, Georgia 708 6/30/2017 113,500 1,557 95.5 % 440 11,091 Tennessee Brandywine I & II Nashville, Tennessee 632 9/26/2018 79,800 1,222 93.7 % 515 10,755 Arbors of Brentwood Nashville, Tennessee 346 9/10/2019 62,250 1,494 92.2 % 135 10,346 Residences at Glenview Reserve Nashville, Tennessee 360 7/17/2019 45,000 1,307 95.3 % 233 13,431 Arizona Madera Point Mesa, Arizona 256 8/5/2015 22,525 1,312 94.9 % 255 4,535 The Venue on Camelback Phoenix, Arizona 415 10/11/2016 44,600 1,065 95.2 % 264 10,269 Bella Vista Phoenix, Arizona 248 1/28/2019 48,400 1,774 96.4 % 197 10,516 The Enclave Tempe, Arizona 204 1/28/2019 41,800 1,820 94.6 % 162 10,392 The Heritage Phoenix, Arizona 204 1/28/2019 41,900 1,698 96.6 % 173 9,609 Fairways at San Marcos Chandler, Arizona 352 11/2/2020 84,480 1,580 94.9 % 135 13,665 North Carolina The Verandas at Lake Norman Charlotte, North Carolina 264 6/30/2021 63,500 1,354 95.8 % 30 1,408 Creekside at Matthews Charlotte, North Carolina 240 6/30/2021 58,000 1,431 95.8 % 15 4,083 Six Forks Station Raleigh, North Carolina 323 9/10/2021 74,760 1,409 92.4 % 83 1,281 High House at Cary Cary, North Carolina 302 12/7/2021 93,250 1,464 95.0 % — — Total 2022-2023 Same Store Properties (5) 12,422 $ 1,889,577 $ 1,509 94.7 % 7,013 $ 46,581 Non-Same Store Properties Texas Old Farm Houston, Texas 734 12/29/2016 $ 84,721 $ 1,322 93.9 % — $ — Stone Creek at Old Farm Houston, Texas 190 12/29/2016 23,332 1,299 94.7 % — — Arizona Estates on Maryland Phoenix, Arizona 330 4/1/2022 77,900 1,435 95.2 % — — North Carolina Radbourne Lake Charlotte, North Carolina 225 9/30/2014 24,250 1,450 95.6 % 329 2,841 Georgia The Adair Sandy Springs, Georgia 232 4/1/2022 65,500 1,968 96.6 % — — Total Non-Same Store Properties 1,711 $ 275,703 $ 7,474 94.8 % 329 $ 21,244 Total 14,133 $ 2,165,280 $ 1,502 95.3 % 7,342 $ 45,820 (1) Average effective monthly rent per unit is equal to the average of the contractual rent for commenced leases as of December 31, 2023 minus any tenant concessions over the term of the lease, divided by the number of units under commenced leases as of December 31, 2023.
(2) Percent occupied is calculated as the number of units occupied as of December 31, 2022, divided by the total number of units, expressed as a percentage. (3) Inclusive of all full and partial interior upgrades completed. 45 (4) Inclusive of all full and partial interior upgrades completed and leased as of December 31, 2022.
(2) Percent occupied is calculated as the number of units occupied as of December 31, 2023, divided by the total number of units, expressed as a percentage. (3) Inclusive of all full and partial interior upgrades completed. (4) Inclusive of all full and partial interior upgrades completed and leased as of December 31, 2023.
(5) Includes the 106 downed units excluded from our 2021-2022 Same Store pool (see Note 5 to our consolidated financial statements). For additional information regarding our portfolio, see Notes 3, 4, 5 and 6 to our consolidated financial statements.
(5) Includes the 45 downed units excluded from our 2022-2023 Same Store pool (see Note 4 to our consolidated financial statements). For additional information regarding our portfolio, see Notes 3 and 4 to our consolidated financial statements. 44
Item 2. Properties As of December 31, 2022, our portfolio consisted of 40 properties representing 15,127 units in seven states.
Item 2. Pr operties As of December 31, 2023, our portfolio consisted of 38 properties representing 14,133 units in seven states.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeManagement is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies. Item 4. Mine Safety Disclosures Not applicable. 46 PART II
Biggest changeManagement is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies. Item 4. Mine Saf ety Disclosures Not applicable. 45 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+0 added−1 removed9 unchanged
Biggest changeSince the inception of the Share Repurchase Program through December 31, 2022, the Company had repurchased 2,550,628 shares of its common stock, par value $0.01 per share, at a total cost of approximately $65.6 million, or $27.070 per share as shown in the table below: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that may yet be Purchased under the Plans or Programs (in millions) Beginning Total 2,550,628 $ 28.37 2,550,628 $ 27.6 October 1 – October 31 — — — 100.0 November 1 – November 30 — — — 100.0 December 1 – December 31 — — — 100.0 Total as of December 31, 2022 2,550,628 $ 28.37 2,550,628 $ 100.0 47 PERFORMANCE GRAPH On April 1, 2015, our common stock commenced trading on the NYSE.
Biggest changeSince the inception of the Share Repurchase Program through December 31, 2023, the Company had repurchased 2,550,628 shares of its common stock, par value $0.01 per share, at a total cost of approximately $72.4 million, or $28.36 per share as shown in the table below: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that may yet be Purchased under the Plans or Programs (in millions) Beginning Total 2,550,628 $ 28.36 2,550,628 $ 100.0 October 1 – October 31 — — — 100.0 November 1 – November 30 — — — 100.0 December 1 – December 31 — — — 100.0 Total as of December 31, 2023 2,550,628 $ 28.36 2,550,628 $ 100.0 46 PERFORMANCE GRAPH On April 1, 2015, our common stock commenced trading on the NYSE.
The following graph compares the cumulative total stockholder return on our common shares for the measurement period commencing December 31, 2017 and ending December 31, 2022 with the cumulative total returns of the Russell 3000 Index, the MSCI U.S. REIT Index (^RMZ) and the Standard & Poor’s U.S. REIT Index.
The following graph compares the cumulative total stockholder return on our common shares for the measurement period commencing December 31, 2017 and ending December 31, 2023 with the cumulative total returns of the Russell 3000 Index, the MSCI U.S. REIT Index (^RMZ) and the Standard & Poor’s U.S. REIT Index.
If our cash available for distribution is less than our taxable income, we could be required to sell assets, borrow funds or raise additional capital to make cash dividends or we may make a portion of the required dividend in the form of a taxable distribution of stock or debt securities. Item 6. [Reserved] 48
If our cash available for distribution is less than our taxable income, we could be required to sell assets, borrow funds or raise additional capital to make cash dividends or we may make a portion of the required dividend in the form of a taxable distribution of stock or debt securities. Item 6. [R eserved] 47
The number of record holders is based on the records of American Stock Transfer & Trust Company, LLC, who serves as our transfer agent.
The number of record holders is based on the records of Equiniti Trust Company, LLC, who serves as our transfer agent.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the NYSE under the ticker symbol “NXRT.” Stockholder Information On February 23, 2023, we had 25,549,319 shares of common stock outstanding held by a total of approximately 899 record holders.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the NYSE under the ticker symbol “NXRT.” Stockholder Information On February 27, 2024, we had 25,774,730 shares of common stock outstanding held by a total of approximately 815 record holders.
Removed
During the year ended December 31, 2022, the Company purchased 168,473 shares of its common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

171 edited+14 added−14 removed97 unchanged
Biggest changeOur 2021-2022 Same Store properties exclude the following 9 properties in our portfolio as of December 31, 2022: Cutter’s Point, Old Farm, Stone Creek at Old Farm, The Verandas at Lake Norman, Creekside at Matthews, Six Forks Station, High House at Cary, The Adair, Estates on Maryland as well as the 106 units that are currently down (see Note 5 to our consolidated financial statements). 58 The following table reflects the revenues, property operating expenses and NOI for the years ended December 31, 2022 and 2021 for our 2021 - 2022 Same Store and Non-Same Store properties (dollars in thousands): For the Year Ended December 31, 2022 2021 $ Change % Change Revenues Same Store Rental income $ 210,179 $ 183,696 $ 26,483 14.4 % Other income 5,455 5,428 27 0.5 % Same Store revenues 215,634 189,124 26,510 14.0 % Non-Same Store Rental income 47,676 29,809 17,867 59.9 % Other income 642 307 335 109.1 % Non-Same Store revenues 48,318 30,116 18,202 60.4 % Total revenues 263,952 219,240 44,712 20.4 % Operating expenses Same Store Property operating expenses (1) 46,614 40,981 5,633 13.7 % Real estate taxes and insurance 29,743 28,084 1,659 5.9 % Property management fees (2) 6,226 5,426 800 14.7 % Property general and administrative expenses (3) 4,528 3,890 638 16.4 % Same Store operating expenses 87,111 78,381 8,730 11.1 % Non-Same Store Property operating expenses (4) 10,418 6,957 3,461 49.7 % Real estate taxes and insurance 7,690 5,068 2,622 51.7 % Property management fees (2) 1,410 908 502 55.3 % Property general and administrative expenses (5) 1,170 787 383 48.7 % Non-Same Store operating expenses 20,688 13,720 6,968 50.8 % Total operating expenses 107,799 92,101 15,698 17.0 % Operating income Same Store Miscellaneous income 756 522 234 44.8 % Non-Same Store Miscellaneous income 515 1,102 (587 ) N/M Total operating income 1,271 1,624 (353 ) -21.7 % NOI Same Store 129,279 111,265 18,014 16.2 % Non-Same Store 28,145 17,498 10,647 60.8 % Total NOI $ 157,424 $ 128,763 $ 28,661 22.3 % (1) For the years ended December 31, 2022 and 2021, excludes approximately $2,909,000 and $282,000, respectively, of casualty-related recoveries.
Biggest changeOur 2021-2023 Same Store properties exclude the following 10 properties in our portfolio as of December 31, 2023: Cutter’s Point, Old Farm, Stone Creek at Old Farm, The Verandas at Lake Norman, Creekside at Matthews, Six Forks Station, High House at Cary, The Adair, Estates on Maryland and Radbourne Lake as well as 45 units that are currently down (see Note 4 to our consolidated financial statements). 59 The following table reflects the revenues, property operating expenses and NOI for the years ended December 31, 2023, 2022 and 2021 for our 2021-2023 Same Store and Non-Same Store properties (dollars in thousands): For the Year Ended December 31, 2023 compared to 2022 2023 compared to 2021 2023 2022 2021 $ Change % Change $ Change % Change Revenues Same Store Rental income $ 207,034 $ 193,060 $ 167,971 $ 13,974 7.2 % $ 39,063 23.3 % Other income 5,278 5,017 5,033 261 5.2 % 245 4.9 % Same Store revenues 212,312 198,077 173,004 14,235 7.2 % 39,308 22.7 % Non-Same Store Rental income 63,044 64,795 45,534 (1,751 ) -2.7 % 17,510 38.5 % Other income 1,687 1,080 702 607 56.2 % 985 140.3 % Non-Same Store revenues 64,731 65,875 46,236 (1,144 ) -1.7 % 18,495 40.0 % Total revenues 277,043 263,952 219,240 13,091 5.0 % 57,803 26.4 % Operating expenses Same Store Property operating expenses (1) 44,358 42,015 36,848 2,343 5.6 % 7,510 20.4 % Real estate taxes and insurance 27,941 26,945 25,505 996 3.7 % 2,436 9.6 % Property management fees (2) 6,151 5,705 4,946 446 7.8 % 1,205 24.4 % Property general and administrative expenses (3) 4,157 4,017 3,563 140 3.5 % 594 16.7 % Same Store operating expenses 82,607 78,682 70,862 3,925 5.0 % 11,745 16.6 % Non-Same Store Property operating expenses (4) 15,694 15,017 11,090 677 4.5 % 4,604 41.5 % Real estate taxes and insurance 8,906 10,488 7,647 (1,582 ) -15.1 % 1,259 16.5 % Property management fees (2) 1,918 1,931 1,388 (13 ) -0.7 % 530 38.2 % Property general and administrative expenses (5) 1,685 1,680 1,230 5 0.3 % 455 37.0 % Non-Same Store operating expenses 28,203 29,116 21,355 (913 ) -3.1 % 6,848 32.1 % Total operating expenses 110,810 107,798 92,217 3,012 2.8 % 18,593 20.2 % Operating income Same Store Miscellaneous income 886 340 321 546 N/M 565 N/M Non-Same Store Miscellaneous income 285 930 1,303 (645 ) N/M (1,018 ) N/M Total operating income 1,171 1,270 1,624 (99 ) -7.8 % (453 ) -27.9 % NOI Same Store 130,591 119,735 102,463 10,856 9.1 % 28,128 27.5 % Non-Same Store 36,813 37,689 26,184 (876 ) -2.3 % 10,629 40.6 % Total NOI $ 167,404 $ 157,424 $ 128,647 $ 9,980 6.3 % $ 38,757 30.1 % (1) For the years ended December 31, 2023, 2022 and 2021, excludes approximately $(2,008,000), $(2,096,000) and $142,000, respectively, of casualty-related expenses/(recoveries).
Advisory and administrative fees. Advisory and administrative fees were $7.5 million for the year ended December 31, 2022 compared to $7.6 million for the year ended December 31, 2021, which was an decrease of approximately $0.1 million.
Advisory and administrative fees were $7.5 million for the year ended December 31, 2022 compared to $7.6 million for the year ended December 31, 2021, which was an decrease of approximately $0.1 million.
Gain on sales of real estate was $14.7 million for the year ended December 31, 2022 compared to $46.2 million for the year ended December 31, 2021, which was a decrease of approximately $31.5 million. During the year ended December 31, 2022, we sold one property; during the year ended December 31, 2021, we sold two properties.
Gain on sales of real estate was $14.7 million for the year ended December 31, 2022 compared to $46.2 million for the year ended December 31, 2021, which was a decrease of approximately $31.5 million. During the year ended December 31, 2022, we sold one property; for the year ended December 31, 2021, we sold two properties.
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.
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.
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.
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.
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.
The following table details the various costs included in loss on extinguishment of debt and modification costs for the years ended December 31, 2022 and 2021 (in thousands): For the Year Ended December 31, 2022 2021 $ Change Prepayment penalties and defeasance costs $ 5,702 $ 407 $ 5,295 Write-off of deferred financing costs 1,961 503 1,458 Write-off of fair market value adjustment of assumed debt $ (256 ) $ — $ (256 ) Debt modification and other extinguishment costs 1,327 2 1,325 Total $ 8,734 $ 912 $ 7,822 52 Casualty gains (losses).
The following table details the various costs included in loss on extinguishment of debt and modification costs for the years ended December 31, 2022 and 2021 (in thousands): For the Year Ended December 31, 2022 2021 $ Change Prepayment penalties and defeasance costs $ 5,702 $ 407 $ 5,295 Write-off of deferred financing costs 1,961 503 1,458 Write-off of fair market value adjustment of assumed debt (256 ) — (256 ) Debt modification and other extinguishment costs 1,327 2 1,325 Total $ 8,734 $ 912 $ 7,822 Casualty gains (losses).
We expect to meet our long-term cash requirements through various sources of capital, which may include a revolving credit facility and future debt or equity issuances, existing working capital, net cash provided by operations, long-term mortgage 66 indebtedness and other secured and unsecured borrowings, and property dispositions.
We expect to meet our long-term cash requirements through various sources of capital, which may include a revolving credit facility and future debt or equity issuances, existing working capital, net cash provided by operations, long-term mortgage indebtedness and other secured and unsecured borrowings, and property dispositions.
See Note 6 to our consolidated financial statements. Advisory Agreement Our Advisory Agreement requires that we pay our Adviser an annual advisory and administrative fee of 1.2%. The advisory and administrative fees paid to the Adviser on the Contributed Assets (as defined in the Advisory Agreement) are subject to an annual cap of approximately $5.4 million.
See Note 5 to our consolidated financial statements. Advisory Agreement Our Advisory Agreement requires that we pay our Adviser an annual advisory and administrative fee of 1.2%. The advisory and administrative fees paid to the Adviser on the Contributed Assets (as defined in the Advisory Agreement) are subject to an annual cap of approximately $5.4 million.
The increase was also attributable to a $2.8 million increase in payroll expense, $1.3 million increase in casualty expenses, $1.1 million increase in water and sewer expenses, $0.5 million increase in trash removal services and an increase in all other property operating expenses of approximately $4.8 million. Real estate taxes and insurance.
The increase was also attributable to a $2.8 million increase in payroll expense, $1.3 million increase in casualty expenses, $1.1 million increase in water and sewer expenses, $0.5 million increase in trash removal services and an increase in all other property operating expenses of approximately $4.8 million. 52 Real estate taxes and insurance.
Property taxes incurred in the first year of ownership may be significantly less than subsequent years since the purchase price of the property may trigger a significant increase in assessed value by the taxing authority in subsequent years, 51 increasing the costs of real estate taxes. Property management fees.
Property taxes incurred in the first year of ownership may be significantly less than subsequent years since the purchase price of the property may trigger a significant increase in assessed value by the taxing authority in subsequent years, increasing the costs of real estate taxes. Property management fees.
When applicable, we recognize interest and/or penalties related to uncertain tax positions on our consolidated statements of operations and comprehensive income (loss). Dividends We intend to make regular quarterly dividend payments to holders of our common stock.
When applicable, we recognize interest and/or penalties related to uncertain tax positions on our consolidated statements of operations and comprehensive income (loss). 71 Dividends We intend to make regular quarterly dividend payments to holders of our common stock.
However, there can be no assurance that we will be able to refinance our indebtedness, incur additional indebtedness or access additional sources of capital, such as by issuing common stock or other debt or equity securities, on terms that are acceptable to us or at all. 68 Furthermore, following the completion of our value-add and capital expenditures programs and depending on the interest rate environment at the applicable time, we may seek to refinance our floating rate debt into longer-term fixed rate debt at lower leverage levels.
However, there can be no assurance that we will be able to refinance our indebtedness, incur additional indebtedness or access additional sources of capital, such as by issuing common stock or other debt or equity securities, on terms that are acceptable to us or at all. 67 Furthermore, following the completion of our value-add and capital expenditures programs and depending on the interest rate environment at the applicable time, we may seek to refinance our floating rate debt into longer-term fixed rate debt at lower leverage levels.
To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we 73 distribute at least 90% of our “REIT taxable income,” as defined by the Code, to our stockholders.
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,” as defined by the Code, to our stockholders.
The allocation of total consideration, which is determined using inputs that are classified within Level 3 of the fair value hierarchy established by FASB ASC 820, Fair Value Measurement and Disclosures (see Note 7 to our consolidated financial statements), is based on management’s estimate of the property’s “as-if” vacant fair value and is calculated by using all available information such as the replacement cost of such asset, appraisals, property condition reports, market data and other related information.
The allocation of total consideration, which is determined using inputs that are classified within Level 3 of the fair value hierarchy established by FASB ASC 820, Fair Value Measurement and Disclosures (see Note 6 to our consolidated financial statements), is based on management’s estimate of the property’s “as-if” vacant fair value and is calculated by using all available information such as the replacement cost of such asset, appraisals, property condition reports, market data and other related information.
The increase was primarily due to increases in stock compensation expense, professional fees, and general liability insurance of $0.9 million, $1.4 million and $0.2 million. Property general and administrative expenses.
The increase was primarily due to increases in stock compensation expense, professional fees, and general liability insurance of $0.9 million, $1.4 million and $0.2 million, respectively. Property general and administrative expenses.
For the years ended December 31, 2022 and 2021, the Company incurred advisory and administrative fees of $7.5 million and $7.6 million, respectively. NLMF Holdco, LLC The Company’s agreement with NLMF Holdco, LLC may result in additional funding requirements to cover future project costs. The maximum exposure of potential commitments is expected to be no more than $4.0 million.
For the years ended December 31, 2023 and 2022, the Company incurred advisory and administrative fees of $7.6 million and $7.5 million, respectively. NLMF Holdco, LLC The Company’s agreement with NLMF Holdco, LLC may result in additional funding requirements to cover future project costs. The maximum exposure of potential commitments is expected to be no more than $4.0 million.
We expect that these actions will provide faster, more reliable and lower cost internet to our residents. As of December 31, 2022, the Company has funded approximately $0.3 million to NLMF Holdco, LLC which is included in prepaid and other assets on the consolidated balance sheet of the Company.
We expect that these actions will provide faster, more reliable and lower cost internet to our residents. As of December 31, 2023, the Company has funded approximately $0.3 million to NLMF Holdco, LLC which is included in prepaid and other assets on the consolidated balance sheet of the Company.
Corporate Credit Facility On June 30, 2021, the Company, through the OP, entered into a secured $250.0 million credit facility with Truist Bank (“Truist Bank”), as administrative agent, and the lenders from time to time party thereto (the “Corporate Credit Facility”). $225 million of the Corporate Credit Facility was a revolving credit facility and $25 million of the Amended and Restated Corporate Credit Facility was a term loan.
Corporate Credit Facility On June 30, 2021, the Company, through the OP, entered into a secured $250.0 million credit facility with Truist Bank (“Truist Bank”), as administrative agent, and the lenders from time to time party thereto (the “Corporate Credit Facility”). $225 million of the Corporate Credit Facility was a revolving credit facility and $25 million of the Corporate Credit Facility was a term loan.
In addition, on June 30, 2021, in connection with entering into the Amended and Restated Corporate Credit Facility, the Company, through the OP, terminated its prior $225.0 million revolving credit facility with Truist Bank, as administrative agent, and the lenders from time to time party thereto, prior to the maturity date of January 28, 2022.
In addition, on June 30, 2021, in connection with entering into the Corporate Credit Facility, the Company, through the OP, terminated its prior $225.0 million revolving credit facility with Truist Bank, as administrative agent, and the lenders from time to time party thereto, prior to the maturity date of January 28, 2022.
We believe that our available cash, expected operating cash flows, and potential debt or equity financings will provide sufficient funds for our operations, anticipated scheduled debt service payments and dividend requirements for the twelve-month period following December 31, 2022. We believe that our sources of long-term cash will be sufficient for our needs thereafter.
We believe that our available cash, expected operating cash flows, and potential debt or equity financings will provide sufficient funds for our operations, anticipated scheduled debt service payments and dividend requirements for the twelve-month period following December 31, 2023. We believe that our sources of long-term cash will be sufficient for our needs thereafter.
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 years ended December 31, 2022, 2021 and 2020.
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 years ended December 31, 2023, 2022 and 2021.
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 years ended December 31, 2022, 2021 and 2020.
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 years ended December 31, 2023, 2022 and 2021.
Second, we will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement. We had no material unrecognized tax benefit or expense, accrued interest or penalties as of December 31, 2022.
Second, we will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement. We had no material unrecognized tax benefit or expense, accrued interest or penalties as of December 31, 2023.
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 years ended December 31, 2022, 2021 and 2020 .
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 years ended December 31, 2023, 2022 and 2021.
The increase between the periods was primarily due to an increase in interest on debt of $30.5 million, partially offset by a decrease in interest rate swap expense of $21.6 million for the years ended December 31, 2022 and 2021 (in thousands): For the Year Ended December 31, 2022 2021 $ Change Interest on debt $ 57,932 $ 27,405 $ 30,527 Amortization of deferred financing costs 2,779 2,197 582 Interest rate swaps expense (6,678 ) 14,909 (21,587 ) Interest rate caps expense (3,446 ) 112 (3,558 ) Total $ 50,587 $ 44,623 $ 5,964 Loss on extinguishment of debt and modification costs.
The increase between the periods was primarily due to an increase in interest on debt of $30.5 million, partially offset by a decrease in interest rate swap expense of $21.6 million for the years ended December 31, 2022 and 2021 (in thousands): For the Year Ended December 31, 2022 2021 $ Change Interest on debt $ 57,932 $ 27,405 $ 30,527 Amortization of deferred financing costs 2,779 2,197 582 Interest rate swaps (6,678 ) 14,909 (21,587 ) Interest rate caps mark-to-market (gain) (3,446 ) 112 (3,558 ) Total $ 50,587 $ 44,623 $ 5,964 53 Loss on extinguishment of debt and modification costs.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 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. This discussion contains forward-looking statements that involve risks and uncertainties.
Item 7. Management’s Discussion and Analysis o f Financial Condition and Results of Operations 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. This discussion contains forward-looking statements that involve risks and uncertainties.
Insurance includes the cost of commercial, general liability, and other needed insurance for each property. Property management fees. Property management fees include fees paid to BH, our property manager, or other third party management companies for managing each property (see Note 10 to our consolidated financial statements). Advisory and administrative fees.
Insurance includes the cost of commercial, general liability, and other needed insurance for each property. Property management fees. Property management fees include fees paid to BH, our property manager, or other third party management companies for managing each property (see Note 9 to our consolidated financial statements). Advisory and administrative fees.
(2) Fees incurred to an unaffiliated third party that is an affiliate of the noncontrolling limited partner of the OP.
(2) Fees incurred to an unaffiliated third party that is an affiliate of a noncontrolling limited partner of the OP.
(2) Fees incurred to an unaffiliated third party that is an affiliate of the noncontrolling limited partner of the OP.
(2) Fees incurred to an unaffiliated third party that is an affiliate of a noncontrolling limited partner of the OP.
FFO, Core FFO and AFFO do not purport to be indicative of cash available to fund our future cash requirements.
FFO, Core FFO and AFFO do not purport to be indicative of 62 cash available to fund our future cash requirements.
Also included are utility reimbursements, late fees, pet fees, and other rental fees charged to tenants. 49 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. Expenses Property operating expenses.
Also included are utility reimbursements, late fees, pet fees, and other rental fees charged to tenants. 48 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. Expenses Property operating expenses.
Core FFO adjusts FFO to remove items such as losses on extinguishment of debt and modification costs (including prepayment penalties and defeasance costs incurred on the early repayment of debt, the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt related to the early repayment of debt, costs incurred in a debt modification that are not capitalized as deferred financing costs and other costs incurred in a debt extinguishment), casualty-related expenses and recoveries and gains or losses, pandemic expenses, the amortization of deferred financing costs incurred in connection with obtaining short-term debt financing, and the noncontrolling interests (as described above) related to these items.
Core FFO adjusts FFO to remove items such as losses on extinguishment of debt and modification costs (including prepayment penalties and defeasance costs incurred on the early repayment of debt, the write-off of unamortized deferred financing costs and fair market value adjustments of assumed debt related to the early repayment of debt, costs incurred in a debt modification that are not capitalized as deferred financing costs and other costs incurred in a debt extinguishment), casualty-related expenses and recoveries and gains or losses, gain on forfeited deposits, the amortization of deferred financing costs incurred in connection with obtaining short-term debt financing, and the noncontrolling interests (as described above) related to these items.
We and our subsidiaries are subject to U.S. federal income tax as well as income tax of various state and local jurisdictions. The 2021, 2020 and 2019 tax years remain open to examination by tax jurisdictions to which our subsidiaries and we are subject.
We and our subsidiaries are subject to U.S. federal income tax as well as income tax of various state and local jurisdictions. The 2022, 2021 and 2020 tax years remain open to examination by tax jurisdictions to which our subsidiaries and we are subject.
An unused commitment fee at a rate of 0.15% or 0.25%, depending on the outstanding aggregate revolving commitments, applies to unutilized borrowing capacity under the Amended and Restated Corporate Credit Facility. Amounts owing under the Amended and Restated Corporate Credit Facility may be prepaid at any time without premium or penalty.
An unused commitment fee at a rate of 0.15% or 0.25%, depending on the outstanding aggregate revolving commitments, applies to unutilized borrowing capacity under the Corporate Credit Facility. Amounts owing under the Corporate Credit Facility may be prepaid at any time without premium or penalty.
Property management fees were $ 7.6 million for the year ended December 31, 2022 compared to $ 6.3 million for the year ended December 31, 2021 , which was an increase of approximately $ 1.3 million . The increase between the periods was primarily due to an increase in total revenues, which the fee is primarily based on.
Property management fees were $7.6 million for the year ended December 31, 2022 compared to $6.3 million for the year ended December 31, 2021, which was an increase of approximately $1.3 million. The increase between the periods was primarily due to an increase in total revenues, which the fee is primarily based on. Advisory and administrative fees.
During the year ended December 31, 2022, net cash provided by operating activities was $79.1 million compared to net cash provided by operating activities of $73.3 million for the year ended December 31, 2021.
During the year ended December 31, 2022, net cash provided by operating activities was $79.1 million compared to net cash provided by operating activities of $73.3 million for the year ended December 31, 2020.
Property management fees were $6.2 million for the year ended December 31, 2022 compared to $5.4 million for the year ended December 31, 2021, which was an increase of approximately $0.8 million, or 14.7%. The majority of the increase is related to an increase in total revenues, which the fee is primarily based on. Property general and administrative expenses.
Property management fees were $6.2 million for the year ended December 31, 2023 compared to $5.7 million for the year ended December 31, 2022, which was an increase of approximately $0.5 million, or 7.8%. The majority of the increase is related to an increase in total revenues, which the fee is primarily based on. Property general and administrative expenses.
Advisory and administrative fees include the fees paid to our Adviser pursuant to the Advisory Agreement (see Note 11 to our consolidated financial statements). Corporate general and administrative expenses.
Advisory and administrative fees include the fees paid to our Adviser pursuant to the Advisory Agreement (see Note 10 to our consolidated financial statements). Corporate general and administrative expenses.
As of December 31, 2021, our 2021-2022 Same Store properties were approximately 94.3% leased with a weighted average monthly effective rent per occupied apartment unit of $1,267. For our 2021-2022 Same Store properties, we recorded the following operating results for the year ended December 31, 2022 as compared to the year ended December 31, 2021: Revenues Rental income .
As of December 31, 2022, our 2021-2023 Same Store properties were approximately 94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $1,520. For our 2021-2023 Same Store properties, we recorded the following operating results for the year ended December 31, 2023 as compared to the year ended December 31, 2022: Revenues Rental income .
Property management fees were $6.0 million for the year ended December 31, 2022 compared to $5.3 million for the year ended December 31, 2021, which was an increase of approximately $0.7 million, or 14.5%. The majority of the increase is related to an increase in total revenues, which the fee is primarily based on. Property general and administrative expenses.
Property management fees were $6.8 million for the year ended December 31, 2023 compared to $6.3 million for the year ended December 31, 2022, which was an increase of approximately $0.5 million, or 7.7%. The majority of the increase is related to an increase in total revenues, which the fee is primarily based on. Property general and administrative expenses.
The increase between period is mainly attributable to our acquisition of four properties in 2021 and two in 2022. Other Income and Expense Interest expense. Interest expense was $50.6 million for the year ended December 31, 2022 compared to $44.6 million for the year ended December 31, 2021, which was an increase of approximately $6.0 million.
The increase between the periods is mainly attributable to our acquisitions of four properties in 2021 and two in 2022. Other Income and Expense Interest expense. Interest expense was $50.6 million for the year ended December 31, 2022 compared to $44.6 million for the year ended December 31, 2021, which was an increase of approximately $6.0 million.
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) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (4) corporate general and administrative expenses, (5) other gains and losses that are specific to us including loss on extinguishment of debt and modification costs, (6) casualty-related expenses/(recoveries) and casualty gains (losses), and (7) 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. 55 The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints.
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) the impact of: (a) depreciation and amortization expenses and (b) gains or losses from the sale of operating real estate assets that are included in net income (loss) computed in accordance with GAAP, (4) corporate general and administrative expenses, (5) other gains and losses that are specific to us including loss on extinguishment of debt and modification costs, (6) casualty-related expenses/(recoveries) and casualty gains (losses), (7) gain on forfeited deposits, (8) 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 (9) equity in earnings of affiliates. 54 The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints.
For purposes of calculating the adjusted weighted average interest rate of our mortgage debt outstanding, we have included the weighted average fixed rate of 1.0682% for one-month LIBOR on our combined $1.2 billion notional amount of interest rate swap agreements, which effectively fix the interest rate on $1.2 billion of our floating rate mortgage debt.
For purposes of calculating the adjusted weighted average interest rate of our mortgage debt outstanding, we have included the weighted average fixed rate of 1.0682% for Adjusted SOFR on our combined $1.2 billion notional amount of interest rate swap agreements, which effectively fix the interest rate on $1.2 billion of our floating rate mortgage debt.
The Advisory Agreement was renewed on February 22, 2023 for a one-year term. The Adviser is wholly owned by NexPoint Advisors, L.P. On March 4, 2020, the Company, the OP and the Adviser entered into separate equity distribution agreements with each the ATM Sales Agents, pursuant to the 2020 ATM Program. See Note 8 to our consolidated financial statements.
The Advisory Agreement was renewed on February 26, 2024 for a one-year term. The Adviser is wholly owned by NexPoint Advisors, L.P. On March 4, 2020, the Company, the OP and the Adviser entered into separate equity distribution agreements with each the ATM Sales Agents, pursuant to the 2020 ATM Program. See Note 7 to our consolidated financial statements.
As of December 31, 2020, our 2020-2022 Same Store properties were approximately 94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $1,132. For our 2020-2022 Same Store properties, we recorded the following operating results for the year end December 31, 2022 as compared to the year ended December 31, 2020: Revenues Rental income .
As of December 31, 2022, our 2022-2023 Same Store properties were approximately 94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $1,508. For our 2022-2023 Same Store properties, we recorded the following operating results for the year ended December 31, 2023 as compared to the year ended December 31, 2022: Revenues Rental income .
The FFO, Core FFO and AFFO allocable to such units is allocated on this same basis and reflected in the adjustments for noncontrolling interests in the table below. As such, the assumed conversion of these units would have no net impact on the determination of diluted FFO, Core FFO and AFFO per share.
The FFO, Core FFO and AFFO allocable to such units is allocated on this same basis and reflected in the adjustments for noncontrolling interests in the table below. As such, the assumed conversion of these units would have no net impact on the determination of diluted FFO, Core FFO and AFFO per share. See Note 9 for additional information.
See Notes 6 and 7 to our consolidated financial statements for additional information. We have entered into and expect to continue to enter into interest rate swap and cap agreements with various third parties to fix or cap the floating interest rates on a majority of our floating rate mortgage debt outstanding.
See Notes 5 and 6 for additional information. We have entered into and expect to continue to enter into interest rate swap and cap agreements with various third parties to fix or cap the floating interest rates on a majority of our floating rate mortgage debt outstanding.
(3) For the years ended December 31, 2022 and 2021, excludes approximately $2,884,000 and $1,986,000, respectively, of expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees.
(3) For the years ended December 31, 2023, 2022 and 2021, excludes approximately $2,619,000, $2,638,000 and $1,696,000, respectively, of expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees.
Subject to conditions provided in the Amended and Restated Corporate Credit Facility, the Amended and Restated Corporate Credit Facility may be increased up to an additional $100.0 million (the “Accordion Feature”) if the lenders agree to increase their commitments or if the lenders agree for the increase to be funded by any additional lender proposed by the Company, through the OP.
Subject to conditions provided in the Corporate Credit Facility, the Corporate Credit Facility may be increased up to an additional $100.0 million if the lenders agree to increase their commitments or if the lenders agree for the increase to be funded by any additional lender proposed by the Company, through the OP.
During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 1.0682%, on a weighted average basis, on the notional amounts, while the Counterparties are obligated to make monthly floating rate payments based on one-month LIBOR to us referencing the same notional amounts.
During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 1.0682%, on a weighted average basis, on the notional amounts, while the Counterparties are obligated to make monthly floating rate payments based on Adjusted SOFR to us referencing the same notional amounts.
The increase between periods was primarily due to an increase in prepayment penalties and defeasance costs of $5.3 million, increase in write-offs of deferred financing costs of $1.5 million and an increase in debt modification and other extinguishment costs of $1.3 million.
The decrease between periods was primarily due to a decrease in prepayment penalties and defeasance costs of $3.3 million, decrease in write-offs of deferred financing costs of $1.5 million and an decrease in debt modification and other extinguishment costs of $1.8 million.
A discussion of recent accounting pronouncements and our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included in this annual report.
A discussion of recent accounting pronouncements and our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2 “Summary of Significant Accounting Policies” included in this Annual Report.
Gain on sales of real estate is calculated by deducting the carrying value of the real estate and costs incurred to sell the properties from the sales prices of the properties. 50 Results of Operations for the Years Ended December 31, 2022, 2021 and 2020 The year ended December 31, 2022 as compared to the year ended December 31, 2021 The following table sets forth a summary of our operating results for the years ended December 31, 2022 and 2021 (in thousands): For the Year Ended December 31, 2022 2021 $ Change Total revenues $ 263,952 $ 219,240 $ 44,712 Total expenses (232,383 ) (201,032 ) (31,351 ) Operating income before gain on sales of real estate 31,569 18,208 13,361 Gain on sales of real estate 14,684 46,214 (31,530 ) Operating income 46,253 64,422 (18,169 ) Interest expense (50,587 ) (44,623 ) (5,964 ) Loss on extinguishment of debt and modification costs (8,734 ) (912 ) (7,822 ) Casualty gain 2,506 2,595 (89 ) Miscellaneous income 1,271 1,624 (353 ) Net income (loss) (9,291 ) 23,106 (32,397 ) Net income (loss) attributable to redeemable noncontrolling interests in the Operating Partnership (31 ) 69 (100 ) Net income (loss) attributable to common stockholders $ (9,260 ) $ 23,037 $ (32,297 ) The change in our net income between the periods primarily relates to an increase in total expenses of approximately $31.4 million and a decrease in gain on sale of real estate of approximately $31.5 million, partially offset by an increase in revenues of approximately $44.7 million.
The year ended December 31, 2022 as compared to the year ended December 31, 2021 The following table sets forth a summary of our operating results for the years ended December 31, 2022 and 2021 (in thousands): For the Year Ended December 31, 2022 2021 $ Change Total revenues $ 263,952 $ 219,240 $ 44,712 Total expenses (232,383 ) (201,032 ) (31,351 ) Operating income before gain on sales of real estate 31,569 18,208 13,361 Gain on sales of real estate 14,684 46,214 (31,530 ) Operating income 46,253 64,422 (18,169 ) Interest expense (50,587 ) (44,623 ) (5,964 ) Loss on extinguishment of debt and modification costs (8,734 ) (912 ) (7,822 ) Casualty gain 2,506 2,595 (89 ) Miscellaneous income 1,271 1,624 (353 ) Net income (loss) (9,291 ) 23,106 (32,397 ) Net income (loss) attributable to redeemable noncontrolling interests in the Operating Partnership (31 ) 69 (100 ) Net income (loss) attributable to common stockholders $ (9,260 ) $ 23,037 $ (32,297 ) The change in our net income (loss) between the periods primarily relates to decreases in gain on sales of real estate of $31.5 million, increase in interest expense of $6.0 million, increase in loss on extinguishment of debt and modification costs of $7.8 million, increase in total expenses of $31.4 million, partially offset by an increase in total revenues of $44.7 million.
The interest rate swap agreements involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of December 31, 2022, interest rate swap agreements effectively covered 74% of our $1.6 billion of floating rate mortgage debt outstanding.
The interest rate swap agreements involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. As of December 31, 2023, interest rate swap agreements effectively covered 77% of our $1.5 billion of floating rate mortgage debt outstanding.
(5) For the years ended December 31, 2022 and 2021, excludes approximately $716,000 and $669,000, respectively, of expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees. 59 See reconciliation of net income (loss) to NOI above under “NOI and 2021 - 2022 Same Store NOI for the Years Ended December 31, 2022 and 2021 .” 2021-2022 Same Store Results of Operations for the Years Ended December 31, 2022 and 2021 As of December 31, 2022, our 2021-2022 Same Store properties were approximately 94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $1,493.
(5) For the years ended December 31, 2023, 2022 and 2021, excludes approximately $1,082,000, $963,000 and $843,000, respectively, of expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees. 60 See reconciliation of net income (loss) to NOI above under “NOI and 2021-2023 Same Store NOI for the Years Ended December 31, 2023, 2022 and 2021.” 2021-2023 Same Store Results of Operations for the Years Ended December 31, 2023 and 2022 As of December 31, 2023, our 2021-2023 Same Store properties were approximately 94.7% leased with a weighted average monthly effective rent per occupied apartment unit of $1,520.
See Note 6 for additional information. The Corporate Credit Facility is a non-recourse obligation and contains customary events of default, including defaults in the payment of principal or interest, defaults in compliance with the covenants contained in the document evidencing the loan, defaults in payments under any other security instrument, and bankruptcy or other insolvency events.
The Corporate Credit Facility is a non-recourse obligation and contains customary events of default, including defaults in the payment of principal or interest, defaults in compliance with the covenants contained in the document evidencing the loan, defaults in payments under any other security instrument, and bankruptcy or other insolvency events.
As of December 31, 2022, the Company had the following outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk with future effective dates (dollars in thousands): Effective Date Termination Date Counterparty Notional Amount Fixed Rate (1) September 1, 2026 January 1, 2027 KeyBank $ 92,500 1.7980 % (2) (1) The floating rate option for the interest rate swaps is one-month LIBOR.
As of December 31, 2023, the Company had the following outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk with future effective dates (dollars in thousands): Effective Date Termination Date Counterparty Notional Amount Fixed Rate (1) September 1, 2026 January 1, 2027 KeyBank $ 92,500 1.7980 % (1) The floating rate option for the interest rate swaps is Adjusted SOFR.
Casualty gains were $2.5 million for the year ended December 31, 2022 compared to casualty gains of $2.6 million for the year ended December 31, 2021. The decrease between periods was primarily due to damages sustained at Cutter’s Point, Venue 8651, and Timber Creek during the year ended December 31, 2021 (see Note 5 to our consolidated financial statements).
Casualty losses were $0.9 million for the year ended December 31, 2023 compared to casualty gains of $2.5 million for the year ended December 31, 2022. The decrease between periods was primarily due to damages sustained at Cutter’s Point, Venue 8651, and Timber Creek during the year ended December 31, 2022 (see Note 4 to our consolidated financial statements).
Advances under the Amended and Restated Corporate Credit Facility accrue interest at a per annum rate equal to, at the Company’s election, either LIBOR plus a margin of 1.90% to 2.40%, depending on the Company’s total leverage ratio, or a base rate determined according to the highest of (a) the prime rate, (b) the federal funds rate plus 0.50%, (c) LIBOR plus 1.0% or (d) 0.0% plus a margin of 0.90% to 1.40%, depending on the Company’s total leverage ratio.
Advances under the Corporate Credit Facility accrue interest at a per annum rate equal to, at the Company’s election, either Term SOFR plus a margin of 1.90% to 2.40%, depending on the Company’s total leverage ratio, and a benchmark replacement adjustment of 0.1%, or a base rate determined according to the highest of (a) the prime rate, (b) the federal funds rate plus 0.50%, (c) Term SOFR plus 1.0% or (d) 0.0% plus a margin of 0.90% to 1.40%, depending on the Company’s total leverage ratio.
The Company is in compliance with all the covenants in its Corporate Credit Facility Interest Rate Swap Agreements In order to fix a portion of, and mitigate the risk associated with, our floating rate indebtedness (without incurring substantial prepayment penalties or defeasance costs typically associated with fixed rate indebtedness when repaid early or refinanced), we, through the OP, have entered into six interest rate swap transactions with KeyBank and four with Truist Bank (collectively the “Counterparties”) with a combined notional amount of $1.2 billion which are effective as of December 31, 2022.
Interest Rate Swap Agreements In order to fix a portion of, and mitigate the risk associated with, our floating rate indebtedness (without incurring substantial prepayment penalties or defeasance costs typically associated with fixed rate indebtedness when repaid early or refinanced), we, through the OP, have entered into six interest rate swap transactions with KeyBank and four with Truist Bank (collectively the “Counterparties”) with a combined notional amount of $1.2 billion which are effective as of December 31, 2023.
See reconciliation of net income to NOI above under “NOI and 2020 -2022 Same Store NOI for the Years Ended December 31, 2022, 2021 and 2020.” 2020-2022 Same Store Results of Operations for the Years Ended December 31, 2022 and 2021 As of December 31, 2022, our 2020-2022 Same Store properties were approximately 94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $1,489.
See reconciliation of net income (loss) to NOI above under “NOI and 2022-2023 Same Store NOI for the Years Ended December 31, 2023 and 2022.” 58 2022-2023 Same Store Results of Operations for the Years Ended December 31, 2023 and 2022 As of December 31, 2023, our 2022-2023 Same Store properties were approximately 94.7% leased with a weighted average monthly effective rent per occupied apartment unit of $1,509.
The change in cash flows from investing activities was mainly due to our acquisition and disposition activity in 2021 and 2020 and the timing of the transactions. Cash flows from financing activities.
The change in cash flows from investing activities was mainly due to our acquisition and disposition activity in 2023 and 2022 and the timing of the transactions. Cash flows from financing activities.
In many cases, we reserve cash at the closing of each acquisition to fund these planned capital expenditures and value-add improvements. As of December 31, 2022, we had approximately $11.9 million of renovation value-add reserves for our planned capital expenditures and other expenses to implement our value-add program, which will complete approximately 14,203 planned interior rehabs.
In many cases, we reserve cash at the closing of each acquisition to fund these planned capital expenditures and value-add improvements. As of December 31, 2023, we had approximately $2.9 million of renovation value-add reserves for our planned capital expenditures and other expenses to implement our value-add program, which will complete approximately 13,209 planned interior rehabs.
The change in cash flows from financing activities was mainly due to a net decrease in debt of approximately $89.7 million between the periods. 67 The year ended December 31, 2021 as compared to the year ended December 31, 2020 Cash flows from operating activities.
The change in cash flows from financing activities was mainly due to a net decrease in debt of approximately $226.7 million between the periods. 65 The year ended December 31, 2022 as compared to the year ended December 31, 2021 Cash flows from operating activities.
(5) For the years ended December 31, 2022, 2021 and 2020, excludes approximately $776,000, $696,000 and $654,000, respectively, of expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees.
(5) For the years ended December 31, 2023 and 2022, excludes approximately $792,000 and $686,000, respectively, of expenses that are not reflective of the continuing operations of the properties or are incurred on our behalf at the property for expenses such as legal, professional, centralized leasing service and franchise tax fees.
As of December 31, 2021, our 2020-2022 Same Store properties were approximately 94.2% leased with a weighted average monthly effective rent per occupied apartment unit of $1,262. For our 2020-2022 Same Store properties, we recorded the following operating results for the year ended December 31, 2022 as compared to the year ended December 31, 2021: Revenues Rental income .
As of December 31, 2021, our 2021-2023 Same Store properties were approximately 94.3% leased with a weighted average monthly effective rent per occupied apartment unit of $1,288. For our 2021-2023 Same Store properties, we recorded the following operating results for the year end December 31, 2023 as compared to the year ended December 31, 2021: Revenues Rental income .
Net Operating Income for Our 2021-2022 Same Store and Non-Same Store Properties for the Years Ended December 31, 2022 and 2021 There are 31 properties encompassing 12,210 units of apartment space in our same store pool for the years ended December 31, 2022 and 2021 (our “2021-2022 Same Store” properties).
Net Operating Income for Our 2021-2023 Same Store and Non-Same Store Properties for the Years Ended December 31, 2023, 2022 and 2021 There are 28 properties encompassing 11,061 units of apartment space in our same store pool for the years ended December 31, 2023, 2022 and 2021 (our “2021-2023 Same Store” properties).
The majority of the increase is related to a 18.0% increase in the weighted average monthly effective rent per occupied apartment unit to $1,489 as of December 31, 2022 from $1,262 as of December 31, 2021. Other income.
The majority of the increase is related to a 18.0% increase in the weighted average monthly effective rent per occupied apartment unit to $1,520 as of December 31, 2023 from 1,288 as of December 31, 2021. Other income.
The change in our Core FFO between the periods primarily relates to an increase in FFO $16.2 million and an increase in loss on extinguishment of debt and medication costs of $7.3 million.
The change in our Core FFO between the periods primarily relates to an increase in FFO $7.7 million and an increase in loss on extinguishment of debt and medication costs of $1.5 million.
We have allocated the total impact of expected settlements on the $1.2 billion notional amount of interest rate swaps to “Operating Properties Mortgage Debt.” We used one-month LIBOR as of December 31, 2022 to determine our expected settlements through the terms of the interest rate swaps.
We have allocated the total impact of expected settlements on the $1.2 billion notional amount of interest rate swaps to “Operating Properties Mortgage Debt.” We used Adjusted SOFR as of December 31, 2023 to determine our expected settlements through the terms of the interest rate swaps.
Property general and administrative expenses were $4.5 million for the year ended December 31, 2022 compared to $3.9 million for the year ended December 31, 2021, which was an increase of approximately $0.6 million, or 16.4%.
Property general and administrative expenses were $4.2 million for the year ended December 31, 2023 compared to $4.0 million for the year ended December 31, 2022, which was an increase of approximately $0.2 million, or 3.5%.
Real estate taxes and insurance costs were $29.3. million for the year ended December 31, 2022 compared to $27.7 million for the year ended December 31, 2021, which was an increase of approximately $1.6 million, or 5.9%. The majority of the increase is related to a $1.2 million, or 4.9%, increase in property taxes. Property management fees.
Real estate taxes and insurance costs were $30.7 million for the year ended December 31, 2023 compared to $29.4 million for the year ended December 31, 2022, which was an increase of approximately $1.3 million, or 4.4%. The majority of the increase is related to a $1.2 million increase in property tax expense. Property management fees.
Overview As of December 31, 2022, our portfolio consisted of 40 multifamily properties primarily located in the Southeastern and Southwestern United States encompassing 15,127 units of apartment space that was approximately 94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $1,480. Substantially all of our business is conducted through the OP.
Overview As of December 31, 2023, our portfolio consisted of 38 multifamily properties primarily located in the Southeastern and Southwestern United States encompassing 14,133 units of apartment space that was approximately 94.7% leased with a weighted average monthly effective rent per occupied apartment unit of $1,502. Substantially all of our business is conducted through the OP.
This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “—Results of Operations” regarding the components of net income (loss) that are eliminated in the calculation of NOI.
NOI is therefore not a substitute for net income (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “—Results of Operations” regarding the components of net income (loss) that are eliminated in the calculation of NOI.
The following table sets forth a summary of our capital expenditures related to our value-add program for the years ended December 31, 2022, 2021 and 2020 (in thousands): For the Year Ended December 31, Rehab Expenditures 2022 2021 2020 Interior (1) $ 26,229 $ 11,278 $ 10,093 Exterior and common area 9,957 7,773 20,447 Total rehab expenditures $ 36,186 $ 19,051 $ 30,540 (1) Includes total capital expenditures during the period on completed and in-progress interior rehabs.
The following table sets forth a summary of our capital expenditures related to our value-add program for the years ended December 31, 2023, 2022 and 2021 (in thousands): For the Year Ended December 31, Rehab Expenditures 2023 2022 2021 Interior (1) $ 25,504 $ 26,229 $ 11,278 Exterior and common area 11,730 9,957 7,773 Total rehab expenditures $ 37,234 $ 36,186 $ 19,051 (1) Includes total capital expenditures during the period on completed and in-progress interior rehabs.
For purposes of hedge accounting under FASB ASC 815, Derivatives and Hedging, we have designated these interest rate swaps as cash flow hedges of interest rate risk.
For purposes of hedge accounting under FASB ASC 815, Derivatives and Hedging, we have designated these interest rate swaps as cash flow hedges of interest rate risk. See Notes 5 and 6 for additional information.
Liquidity and Capital Resources Our short-term cash requirements consist primarily of funds necessary to pay for debt maturities, operating expenses and other expenditures directly associated with our multifamily properties, including: • capital expenditures to continue our value-add program and to improve the quality and performance of our multifamily properties; • interest expense and scheduled principal payments on outstanding indebtedness (see “—Obligations and Commitments” below); • recurring maintenance necessary to maintain our multifamily properties; • distributions necessary to qualify for taxation as a REIT; • acquisition of additional properties; • advisory and administrative fees payable to our Adviser; • general and administrative expenses; • reimbursements to our Adviser; and • property management fees payable to BH.
Liquidity and Capital Resources Our short-term cash requirements consist primarily of funds necessary to pay for debt maturities, operating expenses and other expenditures directly associated with our multifamily properties, including: • capital expenditures to continue our value-add program and to improve the quality and performance of our multifamily properties; • interest expense and scheduled principal payments on outstanding indebtedness (see “—Obligations and Commitments” below); • recurring maintenance necessary to maintain our multifamily properties; • distributions necessary to qualify for taxation as a REIT; • acquisition of additional properties; • advisory and administrative fees payable to our Adviser; • general and administrative expenses; • reimbursements to our Adviser; and • property management fees payable to BH. 64 We expect to meet our short-term cash requirements generally through net cash provided by operations and existing cash balances and any unused capacity on the Corporate Credit Facility.
See Notes 6 and 7 to our consolidated financial statements for additional information. 69 The following table contains summary information regarding our outstanding interest rate swaps (dollars in thousands): Effective Date Termination Date Counterparty Notional Fixed Rate (1) June 1, 2019 June 1, 2024 KeyBank $ 50,000 2.002 % June 1, 2019 June 1, 2024 Truist 50,000 2.002 % September 1, 2019 September 1, 2026 KeyBank 100,000 1.462 % September 1, 2019 September 1, 2026 KeyBank 125,000 1.302 % January 3, 2020 September 1, 2026 KeyBank 92,500 1.609 % March 4, 2020 June 1, 2026 Truist 100,000 0.820 % June 1, 2021 September 1, 2026 KeyBank 200,000 0.845 % June 1, 2021 September 1, 2026 KeyBank 200,000 0.953 % March 1, 2022 March 1, 2025 Truist 145,000 0.573 % March 1, 2022 March 1, 2025 Truist 105,000 0.614 % $ 1,167,500 1.068 % (2) (1) The floating rate option for the interest rate swaps is one-month LIBOR.
The following table contains summary information regarding our outstanding interest rate swaps (dollars in thousands): Effective Date Termination Date Counterparty Notional Fixed Rate (1) June 1, 2019 June 1, 2024 KeyBank $ 50,000 2.002 % June 1, 2019 June 1, 2024 Truist 50,000 2.002 % September 1, 2019 September 1, 2026 KeyBank 100,000 1.462 % September 1, 2019 September 1, 2026 KeyBank 125,000 1.302 % January 3, 2020 September 1, 2026 KeyBank 92,500 1.609 % March 4, 2020 June 1, 2026 Truist 100,000 0.820 % June 1, 2021 September 1, 2026 KeyBank 200,000 0.845 % June 1, 2021 September 1, 2026 KeyBank 200,000 0.953 % March 1, 2022 March 1, 2025 Truist 145,000 0.573 % March 1, 2022 March 1, 2025 Truist 105,000 0.614 % $ 1,167,500 1.068 % (2) (1) The floating rate option for the interest rate swaps is Adjusted SOFR.
Property management fees were $6.3 million for the year ended December 31, 2021 compared to $6.0 million for the year ended December 31, 2020, which was an increase of approximately $0.3 million. The increase between the periods was primarily due to an increase in total revenues, which the fee is primarily based on. Advisory and administrative fees.
Property management fees were $8.1 million for the year ended December 31, 2023 compared to $7.6 million for the year ended December 31, 2022, which was an increase of approximately $0.5 million. The increase between the periods was primarily due to an increase in total revenues, which the fee is primarily based on. Advisory and administrative fees.

… 119 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

11 edited+0 added−4 removed3 unchanged
Biggest changeIn order to fix a portion of, and mitigate the risk associated with, our floating rate indebtedness (without incurring substantial prepayment penalties or defeasance costs typically associated with fixed rate indebtedness when repaid early or refinanced), we, through the OP, have entered into eleven interest rate swap transactions with the Counterparties with a combined notional amount of $1.2 billion.
Biggest changeWe also expect to manage our exposure to interest rate risk by maintaining a mix of fixed and floating rates for our indebtedness. 73 In order to fix a portion of, and mitigate the risk associated with, our floating rate indebtedness (without incurring substantial prepayment penalties or defeasance costs typically associated with fixed rate indebtedness when repaid early or refinanced), we, through the OP, have entered into eleven interest rate swap transactions with the Counterparties with a combined notional amount of $1.2 billion.
An increase in interest rates could make the financing of any acquisition by us costlier. Rising interest rates could also limit our ability to refinance our debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness.
An increase in interest rates could make the financing of any acquisition by us costlier. Rising or high interest rates could also limit our ability to refinance our debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk is the adverse effect on the value of assets and liabilities that results from a change in market conditions. Our primary market risk exposure is interest rate risk with respect to our indebtedness and counterparty credit risk with respect to our interest rate derivatives.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk Market risk is the adverse effect on the value of assets and liabilities that results from a change in market conditions. Our primary market risk exposure is interest rate risk with respect to our indebtedness and counterparty credit risk with respect to our interest rate derivatives.
In order to minimize counterparty credit risk, we enter into and expect to enter into hedging arrangements only with major financial institutions that have high credit ratings. As of December 31, 2022, we had total indebtedness of $1.7 billion at a weighted average interest rate of 5.74%, of which $1.6 billion was debt with a floating interest rate.
In order to minimize counterparty credit risk, we enter into and expect to enter into hedging arrangements only with major financial institutions that have high credit ratings. As of December 31, 2023, we had total indebtedness of $1.6 billion at a weighted average interest rate of 6.91%, of which $1.5 billion was debt with a floating interest rate.
During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 1.0682%, on a weighted average basis, on the notional amounts, while the Counterparties are obligated to make monthly floating rate payments based on one-month LIBOR to us referencing the same notional amounts.
During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 1.0682%, on a weighted average basis, on the notional amounts, while the Counterparties are obligated to make monthly floating rate payments based on Adjusted SOFR to us referencing the same notional amounts.
For purposes of calculating the adjusted weighted average interest rate of the total indebtedness, we have included the weighted average fixed rate of 1.0682% for one-month LIBOR on the $1.2 billion notional amount of interest rate swap agreements that we have entered into as of December 31, 2022, which effectively fix the interest rate on $1.2 billion of our floating rate mortgage debt outstanding.
For purposes of calculating the adjusted weighted average interest rate of the total indebtedness, we have included the weighted average fixed rate of 1.0682% for Adjusted SOFR on the $1.2 billion notional amount of interest rate swap agreements that we have entered into as of December 31, 2023, which effectively fix the interest rate on $1.2 billion of our floating rate mortgage debt outstanding.
Until our interest rates reach the caps provided by our interest rate cap agreements, each quarter point change in LIBOR would result in an approximate increase to annual interest expense costs on our floating rate indebtedness, reduced by any payments due from the Counterparties under the terms of the interest rate swap agreements we had entered into as of December 31, 2022, of the amounts illustrated in the table below for our indebtedness as of December 31, 2022 (dollars in thousands): Change in Interest Rates Annual Increase to Interest Expense 0.25% $ 1,200 0.50% 2,400 0.75% 3,600 1.00% 4,800 There is no assurance that we would realize such expense as such changes in interest rates could alter our liability positions or strategies in response to such changes.
Until our interest rates reach the caps provided by our interest rate cap agreements, each quarter point change in SOFR would result in an approximate increase to annual interest expense costs on our floating rate indebtedness, reduced by any payments due from the Counterparties under the terms of the interest rate swap agreements we had entered into as of December 31, 2023, of the amounts illustrated in the table below for our indebtedness as of December 31, 2023 (dollars in thousands): Change in Interest Rates Annual Increase to Interest Expense 0.25% $ 930 0.50% 1,860 0.75% 2,790 1.00% 3,720 There is no assurance that we would realize such expense as such changes in interest rates could alter our liability positions or strategies in response to such changes.
The interest rate swaps we have entered into effectively replace the floating interest rate (one-month LIBOR) with respect to that amount with a weighted average fixed rate of 1.0682%.
The interest rate swaps we have entered into effectively replace the floating interest rate (SOFR) with respect to that amount with a weighted average fixed rate of 1.0682%.
As of December 31, 2022, the interest rate cap agreements we have entered into effectively cap one-month LIBOR on $1.3 billion of our floating rate mortgage debt at a weighted average rate of 5.81% for the term of the agreements, which is generally three to four years.
As of December 31, 2023, the interest rate cap agreements we have entered into effectively cap SOFR on $1.3 billion of our floating rate mortgage debt at a weighted average rate of 5.90% for the term of the agreements, which is generally three to four years.
The interest rate swap agreements we have entered into effectively fix the interest rate on 74% of our $1.6 billion of floating rate mortgage debt outstanding (see below) and 0.0% of our $74.5 million floating rate Credit Facility. As of December 31, 2022, the adjusted weighted average interest rate of our total indebtedness was 3.38%.
The interest rate swap agreements we have entered into effectively fix the interest rate on 77% of our $1.5 billion of floating rate mortgage debt outstanding (see below). As of December 31, 2023, the adjusted weighted average interest rate of our total indebtedness was 3.59%.
If the fair value of a derivative financial instrument is negative, we will owe the Counterparties and, therefore, do not have credit risk.
If the fair value of a derivative financial instrument is negative, we will owe the Counterparties and, therefore, do not have credit risk. We seek to minimize the credit risk in derivative financial instruments by entering into transactions with major financial institutions that have high credit ratings.
Removed
We also expect to manage our exposure to interest rate risk by maintaining a mix of fixed and floating rates for our indebtedness.
Removed
We seek to minimize the credit risk in derivative financial instruments by entering into transactions with major financial institutions that have high credit ratings. 74 In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021 .
Removed
The Alternative Reference Rates Committee (“ ARRC ”) has proposed that the Secured Overnight Financing Rate (“ SOFR ”) is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR.
Removed
ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR. We have material contracts that are indexed to USD-LIBOR and are monitoring this activity and evaluating the related risks .

Other NXRT 10-K year-over-year comparisons