0001620393 nxrt:SelfInsuranceProgramMember 2021-01-01 2021-03-31

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 20212022

OR

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                     to                     

Commission File Number 001-36663

 

NexPoint Residential Trust, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Maryland

 

47-1881359

(State or other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

300 Crescent Court, Suite 700, Dallas, Texas

(Address of Principal Executive Offices)

 

75201

(Zip Code)

 

(214) 276-6300

(Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

NXRT

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

☒

 

Accelerated Filer

☐

Non-Accelerated Filer

☐

 

Smaller reporting company

☐

Emerging growth company

☐

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of November 3, 2021,October 26, 2022, the registrant had 25,251,64125,549,319 shares of its common stock, par value $0.01 per share, outstanding.

 

 

 

 

 

NEXPOINT RESIDENTIAL TRUST, INC.

Form 10-Q

Quarter Ended September 30, 20212022

INDEX

 

 

 

Page

Cautionary Statement Regarding Forward-Looking Statements

 

ii

 

 

 

 

 

 

PART I—FINANCIAL INFORMATION

 

 

 

 

Item 1.

 

Financial Statements

 

 

 

 

Consolidated Balance Sheets as of September 30, 20212022 (Unaudited) and December 31, 20202021

 

1

 

 

Consolidated Unaudited Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 20212022 and 20202021

 

2

 

 

Consolidated Unaudited Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 20212022 and 20202021

 

3

 

 

Consolidated Unaudited Statements of Cash Flows for the Nine Months Ended September 30, 20212022 and 20202021

 

5

 

 

Notes to Consolidated Unaudited Financial Statements

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

3230

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

5351

Item 4.

 

Controls and Procedures

 

5452

 

 

 

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

Item 1.

 

Legal Proceedings

 

5553

Item 1A.

 

Risk Factors

 

5553

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

5553

Item 3.

 

Defaults Upon Senior Securities

 

5553

Item 4.

 

Mine Safety Disclosures

 

5553

Item 5.

 

Other Information

 

5554

Item 6.

 

Exhibits

 

5655

Signatures

 

 

 

5756

 

i

 

 

Cautionary Statement Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. In particular, statements relating to our liquidity and capital resources, the performance of our properties and results of operations contain forward-looking statements. Furthermore, all of the statements regarding future financial performance (including market conditions and demographics) are forward-looking statements. We caution investors that any forward-looking statements presented in this quarterly report are based on management’s current beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “would,” “result” and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

Forward-looking statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you therefore against relying on any of these forward-looking statements.

Some of the risks and uncertainties that may cause our actual results, performance, liquidity or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

 

•

unfavorable changes in market and economic conditions in the United States and globally and in the specific markets where our properties are located;

 

•

risks associated with the current COVID-19 pandemic, including unpredictable variants, and the future outbreak of other highly infectious or contagious diseases;

 

•

risks associated with 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;

•

potential reforms to the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Federal National Mortgage Association;Association (“Fannie Mae”);

 

•

competition could limit our ability to acquire attractive investment opportunities, which could 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;

 

•

the relatively low residential mortgage rates may result in potential renters purchasing residences rather than leasing them, and as a result, cause a decline in our occupancy rates;

 

•

the risk that we may fail to consummate future property acquisitions;

 

•

failure of acquisitions to yield anticipated results;

 

•

risks associated with increases in interest rates and our ability to issue additional debt or equity securities in the future;

 

•

risks associated with selling apartment communities, which could limit our operational and financial flexibility;

 

•

contingent or unknown liabilities related to properties or businesses that we have acquired or may acquire;

 

•

lack of or insufficient amounts of insurance;

 

•

the risk that our environmental assessments may not identify all potential environmental liabilities and our remediation actions may be insufficient;

 

•

high costs associated with the investigation or remediation of environmental contamination, including asbestos, lead-based paint, chemical vapor, subsurface contamination and mold growth;

 

•

high costs associated with the compliance with various accessibility, environmental, building and health and safety laws and regulations, such as the Americans with Disabilities Act of 1990 and the Fair Housing Act;

 

•

risks associated with limited warranties we may obtain when purchasing properties;

ii

 

•

exposure to decreases in market rents due to our short-term leases;

ii

 

•

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 the 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 NexPoint Advisors, L.P. (our “Sponsor”), NexPoint Real Estate Advisors, L.P. (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 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 taxable REIT subsidiaries;

 

•

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 Internal Revenue Code of 1986, as amended (the “Code”);

 

•

the risk that the Internal Revenue Service (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;

•

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;

iii

•

risks associated with the Highland Capital Management, L.P. bankruptcy, including related litigation and potential conflicts of interest; and

 

•

any other risks included under Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission on February 22, 2021.18, 2022.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. They are based on estimates and assumptions only as of the date of this quarterly report. We undertake no obligation to update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by law.

 

iiiiv

 

 

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

 

 

September 30, 2021

 

 

December 31, 2020

 

 

September 30, 2022

 

 

December 31, 2021

 

 

(Unaudited)

 

 

 

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Real Estate Investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land

 

$

352,048

 

 

$

323,429

 

 

$

378,438

 

 

$

375,857

 

Buildings and improvements

 

 

1,676,850

 

 

 

1,544,115

 

 

 

1,759,301

 

 

 

1,743,866

 

Intangible lease assets

 

 

3,172

 

 

 

1,675

 

 

 

—

 

 

 

2,576

 

Construction in progress

 

 

6,374

 

 

 

10,796

 

 

 

8,170

 

 

 

6,078

 

Furniture, fixtures, and equipment

 

 

108,430

 

 

 

96,228

 

 

 

141,184

 

 

 

120,419

 

Total Gross Operating Real Estate Investments

 

 

2,146,874

 

 

 

1,976,243

 

 

 

2,287,093

 

 

 

2,248,796

 

Accumulated depreciation and amortization

 

 

(264,543

)

 

 

(215,494

)

 

 

(326,738

)

 

 

(287,096

)

Total Net Operating Real Estate Investments

 

 

1,882,331

 

 

 

1,760,749

 

 

 

1,960,355

 

 

 

1,961,700

 

Real estate held for sale, net of accumulated depreciation of $11,028 and $0, respectively

 

 

43,998

 

 

 

—

 

Real estate held for sale, net of accumulated depreciation of $28,477 and $0, respectively

 

 

110,638

 

 

 

—

 

Total Net Real Estate Investments

 

 

1,926,329

 

 

 

1,760,749

 

 

 

2,070,993

 

 

 

1,961,700

 

Cash and cash equivalents

 

 

18,413

 

 

 

24,457

 

 

 

15,771

 

 

 

49,450

 

Restricted cash

 

 

48,871

 

 

 

32,558

 

 

 

50,844

 

 

 

39,246

 

Accounts receivable, net

 

 

5,783

 

 

 

9,045

 

 

 

11,519

 

 

 

4,844

 

Prepaid and other assets

 

 

5,848

 

 

 

2,405

 

 

 

9,869

 

 

 

4,701

 

Fair market value of interest rate swaps

 

 

110,399

 

 

 

3,526

 

TOTAL ASSETS

 

$

2,005,244

 

 

$

1,829,214

 

 

$

2,269,395

 

 

$

2,063,467

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgages payable, net

 

$

1,229,972

 

 

$

1,162,855

 

 

$

1,268,607

 

 

$

1,276,285

 

Mortgages payable held for sale, net

 

 

40,486

 

 

 

—

 

 

 

82,692

 

 

 

—

 

Credit facility, net

 

 

273,339

 

 

 

182,323

 

 

 

333,428

 

 

 

278,215

 

Accounts payable and other accrued liabilities

 

 

11,452

 

 

 

10,058

 

 

 

13,866

 

 

 

12,590

 

Accrued real estate taxes payable

 

 

20,624

 

 

 

12,822

 

 

 

22,165

 

 

 

13,182

 

Accrued interest payable

 

 

2,364

 

 

 

2,274

 

 

 

5,981

 

 

 

2,491

 

Security deposit liability

 

 

2,941

 

 

 

2,688

 

 

 

3,168

 

 

 

2,945

 

Prepaid rents

 

 

1,643

 

 

 

1,639

 

 

 

2,039

 

 

 

1,775

 

Fair market value of interest rate swaps

 

 

12,466

 

 

 

43,530

 

Total Liabilities

 

 

1,595,287

 

 

 

1,418,189

 

 

 

1,731,946

 

 

 

1,587,483

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests in the Operating Partnership

 

 

4,532

 

 

 

3,098

 

 

 

5,828

 

 

 

6,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value: 100,000,000 shares authorized; 0 shares issued

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Common stock, $0.01 par value: 500,000,000 shares authorized; 25,251,641 and 25,016,957 shares issued and outstanding, respectively

 

 

252

 

 

 

250

 

Common stock, $0.01 par value: 500,000,000 shares authorized; 25,549,036 and 25,500,567 shares issued and outstanding, respectively

 

 

255

 

 

 

255

 

Additional paid-in capital

 

 

386,734

 

 

 

376,710

 

 

 

403,377

 

 

 

407,803

 

Accumulated earnings less dividends

 

 

31,804

 

 

 

75,321

 

 

 

18,902

 

 

 

59,209

 

Accumulated other comprehensive loss

 

 

(13,365

)

 

 

(44,354

)

Accumulated other comprehensive income

 

 

109,087

 

 

 

2,578

 

Total Stockholders' Equity

 

 

405,425

 

 

 

407,927

 

 

 

531,621

 

 

 

469,845

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

2,005,244

 

 

$

1,829,214

 

 

$

2,269,395

 

 

$

2,063,467

 

 

See Notes to Consolidated Financial Statements

 


 

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts)

(Unaudited)

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

54,918

 

 

$

49,578

 

 

$

156,305

 

 

$

149,945

 

 

$

66,500

 

 

$

54,918

 

 

$

189,949

 

 

$

156,305

 

Other income

 

 

1,466

 

 

 

1,412

 

 

 

4,438

 

 

 

4,307

 

 

 

1,551

 

 

 

1,466

 

 

 

4,654

 

 

 

4,438

 

Total revenues

 

 

56,384

 

 

 

50,990

 

 

 

160,743

 

 

 

154,252

 

 

 

68,051

 

 

 

56,384

 

 

 

194,603

 

 

 

160,743

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

 

12,783

 

 

 

11,906

 

 

 

35,116

 

 

 

35,591

 

 

 

12,370

 

 

 

12,783

 

 

 

42,669

 

 

 

35,116

 

Real estate taxes and insurance

 

 

7,646

 

 

 

7,686

 

 

 

24,876

 

 

 

23,485

 

 

 

9,419

 

 

 

7,646

 

 

 

27,670

 

 

 

24,876

 

Property management fees (1)

 

 

1,639

 

 

 

1,489

 

 

 

4,640

 

 

 

4,504

 

 

 

1,960

 

 

 

1,639

 

 

 

5,629

 

 

 

4,640

 

Advisory and administrative fees (2)

 

 

1,938

 

 

 

1,976

 

 

 

5,706

 

 

 

5,777

 

 

 

1,904

 

 

 

1,938

 

 

 

5,615

 

 

 

5,706

 

Corporate general and administrative expenses

 

 

3,152

 

 

 

2,807

 

 

 

9,070

 

 

 

8,440

 

 

 

3,818

 

 

 

3,152

 

 

 

11,116

 

 

 

9,070

 

Property general and administrative expenses

 

 

2,076

 

 

 

1,559

 

 

 

5,451

 

 

 

4,924

 

 

 

2,387

 

 

 

2,076

 

 

 

6,586

 

 

 

5,451

 

Depreciation and amortization

 

 

21,591

 

 

 

17,723

 

 

 

62,335

 

 

 

62,479

 

 

 

25,224

 

 

 

21,591

 

 

 

74,490

 

 

 

62,335

 

Total expenses

 

 

50,825

 

 

 

45,146

 

 

 

147,194

 

 

 

145,200

 

 

 

57,082

 

 

 

50,825

 

 

 

173,775

 

 

 

147,194

 

Operating income before gain on sales of real estate

 

 

5,559

 

 

 

5,844

 

 

 

13,549

 

 

 

9,052

 

Gain on sales of real estate

 

 

—

 

 

 

30,160

 

 

 

—

 

 

 

69,151

 

Operating income

 

 

5,559

 

 

 

36,004

 

 

 

13,549

 

 

 

78,203

 

 

 

10,969

 

 

 

5,559

 

 

 

20,828

 

 

 

13,549

 

Interest expense

 

 

(11,531

)

 

 

(11,049

)

 

 

(32,830

)

 

 

(33,704

)

 

 

(11,766

)

 

 

(11,531

)

 

 

(34,804

)

 

 

(32,830

)

Loss on extinguishment of debt and modification costs

 

 

—

 

 

 

(596

)

 

 

(328

)

 

 

(1,470

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(328

)

Casualty gains

 

 

—

 

 

 

4,960

 

 

 

2,379

 

 

 

3,932

 

 

 

—

 

 

 

—

 

 

 

357

 

 

 

2,379

 

Miscellaneous income

 

 

565

 

 

 

322

 

 

 

1,505

 

 

 

1,401

 

 

 

198

 

 

 

565

 

 

 

526

 

 

 

1,505

 

Net income (loss)

 

 

(5,407

)

 

 

29,641

 

 

 

(15,725

)

 

 

48,362

 

Net income (loss) attributable to redeemable noncontrolling interests in the Operating Partnership

 

 

(16

)

 

 

89

 

 

 

(47

)

 

 

145

 

Net income (loss) attributable to common stockholders

 

$

(5,391

)

 

$

29,552

 

 

$

(15,678

)

 

$

48,217

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on interest rate derivatives

 

 

4,545

 

 

 

4,068

 

 

 

31,082

 

 

 

(54,518

)

Net loss

 

 

(599

)

 

 

(5,407

)

 

 

(13,093

)

 

 

(15,725

)

Net loss attributable to redeemable noncontrolling interests in the Operating Partnership

 

 

(2

)

 

 

(16

)

 

 

(46

)

 

 

(47

)

Net loss attributable to common stockholders

 

$

(597

)

 

$

(5,391

)

 

$

(13,047

)

 

$

(15,678

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains on interest rate derivatives

 

 

34,938

 

 

 

4,545

 

 

 

106,874

 

 

 

31,082

 

Total comprehensive income (loss)

 

 

(862

)

 

 

33,709

 

 

 

15,357

 

 

 

(6,156

)

 

 

34,339

 

 

 

(862

)

 

 

93,781

 

 

 

15,357

 

Comprehensive income (loss) attributable to redeemable noncontrolling interests in the Operating Partnership

 

 

(3

)

 

 

101

 

 

 

46

 

 

 

(19

)

 

 

132

 

 

 

(3

)

 

 

319

 

 

 

46

 

Comprehensive income (loss) attributable to common stockholders

 

$

(859

)

 

$

33,608

 

 

$

15,311

 

 

$

(6,137

)

 

$

34,207

 

 

$

(859

)

 

$

93,462

 

 

$

15,311

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

25,175

 

 

 

24,372

 

 

 

25,128

 

 

 

24,688

 

Weighted average common shares outstanding - diluted

 

 

25,175

 

 

 

24,926

 

 

 

25,128

 

 

 

25,194

 

Weighted average common stock outstanding - basic

 

 

25,598

 

 

 

25,175

 

 

 

25,630

 

 

 

25,128

 

Weighted average common stock outstanding - diluted

 

 

25,598

 

 

 

25,175

 

 

 

25,630

 

 

 

25,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share - basic

 

$

(0.21

)

 

$

1.21

 

 

$

(0.62

)

 

$

1.95

 

Earnings (loss) per share - diluted

 

$

(0.21

)

 

$

1.19

 

 

$

(0.62

)

 

$

1.91

 

Loss per share - basic

 

$

(0.02

)

 

$

(0.21

)

 

$

(0.51

)

 

$

(0.62

)

Loss per share - diluted

 

$

(0.02

)

 

$

(0.21

)

 

$

(0.51

)

 

$

(0.62

)

 

(1)

Fees incurred to an unaffiliated third party that is an affiliate of the noncontrolling limited partner of the Company’s operating partnership (see Note 10).

(2)

Fees incurred to the Adviser (see Note 11).

 

See Notes to Consolidated Financial Statements

 

 


 

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in thousands)

(Unaudited)

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

Accumulated

Earnings (Loss)

 

 

Accumulated Other

 

 

 

 

 

Three Months ended September 30, 2021

 

Number of

Shares

 

 

Par Value

 

 

Number of

Shares

 

 

Par Value

 

 

Paid-in

Capital

 

 

Less

Dividends

 

 

Comprehensive

Income (Loss)

 

 

Total

 

Balances, June 30, 2021

 

 

—

 

 

$

—

 

 

 

25,149,927

 

 

$

251

 

 

$

378,365

 

 

$

46,551

 

 

$

(17,897

)

 

$

407,270

 

Net loss attributable to common stockholders

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,391

)

 

 

—

 

 

 

(5,391

)

Vesting of stock-based compensation

 

 

—

 

 

 

—

 

 

 

127

 

 

 

—

 

 

 

1,803

 

 

 

—

 

 

 

—

 

 

 

1,803

 

Issuance of common shares through at-the-market offering

 

 

—

 

 

 

—

 

 

 

101,587

 

 

 

1

 

 

 

6,566

 

 

 

—

 

 

 

—

 

 

 

6,567

 

Common stock dividends declared ($0.34125 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,826

)

 

 

—

 

 

 

(8,826

)

Other comprehensive income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,532

 

 

 

4,532

 

Adjustment to reflect redemption value of redeemable noncontrolling interests in the Operating Partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(530

)

 

 

—

 

 

 

(530

)

Balances, September 30, 2021

 

 

—

 

 

$

—

 

 

 

25,251,641

 

 

$

252

 

 

$

386,734

 

 

$

31,804

 

 

$

(13,365

)

 

$

405,425

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

Accumulated

Earnings (Loss)

 

 

Accumulated Other

 

 

Common

Stock

Held in

 

 

 

 

 

Three Months ended September 30, 2022

 

Number of

Shares

 

 

Par Value

 

 

Number of

Shares

 

 

Par Value

 

 

Paid-in

Capital

 

 

Less

Dividends

 

 

Comprehensive

Income (Loss)

 

 

Treasury

at Cost

 

 

Total

 

Balances, June 30, 2022

 

 

—

 

 

$

—

 

 

 

25,647,942

 

 

$

256

 

 

$

407,436

 

 

$

28,120

 

 

$

74,283

 

 

$

—

 

 

$

510,095

 

Net loss attributable to common stockholders

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(597

)

 

 

—

 

 

 

—

 

 

 

(597

)

Repurchases of common stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,991

)

 

 

(5,991

)

Retirement of common stock held in treasury

 

 

—

 

 

 

—

 

 

 

(98,906

)

 

 

(1

)

 

 

(5,990

)

 

 

—

 

 

 

—

 

 

 

5,991

 

 

 

—

 

Vesting of stock-based compensation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,007

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,007

 

Issuance of common stock through at-the-market offering, net of offering costs

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(76

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(76

)

Common stock dividends declared ($0.38 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(9,907

)

 

 

—

 

 

 

—

 

 

 

(9,907

)

Other comprehensive income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

34,804

 

 

 

—

 

 

 

34,804

 

Adjustment to reflect redemption value of redeemable noncontrolling interests in the Operating Partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,286

 

 

 

—

 

 

 

—

 

 

 

1,286

 

Balances, September 30, 2022

 

 

—

 

 

$

—

 

 

 

25,549,036

 

 

$

255

 

 

$

403,377

 

 

$

18,902

 

 

$

109,087

 

 

$

—

 

 

$

531,621

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

Accumulated

Earnings (Loss)

 

 

Accumulated Other

 

 

 

 

 

Nine Months ended September 30, 2021

 

Number of

Shares

 

 

Par Value

 

 

Number of

Shares

 

 

Par Value

 

 

Paid-in

Capital

 

 

Less

Dividends

 

 

Comprehensive

Income (Loss)

 

 

Total

 

Balances, December 31, 2020

 

 

—

 

 

$

—

 

 

 

25,016,957

 

 

$

250

 

 

$

376,710

 

 

$

75,321

 

 

$

(44,354

)

 

$

407,927

 

Net loss attributable to common stockholders

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(15,678

)

 

 

—

 

 

 

(15,678

)

Vesting of stock-based compensation

 

 

—

 

 

 

—

 

 

 

133,097

 

 

 

1

 

 

 

3,720

 

 

 

—

 

 

 

—

 

 

 

3,721

 

Issuance of common shares through at-the-market offering

 

 

—

 

 

 

—

 

 

 

101,587

 

 

 

1

 

 

 

6,304

 

 

 

—

 

 

 

—

 

 

 

6,305

 

Common stock dividends declared ($1.02375 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(26,384

)

 

 

—

 

 

 

(26,384

)

Other comprehensive income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

30,989

 

 

 

30,989

 

Adjustment to reflect redemption value of redeemable noncontrolling interests in the Operating Partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,455

)

 

 

—

 

 

 

(1,455

)

Balances, September 30, 2021

 

 

—

 

 

$

—

 

 

 

25,251,641

 

 

$

252

 

 

$

386,734

 

 

$

31,804

 

 

$

(13,365

)

 

$

405,425

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

Accumulated

Earnings (Loss)

 

 

Accumulated Other

 

 

Common

Stock

Held in

 

 

 

 

 

Nine Months ended September 30, 2022

 

Number of

Shares

 

 

Par Value

 

 

Number of

Shares

 

 

Par Value

 

 

Paid-in

Capital

 

 

Less

Dividends

 

 

Comprehensive

Income (Loss)

 

 

Treasury

at Cost

 

 

Total

 

Balances, December 31, 2021

 

 

—

 

 

$

—

 

 

 

25,500,567

 

 

$

255

 

 

$

407,803

 

 

$

59,209

 

 

$

2,578

 

 

$

—

 

 

$

469,845

 

Net loss attributable to common stockholders

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(13,047

)

 

 

—

 

 

 

—

 

 

 

(13,047

)

Repurchases of common stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(11,127

)

 

 

(11,127

)

Retirement of common stock held in treasury

 

 

—

 

 

 

—

 

 

 

(168,473

)

 

 

(2

)

 

 

(11,125

)

 

 

—

 

 

 

—

 

 

 

11,127

 

 

 

—

 

Vesting of stock-based compensation

 

 

—

 

 

 

—

 

 

 

164,851

 

 

 

1

 

 

 

2,760

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,761

 

Issuance of common stock through at-the-market offering, net of offering costs

 

 

—

 

 

 

—

 

 

 

52,091

 

 

 

1

 

 

 

3,991

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,992

 

Common stock dividends declared ($1.14 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(29,857

)

 

 

—

 

 

 

—

 

 

 

(29,857

)

Other comprehensive income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

106,509

 

 

 

—

 

 

 

106,509

 

Offering costs of the issuance of redeemable noncontrolling interests in the Operating Partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(52

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(52

)

Adjustment to reflect redemption value of redeemable noncontrolling interests in the Operating Partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,597

 

 

 

—

 

 

 

—

 

 

 

2,597

 

Balances, September 30, 2022

 

 

—

 

 

$

—

 

 

 

25,549,036

 

 

$

255

 

 

$

403,377

 

 

$

18,902

 

 

$

109,087

 

 

 

—

 

 

$

531,621

 

 

 

See Notes to Consolidated Financial Statements


NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(dollars in thousands)

(Unaudited)

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

Accumulated

Earnings (Loss)

 

 

Accumulated Other

 

 

Common Stock

Held in

 

 

 

 

 

Three Months ended September 30, 2020

 

Number of

Shares

 

 

Par Value

 

 

Number of

Shares

 

 

Par Value

 

 

Paid-in

Capital

 

 

Less

Dividends

 

 

Comprehensive

Income (Loss)

 

 

Treasury

at Cost

 

 

Total

 

Balances, June 30, 2020

 

 

—

 

 

$

—

 

 

 

24,298,651

 

 

$

242

 

 

$

343,257

 

 

$

66,860

 

 

$

(55,944

)

 

$

—

 

 

$

354,415

 

Net income attributable to common stockholders

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

29,552

 

 

 

—

 

 

 

—

 

 

 

29,552

 

Vesting of stock-based compensation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,434

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,434

 

Issuance of common shares through at-the-market offering

 

 

—

 

 

 

—

 

 

 

243,032

 

 

 

2

 

 

 

9,839

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

9,841

 

Common stock dividends declared ($0.3125 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(7,798

)

 

 

—

 

 

 

—

 

 

 

(7,798

)

Other comprehensive income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,056

 

 

 

—

 

 

 

4,056

 

Adjustment to reflect redemption value of redeemable noncontrolling interests in the Operating Partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(586

)

 

 

—

 

 

 

—

 

 

 

(586

)

Balances, September 30, 2020

 

 

—

 

 

$

—

 

 

 

24,541,683

 

 

$

244

 

 

$

354,530

 

 

$

88,028

 

 

$

(51,888

)

 

$

—

 

 

$

390,914

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

Accumulated

Earnings (Loss)

 

 

Accumulated Other

 

 

 

 

 

Three Months ended September 30, 2021

 

Number of

Shares

 

 

Par Value

 

 

Number of

Shares

 

 

Par Value

 

 

Paid-in

Capital

 

 

Less

Dividends

 

 

Comprehensive

Income (Loss)

 

 

Total

 

Balances, June 30, 2021

 

 

—

 

 

$

—

 

 

 

25,149,927

 

 

$

251

 

 

$

378,365

 

 

$

46,551

 

 

$

(17,897

)

 

$

407,270

 

Net loss attributable to common stockholders

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,391

)

 

 

—

 

 

 

(5,391

)

Vesting of stock-based compensation

 

 

—

 

 

 

—

 

 

 

127

 

 

 

—

 

 

 

1,803

 

 

 

—

 

 

 

—

 

 

 

1,803

 

Issuance of common shares through at-the-market offering

 

 

—

 

 

 

—

 

 

 

101,587

 

 

 

1

 

 

 

6,566

 

 

 

—

 

 

 

—

 

 

 

6,567

 

Common stock dividends declared ($0.34125 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(8,826

)

 

 

—

 

 

 

(8,826

)

Other comprehensive income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,532

 

 

 

4,532

 

Adjustment to reflect redemption value of redeemable noncontrolling interests in the Operating Partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(530

)

 

 

—

 

 

 

(530

)

Balances, September 30, 2021

 

 

—

 

 

$

—

 

 

 

25,251,641

 

 

$

252

 

 

$

386,734

 

 

$

31,804

 

 

$

(13,365

)

 

$

405,425

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

Accumulated

Earnings (Loss)

 

 

Accumulated Other

 

 

Common Stock

Held in

 

 

 

 

 

Nine Months ended September 30, 2020

 

Number of

Shares

 

 

Par Value

 

 

Number of

Shares

 

 

Par Value

 

 

Paid-in

Capital

 

 

Less

Dividends

 

 

Comprehensive

Income (Loss)

 

 

Treasury

at Cost

 

 

Total

 

Balances, December 31, 2019

 

 

—

 

 

$

—

 

 

 

25,245,740

 

 

$

251

 

 

$

359,748

 

 

$

63,776

 

 

$

2,466

 

 

$

—

 

 

$

426,241

 

Net income attributable to common stockholders

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

48,217

 

 

 

—

 

 

 

—

 

 

 

48,217

 

Repurchases of common stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(44,530

)

 

 

(44,530

)

Retirement of common stock held in treasury

 

 

—

 

 

 

—

 

 

 

(1,644,697

)

 

 

(16

)

 

 

(44,514

)

 

 

—

 

 

 

—

 

 

 

44,530

 

 

 

—

 

Vesting of stock-based compensation

 

 

—

 

 

 

—

 

 

 

137,608

 

 

 

1

 

 

 

2,338

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,339

 

Issuance of common shares through at-the-market offering

 

 

—

 

 

 

—

 

 

 

803,032

 

 

 

8

 

 

 

36,958

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

36,966

 

Common stock dividends declared ($0.9375 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(23,838

)

 

 

—

 

 

 

—

 

 

 

(23,838

)

Other comprehensive loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(54,354

)

 

 

—

 

 

 

(54,354

)

Adjustment to reflect redemption value of redeemable noncontrolling interests in the Operating Partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(127

)

 

 

—

 

 

 

—

 

 

 

(127

)

Balances, September 30, 2020

 

 

—

 

 

$

—

 

 

 

24,541,683

 

 

$

244

 

 

$

354,530

 

 

$

88,028

 

 

$

(51,888

)

 

$

—

 

 

$

390,914

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

Accumulated

Earnings (Loss)

 

 

Accumulated Other

 

 

 

 

 

Nine Months ended September 30, 2021

 

Number of

Shares

 

 

Par Value

 

 

Number of

Shares

 

 

Par Value

 

 

Paid-in

Capital

 

 

Less

Dividends

 

 

Comprehensive

Income (Loss)

 

 

Total

 

Balances, December 31, 2020

 

 

—

 

 

$

—

 

 

 

25,016,957

 

 

$

250

 

 

$

376,710

 

 

$

75,321

 

 

$

(44,354

)

 

$

407,927

 

Net loss attributable to common stockholders

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(15,678

)

 

 

—

 

 

 

(15,678

)

Vesting of stock-based compensation

 

 

—

 

 

 

—

 

 

 

133,097

 

 

 

1

 

 

 

3,720

 

 

 

—

 

 

 

—

 

 

 

3,721

 

Issuance of common shares through at-the-market offering

 

 

—

 

 

 

—

 

 

 

101,587

 

 

 

1

 

 

 

6,304

 

 

 

—

 

 

 

—

 

 

 

6,305

 

Common stock dividends declared ($1.02375 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(26,384

)

 

 

—

 

 

 

(26,384

)

Other comprehensive income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

30,989

 

 

 

30,989

 

Adjustment to reflect redemption value of redeemable noncontrolling interests in the Operating Partnership

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,455

)

 

 

—

 

 

 

(1,455

)

Balances, September 30, 2021

 

 

—

 

 

$

—

 

 

 

25,251,641

 

 

$

252

 

 

$

386,734

 

 

$

31,804

 

 

$

(13,365

)

 

$

405,425

 

 

 

See Notes to Consolidated Financial Statements

 

 


 

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

 

For the Nine Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(15,725

)

 

$

48,362

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Gain on sales of real estate

 

 

—

 

 

 

(69,151

)

Net loss

 

$

(13,093

)

 

$

(15,725

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

62,335

 

 

 

62,479

 

 

 

74,490

 

 

 

62,335

 

Amortization/write-off of deferred financing costs

 

 

1,931

 

 

 

2,940

 

 

 

2,033

 

 

 

1,931

 

Change in fair value on derivative instruments included in interest expense

 

 

11,202

 

 

 

5,651

 

 

 

(2,365

)

 

 

11,202

 

Net cash paid on derivative settlements

 

 

(11,253

)

 

 

(4,192

)

 

 

(4,849

)

 

 

(11,253

)

Amortization/write-off of fair market value adjustment of assumed debt

 

 

(86

)

 

 

(152

)

 

 

(150

)

 

 

(86

)

Provision for bad debts, net

 

 

2,958

 

 

 

1,615

 

 

 

5,619

 

 

 

2,958

 

Vesting of stock-based compensation

 

 

5,212

 

 

 

4,071

 

 

 

5,874

 

 

 

5,212

 

Insurance proceeds received for business interruption

 

 

312

 

 

 

1,401

 

 

 

250

 

 

 

312

 

Casualty gains

 

 

(4,241

)

 

 

(4,684

)

 

 

(518

)

 

 

(4,241

)

Changes in operating assets and liabilities, net of effects of acquisitions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating assets

 

 

(3,690

)

 

 

(4,988

)

 

 

(9,446

)

 

 

(3,690

)

Operating liabilities

 

 

8,959

 

 

 

3,172

 

 

 

11,737

 

 

 

8,959

 

Net cash provided by operating activities

 

 

57,914

 

 

 

46,524

 

 

 

69,582

 

 

 

57,914

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net proceeds from sales of real estate

 

 

—

 

 

 

140,197

 

Prepaid acquisition costs

 

 

—

 

 

 

(5,077

)

Self-insurance paid for casualty losses

 

 

(1,591

)

 

 

(2,049

)

Insurance premiums paid for casualty losses

 

 

(1,819

)

 

 

(1,591

)

Insurance proceeds received from casualty losses

 

 

8,419

 

 

 

1,626

 

 

 

4,940

 

 

 

8,419

 

Additions to real estate investments

 

 

(32,689

)

 

 

(35,298

)

 

 

(41,619

)

 

 

(32,689

)

Acquisitions of real estate investments

 

 

(197,094

)

 

 

—

 

 

 

(141,038

)

 

 

(197,094

)

Net cash provided by (used in) investing activities

 

 

(222,955

)

 

 

99,399

 

Net cash used in investing activities

 

 

(179,536

)

 

 

(222,955

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage proceeds received

 

 

108,005

 

 

 

—

 

 

 

78,272

 

 

 

108,005

 

Mortgage payments

 

 

(582

)

 

 

(71,723

)

 

 

(1,076

)

 

 

(582

)

Credit facilities proceeds received

 

 

285,000

 

 

 

35,000

 

 

 

55,000

 

 

 

285,000

 

Credit facilities payments

 

 

(193,000

)

 

 

(38,000

)

 

 

—

 

 

 

(193,000

)

Deferred financing costs paid

 

 

(2,583

)

 

 

—

 

 

 

(3,852

)

 

 

(2,583

)

Interest rate cap fees paid

 

 

(175

)

 

 

—

 

 

 

(239

)

 

 

(175

)

Prepayment penalties on extinguished debt

 

 

—

 

 

 

(711

)

Proceeds from the issuance of common shares through at-the-market offering, net of offering costs

 

 

6,305

 

 

 

36,966

 

Proceeds from the issuance of common stock through at-the-market offering, net of offering costs

 

 

3,992

 

 

 

6,305

 

Payments for taxes related to net share settlement of stock-based compensation

 

 

(1,491

)

 

 

(1,732

)

 

 

(3,113

)

 

 

(1,491

)

Distributions to redeemable noncontrolling interests in the Operating Partnership

 

 

(76

)

 

 

—

 

Repurchase of common stock

 

 

—

 

 

 

(44,530

)

 

 

(11,127

)

 

 

—

 

Dividends paid to common stockholders

 

 

(26,169

)

 

 

(23,759

)

 

 

(29,908

)

 

 

(26,169

)

Net cash provided by (used in) financing activities

 

 

175,310

 

 

 

(108,489

)

Net cash provided by financing activities

 

 

87,873

 

 

 

175,310

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase in cash, cash equivalents and restricted cash

 

 

10,269

 

 

 

37,434

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

(22,081

)

 

 

10,269

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

57,015

 

 

 

71,182

 

 

 

88,696

 

 

 

57,015

 

Cash, cash equivalents and restricted cash, end of period

 

$

67,284

 

 

$

108,616

 

 

$

66,615

 

 

$

67,284

 

 

 

 

See Notes to Consolidated Financial Statements


NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

Supplemental Disclosure of Cash Flow Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest paid

 

$

20,026

 

 

$

27,573

 

 

$

31,796

 

 

$

20,026

 

Supplemental Disclosure of Noncash Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of operating partnership units for purchase of noncontrolling interests

 

 

2,444

 

 

 

—

 

Capitalized construction costs included in accounts payable and other accrued liabilities

 

 

2,826

 

 

 

5,288

 

 

 

6,005

 

 

 

2,826

 

Change in fair value on derivative instruments designated as hedges

 

 

31,082

 

 

 

(54,518

)

 

 

106,874

 

 

 

31,082

 

Other assets acquired from acquisitions

 

 

145

 

 

 

—

 

 

 

168

 

 

 

145

 

Liabilities assumed from acquisitions

 

 

192

 

 

 

—

 

 

 

116

 

 

 

192

 

Increase in dividends payable upon vesting of restricted stock units

 

 

215

 

 

 

79

 

Increase (decrease) in dividends payable upon vesting of restricted stock units

 

 

(51

)

 

 

215

 

Write-off of assets due to casualty losses

 

 

2,028

 

 

 

648

 

 

 

4,506

 

 

 

2,028

 

Write-off of fully amortized in-place leases

 

 

1,675

 

 

 

12,414

 

 

 

5,179

 

 

 

1,675

 

Write-off of deferred financing costs

 

 

328

 

 

 

757

 

 

 

—

 

 

 

328

 

 

See Notes to Consolidated Financial Statements

 

 


 

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1. Organization and Description of Business

NexPoint Residential Trust, Inc. (the “Company”, “we”,“Company,” “we,” “our”) was incorporated in Maryland on September 19, 2014, and has elected to be taxed as a real estate investment trust (“REIT”). The Company is focused on “value-add” multifamily investments primarily located in the Southeastern and Southwestern United States. Substantially all of the Company’s business is conducted through NexPoint Residential Trust Operating Partnership, L.P. (the “OP”), the Company’s operating partnership. The Company owns its properties (the “Portfolio”) through the OP and its wholly owned taxable REIT subsidiary (“TRS”). The OP owns approximately 99.9% of the Portfolio; the TRS owns approximately 0.1% of the Portfolio. The Company’s wholly owned subsidiary, NexPoint Residential Trust Operating Partnership GP, LLC (the “OP GP”), is the sole general partner of the OP. As of September 30, 2021,2022, there were 23,819,40226,050,945 common units in the OP (“OP Units”) outstanding, of which 23,746,169,25,951,154, or 99.7%99.6%, were owned by the Company and 73,233,99,791, or 0.3%0.4%, were owned by a noncontrolling limited partnerpartners (see Note 10).

The Company is externally managed by NexPoint Real Estate Advisors, L.P. (the “Adviser”), through an agreement dated March 16, 2015, as amended, and renewed on February 15, 202114, 2022 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 expects it will only have accounting employees while the Advisory Agreement is in effect. All of the Company’s investment decisions are made by the Adviser, subject to general oversight by the Adviser’s investment committee and the Company’s board of directors (the “Board”). The Adviser is wholly owned by NexPoint Advisors, L.P. (the “Sponsor”).

The Company’s investment objectives are to maximize the cash flow and value of properties owned, acquire properties with cash flow growth potential, provide quarterly cash distributions and achieve long-term capital appreciation for its stockholders through targeted management and a value-add program. Consistent with the Company’s policy to acquire assets for both income and capital gain, the Company intends to hold at least majority interests in its properties for long-term appreciation and to engage in the business of directly or indirectly acquiring, owning, and operating well-located multifamily properties with a value-add component in large cities and suburban submarkets of large cities primarily in the Southeastern and Southwestern United States consistent with its investment objectives. Economic and market conditions may influence the Company to hold properties for different periods of time. From time to time, the Company may sell a property if, among other deciding factors, the sale would be in the best interest of its stockholders.

The Company may allocate up to 30% of the Portfolio to investments in real estate-related debt and securities with the potential for high current income or total returns. These allocations may include first and second mortgages and subordinated, bridge, mezzanine, construction and other loans, as well as debt securities related to or secured by multifamily real estate and common and preferred equity securities, which may include securities of other REITs or real estate companies.

2. Summary of Significant Accounting Policies

Basis of Accounting

The accompanying unaudited consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States (“GAAP”). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the unaudited consolidated financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. All significant intercompany accounts and transactions have been eliminated in consolidation. There have been no significant changes to the Company’s significant accounting policies during the nine months ended September 30, 2021.

Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year. These reclassifications had no impact on net income (loss), stockholders' equity or cash flows as previously reported.2022.

The accompanying unaudited consolidated financial statements have been prepared according to the rules and regulations of the SEC.  Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading.

In the opinion of management, all adjustments and eliminations necessary for the fair presentation of the Company’s financial position as of September 30, 20212022 and December 31, 20202021 and results of operations for the three and nine months ended September 30, 20212022 and 20202021 have been included.  Such adjustments are normal and recurring in nature.  The unaudited information included in this quarterly report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements for the


year ended December 31, 20202021 and notes thereto included in its Annual Report on Form 10-K filed with the SEC on February 22, 2021.18, 2022.

Principles of Consolidation

The Company accounts for subsidiary partnerships, joint ventures and other similar entities in which it holds an ownership interest in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation. The Company first evaluates whether each entity is a variable interest entity (“VIE”). Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest. The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries, including the OP and its subsidiaries.


Revenue Recognition

The Company’s primary operations consist of rental income earned from its residents under lease agreements typically with terms of one year or less. Rental income is recognized when earned. This policy effectively results in income recognition on the straight-line method over the related terms of the leases. The Company records an allowance to reflect revenue that may not be collectable. This is recorded through a provision for bad debts which is included in rental income in the accompanying consolidated statements of operations and comprehensive income (loss). Resident reimbursements and other income consist of charges billed to residents for utilities, carport and garage rental, and pets, administrative, application and other fees and are recognized when earned.  The Company implemented the provisions of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) as of January 1, 2019 using the modified retrospective approach.  The adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements as a substantial portion of its revenue consists of rental income from leasing arrangements, which is specifically excluded from ASU 2014-09. 

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which supersedes the current accounting for leases and while retaining two distinct types of leases, finance and operating, (1) requires lessees to record a right of use asset and a related liability for the rights and obligations associated with a lease, regardless of lease classification, and recognize lease expense in a manner similar to current accounting, (2) eliminates most real estate specific lease provisions and (3) aligns many of the underlying lessor model principles with those in the new revenue standard. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. Entities are required to use a modified retrospective approach when transitioning to the ASU for leases that exist as of or are entered into after the beginning of the earliest comparative period presented in the financial statements. As lessors, substantially all of the Company’s agreements have a term of 12 months or less. For lessors, accounting for leases under the new standard is substantially the same as existing guidance for sales-type leases, direct financing leases, and operating leases, but eliminates current real estate specific provisions and changes the treatment of initial direct costs.

In April 2020, the FASB issued a Staff Q&A on accounting for leases during the COVID-19 pandemic, focused on the application of lease guidance in ASC 842, Leases. The Q&A states that some lease contracts may contain explicit or implicit enforceable rights and obligations that require lease concessions if certain circumstances arise that are beyond the control of the parties to the contract. Therefore, entities would need to perform a lease-by-lease analysis to determine whether contractual provisions in an existing lease agreement provide enforceable rights and obligations related to lease concessions. The FASB determined it would be acceptable for entities to not perform a lease-by-lease analysis regarding rent concessions resulting from COVID-19, and to instead make a policy election regarding rent concessions, which would give entities the option to account or not to account for these rent concessions as lease modifications if the total payments required by the modified contract are substantially the same or less than the total payments required by the original contract. Entities making the election to account for these rent concessions as lease modifications would recognize the effects of rent abatements and rent deferrals on a prospective straight-line basis over the remainder of the modified contract. We have made the election to not perform a lease-by-lease analysis to determine whether contractual provisions in an existing lease agreement provide enforceable rights and obligations related to payment plans. By electing the FASB relief, we have also made an accounting policy election to not account for rent deferrals provided to lessees due to the COVID-19 pandemic as lease modifications. Lessees are required to pay the full outstanding balance of the rent deferred over the period of the payment plan.

Purchase Price Allocation

Upon acquisition of a property considered to be an asset acquisition, the purchase price and related acquisition costs (“total consideration”) are allocated to land, buildings, improvements, furniture, fixtures, and equipment, and intangible lease assets in accordance with FASB ASC 805, Business Combinations. Acquisition costs are capitalized in accordance with FASB ASC 805.

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 (“ASC 820”) (see Note 7), 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 the total consideration to intangible lease assets represents the value associated with the in-place leases, which may include lost rent, leasing commissions, legal and other related costs, which the Company, as buyer of the property, did not have to incur to obtain the residents. If any debt is assumed in an acquisition, the difference between the fair value, which is estimated using inputs that are classified within Level 2 of the fair value hierarchy, and the face value of debt is recorded as a premium or discount and amortized as interest expense over the life of the debt assumed.

Real estate assets, including land, buildings, improvements, furniture, fixtures and equipment, and intangible lease assets are stated at historical cost less accumulated depreciation and amortization. Costs incurred in making repairs and maintaining real estate assets are expensed as incurred. Expenditures for improvements, renovations, and replacements are capitalized at cost. Real estate-related depreciation and amortization are computed on a straight-line basis over the estimated useful lives as described in the following table:

 

Land

 

Not depreciated

Buildings

 

30 years

Improvements

 

15 years

Furniture, fixtures, and equipment

 

3 years

Intangible lease assets

 

6 months

 

Construction in progress includes the cost of renovation projects being performed at the various properties. Once a project is complete, the historical cost of the renovation is placed into service in one of the categories above depending on the type of renovation project and is depreciated over the estimated useful lives as described in the table above.

Impairment

Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The key inputs into our impairment analysis include, but are not limited to, the holding period, net operating income, and capitalization rates. In such cases, the Company will evaluate the recoverability of such real estate assets based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate asset. If impaired, the real estate asset will be written down to its estimated fair value. The Company’s impairment analysis identifies and evaluates events or changes in circumstances that indicate the carrying amount of a real estate investment may not be recoverable, including determining the period the Company will hold the rental property, net operating income, and the estimated capitalization rate for each respective real estate investment.

As of September 30, 2021,2022, the Company has 0tnot recorded any impairment on its real estate assets. However, we continue to monitor the impact of COVID-19 (see “–Coronavirus (“COVID-19”)” for additional information, below).

Held for Sale

The Company periodically classifies real estate assets as held for sale when certain criteria are met in accordance with GAAP. At that time, the Company presents the net real estate assets and the net debt associated with the real estate held for sale separately in its consolidated balance sheet, and the Company ceases recording depreciation and amortization expense related to that property. Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell. As of September 30, 2021,2022, there are 2were three properties classified as held for sale. HeldIn addition to the net real estate and mortgages payable held for sale, assets on the consolidated balance sheet includedalso includes approximately $0.1$0.9 million of accounts receivable and prepaid and other assets, and approximately $1.1$2.4 million of accounts payable, real estate taxes payable, security deposits, prepaid rents, and other accrued liabilities.


Income Taxes

The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), and expects to continue to qualify as a REIT. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute annually at least 90% of its “REIT taxable income,” as defined by the Code, to its stockholders. As a REIT, the Company will be subject to federal income tax on its undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions it pays with respect to any calendar year are less than the sum of (1) 85% of its ordinary income, (2) 95% of its capital gain net income and (3) 100% of its undistributed income from prior years. The Company intends to operate in such a manner so as to qualify as a REIT, but no assurance can be given that the Company will operate in a manner so as to qualify as a REIT. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. The Company had no significant taxes associated with its TRS for the nine months ended September 30, 20212022 and 2020.2021.


If the Company fails to meet these requirements, it could be subject to federal income tax on all of the Company’s taxable income at regular corporate rates for that year. The Company would not be able to deduct distributions paid to stockholders in any year in which it fails to qualify as a REIT. Additionally, the Company will also be disqualified from electing to be taxed as a REIT for the four taxable years following the year during which qualification was lost unless the Company is entitled to relief under specific statutory provisions. As of September 30, 2021,2022, the Company believes it is in compliance with all applicable REIT requirements.

The Company evaluates the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” (greater than 50 percent probability) of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. The Company’s management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. The Company has no examinations in progress and none are expected at this time.

The Company recognizes its tax positions and evaluates them using a two-step process. First, the Company determines whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, the Company will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement.

The Company had 0no material unrecognized tax benefit or expense, accrued interest or penalties as of September 30, 2021.2022. The Company and its subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions. The 2021, 2020 2019 and 20182019 tax years remain open to examination by tax jurisdictions to which the Company and its subsidiaries are subject. When applicable, the Company recognizes interest and/or penalties related to uncertain tax positions on its consolidated statements of operations and comprehensive income (loss).

Recent Accounting Pronouncements

In March 2020,, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2022, the Company transitioned a portion its debt to one-month term SOFR (“Term SOFR”). The Company has electedtaken the ASC 848 elections needed to applyallow for the hedged forecasted transactions to transition while not discontinuing the associated hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.designations. Application of these hedged accounting expedients preserves the presentation of derivatives consistent with past presentation.  The Company will continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Coronavirus (“COVID-19”)

As a result of the COVID-19 pandemic, the Company may experience difficulties collecting monthly rent on time, leasing additional apartment units and/or renewing leases with existing tenants, selling or purchasing properties and accessing debt and equity capital on attractive terms, or at all. To date, the Company has not been materially impacted by the COVID-19 pandemic and will continue to monitor the impact of the COVID-19 pandemic on all aspects of its business. For additional information regarding the risks to the Company related to the COVID-19 pandemic, or any other future pandemic, see Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2020.

3. Investments in Subsidiaries

The Company conducts its operations through the OP, which owns properties through single asset limited liability companies that are special purpose entities (“SPEs”). The Company consolidates the SPEs that it controls as well as any VIEs where it is the primary beneficiary. The Company controls and consolidates the OP as a VIE. In connection with its indirect equity investments in the properties acquired, the Company, through the OP and the TRS, directly or indirectly holds 100% of the membership interests in SPEs that directly own the properties. All of the properties the SPEs own are consolidated in the Company’s consolidated financial statements. The assets of each entity can only be used to settle obligations of that particular entity, and the creditors of each entity have no recourse to the assets of other entities or the Company.


Additionally, the Company has in the past and may in the future enter into purchase and sale transactions structured as reverse like-kind exchanges (“1031 Exchanges”) under Section 1031 of the Code. For a reverse 1031 Exchange in which the Company purchases a new property prior to selling the property to be matched in the like-kind exchange (the Company refers to the new property being acquired in the 1031 Exchange prior to the sale of the related property as a “Parked Asset”), legal title to the Parked Asset is held by an Exchange Accommodation Titleholder (“EAT”) engaged to execute the 1031 Exchange until the sale transaction and the 1031 Exchange are completed. The Company, through a wholly owned subsidiary, enters into a master lease agreement with the EAT whereby the EAT leases the acquired property and all other rights acquired in connection with the acquisition to the Company. The term of the master lease agreement is the earlier of the completion of the reverse 1031 Exchange or 180 days from the


date that the property was acquired. The EAT is classified as a VIE as it does not have sufficient equity investment at risk to finance its activities without additional subordinated financial support. The Company consolidates the EAT as its primary beneficiary because it has the ability to control the activities that most significantly impact the EAT’s economic performance and the Company retains all of the legal and economic benefits and obligations related to the Parked Assets prior to completion of the 1031 Exchange. As such, the Parked Assets are included in the Company’s consolidated financial statements as VIEs until legal title and control is transferred to the Company upon either completion of the 1031 Exchange or termination of the master lease agreement, at which time they will be consolidated as wholly owned subsidiaries.


As of September 30, 2021,2022, the Company, through the OP and the wholly owned TRS, owned 4041 properties through SPEs. The following table represents the Company’s ownership in each property by virtue of its 100% ownership of the SPEs that directly own the title to each property as of September 30, 20212022 and December 31, 2020:2021:

 

 

 

 

 

 

Effective Ownership Percentage at

 

 

 

 

 

 

 

Effective Ownership Percentage at

 

 

Property Name

 

Location

 

Year Acquired

 

September 30, 2021

 

 

December 31, 2020

 

 

 

Location

 

Year Acquired

 

September 30, 2022

 

 

December 31, 2021

 

 

Arbors on Forest Ridge

 

Bedford, Texas

 

2014

 

 

100

%

 

 

100

%

 

 

Bedford, Texas

 

2014

 

 

100

%

 

 

100

%

 

Cutter's Point

 

Richardson, Texas

 

2014

 

 

100

%

 

 

100

%

 

 

Richardson, Texas

 

2014

 

 

100

%

 

 

100

%

 

Silverbrook

 

Grand Prairie, Texas

 

2014

 

 

100

%

 

 

100

%

 

 

Grand Prairie, Texas

 

2014

 

 

100

%

 

 

100

%

 

Beechwood Terrace

(1)

Antioch, Tennessee

 

2014

 

 

100

%

 

 

100

%

 

The Summit at Sabal Park

 

Tampa, Florida

 

2014

 

 

100

%

 

 

100

%

 

 

Tampa, Florida

 

2014

 

 

100

%

 

 

100

%

 

Courtney Cove

 

Tampa, Florida

 

2014

 

 

100

%

 

 

100

%

 

 

Tampa, Florida

 

2014

 

 

100

%

 

 

100

%

 

Radbourne Lake

 

Charlotte, North Carolina

 

2014

 

 

100

%

 

 

100

%

 

 

Charlotte, North Carolina

 

2014

 

 

100

%

 

 

100

%

 

Timber Creek

 

Charlotte, North Carolina

 

2014

 

 

100

%

 

 

100

%

 

 

Charlotte, North Carolina

 

2014

 

 

100

%

 

 

100

%

 

Sabal Palm at Lake Buena Vista

 

Orlando, Florida

 

2014

 

 

100

%

 

 

100

%

 

 

Orlando, Florida

 

2014

 

 

100

%

 

 

100

%

 

Cornerstone

 

Orlando, Florida

 

2015

 

 

100

%

 

 

100

%

 

 

Orlando, Florida

 

2015

 

 

100

%

 

 

100

%

 

The Preserve at Terrell Mill

 

Marietta, Georgia

 

2015

 

 

100

%

 

 

100

%

 

 

Marietta, Georgia

 

2015

 

 

100

%

 

 

100

%

 

Versailles

 

Dallas, Texas

 

2015

 

 

100

%

 

 

100

%

 

 

Dallas, Texas

 

2015

 

 

100

%

 

 

100

%

 

Seasons 704 Apartments

 

West Palm Beach, Florida

 

2015

 

 

100

%

 

 

100

%

 

 

West Palm Beach, Florida

 

2015

 

 

100

%

 

 

100

%

 

Madera Point

 

Mesa, Arizona

 

2015

 

 

100

%

 

 

100

%

 

 

Mesa, Arizona

 

2015

 

 

100

%

 

 

100

%

 

Venue at 8651

 

Fort Worth, Texas

 

2015

 

 

100

%

 

 

100

%

 

 

Fort Worth, Texas

 

2015

 

 

100

%

 

 

100

%

 

Parc500

 

West Palm Beach, Florida

 

2016

 

 

100

%

 

 

100

%

 

 

West Palm Beach, Florida

 

2016

 

 

100

%

 

 

100

%

 

The Venue on Camelback

 

Phoenix, Arizona

 

2016

 

 

100

%

 

 

100

%

 

 

Phoenix, Arizona

 

2016

 

 

100

%

 

 

100

%

 

Old Farm

 

Houston, Texas

 

2016

 

 

100

%

 

 

100

%

 

(1)

Houston, Texas

 

2016

 

 

100

%

 

 

100

%

 

Stone Creek at Old Farm

 

Houston, Texas

 

2016

 

 

100

%

 

 

100

%

 

(1)

Houston, Texas

 

2016

 

 

100

%

 

 

100

%

 

Hollister Place

 

Houston, Texas

 

2017

 

 

100

%

 

 

100

%

 

(1)

Houston, Texas

 

2017

 

 

100

%

 

 

100

%

 

Rockledge Apartments

 

Marietta, Georgia

 

2017

 

 

100

%

 

 

100

%

 

 

Marietta, Georgia

 

2017

 

 

100

%

 

 

100

%

 

Atera Apartments

 

Dallas, Texas

 

2017

 

 

100

%

 

 

100

%

 

 

Dallas, Texas

 

2017

 

 

100

%

 

 

100

%

 

Cedar Pointe

(1)

Antioch, Tennessee

 

2018

 

 

100

%

 

 

100

%

 

Crestmont Reserve

 

Dallas, Texas

 

2018

 

 

100

%

 

 

100

%

 

 

Dallas, Texas

 

2018

 

 

100

%

 

 

100

%

 

Brandywine I & II

 

Nashville, Tennessee

 

2018

 

 

100

%

 

 

100

%

 

 

Nashville, Tennessee

 

2018

 

 

100

%

 

 

100

%

 

Bella Vista

 

Phoenix, Arizona

 

2019

 

 

100

%

 

 

100

%

 

 

Phoenix, Arizona

 

2019

 

 

100

%

 

 

100

%

 

The Enclave

 

Tempe, Arizona

 

2019

 

 

100

%

 

 

100

%

 

 

Tempe, Arizona

 

2019

 

 

100

%

 

 

100

%

 

The Heritage

 

Phoenix, Arizona

 

2019

 

 

100

%

 

 

100

%

 

 

Phoenix, Arizona

 

2019

 

 

100

%

 

 

100

%

 

Summers Landing

 

Fort Worth, Texas

 

2019

 

 

100

%

 

 

100

%

 

 

Fort Worth, Texas

 

2019

 

 

100

%

 

 

100

%

 

Residences at Glenview Reserve

 

Nashville, Tennessee

 

2019

 

 

100

%

 

 

100

%

 

 

Nashville, Tennessee

 

2019

 

 

100

%

 

 

100

%

 

Residences at West Place

 

Orlando, Florida

 

2019

 

 

100

%

 

 

100

%

 

 

Orlando, Florida

 

2019

 

 

100

%

 

 

100

%

 

Avant at Pembroke Pines

 

Pembroke Pines, Florida

 

2019

 

 

100

%

 

 

100

%

 

 

Pembroke Pines, Florida

 

2019

 

 

100

%

 

 

100

%

 

Arbors of Brentwood

 

Nashville, Tennessee

 

2019

 

 

100

%

 

 

100

%

 

 

Nashville, Tennessee

 

2019

 

 

100

%

 

 

100

%

 

Torreyana Apartments

(2)

Las Vegas, Nevada

 

2019

 

 

100

%

 

 

100

%

 

 

Las Vegas, Nevada

 

2019

 

 

100

%

 

 

100

%

 

Bloom

(2)

Las Vegas, Nevada

 

2019

 

 

100

%

 

 

100

%

 

 

Las Vegas, Nevada

 

2019

 

 

100

%

 

 

100

%

 

Bella Solara

(2)

Las Vegas, Nevada

 

2019

 

 

100

%

 

 

100

%

 

 

Las Vegas, Nevada

 

2019

 

 

100

%

 

 

100

%

 

Fairways at San Marcos

 

Chandler, Arizona

 

2020

 

 

100

%

 

 

100

%

 

 

Chandler, Arizona

 

2020

 

 

100

%

 

 

100

%

 

The Verandas at Lake Norman

(3)

Charlotte, North Carolina

 

2021

 

 

100

%

 

 

0

%

(4)

(2)

Charlotte, North Carolina

 

2021

 

 

100

%

 

 

100

%

 

Creekside at Matthews

(3)

Charlotte, North Carolina

 

2021

 

 

100

%

 

 

0

%

(4)

(2)

Charlotte, North Carolina

 

2021

 

 

100

%

 

 

100

%

 

Six Forks Station

(5)

Raleigh, North Carolina

 

2021

 

 

100

%

 

 

0

%

(4)

 

Raleigh, North Carolina

 

2021

 

 

100

%

 

 

100

%

 

High House at Cary

 

Cary, North Carolina

 

2021

 

 

100

%

 

 

100

%

 

The Adair

 

Sandy Springs, Georgia

 

2022

 

 

100

%

 

 

—

 

(3)

Estates on Maryland

 

Phoenix, Arizona

 

2022

 

 

100

%

 

 

—

 

(3)

 

(1)

Property wasProperties classified as held for sale as of September 30, 2021.2022.

(2)

The EAT that directly owned Torreyana, Bloom and Bella Solara was consolidated as a VIE at December 31, 2019. The master lease agreement with the EAT that directly owned these properties terminated on March 31, 2020, at which time legal title


transferred to the Company. Upon the transfer of the title, the EAT that directly owned these properties was no longer considered a VIE.

(3)

The EAT that directly owned The Verandas at Lake Norman and Creekside at Matthews was consolidated as a VIE at June 30, 2021 giving the Company an effective 100% ownership interest. Legal title will transfer toThe master lease agreement with the Company upon completion of the reverse 1031 Exchange orEAT that directly owned these properties terminated on December 28, 2021, whichever comes first.at which time legal title and control transferred to the Company. Upon the transfer of title, the EAT that directly owned these properties willwas no longer be considered a VIE.

(4)(3)

Properties were acquired in 2021;2022; therefore, no ownership as of December 31, 2020.2021.

(5)

The EAT that directly owned Six Forks Station was consolidated as a VIE at September 30, 2021 giving the Company an effective 100% ownership interest. Legal title will transfer to the Company upon completion of the reverse 1031 Exchange or March 9, 2022, whichever comes first.  Upon the transfer of title, the EAT that directly owned these properties will no longer be considered a VIE.

4. Real Estate Investments Statistics

As of September 30, 2021,2022, the Company was invested in a total of 4041 multifamily properties, as listed below:

 

 

 

 

 

 

 

 

 

 

 

 

Average Effective Monthly

Rent Per Unit

(1) as of

 

 

% Occupied (2) as of

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Effective Monthly

Rent Per Unit

(1) as of

 

 

% Occupied (2) as of

 

 

Property Name

 

Rentable Square

Footage

(in thousands)

 

 

Number

of

Units (3)

 

 

Date

Acquired

 

September 30, 2021

 

 

December 31, 2020

 

 

September 30, 2021

 

 

December 31, 2020

 

 

 

Rentable Square

Footage

(in thousands)

 

 

Number

of

Units (3)

 

 

Date

Acquired

 

September 30, 2022

 

 

December 31, 2021

 

 

September 30, 2022

 

 

December 31, 2021

 

 

Arbors on Forest Ridge

 

 

155

 

 

 

210

 

 

1/31/2014

 

$

958

 

 

$

917

 

 

 

96.7

%

 

 

94.3

%

 

 

 

155

 

 

 

210

 

 

1/31/2014

 

$

1,168

 

 

$

1,021

 

 

 

92.9

%

 

 

96.2

%

 

Cutter's Point

 

 

198

 

 

 

196

 

 

1/31/2014

 

 

1,104

 

 

 

1,112

 

 

 

91.0

%

 

 

95.0

%

 

 

 

198

 

 

 

196

 

 

1/31/2014

 

 

1,350

 

 

 

1,219

 

 

 

94.9

%

 

 

95.4

%

 

Silverbrook

 

 

526

 

 

 

642

 

 

1/31/2014

 

 

1,007

 

 

 

926

 

 

 

94.1

%

 

 

94.9

%

 

 

 

526

 

 

 

642

 

 

1/31/2014

 

 

1,146

 

 

 

1,043

 

 

 

95.2

%

 

 

94.1

%

 

Beechwood Terrace

(4)

 

272

 

 

 

300

 

 

7/21/2014

 

 

982

 

 

 

947

 

 

 

96.7

%

 

 

95.7

%

 

The Summit at Sabal Park

 

 

205

 

 

 

252

 

 

8/20/2014

 

 

1,150

 

 

 

1,033

 

 

 

97.2

%

 

 

96.0

%

 

 

 

205

 

 

 

252

 

 

8/20/2014

 

 

1,466

 

 

 

1,198

 

 

 

90.1

%

 

 

96.0

%

 

Courtney Cove

 

 

225

 

 

 

324

 

 

8/20/2014

 

 

1,054

 

 

 

946

 

 

 

94.8

%

 

 

93.5

%

 

 

 

225

 

 

 

324

 

 

8/20/2014

 

 

1,322

 

 

 

1,132

 

 

 

92.6

%

 

 

93.8

%

 

Radbourne Lake

 

 

247

 

 

 

225

 

 

9/30/2014

 

 

1,179

 

 

 

1,137

 

 

 

96.9

%

 

 

89.8

%

 

 

 

247

 

 

 

225

 

 

9/30/2014

 

 

1,390

 

 

 

1,227

 

 

 

95.6

%

 

 

94.2

%

 

Timber Creek

 

 

248

 

 

 

352

 

 

9/30/2014

 

 

1,006

 

 

 

949

 

 

 

94.3

%

 

 

93.5

%

 

 

 

248

 

 

 

352

 

 

9/30/2014

 

 

1,206

 

 

 

1,032

 

 

 

95.2

%

 

 

96.1

%

 

Sabal Palm at Lake Buena Vista

 

 

371

 

 

 

400

 

 

11/5/2014

 

 

1,308

 

 

 

1,259

 

 

 

98.3

%

 

 

95.0

%

 

 

 

371

 

 

 

400

 

 

11/5/2014

 

 

1,655

 

 

 

1,377

 

 

 

94.8

%

 

 

97.8

%

 

Cornerstone

 

 

318

 

 

 

430

 

 

1/15/2015

 

 

1,103

 

 

 

1,056

 

 

 

95.8

%

 

 

91.2

%

 

 

 

318

 

 

 

430

 

 

1/15/2015

 

 

1,399

 

 

 

1,152

 

 

 

94.7

%

 

 

95.6

%

 

The Preserve at Terrell Mill

 

 

692

 

 

 

752

 

 

2/6/2015

 

 

1,088

 

 

 

1,006

 

 

 

93.2

%

 

 

95.5

%

 

 

 

692

 

 

 

752

 

 

2/6/2015

 

 

1,262

 

 

 

1,156

 

 

 

91.3

%

 

 

90.9

%

 

Versailles

 

 

301

 

 

 

388

 

 

2/26/2015

 

 

991

 

 

 

925

 

 

 

94.8

%

 

 

94.3

%

 

 

 

301

 

 

 

388

 

 

2/26/2015

 

 

1,242

 

 

 

1,024

 

 

 

94.5

%

 

 

96.4

%

 

Seasons 704 Apartments

 

 

217

 

 

 

222

 

 

4/15/2015

 

 

1,346

 

 

 

1,209

 

 

 

98.2

%

 

 

98.6

%

 

 

 

217

 

 

 

222

 

 

4/15/2015

 

 

1,729

 

 

 

1,410

 

 

 

95.0

%

 

 

96.8

%

 

Madera Point

 

 

193

 

 

 

256

 

 

8/5/2015

 

 

1,106

 

 

 

980

 

 

 

96.1

%

 

 

93.8

%

 

 

 

193

 

 

 

256

 

 

8/5/2015

 

 

1,373

 

 

 

1,140

 

 

 

94.1

%

 

 

94.5

%

 

Venue at 8651

 

 

289

 

 

 

333

 

 

10/30/2015

 

 

967

 

 

 

933

 

 

 

92.9

%

 

 

93.4

%

 

 

 

289

 

 

 

333

 

 

10/30/2015

 

 

1,094

 

 

 

1,006

 

 

 

93.2

%

 

 

94.5

%

 

Parc500

 

 

266

 

 

 

217

 

 

7/27/2016

 

 

1,474

 

 

 

1,340

 

 

 

97.7

%

 

 

97.7

%

 

 

 

266

 

 

 

217

 

 

7/27/2016

 

 

1,783

 

 

 

1,543

 

 

 

95.3

%

 

 

96.3

%

 

The Venue on Camelback

 

 

256

 

 

 

415

 

 

10/11/2016

 

 

870

 

 

 

821

 

 

 

96.1

%

 

 

93.7

%

 

 

 

256

 

 

 

415

 

 

10/11/2016

 

 

1,064

 

 

 

915

 

 

 

93.0

%

 

 

92.3

%

 

Old Farm

 

 

697

 

 

 

734

 

 

12/29/2016

 

 

1,159

 

 

 

1,133

 

 

 

97.0

%

 

 

92.1

%

 

(4)

 

697

 

 

 

734

 

 

12/29/2016

 

 

1,309

 

 

 

1,207

 

 

 

94.6

%

 

 

93.9

%

 

Stone Creek at Old Farm

 

 

186

 

 

 

190

 

 

12/29/2016

 

 

1,218

 

 

 

1,194

 

 

 

93.2

%

 

 

92.1

%

 

(4)

 

186

 

 

 

190

 

 

12/29/2016

 

 

1,321

 

 

 

1,248

 

 

 

95.3

%

 

 

96.8

%

 

Hollister Place

 

 

246

 

 

 

260

 

 

2/1/2017

 

 

1,024

 

 

 

1,007

 

 

 

95.1

%

 

 

91.2

%

 

(4)

 

246

 

 

 

260

 

 

2/1/2017

 

 

1,180

 

 

 

1,065

 

 

 

94.0

%

 

 

92.5

%

 

Rockledge Apartments

 

 

802

 

 

 

708

 

 

6/30/2017

 

 

1,345

 

 

 

1,261

 

 

 

95.3

%

 

 

95.5

%

 

 

 

802

 

 

 

708

 

 

6/30/2017

 

 

1,561

 

 

 

1,408

 

 

 

94.8

%

 

 

93.9

%

 

Atera Apartments

 

 

334

 

 

 

380

 

 

10/25/2017

 

 

1,248

 

 

 

1,247

 

 

 

95.9

%

 

 

92.1

%

 

 

 

334

 

 

 

380

 

 

10/25/2017

 

 

1,491

 

 

 

1,310

 

 

 

93.9

%

 

 

93.9

%

 

Cedar Pointe

(4)

 

224

 

 

 

210

 

 

8/24/2018

 

 

1,132

 

 

 

1,075

 

 

 

95.7

%

 

 

96.2

%

 

Crestmont Reserve

 

 

199

 

 

 

242

 

 

9/26/2018

 

 

939

 

 

 

895

 

 

 

95.5

%

 

 

98.8

%

 

 

 

199

 

 

 

242

 

 

9/26/2018

 

 

1,180

 

 

 

985

 

 

 

93.4

%

 

 

95.5

%

 

Brandywine I & II

 

 

414

 

 

 

632

 

 

9/26/2018

 

 

991

 

 

 

960

 

 

 

94.8

%

 

 

94.3

%

 

 

 

414

 

 

 

632

 

 

9/26/2018

 

 

1,215

 

 

 

1,031

 

 

 

95.3

%

 

 

95.6

%

 

Bella Vista

 

 

243

 

 

 

248

 

 

1/28/2019

 

 

1,419

 

 

 

1,320

 

 

 

98.0

%

 

 

95.6

%

 

 

 

243

 

 

 

248

 

 

1/28/2019

 

 

1,714

 

 

 

1,515

 

 

 

96.0

%

 

 

96.0

%

 

The Enclave

 

 

194

 

 

 

204

 

 

1/28/2019

 

 

1,449

 

 

 

1,355

 

 

 

98.5

%

 

 

97.5

%

 

 

 

194

 

 

 

204

 

 

1/28/2019

 

 

1,765

 

 

 

1,507

 

 

 

94.6

%

 

 

96.6

%

 

The Heritage

 

 

199

 

 

 

204

 

 

1/28/2019

 

 

1,403

 

 

 

1,298

 

 

 

96.6

%

 

 

94.1

%

 

 

 

199

 

 

 

204

 

 

1/28/2019

 

 

1,630

 

 

 

1,432

 

 

 

95.1

%

 

 

95.6

%

 

Summers Landing

 

 

139

 

 

 

196

 

 

6/7/2019

 

 

981

 

 

 

941

 

 

 

96.4

%

 

 

95.9

%

 

 

 

139

 

 

 

196

 

 

6/7/2019

 

 

1,145

 

 

 

1,033

 

 

 

95.4

%

 

 

93.9

%

 

Residences at Glenview Reserve

 

 

344

 

 

 

360

 

 

7/17/2019

 

 

1,036

 

 

 

993

 

 

 

96.1

%

 

 

92.8

%

 

 

 

344

 

 

 

360

 

 

7/17/2019

 

 

1,266

 

 

 

1,074

 

 

 

95.3

%

 

 

95.6

%

 

Residences at West Place

 

 

345

 

 

 

342

 

 

7/17/2019

 

 

1,305

 

 

 

1,214

 

 

 

94.4

%

 

 

90.1

%

 

 

 

345

 

 

 

342

 

 

7/17/2019

 

 

1,586

 

 

 

1,345

 

 

 

91.5

%

 

 

93.0

%

 

Avant at Pembroke Pines

 

 

1,442

 

 

 

1,520

 

 

8/30/2019

 

 

1,631

 

 

 

1,515

 

 

 

95.1

%

 

 

94.4

%

 

 

 

1,442

 

 

 

1,520

 

 

8/30/2019

 

 

1,990

 

 

 

1,695

 

 

 

95.3

%

 

 

93.9

%

 

Arbors of Brentwood

 

 

325

 

 

 

346

 

 

9/10/2019

 

 

1,259

 

 

 

1,194

 

 

 

96.8

%

 

 

91.3

%

 

 

 

325

 

 

 

346

 

 

9/10/2019

 

 

1,478

 

 

 

1,284

 

 

 

94.2

%

 

 

95.1

%

 

Torreyana Apartments

 

 

309

 

 

 

315

 

 

11/22/2019

 

 

1,292

 

 

 

1,184

 

 

 

95.6

%

 

 

93.0

%

 

 

 

309

 

 

 

316

 

 

11/22/2019

 

 

1,538

 

 

 

1,365

 

 

 

95.6

%

 

 

93.7

%

 

Bloom

 

 

498

 

 

 

528

 

 

11/22/2019

 

 

1,210

 

 

 

1,120

 

 

 

90.9

%

 

 

94.1

%

 

 

 

498

 

 

 

528

 

 

11/22/2019

 

 

1,369

 

 

 

1,238

 

 

 

91.3

%

 

 

89.2

%

 

Bella Solara

 

 

271

 

 

 

320

 

 

11/22/2019

 

 

1,221

 

 

 

1,128

 

 

 

93.4

%

 

 

91.6

%

 

 

 

271

 

 

 

320

 

 

11/22/2019

 

 

1,475

 

 

 

1,309

 

 

 

89.1

%

 

 

91.3

%

 

Fairways at San Marcos

 

 

340

 

 

 

352

 

 

11/2/2020

 

 

1,377

 

 

 

1,232

 

 

 

96.6

%

 

 

96.0

%

 

 

 

340

 

 

 

352

 

 

11/2/2020

 

 

1,659

 

 

 

1,425

 

 

 

93.2

%

 

 

96.3

%

 

The Verandas at Lake Norman

 

 

241

 

 

 

264

 

 

6/30/2021

 

 

1,175

 

 

 

—

 

(5)

 

95.1

%

 

 

—

 

(5)

 

 

241

 

 

 

264

 

 

6/30/2021

 

 

1,319

 

 

 

1,215

 

 

 

95.1

%

 

 

93.2

%

 

Creekside at Matthews

 

 

263

 

 

 

240

 

 

6/30/2021

 

 

1,334

 

 

 

—

 

(5)

 

94.6

%

 

 

—

 

(5)

 

 

263

 

 

 

240

 

 

6/30/2021

 

 

1,402

 

 

 

1,350

 

 

 

92.5

%

 

 

94.2

%

 

Six Forks Station

 

 

360

 

 

 

323

 

 

9/10/2021

 

 

1,244

 

 

 

—

 

(5)

 

96.3

%

 

 

—

 

(5)

 

 

360

 

 

 

323

 

 

9/10/2021

 

 

1,321

 

 

 

1,228

 

 

 

97.2

%

 

 

95.4

%

 

High House at Cary

 

 

293

 

 

 

302

 

 

12/7/2021

 

 

1,480

 

 

 

1,361

 

 

 

94.7

%

 

 

94.7

%

 

The Adair

 

 

328

 

 

 

232

 

 

4/1/2022

 

 

1,823

 

 

 

—

 

(5)

 

95.7

%

 

 

—

 

(5)

Estates on Maryland

 

 

324

 

 

 

330

 

 

4/1/2022

 

 

1,388

 

 

 

—

 

(5)

 

92.7

%

 

 

—

 

(5)

 

 

13,594

 

 

 

15,032

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,043

 

 

 

15,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Average effective monthly rent per unit is equal to the average of the contractual rent for commenced leases as of September 30, 20212022 and December 31, 2020,2021, respectively, minus any tenant concessions over the term of the lease, divided by the number of units under commenced leases as of September 30, 20212022 and December 31, 2020,2021, respectively.


(2)

Percent occupied is calculated as the number of units occupied as of September 30, 20212022 and December 31, 2020,2021, divided by the total number of units, expressed as a percentage.

(3)

Includes 8981 units that were down units due to casualty events as of September 30, 20212022 (see Note 5).

(4)

PropertyProperties classified as held for sale as of September 30, 2021.2022.

(5)

Properties were acquired in 2021.2022.


5. Real Estate Investments

As of September 30, 2022, the major components of the Company’s investments in multifamily properties were as follows (in thousands):

Operating Properties

 

 

Land

 

 

Buildings and

Improvements

 

 

Intangible Lease

Assets

 

 

Construction in

Progress

 

 

Furniture,

Fixtures and

Equipment

 

 

Totals

 

Arbors on Forest Ridge

 

 

$

2,330

 

 

$

11,778

 

 

$

—

 

 

$

1

 

 

$

1,956

 

 

$

16,065

 

Cutter's Point

 

 

 

3,330

 

 

 

13,103

 

 

 

—

 

 

 

10

 

 

 

7,491

 

 

 

23,934

 

Silverbrook

 

 

 

4,860

 

 

 

25,774

 

 

 

—

 

 

 

905

 

 

 

6,070

 

 

 

37,609

 

The Summit at Sabal Park

 

 

 

5,770

 

 

 

13,956

 

 

 

—

 

 

 

38

 

 

 

2,231

 

 

 

21,995

 

Courtney Cove

 

 

 

5,880

 

 

 

14,625

 

 

 

—

 

 

 

—

 

 

 

2,752

 

 

 

23,257

 

Radbourne Lake

 

 

 

2,440

 

 

 

23,003

 

 

 

—

 

 

 

—

 

 

 

3,023

 

 

 

28,466

 

Timber Creek

 

 

 

11,260

 

 

 

13,466

 

 

 

—

 

 

 

2,559

 

 

 

4,258

 

 

 

31,543

 

Sabal Palm at Lake Buena Vista

 

 

 

7,580

 

 

 

42,670

 

 

 

—

 

 

 

—

 

 

 

3,307

 

 

 

53,557

 

Cornerstone

 

 

 

1,500

 

 

 

30,960

 

 

 

—

 

 

 

2

 

 

 

4,143

 

 

 

36,605

 

The Preserve at Terrell Mill

 

 

 

10,170

 

 

 

53,278

 

 

 

—

 

 

 

(20

)

 

 

10,371

 

 

 

73,799

 

Versailles

 

 

 

6,720

 

 

 

21,722

 

 

 

—

 

 

 

—

 

 

 

4,539

 

 

 

32,981

 

Seasons 704 Apartments

 

 

 

7,480

 

 

 

14,945

 

 

 

—

 

 

 

3

 

 

 

2,778

 

 

 

25,206

 

Madera Point

 

 

 

4,920

 

 

 

18,270

 

 

 

—

 

 

 

—

 

 

 

3,013

 

 

 

26,203

 

Venue at 8651

 

 

 

2,350

 

 

 

17,939

 

 

 

—

 

 

 

578

 

 

 

4,229

 

 

 

25,096

 

Parc500

 

 

 

3,860

 

 

 

21,146

 

 

 

—

 

 

 

4

 

 

 

4,573

 

 

 

29,583

 

The Venue on Camelback

 

 

 

8,340

 

 

 

38,788

 

 

 

—

 

 

 

—

 

 

 

3,879

 

 

 

51,007

 

Rockledge Apartments

 

 

 

17,451

 

 

 

97,774

 

 

 

—

 

 

 

973

 

 

 

7,552

 

 

 

123,750

 

Atera Apartments

 

 

 

22,371

 

 

 

38,852

 

 

 

—

 

 

 

30

 

 

 

2,881

 

 

 

64,134

 

Crestmont Reserve

 

 

 

4,124

 

 

 

21,094

 

 

 

—

 

 

 

6

 

 

 

1,810

 

 

 

27,034

 

Brandywine I & II

 

 

 

6,237

 

 

 

73,821

 

 

 

—

 

 

 

—

 

 

 

6,399

 

 

 

86,457

 

Bella Vista

 

 

 

10,942

 

 

 

37,444

 

 

 

—

 

 

 

8

 

 

 

3,271

 

 

 

51,665

 

The Enclave

 

 

 

11,046

 

 

 

30,557

 

 

 

—

 

 

 

90

 

 

 

2,922

 

 

 

44,615

 

The Heritage

 

 

 

6,835

 

 

 

35,199

 

 

 

—

 

 

 

29

 

 

 

2,977

 

 

 

45,040

 

Summers Landing

 

 

 

1,798

 

 

 

18,619

 

 

 

—

 

 

 

1

 

 

 

948

 

 

 

21,366

 

Residences at Glenview Reserve

 

 

 

3,367

 

 

 

42,557

 

 

 

—

 

 

 

—

 

 

 

3,415

 

 

 

49,339

 

Residences at West Place

 

 

 

3,345

 

 

 

52,569

 

 

 

—

 

 

 

12

 

 

 

2,693

 

 

 

58,619

 

Avant at Pembroke Pines

 

 

 

48,434

 

 

 

278,810

 

 

 

—

 

 

 

1,810

 

 

 

14,338

 

 

 

343,392

 

Arbors of Brentwood

 

 

 

6,346

 

 

 

54,172

 

 

 

—

 

 

 

25

 

 

 

2,845

 

 

 

63,388

 

Torreyana Apartments

 

 

 

23,824

 

 

 

43,851

 

 

 

—

 

 

 

—

 

 

 

1,846

 

 

 

69,521

 

Bloom

 

 

 

23,805

 

 

 

82,749

 

 

 

—

 

 

 

78

 

 

 

3,820

 

 

 

110,452

 

Bella Solara

 

 

 

12,605

 

 

 

53,573

 

 

 

—

 

 

 

24

 

 

 

2,556

 

 

 

68,758

 

Fairways at San Marcos

 

 

 

10,993

 

 

 

72,963

 

 

 

—

 

 

 

9

 

 

 

2,997

 

 

 

86,962

 

The Verandas at Lake Norman

 

 

 

9,510

 

 

 

52,950

 

 

 

—

 

 

 

124

 

 

 

1,589

 

 

 

64,173

 

Creekside at Matthews

 

 

 

11,515

 

 

 

45,812

 

 

 

—

 

 

 

22

 

 

 

1,935

 

 

 

59,284

 

Six Forks Station

 

 

 

11,357

 

 

 

62,752

 

 

 

—

 

 

 

51

 

 

 

1,877

 

 

 

76,037

 

High House at Cary

 

 

 

23,809

 

 

 

67,766

 

 

 

—

 

 

 

33

 

 

 

1,462

 

 

 

93,070

 

The Adair

 

 

 

8,361

 

 

 

55,532

 

 

 

—

 

 

 

572

 

 

 

1,213

 

 

 

65,678

 

Estates on Maryland

 

 

 

11,573

 

 

 

64,462

 

 

 

—

 

 

 

193

 

 

 

1,225

 

 

 

77,453

 

 

 

 

 

378,438

 

 

 

1,759,301

 

 

 

—

 

 

 

8,170

 

 

 

141,184

 

 

 

2,287,093

 

Accumulated depreciation and amortization

 

 

 

—

 

 

 

(229,667

)

 

 

—

 

 

 

—

 

 

 

(97,071

)

 

 

(326,738

)

Total Operating Properties

 

 

 

378,438

 

 

 

1,529,634

 

 

 

—

 

 

 

8,170

 

 

 

44,113

 

 

 

1,960,355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held For Sale Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hollister Place

 

 

 

2,782

 

 

 

22,029

 

 

 

—

 

 

 

184

 

 

 

2,947

 

 

 

27,942

 

Old Farm

 

 

 

11,078

 

 

 

71,241

 

 

 

—

 

 

 

10

 

 

 

4,516

 

 

 

86,845

 

Stone Creek at Old Farm

 

 

 

3,493

 

 

 

19,766

 

 

 

—

 

 

 

2

 

 

 

1,067

 

 

 

24,328

 

Accumulated depreciation and amortization

 

 

 

—

 

 

 

(21,240

)

 

 

—

 

 

 

—

 

 

 

(7,237

)

 

 

(28,477

)

Total Held For Sale Properties

 

 

 

17,353

 

 

 

91,796

 

 

 

—

 

 

 

196

 

 

 

1,293

 

 

 

110,638

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

$

395,791

 

 

$

1,621,430

 

 

$

—

 

 

$

8,366

 

 

$

45,406

 

 

$

2,070,993

 


As of December 31, 2021, the major components of the Company’s investments in multifamily properties were as follows (in thousands):

 

Operating Properties

 

 

Land

 

 

Buildings and

Improvements

 

 

Intangible Lease

Assets

 

 

Construction in

Progress

 

 

Furniture,

Fixtures and

Equipment

 

 

Totals

 

Arbors on Forest Ridge

 

 

$

2,330

 

 

$

11,693

 

 

$

—

 

 

$

37

 

 

$

1,779

 

 

$

15,839

 

Cutter's Point

 

 

 

3,330

 

 

 

17,869

 

 

 

—

 

 

 

(2

)

 

 

2,065

 

 

 

23,262

 

Silverbrook

 

 

 

4,860

 

 

 

27,406

 

 

 

—

 

 

 

47

 

 

 

5,471

 

 

 

37,784

 

The Summit at Sabal Park

 

 

 

5,770

 

 

 

13,768

 

 

 

—

 

 

 

—

 

 

 

1,922

 

 

 

21,460

 

Courtney Cove

 

 

 

5,880

 

 

 

13,916

 

 

 

—

 

 

 

347

 

 

 

2,329

 

 

 

22,472

 

Radbourne Lake

 

 

 

2,440

 

 

 

22,792

 

 

 

—

 

 

 

—

 

 

 

2,361

 

 

 

27,593

 

Timber Creek

 

 

 

11,260

 

 

 

13,293

 

 

 

—

 

 

 

54

 

 

 

3,743

 

 

 

28,350

 

Sabal Palm at Lake Buena Vista

 

 

 

7,580

 

 

 

42,428

 

 

 

—

 

 

 

—

 

 

 

2,679

 

 

 

52,687

 

Cornerstone

 

 

 

1,500

 

 

 

30,870

 

 

 

—

 

 

 

—

 

 

 

3,658

 

 

 

36,028

 

The Preserve at Terrell Mill

 

 

 

10,170

 

 

 

53,043

 

 

 

—

 

 

 

—

 

 

 

8,522

 

 

 

71,735

 

Versailles

 

 

 

6,720

 

 

 

21,879

 

 

 

—

 

 

 

4

 

 

 

4,033

 

 

 

32,636

 

Seasons 704 Apartments

 

 

 

7,480

 

 

 

14,598

 

 

 

—

 

 

 

—

 

 

 

2,001

 

 

 

24,079

 

Madera Point

 

 

 

4,920

 

 

 

17,983

 

 

 

—

 

 

 

70

 

 

 

2,519

 

 

 

25,492

 

Venue at 8651

 

 

 

2,350

 

 

 

16,746

 

 

 

—

 

 

 

1,070

 

 

 

3,713

 

 

 

23,879

 

Parc500

 

 

 

3,860

 

 

 

21,101

 

 

 

—

 

 

 

—

 

 

 

4,089

 

 

 

29,050

 

The Venue on Camelback

 

 

 

8,340

 

 

 

38,419

 

 

 

—

 

 

 

19

 

 

 

3,074

 

 

 

49,852

 

Old Farm

 

 

 

11,078

 

 

 

70,936

 

 

 

—

 

 

 

73

 

 

 

3,768

 

 

 

85,855

 

Stone Creek at Old Farm

 

 

 

3,493

 

 

 

19,396

 

 

 

—

 

 

 

301

 

 

 

866

 

 

 

24,056

 

Hollister Place

 

 

 

2,782

 

 

 

21,155

 

 

 

—

 

 

 

945

 

 

 

2,696

 

 

 

27,578

 

Rockledge Apartments

 

 

 

17,451

 

 

 

97,340

 

 

 

—

 

 

 

—

 

 

 

5,658

 

 

 

120,449

 

Atera Apartments

 

 

 

22,371

 

 

 

36,785

 

 

 

—

 

 

 

1,336

 

 

 

2,320

 

 

 

62,812

 

Crestmont Reserve

 

 

 

4,124

 

 

 

21,067

 

 

 

—

 

 

 

—

 

 

 

1,499

 

 

 

26,690

 

Brandywine I & II

 

 

 

6,237

 

 

 

73,692

 

 

 

—

 

 

 

—

 

 

 

4,867

 

 

 

84,796

 

Bella Vista

 

 

 

10,942

 

 

 

36,874

 

 

 

—

 

 

 

255

 

 

 

2,561

 

 

 

50,632

 

The Enclave

 

 

 

11,046

 

 

 

30,431

 

 

 

—

 

 

 

—

 

 

 

2,293

 

 

 

43,770

 

The Heritage

 

 

 

6,835

 

 

 

34,824

 

 

 

—

 

 

 

107

 

 

 

2,240

 

 

 

44,006

 

Summers Landing

 

 

 

1,798

 

 

 

18,384

 

 

 

—

 

 

 

—

 

 

 

772

 

 

 

20,954

 

Residences at Glenview Reserve

 

 

 

3,367

 

 

 

42,289

 

 

 

—

 

 

 

(15

)

 

 

2,163

 

 

 

47,804

 

Residences at West Place

 

 

 

3,345

 

 

 

52,284

 

 

 

—

 

 

 

—

 

 

 

1,424

 

 

 

57,053

 

Avant at Pembroke Pines

 

 

 

48,434

 

 

 

275,618

 

 

 

—

 

 

 

1,459

 

 

 

10,529

 

 

 

336,040

 

Arbors of Brentwood

 

 

 

6,346

 

 

 

55,986

 

 

 

—

 

 

 

—

 

 

 

2,006

 

 

 

64,338

 

Torreyana Apartments

 

 

 

23,824

 

 

 

43,654

 

 

 

—

 

 

 

25

 

 

 

1,257

 

 

 

68,760

 

Bloom

 

 

 

23,805

 

 

 

82,301

 

 

 

—

 

 

 

162

 

 

 

2,373

 

 

 

108,641

 

Bella Solara

 

 

 

12,605

 

 

 

53,358

 

 

 

—

 

 

 

22

 

 

 

1,659

 

 

 

67,644

 

Fairways at San Marcos

 

 

 

10,993

 

 

 

72,746

 

 

 

—

 

 

 

58

 

 

 

1,708

 

 

 

85,505

 

The Verandas at Lake Norman

 

 

 

9,510

 

 

 

52,760

 

 

 

971

 

 

 

—

 

 

 

584

 

 

 

63,825

 

Creekside at Matthews

 

 

 

11,515

 

 

 

45,269

 

 

 

1,001

 

 

 

—

 

 

 

577

 

 

 

58,362

 

Six Forks Station

 

 

 

11,357

 

 

 

61,897

 

 

 

1,200

 

 

 

—

 

 

 

652

 

 

 

75,106

 

 

 

 

 

352,048

 

 

 

1,676,850

 

 

 

3,172

 

 

 

6,374

 

 

 

108,430

 

 

 

2,146,874

 

Accumulated depreciation and amortization

 

 

 

—

 

 

 

(187,207

)

 

 

(1,186

)

 

 

—

 

 

 

(76,150

)

 

 

(264,543

)

Total Operating Properties

 

 

$

352,048

 

 

$

1,489,643

 

 

$

1,986

 

 

$

6,374

 

 

$

32,280

 

 

$

1,882,331

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held For Sale Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beechwood Terrace

 

 

 

1,390

 

 

 

22,286

 

 

 

—

 

 

 

—

 

 

 

2,982

 

 

 

26,658

 

Cedar Pointe

 

 

 

2,372

 

 

 

24,290

 

 

 

—

 

 

 

—

 

 

 

1,706

 

 

 

28,368

 

Accumulated depreciation and amortization

 

 

 

—

 

 

 

(7,537

)

 

 

—

 

 

 

—

 

 

 

(3,491

)

 

 

(11,028

)

Total Held For Sale Properties

 

 

$

3,762

 

 

$

39,039

 

 

$

—

 

 

$

—

 

 

$

1,197

 

 

$

43,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

$

355,810

 

 

$

1,528,682

 

 

$

1,986

 

 

$

6,374

 

 

$

33,477

 

 

$

1,926,329

 


As of December 31, 2020, the major components of the Company’s investments in multifamily properties were as follows (in thousands):

Operating Properties

 

 

Land

 

 

Buildings and

Improvements

 

 

Intangible Lease

Assets

 

 

Construction in

Progress

 

 

Furniture,

Fixtures and

Equipment

 

 

Totals

 

 

 

Land

 

 

Buildings and

Improvements

 

 

Intangible Lease

Assets

 

 

Construction in

Progress

 

 

Furniture,

Fixtures and

Equipment

 

 

Totals

 

Arbors on Forest Ridge

 

 

$

2,330

 

 

$

11,682

 

 

$

—

 

 

$

17

 

 

$

1,650

 

 

$

15,679

 

 

 

$

2,330

 

 

$

11,755

 

 

$

—

 

 

$

—

 

 

$

1,821

 

 

$

15,906

 

Cutter's Point

 

 

 

3,330

 

 

 

8,035

 

 

 

—

 

 

 

4,983

 

 

 

2,044

 

 

 

18,392

 

 

 

 

3,330

 

 

 

13,091

 

 

 

—

 

 

 

—

 

 

 

7,379

 

 

 

23,800

 

Silverbrook

 

 

 

4,860

 

 

 

27,256

 

 

 

—

 

 

 

3

 

 

 

5,049

 

 

 

37,168

 

 

 

 

4,860

 

 

 

27,495

 

 

 

—

 

 

 

—

 

 

 

5,566

 

 

 

37,921

 

Beechwood Terrace

 

 

 

1,390

 

 

 

22,233

 

 

 

—

 

 

 

32

 

 

 

2,791

 

 

 

26,446

 

The Summit at Sabal Park

 

 

 

5,770

 

 

 

13,749

 

 

 

—

 

 

 

—

 

 

 

1,813

 

 

 

21,332

 

 

 

 

5,770

 

 

 

13,882

 

 

 

—

 

 

 

—

 

 

 

1,978

 

 

 

21,630

 

Courtney Cove

 

 

 

5,880

 

 

 

13,713

 

 

 

—

 

 

 

114

 

 

 

2,165

 

 

 

21,872

 

 

 

 

5,880

 

 

 

14,350

 

 

 

—

 

 

 

—

 

 

 

2,444

 

 

 

22,674

 

Radbourne Lake

 

 

 

2,440

 

 

 

22,617

 

 

 

—

 

 

 

—

 

 

 

2,147

 

 

 

27,204

 

 

 

 

2,440

 

 

 

22,744

 

 

 

—

 

 

 

64

 

 

 

2,455

 

 

 

27,703

 

Timber Creek

 

 

 

11,260

 

 

 

13,245

 

 

 

—

 

 

 

42

 

 

 

3,473

 

 

 

28,020

 

 

 

 

11,260

 

 

 

13,310

 

 

 

—

 

 

 

239

 

 

 

3,827

 

 

 

28,636

 

Sabal Palm at Lake Buena Vista

 

 

 

7,580

 

 

 

42,401

 

 

 

—

 

 

 

—

 

 

 

2,391

 

 

 

52,372

 

 

 

 

7,580

 

 

 

42,456

 

 

 

—

 

 

 

2

 

 

 

2,758

 

 

 

52,796

 

Cornerstone

 

 

 

1,500

 

 

 

30,781

 

 

 

—

 

 

 

2

 

 

 

3,343

 

 

 

35,626

 

 

 

 

1,500

 

 

 

30,901

 

 

 

—

 

 

 

21

 

 

 

3,722

 

 

 

36,144

 

The Preserve at Terrell Mill

 

 

 

10,170

 

 

 

50,757

 

 

 

—

 

 

 

1,524

 

 

 

7,310

 

 

 

69,761

 

 

 

 

10,170

 

 

 

53,080

 

 

 

—

 

 

 

—

 

 

 

8,997

 

 

 

72,247

 

Versailles

 

 

 

6,720

 

 

 

21,766

 

 

 

—

 

 

 

—

 

 

 

3,861

 

 

 

32,347

 

 

 

 

6,720

 

 

 

21,887

 

 

 

—

 

 

 

—

 

 

 

4,075

 

 

 

32,682

 

Seasons 704 Apartments

 

 

 

7,480

 

 

 

14,418

 

 

 

—

 

 

 

18

 

 

 

1,743

 

 

 

23,659

 

 

 

 

7,480

 

 

 

14,644

 

 

 

—

 

 

 

—

 

 

 

2,078

 

 

 

24,202

 

Madera Point

 

 

 

4,920

 

 

 

17,926

 

 

 

—

 

 

 

—

 

 

 

2,273

 

 

 

25,119

 

 

 

 

4,920

 

 

 

18,090

 

 

 

—

 

 

 

48

 

 

 

2,612

 

 

 

25,670

 

Venue at 8651

 

 

 

2,350

 

 

 

17,473

 

 

 

—

 

 

 

106

 

 

 

3,531

 

 

 

23,460

 

 

 

 

2,350

 

 

 

17,495

 

 

 

—

 

 

 

334

 

 

 

3,843

 

 

 

24,022

 

Parc500

 

 

 

3,860

 

 

 

20,927

 

 

 

—

 

 

 

22

 

 

 

3,827

 

 

 

28,636

 

 

 

 

3,860

 

 

 

21,172

 

 

 

—

 

 

 

—

 

 

 

4,147

 

 

 

29,179

 

The Venue on Camelback

 

 

 

8,340

 

 

 

38,106

 

 

 

—

 

 

 

37

 

 

 

2,570

 

 

 

49,053

 

 

 

 

8,340

 

 

 

38,328

 

 

 

—

 

 

 

306

 

 

 

3,248

 

 

 

50,222

 

Old Farm

 

 

 

11,078

 

 

 

70,846

 

 

 

—

 

 

 

24

 

 

 

3,419

 

 

 

85,367

 

 

 

 

11,078

 

 

 

70,993

 

 

 

—

 

 

 

99

 

 

 

3,902

 

 

 

86,072

 

Stone Creek at Old Farm

 

 

 

3,493

 

 

 

19,471

 

 

 

—

 

 

 

—

 

 

 

792

 

 

 

23,756

 

 

 

 

3,493

 

 

 

19,714

 

 

 

—

 

 

 

2

 

 

 

899

 

 

 

24,108

 

Hollister Place

 

 

 

2,782

 

 

 

21,884

 

 

 

—

 

 

 

—

 

 

 

2,555

 

 

 

27,221

 

 

 

 

2,782

 

 

 

21,196

 

 

 

—

 

 

 

1,308

 

 

 

2,739

 

 

 

28,025

 

Rockledge Apartments

 

 

 

17,451

 

 

 

96,902

 

 

 

—

 

 

 

86

 

 

 

5,363

 

 

 

119,802

 

 

 

 

17,451

 

 

 

97,374

 

 

 

—

 

 

 

—

 

 

 

5,968

 

 

 

120,793

 

Atera Apartments

 

 

 

22,371

 

 

 

37,525

 

 

 

—

 

 

 

9

 

 

 

2,188

 

 

 

62,093

 

 

 

 

22,371

 

 

 

36,857

 

 

 

—

 

 

 

1,824

 

 

 

2,384

 

 

 

63,436

 

Cedar Pointe

 

 

 

2,371

 

 

 

24,268

 

 

 

—

 

 

 

—

 

 

 

1,577

 

 

 

28,216

 

Crestmont Reserve

 

 

 

4,124

 

 

 

20,955

 

 

 

—

 

 

 

19

 

 

 

1,411

 

 

 

26,509

 

 

 

 

4,124

 

 

 

21,067

 

 

 

—

 

 

 

—

 

 

 

1,515

 

 

 

26,706

 

Brandywine I & II

 

 

 

6,237

 

 

 

73,613

 

 

 

—

 

 

 

6

 

 

 

4,072

 

 

 

83,928

 

 

 

 

6,237

 

 

 

73,737

 

 

 

—

 

 

 

—

 

 

 

5,160

 

 

 

85,134

 

Bella Vista

 

 

 

10,942

 

 

 

36,787

 

 

 

—

 

 

 

—

 

 

 

2,110

 

 

 

49,839

 

 

 

 

10,942

 

 

 

37,193

 

 

 

—

 

 

 

51

 

 

 

2,687

 

 

 

50,873

 

The Enclave

 

 

 

11,046

 

 

 

30,308

 

 

 

—

 

 

 

—

 

 

 

1,856

 

 

 

43,210

 

 

 

 

11,046

 

 

 

30,469

 

 

 

—

 

 

 

11

 

 

 

2,403

 

 

 

43,929

 

The Heritage

 

 

 

6,835

 

 

 

34,761

 

 

 

—

 

 

 

—

 

 

 

1,793

 

 

 

43,389

 

 

 

 

6,835

 

 

 

35,011

 

 

 

—

 

 

 

68

 

 

 

2,386

 

 

 

44,300

 

Summers Landing

 

 

 

1,798

 

 

 

17,909

 

 

 

—

 

 

 

43

 

 

 

670

 

 

 

20,420

 

 

 

 

1,798

 

 

 

18,433

 

 

 

—

 

 

 

1

 

 

 

790

 

 

 

21,022

 

Residences at Glenview Reserve

 

 

 

3,367

 

 

 

42,027

 

 

 

—

 

 

 

14

 

 

 

1,495

 

 

 

46,903

 

 

 

 

3,367

 

 

 

42,306

 

 

 

—

 

 

 

—

 

 

 

2,366

 

 

 

48,039

 

Residences at West Place

 

 

 

3,345

 

 

 

51,802

 

 

 

—

 

 

 

154

 

 

 

1,049

 

 

 

56,350

 

 

 

 

3,345

 

 

 

52,310

 

 

 

—

 

 

 

—

 

 

 

1,591

 

 

 

57,246

 

Avant at Pembroke Pines

 

 

 

48,436

 

 

 

272,436

 

 

 

—

 

 

 

2,847

 

 

 

7,977

 

 

 

331,696

 

 

 

 

48,434

 

 

 

275,968

 

 

 

—

 

 

 

1,414

 

 

 

11,611

 

 

 

337,427

 

Arbors of Brentwood

 

 

 

6,346

 

 

 

55,777

 

 

 

—

 

 

 

21

 

 

 

1,118

 

 

 

63,262

 

 

 

 

6,346

 

 

 

56,040

 

 

 

—

 

 

 

—

 

 

 

2,235

 

 

 

64,621

 

Torreyana Apartments

 

 

 

23,824

 

 

 

43,489

 

 

 

—

 

 

 

122

 

 

 

1,047

 

 

 

68,482

 

 

 

 

23,824

 

 

 

43,700

 

 

 

—

 

 

 

25

 

 

 

1,371

 

 

 

68,920

 

Bloom

 

 

 

23,805

 

 

 

81,714

 

 

 

—

 

 

 

494

 

 

 

1,782

 

 

 

107,795

 

 

 

 

23,805

 

 

 

82,545

 

 

 

—

 

 

 

16

 

 

 

2,697

 

 

 

109,063

 

Bella Solara

 

 

 

12,605

 

 

 

53,134

 

 

 

—

 

 

 

57

 

 

 

1,228

 

 

 

67,024

 

 

 

 

12,605

 

 

 

53,415

 

 

 

—

 

 

 

24

 

 

 

1,854

 

 

 

67,898

 

Fairways at San Marcos

 

 

 

10,993

 

 

 

71,422

 

 

 

1,675

 

 

 

—

 

 

 

745

 

 

 

84,835

 

 

 

 

10,993

 

 

 

72,920

 

 

 

—

 

 

 

2

 

 

 

1,989

 

 

 

85,904

 

The Verandas at Lake Norman

 

 

 

9,510

 

 

 

52,884

 

 

 

—

 

 

 

6

 

 

 

650

 

 

 

63,050

 

Creekside at Matthews

 

 

 

11,515

 

 

 

45,271

 

 

 

—

 

 

 

18

 

 

 

756

 

 

 

57,560

 

Six Forks Station

 

 

 

11,357

 

 

 

62,129

 

 

 

1,200

 

 

 

195

 

 

 

748

 

 

 

75,629

 

High House at Cary

 

 

 

23,809

 

 

 

67,654

 

 

 

1,376

 

 

 

—

 

 

 

768

 

 

 

93,607

 

 

 

 

323,429

 

 

 

1,544,115

 

 

 

1,675

 

 

 

10,796

 

 

 

96,228

 

 

 

1,976,243

 

 

 

 

375,857

 

 

 

1,743,866

 

 

 

2,576

 

 

 

6,078

 

 

 

120,419

 

 

 

2,248,796

 

Accumulated depreciation and amortization

 

 

 

—

 

 

 

(153,063

)

 

 

(558

)

 

 

—

 

 

 

(61,873

)

 

 

(215,494

)

 

 

 

—

 

 

 

(203,125

)

 

 

(1,029

)

 

 

—

 

 

 

(82,942

)

 

 

(287,096

)

Total Operating Properties

 

 

$

323,429

 

 

$

1,391,052

 

 

$

1,117

 

 

$

10,796

 

 

$

34,355

 

 

$

1,760,749

 

 

 

$

375,857

 

 

$

1,540,741

 

 

$

1,547

 

 

$

6,078

 

 

$

37,477

 

 

$

1,961,700

 

 

Depreciation expense was $20.4$23.9 million and $17.7$20.4 million for the three months ended September 30, 20212022 and 2020,2021, respectively. Depreciation expense was $60.0$70.3 million and $56.2$60.0 million for the nine months ended September 30, 20212022 and 2020,2021, respectively.

Amortization expense related to the Company’s intangible lease assets was $1.2$1.3 million and $0.0$1.2 million for the three months ended September 30, 20212022 and 2020,2021, respectively. Amortization expense related to the Company’s intangible lease assets was $2.3$4.1 million and $6.2$2.3 million for the nine months ended September 30, 20212022 and 2020,2021, respectively. Amortization expense related to the Company’s intangible lease assets for all acquisitions completed through September 30, 20212022 is expected to be $1.5$0.0 million for the remainder of the year ended December 31, 2021.2022. Due to the six-month useful life attributable to intangible lease assets, the value of intangible lease assets on any acquisition prior to March 31, 20212022 has been fully amortized and the assets and related accumulated amortization have been written off as of September 30, 2021.2022.


Acquisitions

The Company acquired 3two properties during the nine months ended September 30, 2022, as detailed in the table below (dollars in thousands). The Company acquired three properties during the nine months ended September 30, 2021 as detailed infor $196.3 million. The Company entered into new debt agreements for the table below (dollars in thousands). There were 0 acquisitions of real estateproperties acquired during the nine months ended September 30, 2020.2022 and 2021.

 

Property Name

 

Location

 

Date of

Acquisition

 

Purchase Price

 

 

Mortgage Debt

 

 

# Units

 

 

Effective

Ownership

 

The Verandas at Lake Norman

 

Charlotte, North Carolina

 

June 30, 2021

 

$

63,500

 

 

$

34,925

 

 

 

264

 

 

 

100

%

Creekside at Matthews

 

Charlotte, North Carolina

 

June 30, 2021

 

 

58,000

 

 

 

31,900

 

 

 

240

 

 

 

100

%

Six Forks Station

 

Raleigh, North Carolina

 

September 10, 2021

 

 

74,760

 

 

 

41,180

 

 

 

323

 

 

 

100

%

 

 

 

 

 

 

$

196,260

 

 

$

108,005

 

 

 

827

 

 

 

 

 

Dispositions

There were 0 dispositions of real estate during the nine months ended September 30, 2021. The Company sold 4 properties for approximately $142.0 million during the nine months ended September 30, 2020.

Cutter’s Point Casualty Losses

On October 20, 2019, as a result of a tornado, the Cutter’s Point property suffered significant property damage. The damage incurred rendered the property inoperable; therefore, the Company ceased operations at the property because it was under reconstruction. In relation to this event, the Company wrote down the carrying value of Cutter’s Point by approximately $7.8 million, and, in accordance with ASC 610 Other Income, the Company recognized approximately $3.5 million in casualty losses on the consolidated  statement of operations and comprehensive income during the year ended December 31, 2019. Lost rental income is insured and the Company expects any operating losses resulting from the damage to be immaterial while the property undergoes reconstruction. Starting November 1, 2019, the Company began capitalizing insurance expense, real estate taxes, interest expense and debt issuance costs to construction in progress and stopped depreciation due to Cutter’s Point being under development. As of September 30, 2021, approximately $0.8 million of these costs have been capitalized. During the nine months ended September 30, 2021, Cutter's Point recognized $1.1 million in casualty gains on the consolidated statements of operations and comprehensive income (loss) in relation to this event.  The Company filed a business interruption insurance claim and recognized approximately $0.9 million for the lost rent, which is included in miscellaneous income on the consolidated statement of operations and comprehensive income (loss) for the nine months ended September 30, 2021. Upon completion of Phase I of the rebuild efforts, the Company returned 60 units to service in 2020; On June 21, 2021, 80 downed units were returned to service; During the third quarter of 2021, the remaining 56 units as part of Phase II of the rebuild were completed of which 48 were leased as of September 30, 2021. As of September 30, 2021, we excluded 8 of the Cutter’s Point units from the Portfolio’s total unit count due to the limited amount of time the 8 returned units were available for the period ending September 30, 2021.

Venue 8651 Casualty Losses

On June 10, 2020, as a result of a fire, the Venue 8651 property suffered property damage. In relation to this event, the Company wrote down the carrying value of Venue 8651 by approximately $0.6 million, and, in accordance with ASC 610 Other Income, the Company recognized approximately $0.2 million in net casualty gains which is included in property operating expense on the consolidated statements of operations and comprehensive income (loss) during the year ended December 31, 2020. During the nine months ended September 30, 2021, Venue 8651 recognized approximately $0.1 million in business interruption proceeds for lost rent which is included in miscellaneous income on the consolidated statements of operations and comprehensive income (loss). As of September 30, 2021, we excluded 8 of the Venue 8651 units from the Portfolio’s total unit count and all same store pools due to the property reconstruction which is estimated to be completed in 2022.

Timber Creek Casualty Losses

On November 26, 2020, as a result of a fire, the Timber Creek property suffered property damage. In relation to this event, the Company wrote down the carrying value of Timber Creek by approximately $0.6 million. During the nine months ended September 30, 2021, Timber Creek recognized approximately $0.2 million in business interruption proceeds for lost rent which is included in miscellaneous income on the consolidated statements of operations and comprehensive income (loss). As of September 30, 2021, we excluded 16 of the Timber Creek units from the Portfolio’s total unit count and all same store pools due to the property reconstruction which is estimated to be completed in 2022.

Winter Storm Uri

In February of 2021, as a result of winter storm Uri, Atera, Hollister Place, Old Farm, Stone Creek, Cutter’s Point, and Venue 8651 each sustained significant property damage. In relation to this event, the Company wrote down the carrying value of the


impacted properties by approximately $2.0 million. During the nine months ended September 30, 2021, the Company recognized $1.3 million in casualty gains and $0.4 million in business interruption proceeds for lost rent, which is included in miscellaneous income, on the consolidated statements of operations and comprehensive income (loss) in relation to this event. As of September 30, 2021, 57 units damaged by winter storm Uri are excluded from the Portfolio’s total unit count and all same store pools due to the properties reconstruction which are estimated to be completed in 2021.

6. Debt

Property Name

 

Location

 

Date of

Acquisition

 

Purchase Price

 

 

Mortgage Debt

# 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

Dispositions

There were no dispositions of real estate during the nine months ended September 30, 2022 and 2021.

Casualty Losses

As of September 30, 2022, ten of the Company’s properties, Silverbrook, Venue at 8651, Versailles, Arbors of Brentwood, Parc500, Timber Creek, Hollister Place, The Preserve at Terrell Mill, High House at Cary and Six Forks, suffered significant property damages as a result of fires and flooding. As of September 30, 2022, 81 units were excluded from the Portfolio’s total unit count and 74 units were excluded from all same store pools due to reconstruction. Business interruption proceeds for lost rent are included in miscellaneous income in the accompanying consolidated statements of operations and comprehensive income (loss) in relation to these events.


6. Debt

Mortgage Debt

 

The following table contains summary information concerning the mortgage debt of the Company as of September 30, 2022 (dollars in thousands):

Operating Properties

 

Type

 

Term (months)

 

 

Outstanding

Principal (1)

 

 

Interest Rate (2)

 

 

Maturity Date

Arbors on Forest Ridge

(3)

Floating

 

 

84

 

 

$

13,130

 

 

4.82%

 

 

7/1/2024

Cutter's Point

(3)

Floating

 

 

84

 

 

 

16,640

 

 

4.82%

 

 

7/1/2024

Silverbrook

(3)

Floating

 

 

84

 

 

 

30,590

 

 

4.82%

 

 

7/1/2024

The Summit at Sabal Park

(3)

Floating

 

 

84

 

 

 

13,560

 

 

4.76%

 

 

7/1/2024

Courtney Cove

(3)

Floating

 

 

84

 

 

 

13,680

 

 

4.76%

 

 

7/1/2024

The Preserve at Terrell Mill

(3)

Floating

 

 

84

 

 

 

42,480

 

 

4.76%

 

 

7/1/2024

Versailles

(3)

Floating

 

 

84

 

 

 

23,880

 

 

4.76%

 

 

7/1/2024

Seasons 704 Apartments

(3)

Floating

 

 

84

 

 

 

17,460

 

 

4.76%

 

 

7/1/2024

Madera Point

(3)

Floating

 

 

84

 

 

 

15,150

 

 

4.76%

 

 

7/1/2024

Venue at 8651

(3)

Floating

 

 

84

 

 

 

13,734

 

 

4.92%

 

 

7/1/2024

The Venue on Camelback

(3)

Floating

 

 

84

 

 

 

28,093

 

 

4.82%

 

 

7/1/2024

Timber Creek

(3)

Floating

 

 

84

 

 

 

24,100

 

 

4.40%

 

 

10/1/2025

Radbourne Lake

(3)

Floating

 

 

84

 

 

 

20,000

 

 

4.43%

 

 

10/1/2025

Sabal Palm at Lake Buena Vista

(3)

Floating

 

 

84

 

 

 

42,100

 

 

4.44%

 

 

9/1/2025

Cornerstone

(4)

Fixed

 

 

120

 

 

 

20,417

 

 

4.24%

 

 

3/1/2023

Parc500

(5)

Fixed

 

 

120

 

 

 

14,443

 

 

4.49%

 

 

8/1/2025

Rockledge Apartments

(3)

Floating

 

 

84

 

 

 

68,100

 

 

4.71%

 

 

7/1/2024

Atera Apartments

(3)

Floating

 

 

84

 

 

 

29,500

 

 

4.62%

 

 

11/1/2024

Crestmont Reserve

(3)

Floating

 

 

84

 

 

 

12,061

 

 

4.32%

 

 

10/1/2025

Brandywine I & II

(3)

Floating

 

 

84

 

 

 

43,835

 

 

4.32%

 

 

10/1/2025

Bella Vista

(3)

Floating

 

 

84

 

 

 

29,040

 

 

4.46%

 

 

2/1/2026

The Enclave

(3)

Floating

 

 

84

 

 

 

25,322

 

 

4.46%

 

 

2/1/2026

The Heritage

(3)

Floating

 

 

84

 

 

 

24,625

 

 

4.46%

 

 

2/1/2026

Summers Landing

(6)

Floating

 

 

84

 

 

 

10,109

 

 

4.32%

 

 

10/1/2025

Residences at Glenview Reserve

(7)

Floating

 

 

84

 

 

 

25,977

 

 

4.58%

 

 

10/1/2025

Residences at West Place

(7)

Fixed

 

 

120

 

 

 

33,817

 

 

4.24%

 

 

10/1/2028

Avant at Pembroke Pines

(3)

Floating

 

 

84

 

 

 

177,101

 

 

4.57%

 

 

9/1/2026

Arbors of Brentwood

(3)

Floating

 

 

84

 

 

 

34,237

 

 

4.57%

 

 

10/1/2026

Torreyana Apartments

(3)

Floating

 

 

84

 

 

 

37,400

 

 

4.84%

 

 

12/1/2026

Bloom

(3)

Floating

 

 

84

 

 

 

58,850

 

 

4.84%

 

 

12/1/2026

Bella Solara

(3)

Floating

 

 

84

 

 

 

36,575

 

 

4.84%

 

 

12/1/2026

Fairways at San Marcos

(3)

Floating

 

 

84

 

 

 

46,464

 

 

4.60%

 

 

12/1/2027

The Verandas at Lake Norman

(8)

Floating

 

 

84

 

 

 

34,925

 

 

4.32%

 

 

7/1/2028

Creekside at Matthews

(8)

Floating

 

 

84

 

 

 

31,900

 

 

4.32%

 

 

7/1/2028

Six Forks Station

(9)

Floating

 

 

120

 

 

 

41,180

 

 

4.18%

 

 

10/1/2031

High House at Cary

(8)

Floating

 

 

84

 

 

 

46,625

 

 

4.48%

 

 

1/1/2029

The Adair

(3)

Floating

 

 

84

 

 

 

35,115

 

 

4.44%

 

 

4/1/2029

Estates on Maryland

(3)

Floating

 

 

84

 

 

 

43,157

 

 

4.44%

 

 

4/1/2029

 

 

 

 

 

 

 

 

 

1,275,372

 

 

 

 

 

 

 

Fair market value adjustment

 

 

 

 

 

 

 

 

908

 

(10)

 

 

 

 

 

Deferred financing costs, net of accumulated amortization of $5,800

 

 

 

 

 

 

 

 

(7,673

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,268,607

 

 

 

 

 

 

 

Held For Sale Property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hollister Place

(3)

Floating

 

 

84

 

 

 

14,811

 

 

4.48%

 

 

10/1/2025

Old Farm

(3)

Floating

 

 

84

 

 

 

52,886

 

 

4.82%

 

 

7/1/2024

Stone Creek at Old Farm

(3)

Floating

 

 

84

 

 

 

15,274

 

 

4.82%

 

 

7/1/2024

 

 

 

 

 

 

 

 

 

82,971

 

 

 

 

 

 

 

Deferred financing costs, net of accumulated amortization of $652

 

 

 

 

 

 

 

 

(279

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

82,692

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Mortgage debt that is non-recourse to the Company and encumbers the multifamily properties.

(2)

Interest rate is based on a reference rate plus an applicable margin, except for fixed rate mortgage debt. Reference rates used in our portfolio include one-month LIBOR and 30-Day Average Secured Overnight Financing Rate (“SOFR”). As of September 30, 2021 (dollars in thousands):

Operating Properties

 

Type

 

Term (months)

 

 

Outstanding

Principal (1)

 

 

Interest Rate (2)

 

 

Maturity Date

Arbors on Forest Ridge

(3)

Floating

 

 

84

 

 

$

13,130

 

 

1.76%

 

 

7/1/2024

Cutter's Point

(3)

Floating

 

 

84

 

 

 

16,640

 

 

1.76%

 

 

7/1/2024

Silverbrook

(3)

Floating

 

 

84

 

 

 

30,590

 

 

1.76%

 

 

7/1/2024

The Summit at Sabal Park

(3)

Floating

 

 

84

 

 

 

13,560

 

 

1.70%

 

 

7/1/2024

Courtney Cove

(3)

Floating

 

 

84

 

 

 

13,680

 

 

1.70%

 

 

7/1/2024

The Preserve at Terrell Mill

(3)

Floating

 

 

84

 

 

 

42,480

 

 

1.70%

 

 

7/1/2024

Versailles

(3)

Floating

 

 

84

 

 

 

23,880

 

 

1.70%

 

 

7/1/2024

Seasons 704 Apartments

(3)

Floating

 

 

84

 

 

 

17,460

 

 

1.70%

 

 

7/1/2024

Madera Point

(3)

Floating

 

 

84

 

 

 

15,150

 

 

1.70%

 

 

7/1/2024

Venue at 8651

(3)

Floating

 

 

84

 

 

 

13,734

 

 

1.86%

 

 

7/1/2024

The Venue on Camelback

(3)

Floating

 

 

84

 

 

 

28,093

 

 

1.76%

 

 

7/1/2024

Old Farm

(3)

Floating

 

 

84

 

 

 

52,886

 

 

1.76%

 

 

7/1/2024

Stone Creek at Old Farm

(3)

Floating

 

 

84

 

 

 

15,274

 

 

1.76%

 

 

7/1/2024

Timber Creek

(3)

Floating

 

 

84

 

 

 

24,100

 

 

1.34%

 

 

10/1/2025

Radbourne Lake

(3)

Floating

 

 

84

 

 

 

20,000

 

 

1.37%

 

 

10/1/2025

Sabal Palm at Lake Buena Vista

(3)

Floating

 

 

84

 

 

 

42,100

 

 

1.38%

 

 

9/1/2025

Cornerstone

(4)

Fixed

 

 

120

 

 

 

20,929

 

 

4.24%

 

 

3/1/2023

Parc500

(5)

Fixed

 

 

120

 

 

 

14,738

 

 

4.49%

 

 

8/1/2025

Hollister Place

(3)

Floating

 

 

84

 

 

 

14,811

 

 

1.42%

 

 

10/1/2025

Rockledge Apartments

(3)

Floating

 

 

84

 

 

 

68,100

 

 

1.65%

 

 

7/1/2024

Atera Apartments

(3)

Floating

 

 

84

 

 

 

29,500

 

 

1.56%

 

 

11/1/2024

Crestmont Reserve

(3)

Floating

 

 

84

 

 

 

12,061

 

 

1.26%

 

 

10/1/2025

Brandywine I & II

(3)

Floating

 

 

84

 

 

 

43,835

 

 

1.26%

 

 

10/1/2025

Bella Vista

(6)

Floating

 

 

84

 

 

 

29,040

 

 

1.40%

 

 

2/1/2026

The Enclave

(6)

Floating

 

 

84

 

 

 

25,322

 

 

1.40%

 

 

2/1/2026

The Heritage

(6)

Floating

 

 

84

 

 

 

24,625

 

 

1.40%

 

 

2/1/2026

Summers Landing

(7)

Floating

 

 

84

 

 

 

10,109

 

 

1.26%

 

 

10/1/2025

Residences at Glenview Reserve

(8)

Floating

 

 

84

 

 

 

26,560

 

 

1.52%

 

 

10/1/2025

Residences at West Place

(8)

Fixed

 

 

120

 

 

 

33,817

 

 

4.24%

 

 

10/1/2028

Avant at Pembroke Pines

(3)

Floating

 

 

84

 

 

 

177,101

 

 

1.51%

 

 

9/1/2026

Arbors of Brentwood

(3)

Floating

 

 

84

 

 

 

34,237

 

 

1.51%

 

 

10/1/2026

Torreyana Apartments

(6)

Floating

 

 

84

 

 

 

37,400

 

 

1.78%

 

 

12/1/2026

Bloom

(6)

Floating

 

 

84

 

 

 

58,850

 

 

1.78%

 

 

12/1/2026

Bella Solara

(6)

Floating

 

 

84

 

 

 

36,575

 

 

1.78%

 

 

12/1/2026

Fairways at San Marcos

(6)

Floating

 

 

84

 

 

 

46,464

 

 

2.18%

 

 

12/1/2027

The Verandas at Lake Norman

(9)

Floating

 

 

84

 

 

 

34,925

 

 

1.90%

 

 

7/1/2028

Creekside at Matthews

(9)

Floating

 

 

84

 

 

 

31,900

 

 

1.90%

 

 

7/1/2028

Six Forks Station

(10)

Floating

 

 

120

 

 

 

41,180

 

 

1.77%

 

 

10/1/2031

 

 

 

 

 

 

 

 

$

1,234,836

 

 

 

 

 

 

 

Fair market value adjustment

 

 

 

 

 

 

 

 

1,110

 

(11)

 

 

 

 

 

Deferred financing costs, net of accumulated amortization of $4,671

 

 

 

 

 

 

 

 

(5,974

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

1,229,972

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held For Sale Property

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beechwood Terrace

(3)

Floating

 

 

84

 

 

$

23,365

 

 

1.52%

 

 

9/1/2025

Cedar Pointe

(6)

Floating

 

 

84

 

 

 

17,300

 

 

1.43%

 

 

9/1/2025

 

 

 

 

 

 

 

 

$

40,665

 

 

 

 

 

 

 

Deferred financing costs, net of accumulated amortization of $139

 

 

 

 

 

 

 

 

(179

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

40,486

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


(1)

Mortgage debt that is non-recourse to the Company and encumbers the multifamily properties.

(2)

Interest rate is based on a reference rate plus an applicable margin, except for fixed rate mortgage debt. One-month LIBOR was 0.08025% and 30-Day Average Secured Overnight Financing Rate (“SOFR”) was 0.05% as of September 30, 2021. Fairways at San Marcos, Verandas at Lake Norman, Creekside at Matthews, and Six Forks Station utilize 30-Day Average SOFR as its reference rate while all other properties utilize one-month LIBOR.

(3)

Loan can be pre-paid in the first 12 months of the term in certain circumstances at par plus 5.00%. Starting in the 13th month of the term through the 81st month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last three months of the term.

(4)

Debt in the amount of $18.0 million was assumed upon acquisition of this property and recorded at approximated fair value. The assumed debt carries a 4.09% fixed rate, was originally issued in March 2013, and had a term of 120 months with an initial 24 months of interest only. At the time of acquisition, the principal balance of the first mortgage remained unchanged and had a remaining term of 98 months with 2 months of interest only. The first mortgage is pre-payable and subject to yield maintenance from the 13th month through August 31, 2022 and is pre-payable at par September 1, 2022 until maturity. Concurrently with the acquisition of the property, the Company placed a supplemental second mortgage on the property with a principal amount of approximately $5.8 million, a fixed rate of 4.70%, and with a maturity date that is the same time as the first mortgage. The supplemental second mortgage is pre-payable and subject to yield maintenance from the date of issuance through August 31, 2022 and is pre-payable at par September 1, 2022 until maturity. As of September 30, 2021, the total indebtedness secured by the property had a blended interest rate of 4.24%2022, one-month LIBOR was 3.14% and SOFR was 2.47%.

(5)

Debt was assumed upon acquisition of this property and recorded at approximated fair value. The loan is open to pre-payment in the last four months of the term.

(6)

(3)

Loan can be pre-paid in the first 12 months of the term in certain circumstances at par plus 5.00%. Starting in the 13th month of the term through the 81st month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last three months of the term.

(4)

Debt in the amount of $18.0 million was assumed upon acquisition of this property and recorded at approximated fair value. The assumed debt carries a 4.09% fixed rate, was originally issued in March 2013, and had a term of 120 months with an initial 24 months of interest only. At the time of acquisition, the principal balance of the first mortgage remained unchanged and had a remaining term of 98 months with 2 months of interest only. The first mortgage is pre-payable and subject to yield maintenance from the 13th month through August 31, 2022 and is pre-payable at par starting on September 1, 2022 until maturity. Concurrently with the acquisition of the property, the Company placed a supplemental second mortgage on the property with a principal amount of approximately $5.8 million, a fixed rate of 4.70%, and with a maturity date that is the same time as the first mortgage. The supplemental second mortgage is pre-payable and subject to yield maintenance from the date of issuance through August 31, 2022 and is pre-payable at par starting on September 1, 2022 until maturity. As of September 30, 2022, the total indebtedness secured by the property had a blended interest rate of 4.24%.

(5)

Debt was assumed upon acquisition of this property and recorded at approximated fair value. The loan is open to pre-payment in the last four months of the term.

(6)

Debt was assumed upon acquisition of this property and recorded at approximated fair value.  It can be pre-paid in the first 12 months of the term in certain circumstances at par plus 5.00%. Starting in the 13th month of the term through the 81st month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last three months of the term.

(7)

Debt was assumed upon acquisition of this property and recorded at approximated fair value.  It can be pre-paid in the first 12 months of the term in certain circumstances at par plus 5.00%. Starting in the 13th month of the term through the 81st month of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last three months of the term.

(8)

Debt was assumed upon acquisition of this property and recorded at approximated fair value. The loan can be prepaid at the greater of par plus 1.00% of the unpaid principal balance or the product obtained by multiplying the present value of the principal being prepaid by the excess of the monthly fixed interest rate of the loan over a daily discount rate. The loan is open to pre-payment in the last three months of the term.  

(9)

Starting in the 25th month of the term through the 36th month of the term, the loan can be pre-paid at par plus 2% of the unpaid principal balance. Starting in the 37th month of the term, the loan can be pre-paid at par plus 1% of the unpaid principal balance. The loan is open to pre-payment in the last three months of the term.

(10)

Loan can be pre-paid in the first 24 months of the term in certain circumstances at par plus 5.00%. Starting in the 25th month of the term through the 116th of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and at par during the last four months of the term.

(11)

The Company reflected a valuation adjustment on its fixed rate debt for Parc500 and Residences at West Place to adjust it to fair market value on their respective dates of acquisition for the difference between the fair value and the assumed principal amount of debt. The difference is amortized into interest expense over the remaining terms of the mortgages.

The weighted average interest rate of the Company’s mortgage indebtedness was 1.77% asloan over a daily discount rate. The loan is open to pre-payment in the last three months of September 30, 2021the term.  

(8)

Loan can be pre-paid in the first 24 months of the term in certain circumstances at par plus 5.00%. Starting in the 25th month of the term through the 36th month of the term, the loan can be pre-paid at par plus 2% of the unpaid principal balance. Starting in the 37th month of the term, the loan can be pre-paid at par plus 1% of the unpaid principal balance. The loan is open to pre-payment in the last three months of the term.

(9)

Loan can be pre-paid in the first 24 months of the term in certain circumstances at par plus 5.00%. Starting in the 25th month of the term through the 116th of the term, the loan can be pre-paid at par plus 1.00% of the unpaid principal balance and 1.83% asat par during the last four months of December 31, 2020. the term.

(10)

The decreaseCompany reflected a valuation adjustment on its fixed rate debt for Parc500 and Residences at West Place to adjust it to fair market value on their respective dates of acquisition for the difference between the periodsfair value and the assumed principal amount of debt. The difference is primarily related to a decrease in one-month LIBOR of approximately 6 basis points to 0.08025% as of September 30, 2021 from 0.14388% as of December 31, 2020. As of September 30, 2021,amortized into interest expense over the adjusted weighted average interest rateremaining terms of the Company’s mortgage indebtedness was 2.93%. For purposes of calculating the adjusted weighted average interest rate of the outstanding mortgage indebtedness, the Company has included the weighted average fixed rate of 1.3461% for one-month LIBOR on its combined $1.2 billion notional amount of interest rate swap agreements, which effectively fix the interest rate on $1.2 billion of the Company’s floating rate mortgage debt (see Note 7).mortgages.

Each of the Company’s mortgages is a non-recourse obligation subject to customary provisions. The loan agreements contain customary events of default, including defaults in the payment of principal or interest, defaults in compliance with the covenants contained in the documents evidencing the loan, defaults in payments under any other security instrument covering any part of the property, whether junior or senior to the loan, and bankruptcy or other insolvency events. As of September 30, 2021,

The weighted average interest rate of the Company’s mortgage indebtedness was 4.58% as of September 30, 2022 and 1.81% as of December 31, 2021. The increase between the periods is primarily related to a increase in one-month LIBOR of approximately 304 basis points to 3.14% as of September 30, 2022 from 0.10125% as of December 31, 2021. As of September 30, 2022, the adjusted weighted average interest rate of the Company’s mortgage indebtedness was 2.80%. For purposes of calculating the adjusted weighted average interest rate of the outstanding mortgage indebtedness, the Company has included the weighted average fixed rate of 1.0682% for one-month LIBOR on its combined $1.2 billion notional amount of interest rate swap agreements, which effectively fix the interest rate on $1.2 billion of the Company’s floating rate mortgage debt (see Note 7).

Each of the Company’s mortgages is a non-recourse obligation subject to customary provisions. The loan agreements contain customary events of default, including defaults in the payment of principal or interest, defaults in compliance with the covenants contained in the documents evidencing the loan, defaults in payments under any other security instrument covering any part of the property, whether junior or senior to the loan, and bankruptcy or other insolvency events. As of September 30, 2022, the Company believes it is in compliance with all provisions.

Freddie Mac Multifamily Green Advantage. In order to obtain more favorable pricing on the Company’s mortgage debt financing with Freddie Mac, the Company decided to participate in Freddie Mac’s Multifamily Green Advantage program (the “Green Program”). As of September 30, 2021, the Company had completed its Green Program improvements on all but 1 property, which is expected to be completed in 2021. The Company expects to reduce water/sewer costs at each property where the Green Program is implemented by at least 15% through the replacement of showerheads, plumbing fixtures and toilets with modern energy efficient upgrades. Due to changes in Freddie Mac’s requirements to participate in the Green Program, the Company is not implementing this on acquisitions going forward.


Credit Facility

The following table contains summary information concerning the Company’s credit facility as of September 30, 20212022 (dollars in thousands):

 

 

Type

 

Term (months)

 

 

Outstanding

Principal

 

 

Interest Rate (1)

 

 

Maturity Date

 

Type

 

Term (months)

 

 

Outstanding

Principal

 

 

Interest Rate (1)

 

 

Maturity Date

Corporate Credit Facility

 

Floating

 

 

36

 

 

$

225,000

 

 

2.48%

 

 

6/30/2024

 

Floating

 

 

36

 

 

$

335,000

 

 

5.29%

 

 

6/30/2024

Corporate Credit Facility

 

Floating

 

 

3

 

 

 

50,000

 

 

2.48%

 

 

12/31/2021

Deferred financing costs, net of accumulated amortization of $149

 

 

 

 

 

 

 

 

(1,661

)

 

 

 

 

 

 

Deferred financing costs, net of accumulated amortization of $910

 

 

 

 

 

 

 

 

(1,572

)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

273,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

333,428

 

 

 

 

 

 

 

 

(1)

Interest rate is based on one-month LIBORTerm SOFR plus an applicable margin.  One-month LIBORTerm SOFR as of September 30, 20212022 was 0.08025%3.04%.

 


Corporate Credit Facility.

On March 25, 2022, the Company entered into a loan modification agreement by and among the Company, the OP, Truist Bank and the Lenders party thereto, which modified the Company’s existing credit facility, dated as of June 30, 2021 the Company, through the OP, entered into a secured $250.0 million credit facility with Truist Bank (“Truist”), as administrative agent,(as modified, amended and supplemented, the lenders from time to time party thereto (the “Corporate Credit Facility”). $225As of September 30, 2022, there was $350.0 million ofavailable for borrowing under 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 Corporate Credit Facility, the Company, through the OP, terminated its $225.0 million revolving credit facility with Truist, as administrative agent, and the lenders from time to time party thereto, prior to the maturity date of January 28, 2022.Facility. Subject to conditions provided in the Corporate Credit Facility, the commitments under Corporate Credit Facility may be increased up to an additional $100.0$150.0 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. The Corporate Credit Facility will mature on June 30, 2024 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 and on December 31, 2021 with respect to the term loan. On September 9, 2021, the Company, through the OP, modified the Corporate Credit Facility to provide for an additional $35.0 million term loan with a maturity dateterm. As of December 31, 2021, increasing the Corporate Credit Facility from $250 million to $285 million. In conjunction with the increase in the facility, the Company incurred costs of $0.3 million in obtaining the additional financing through the modification (see “Deferred Financing Costs” below). On September 30, 2021, the Company made a $10.0 million principal payment on the term loans resulting in $275.02022, there was $335.0 million in aggregate principal outstanding as of September 30, 2021 onunder the Corporate Credit Facility, with $50.0 million of the term loans maturing on December 31, 2021. The Company intends on using the net cash proceeds from the dispositions of its held-for-sale properties, Beechwood Terrace and Cedar Pointe, to repay the $50.0 million term loans that mature on December 31, 2021 (see Note 12).Facility.

 

Advances under the Corporate Credit Facility accrue interest at a per annum rate equal to, at the Company’s election, either LIBORTerm 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) LIBORTerm 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. 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. The Corporate Credit Facility is guaranteed by the Company and the obligations under the Corporate Credit Facility are, subject to some exceptions, secured by a continuing security interest in substantially all of the assets of the Company. The Company is in compliance with all of the covenants required inits Corporate Credit Facility.

Deferred Financing Costs

The Company defers costs incurred in obtaining financing and amortizes the costs over the terms of the related loans using the straight-line method, which approximates the effective interest method. Deferred financing costs, net of amortization, are recorded as a reduction from the related debt on the Company’s consolidated balance sheets. For the three months ended September 30, 20212022 and 2020,2021, amortization of deferred financing costs of approximately $0.5$0.7 million and $0.7$0.5 million, respectively, is included in interest expense on the consolidated statements of operations and comprehensive income (loss). For the nine months ended September 30, 20212022 and 2020,2021, amortization of deferred financing costs of approximately $1.6$2.0 million and $2.1$1.6 million, respectively, is included in interest expense on the consolidated statements of operations and comprehensive income (loss).

Loss on Extinguishment of Debt and Modification Costs

Loss on extinguishment of debt and modification costs includes prepayment penalties and defeasance costs incurred on 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. Upon repayment of or in conjunction with a material change in the terms of the underlying debt agreement, any


unamortized costs are charged to loss on extinguishment of debt and modification costs. For the nine months ended September 30, 20212022 and 2020,2021, the Company wrote-off deferred financing costs of approximately $0.3$0.0 million and $0.8$0.3 million, respectively, which is included in loss on extinguishment of debt and modification costs on the consolidated statements of operations and comprehensive income (loss).

Schedule of Debt Maturities

The aggregate scheduled maturities, including amortizing principal payments, of total debt for the next five calendar years subsequent to September 30, 20212022 are as follows (in thousands):

 

 

Operating

Properties

 

 

Held For Sale

Property

 

 

Credit Facility

 

 

Total

 

 

Operating

Properties

 

 

Held For Sale

Properties

 

 

Credit Facility

 

 

Total

 

2021

 

$

315

 

 

$

—

 

 

$

50,000

 

 

$

50,315

 

2022

 

 

1,508

 

 

 

—

 

 

 

—

 

 

 

1,508

 

 

$

313

 

 

$

—

 

 

$

—

 

 

$

313

 

2023

 

 

21,252

 

 

 

—

 

 

 

—

 

 

 

21,252

 

 

 

20,925

 

 

 

—

 

 

 

—

 

 

 

20,925

 

2024

 

 

395,098

 

 

 

—

 

 

 

225,000

 

 

 

620,098

 

 

 

326,697

 

 

 

68,160

 

 

 

335,000

 

 

 

729,857

 

2025

 

 

205,227

 

 

 

40,665

 

 

 

—

 

 

 

245,892

 

 

 

191,105

 

 

 

14,811

 

 

 

—

 

 

 

205,916

 

2026

 

 

423,149

 

 

 

—

 

 

 

—

 

 

 

423,149

 

Thereafter

 

 

611,436

 

 

 

—

 

 

 

—

 

 

 

611,436

 

 

 

313,183

 

 

 

—

 

 

 

—

 

 

 

313,183

 

Total

 

$

1,234,836

 

 

$

40,665

 

 

$

275,000

 

 

$

1,550,501

 

 

$

1,275,372

 

 

$

82,971

 

 

$

335,000

 

 

$

1,693,343

 


 

7. Fair Value of Derivatives and Financial Instruments

Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy):

 

•

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.

 

•

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals.

 

•

Level 3 inputs are the unobservable inputs for the asset or liability, which are typically based on an entity’s own assumption, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on input from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company utilizes independent third parties to perform the allocation of value analysis for each property acquisition and to perform the market valuations on its derivative financial instruments and has established policies, as described above, processes and procedures intended to ensure that the valuation methodologies for investments and derivative financial instruments are fair and consistent as of the measurement date.

Derivative Financial Instruments and Hedging Activities

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company may enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash payments principally related to the Company’s borrowings. In order to minimize counterparty credit risk, the Company enters into and expects to enter into hedging arrangements only with major financial institutions that have high credit ratings.

The Company utilizes an independent third party to perform the market valuations on its derivative financial instruments. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest


rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate caps are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both the Company’s own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of the Company’s derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with the Company’s derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. The Company has determined that the significance of the impact of the credit valuation adjustments made to its derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of the Company’s derivatives held as of September 30, 20212022 and December 31, 20202021 were classified as Level 2 of the fair value hierarchy.


The Company’s main objective in using interest rate derivatives is to add stability to interest expense related to floating rate debt. To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy. Interest rate swaps involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The interest rate swaps have terms ranging from four to five years. Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. The interest rate caps have terms ranging from three to four years. During the nine months ended September 30, 20212022 and 2020,2021, interest rate cap derivatives were used to hedge the variable cash flows associated with a portion of the Company’s floating rate debt. The interest rate cap agreements the Company has entered into effectively cap one-month LIBOR on $412.2$537.1 million of the Company’s floating rate mortgage indebtedness at a weighted average rate of 5.02%4.67% as of September 30, 2021.2022.

In order to fix a portion of, and mitigate the risk associated with, the Company’s floating rate indebtedness (without incurring substantial prepayment penalties or defeasance costs typically associated with fixed rate indebtedness when repaid early or refinanced), the Company, through the OP, has entered into nine interest rate swap transactions with KeyBank National Association (“KeyBank”) and twofour with Truist Bank (the “Counterparties”) with a combined notional amount of $1.2 billion which are effective as of September 30, 2021.billion. The interest rate swaps the Company has entered into effectively replace the floating interest rate (one-month LIBOR) with respect to that amount with a weighted average fixed rate of 1.3461%1.0682%. The Company has designated these interest rate swaps as cash flow hedges of interest rate risk.

As of September 30, 2021,2022, the Company had the following outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk (dollars in thousands):

 

Effective Date

 

Termination Date

 

Counterparty

 

Notional Amount

 

 

Fixed Rate (1)

 

 

 

Termination Date

 

Counterparty

 

Notional Amount

 

 

Fixed Rate (1)

 

 

April 1, 2017

 

April 1, 2022

 

KeyBank

 

$

100,000

 

 

 

1.9570

%

 

May 1, 2017

 

April 1, 2022

 

KeyBank

 

 

50,000

 

 

 

1.9610

%

 

July 1, 2017

 

July 1, 2022

 

KeyBank

 

 

100,000

 

 

 

1.7820

%

 

June 1, 2019

 

June 1, 2024

 

KeyBank

 

 

50,000

 

 

 

2.0020

%

 

 

June 1, 2024

 

KeyBank

 

 

50,000

 

 

 

2.0020

%

 

June 1, 2019

 

June 1, 2024

 

Truist

 

 

50,000

 

 

 

2.0020

%

 

 

June 1, 2024

 

Truist

 

 

50,000

 

 

 

2.0020

%

 

September 1, 2019

 

September 1, 2026

 

KeyBank

 

 

100,000

 

 

 

1.4620

%

 

 

September 1, 2026

 

KeyBank

 

 

100,000

 

 

 

1.4620

%

 

September 1, 2019

 

September 1, 2026

 

KeyBank

 

 

125,000

 

 

 

1.3020

%

 

 

September 1, 2026

 

KeyBank

 

 

125,000

 

 

 

1.3020

%

 

January 3, 2020

 

September 1, 2026

 

KeyBank

 

 

92,500

 

 

 

1.6090

%

 

 

September 1, 2026

 

KeyBank

 

 

92,500

 

 

 

1.6090

%

 

March 4, 2020

 

June 1, 2026

 

Truist

 

 

100,000

 

 

 

0.8200

%

 

 

June 1, 2026

 

Truist

 

 

100,000

 

 

 

0.8200

%

 

June 1, 2021

 

September 1, 2026

 

KeyBank

 

 

200,000

 

 

 

0.8450

%

 

 

September 1, 2026

 

KeyBank

 

 

200,000

 

 

 

0.8450

%

 

June 1, 2021

 

September 1, 2026

 

KeyBank

 

 

200,000

 

 

 

0.9530

%

 

 

September 1, 2026

 

KeyBank

 

 

200,000

 

 

 

0.9530

%

 

March 1, 2022

 

March 1, 2025

 

Truist

 

 

145,000

 

 

 

0.5730

%

 

March 1, 2022

 

March 1, 2025

 

Truist

 

 

105,000

 

 

 

0.6140

%

 

 

 

 

 

 

$

1,167,500

 

 

 

1.3461

%

(2)

 

 

 

 

 

 

1,167,500

 

 

 

1.0682

%

(2)

 

(1)

The floating rate option for the interest rate swaps is one-month LIBOR. As of September 30, 2021,2022, one-month LIBOR was 0.08025%3.14%.

(2)

Represents the weighted average fixed rate of the interest rate swaps.

 


As of September 30, 2021,2022, 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)

 

 

 

Termination Date

 

Counterparty

 

Notional Amount

 

 

Fixed Rate (1)

 

 

March 1, 2022

 

March 1, 2025

 

Truist

 

$

145,000

 

 

 

0.5730

%

 

March 1, 2022

 

March 1, 2025

 

Truist

 

 

105,000

 

 

 

0.6140

%

 

September 1, 2026

 

January 1, 2027

 

KeyBank

 

 

92,500

 

 

 

1.7980

%

 

 

January 1, 2027

 

KeyBank

 

$

92,500

 

 

 

1.7980

%

 

 

 

 

 

 

$

342,500

 

 

 

0.9164

%

(2)

 

(1)

The floating rate option for the interest rate swaps is one-month LIBOR. As of September 30, 2021,2022, one-month LIBOR was 0.08025%3.14%.

(2)

Represents the weighted average fixed rate of the interest rate swaps.

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements but either do not meet the strict requirements to apply hedge accounting in accordance with FASB ASC 815, Derivatives and Hedging, or the Company has elected not to designate such derivatives as hedges. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in net income (loss) as interest expense.

As of September 30, 20212022 and 2020,2021, the Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (dollars in thousands):

 

As of September 30,

 

Number of

Instruments

 

 

Notional Amount

 

 

Number of

Instruments

 

 

Notional Amount

 

2022

 

 

17

 

 

$

537,118

 

2021

 

 

14

 

 

$

412,221

 

 

 

14

 

 

$

412,221

 

2020

 

 

15

 

 

$

346,542

 


The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 20212022 and December 31, 20202021 (in thousands):

 

 

 

 

Asset Derivatives

 

 

Liability Derivatives

 

 

 

 

Asset Derivatives

 

 

Liability Derivatives

 

 

Balance Sheet Location

 

September 30, 2021

 

 

December 31, 2020

 

 

September 30, 2021

 

 

December 31, 2020

 

 

Balance Sheet Location

 

September 30, 2022

 

 

December 31, 2021

 

 

September 30, 2022

 

 

December 31, 2021

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

Fair market value of interest rate swaps

 

$

—

 

 

$

—

 

 

$

12,466

 

 

$

43,530

 

 

Fair market value of interest rate swaps

 

$

110,399

 

 

$

11,045

 

 

$

—

 

 

$

7,519

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate caps

 

Prepaid and other assets

 

 

81

 

 

 

3

 

 

 

—

 

 

 

—

 

 

Prepaid and other assets

 

 

4,774

 

 

 

263

 

 

 

—

 

 

 

—

 

Total

 

 

 

$

81

 

 

$

3

 

 

$

12,466

 

 

$

43,530

 

 

 

 

$

115,173

 

 

$

11,308

 

 

$

—

 

 

$

7,519

 

 

The tables below present the effect of the Company’s derivative financial instruments on the consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 20212022 and 20202021 (in thousands):

 

 

 

Amount of gain (loss)

recognized in OCI

 

 

Location of gain

(loss) reclassified

from accumulated

 

Amount of gain (loss)

reclassified from

OCI into income

 

 

 

2021

 

 

2020

 

 

OCI into income

 

2021

 

 

2020

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate products

 

$

801

 

 

$

413

 

 

Interest expense

 

$

(3,744

)

 

$

(3,654

)

For the nine months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate products

 

$

19,929

 

 

$

(60,170

)

 

Interest expense

 

$

(11,153

)

 

$

(5,651

)


 

 

Amount of gain (loss)

recognized in OCI

 

 

Location of gain

(loss) reclassified

from accumulated

 

Amount of gain (loss)

reclassified from

OCI into income

 

 

 

2022

 

 

2021

 

 

OCI into income

 

2022

 

 

2021

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate products

 

$

38,406

 

 

$

801

 

 

Interest expense

 

$

3,468

 

 

$

(3,744

)

For the nine months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate products

 

$

105,714

 

 

$

19,929

 

 

Interest expense

 

$

(1,160

)

 

$

(11,153

)

 

 

 

 

 

 

 

Location of gain

(loss)

 

Amount of gain (loss)

recognized in income

 

 

 

 

 

 

Location of gain

(loss)

 

Amount of gain (loss)

recognized in income

 

 

 

 

 

 

recognized in

income

 

2021

 

 

2020

 

 

 

 

 

 

recognized in

income

 

2022

 

 

2021

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate products

 

 

 

 

 

Interest expense

 

$

52

 

 

$

28

 

 

 

 

 

 

Interest expense

 

$

2,161

 

 

$

52

 

For the nine months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate products

 

 

 

 

 

Interest expense

 

$

96

 

 

$

—

 

 

 

 

 

 

Interest expense

 

$

3,525

 

 

$

96

 

 

Other Financial Instruments Carried at Fair Value

Redeemable noncontrolling interests in the OP have a redemption feature and are marked to their redemption value if such value exceeds the carrying value of the redeemable noncontrolling interests in the OP (see Note 10). The redemption value is based on the fair value of the Company’s common stock at the redemption date, and therefore, is calculated based on the fair value of the Company’s common stock at the balance sheet date. Since the valuation is based on observable inputs such as quoted prices for similar instruments in active markets, redeemable noncontrolling interests in the OP are classified as Level 2 if they are adjusted to their redemption value.

Financial Instruments Not Carried at Fair Value

At September 30, 20212022 and December 31, 2020,2021, the fair values of cash and cash equivalents, restricted cash, accounts receivable, prepaid and other assets, excluding interest rate caps, accounts payable and other accrued liabilities, accrued real estate taxes payable, accrued interest payable, security deposits and prepaid rent approximated their carrying values because of the short-term nature of these instruments. The estimated fair values of other financial instruments were determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company would realize on the disposition of the financial instruments. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts.


Long-term indebtedness is carried at amounts that reasonably approximate their fair value at the time they were recognized.value. In calculating the fair value of its long-term indebtedness, the Company used interest rate and spread assumptions that reflect current credit worthiness and market conditions available for the issuance of long-term debt with similar terms and remaining maturities. These financial instruments utilize Level 2 inputs.

The table below presents the carrying value and estimated fair value of our debt at September 30, 20212022 and December 31, 20202021 (in thousands):

 

 

September 30, 2021

 

 

September 30, 2020

 

 

September 30, 2022

 

 

December 31, 2021

 

 

Carrying Value

 

 

Estimated

Fair Value

 

 

Carrying Value

 

 

Estimated

Fair Value

 

 

Carrying Value

 

 

Estimated

Fair Value

 

 

Carrying Value

 

 

Estimated

Fair Value

 

Fixed rate debt

 

$

69,484

 

 

$

71,550

 

 

$

70,258

 

 

$

74,869

 

 

$

68,677

 

 

$

64,486

 

 

$

69,285

 

 

$

71,141

 

Floating rate debt (1)

 

$

1,481,017

 

 

$

1,505,923

 

 

$

1,266,547

 

 

$

1,305,604

 

 

$

1,624,666

 

 

$

1,512,805

 

 

$

1,491,861

 

 

$

1,525,298

 

 

(1)

Includes balances outstanding under our Corporate Credit Facility.

 

 

Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In such cases, the Company will evaluate the recoverability of such real estate assets based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate asset. If impaired, the real estate asset will be written down to its estimated fair value. There can be no assurance that the estimates discussed herein, using Level 3 inputs, are indicative of the amounts the Company could realize on disposition of the real estate asset. For the nine months ended September 30, 2021,2022, the Company did 0tnot record any impairment charges related to real estate assets.

8. Stockholders’ Equity

Common Stock

During the nine months ended September 30, 2021,2022, the Company issued 133,097164,851 shares of common stock pursuant to its long-term incentive plan (see “Long Term Incentive Plan” below) and 101,58752,091 shares pursuant to its at-the-market offering (see “At-the-Market Offering” below).

 


As of September 30, 2021,2022, the Company had 25,251,64125,549,036 shares of common stock, par value $0.01 per share, issued and outstanding.

Share Repurchase Program

On June 15, 2016, the Board authorized the Company to repurchase up to $30.0 million of its common stock, par value $0.01 per share, during a two-year period that was set to expire on June 15, 2018 (the “Share Repurchase Program”). On April 30, 2018, the Board increased the Share Repurchase Program from $30.0 million to up to $40.0 million and extended it by an additional two years to June 15, 2020. On March 13, 2020, the Board further increased the Share Repurchase Program from $40.0 million to up to $100.0 million and extended it to March 12, 2023.  The Company may utilize various methods to effectaffect the repurchases, and the timing and extent of the repurchases will depend upon several factors, including market and business conditions, regulatory requirements and other corporate considerations, including whether the Company’s common stock is trading at a significant discount to net asset value per share. Repurchases under this program may be discontinued at any time. During the nine months ended September 30, 2021 and 2020,2022, the Company repurchased 0 and 1,644,697168,473 shares of its common stock for approximately $11.1 million, or $66.04 per share. During the nine months ended September 30, 2021, the Company did not repurchase any shares of its common stock. Since the inception of the Share Repurchase Program through September 30, 2021,2022, the Company hadhas repurchased 2,382,1552,550,628 shares of its common stock, par value $0.01 per share, at a total cost of approximately $61.2$72.4 million, or $25.70$28.37 per share.

 

Treasury Shares

 

From time to time, in accordance with the Company’s Share Repurchase Program, the Company may repurchase shares of its common stock in the open market. Until any such shares are retired, the cost of the shares is included in common stock held in treasury at cost on the consolidated balance sheet. The number of shares of common stock classified as treasury shares reduces the number of shares of the Company’s common stock outstanding and, accordingly, are considered in the weighted average number of shares outstanding during the period. During the nine months ended September 30, 20212022 and 2020,2021, the Company retired 0168,473 and 1,644,697zero shares of its common stock held in treasury. As of September 30, 2021,2022, the Company had 0did not have any shares of common stock held in treasury.

Long Term Incentive Plan

On June 15, 2016, the Company’s stockholders approved a long-term incentive plan (the “2016 LTIP”) and the Company filed a registration statement on Form S-8 registering 2,100,000 shares of common stock, par value $0.01 per share, which the Company may issue pursuant to the 2016 LTIP. The 2016 LTIP authorizes the compensation committee of the Board to provide equity-based compensation in


the form of stock options, appreciation rights, restricted shares, restricted stock units, performance shares, performance units and certain other awards denominated or payable in, or otherwise based on, the Company’s common stock or factors that may influence the value of the Company’s common stock, plus cash incentive awards, for the purpose of providing the Company’s directors, officers and other key employees (and those of the Adviser and the Company’s subsidiaries), the Company’s non-employee directors, and potentially certain non-employees who perform employee-type functions, incentives and rewards for performance.

Restricted Stock Units

 

Under the 2016 LTIP, restricted stock units may be granted to the Company’s directors, officers and other key employees (and those of the Adviser and the Company’s subsidiaries) and typically vest over a three to five-year period for officers, employees and certain key employees of the Adviser and annually for directors. Beginning on the date of grant, restricted stock units earn dividends that are payable in cash on the vesting date. On August 11, 2016, pursuant to the 2016 LTIP, the Company granted 209,797 restricted stock units to its directors and officers. On March 16, 2017, pursuant to the 2016 LTIP, the Company granted 219,802 restricted stock units to its directors and officers. On February 15, 2018, pursuant to the 2016 LTIP, the Company granted 275,795 restricted stock units to its directors, officers, employees and certain key employees of the Adviser. On February 21, 2019, pursuant to the 2016 LTIP, the Company granted 186,662 restricted stock units to its directors, officers, employees and certain key employees of the Adviser. On February 20, 2020, pursuant to the 2016 LTIP, the Company granted 168,183 restricted stock units to its directors, officers, employees and certain key employees of the Adviser. On May 11, 2020, pursuant to the 2016 LTIP, the Company granted 116,852 restricted stock units to its directors, officers, employees and certain key employees of the Adviser. On February 18, 2021, pursuant to the 2016 LTIP, the Company granted 204,663 restricted stock units to its directors, officers, employees and certain key employees of the Adviser. On February 17, 2022, pursuant to the 2016 LTIP, the Company granted 142,159 restricted stock units to its directors, officers, employees and certain key employees of the Adviser. The following table includes the number of restricted stock units granted, vested, forfeited and outstanding as of September 30, 2021:2022:

 

 

 

2021

 

 

 

Number of Units

 

 

Weighted Average

Grant Date Fair Value

 

Outstanding January 1,

 

 

553,931

 

 

$

36.83

 

Granted

 

 

204,663

 

 

 

41.43

 

Vested

 

 

(167,627

)

(1)

 

34.18

 

Forfeited

 

 

(2,135

)

 

 

41.46

 

Outstanding September 30,

 

 

588,832

 

 

$

39.17

 


 

 

2022

 

 

 

Number of Units

 

 

Weighted Average

Grant Date Fair Value

 

Outstanding January 1,

 

 

589,283

 

 

$

39.17

 

Granted

 

 

142,159

 

 

 

83.88

 

Forfeited

 

 

(589

)

 

 

33.99

 

Vested

 

 

(202,519

)

(1)

 

35.34

 

Outstanding September 30,

 

 

528,334

 

 

$

52.68

 

 

(1)

Certain key employees of the Adviser elected to net the taxes owed upon vesting against the shares issued resulting in 133,097164,851 shares being issued as shown on the Consolidated Statement of Stockholders’ Equity.

 

The following table contains information regarding the vesting of restricted stock units under the 2016 LTIP for the next five calendar years subsequent to September 30, 2021:2022:

 

 

Shares Vesting

 

 

Shares Vesting

 

 

 

 

 

 

February

 

 

May

 

 

Total

 

 

February

 

 

May

 

 

October

 

 

Total

 

2022

 

 

180,249

 

 

 

22,022

 

 

 

202,271

 

 

 

—

 

 

 

—

 

 

 

408

 

 

 

408

 

2023

 

 

105,495

 

 

 

22,019

 

 

 

127,514

 

 

 

138,964

 

 

 

21,879

 

 

 

—

 

 

 

160,843

 

2024

 

 

105,495

 

 

 

22,017

 

 

 

127,512

 

 

 

132,568

 

 

 

21,877

 

 

 

—

 

 

 

154,445

 

2025

 

 

70,607

 

 

 

22,017

 

 

 

92,624

 

 

 

97,680

 

 

 

21,877

 

 

 

—

 

 

 

119,557

 

2026

 

 

38,911

 

 

 

—

 

 

 

38,911

 

 

 

65,984

 

 

 

—

 

 

 

—

 

 

 

65,984

 

2027

 

 

27,097

 

 

 

—

 

 

 

—

 

 

 

27,097

 

Total

 

 

500,757

 

 

 

88,075

 

 

 

588,832

 

 

 

462,293

 

 

 

65,633

 

 

 

408

 

 

 

528,334

 

 

As of September 30, 2021,2022, the Company had issued 692,256857,107 shares of common stock under the 2016 LTIP. For the three months ended September 30, 20212022 and 2020,2021, the Company recognized approximately $1.8$2.0 million and $1.4$1.8 million, respectively, of equity-based compensation expense related to grants of restricted stock units. For the nine months ended September 30, 20212022 and 2020,2021, the Company recognized approximately $5.2$5.9 million and $4.1$5.2 million, respectively, of equity-based compensation expense related to grants of restricted stock units.  As of September 30, 2021,2022, the Company had recognized a liability of approximately $1.3$1.5 million related to dividends earned on restricted stock units that are payable in cash upon vesting.


At-the-Market Offering

On February 20, 2019,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. (“Raymond James”) and Truist Securities, Inc. f/k/a SunTrust Robinson Humphrey, Inc. (“Truist”, and together with Raymond James and Jefferies, the “2019 ATM Sales Agents”), pursuant to which the Company could 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 $100,000,000 (the “2019 ATM Program”).  Sales of shares of common stock, if any, could be made in transactions that were deemed to be “at the market” offerings, as defined in Rule 415 under the Securities Act of 1933, as amended (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.  In addition to the issuance and sale of shares of common stock, the Company could enter into forward sale agreements with each of Jefferies and Raymond James, or their respective affiliates, through the 2019 ATM Program. During the six months ended June 30, 2020, the Company issued 560,000 shares of common stock at an average price of $50.00 per share for gross proceeds of $28.0 million under the 2019 ATM Program. The Company paid approximately $0.4 million in fees to the 2019 ATM Sales Agents with respect to such sales and incurred other issuance costs of approximately $0.4 million, both of which were netted against the gross proceeds and recorded in additional paid in capital. On February 27, 2020, the 2019 ATM Program reached aggregate sales of $100,000,000 and therefore expired. The following table contains summary information of the 2019 ATM Program during the year ended December 31, 2020:

Gross proceeds

 

$

28,000,000

 

Common shares issued

 

 

560,000

 

Gross average sale price per share

 

$

50.00

 

 

 

 

 

 

Sales commissions

 

$

420,000

 

Offering costs

 

 

331,143

 

Net proceeds

 

 

27,248,857

 

Average price per share, net

 

$

48.66

 


On March 4, 2020, the Company, the OP and the Adviser entered into separate equity distribution agreements with each of Jefferies, Raymond James, KeyBanc Capital Markets Inc. (“KeyBanc”) and Truist (togetherSecurities (f/k/a SunTrust Robinson Humphrey, Inc., “SunTrust,” and together with Jefferies, Raymond James and KeyBanc, and Truist, the “2020 ATM“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”).  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.  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, and Truist or their respective affiliates, through the 2020 ATM Program.  During the yearnine months ended December 31, 2020,September 30, 2022, the Company issued 718,30652,091 shares of common stock at an average price of $43.92$83.16 per share for gross proceeds of $31.5$4.3 million under the 2020 ATM Program. The Company paid approximately $0.5$0.1 million in fees to the 2020 ATM Sales Agents with respect to such sales and incurred other issuance costs of approximately $0.6$0.3 million, both of which were netted against the gross proceeds and recorded in additional paid in capital. During the nine months ended September 30, 2021, the Company issued 101,587 shares of common stock at an average price of $66.36 per share for gross proceeds of $6.7 million under the 2020 ATM Program. capital. The following table contains summary information of the 2020 ATM Program since its inception:

 

Gross proceeds

 

$

38,287,751

 

 

$

62,310,967

 

Common shares issued

 

 

819,893

 

 

 

1,120,910

 

Gross average sale price per share

 

$

46.70

 

 

$

55.59

 

 

 

 

 

 

 

 

 

Sales commissions

 

$

574,317

 

 

$

934,665

 

Offering costs

 

 

944,311

 

 

 

1,329,524

 

Net proceeds

 

 

36,769,123

 

 

 

60,046,778

 

Average price per share, net

 

$

44.85

 

 

$

53.57

 

 


 

9. Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of the Company’s common stock outstanding, which excludes any unvested restricted stock units issued pursuant to the 2016 LTIP. Diluted earnings (loss) per share is computed by adjusting basic earnings (loss) per share for the dilutive effect of the assumed vesting of restricted stock units. During periods of net loss, the assumed vesting of restricted stock units is anti-dilutive and is not included in the calculation of earnings (loss) per share.

The effect of the conversion of OP Units held by noncontrolling limited partners is not reflected in the computation of basic and diluted earnings (loss) per share, as they are exchangeable for common stock on a one-for-one basis. The income (loss) allocable to such units is allocated on this same basis and reflected as net income (loss) attributable to redeemable noncontrolling interests in the OP in the accompanying consolidated statements of operations and comprehensive income (loss). As such, the assumed conversion of these units would have no net impact on the determination of diluted earnings (loss) per share. See Note 10 for additional information.


The following table sets forth the computation of basic and diluted earnings (loss)loss per share for the periods presented (in thousands, except per share amounts):

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Numerator for earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(5,407

)

 

$

29,641

 

 

$

(15,725

)

 

$

48,362

 

Net income (loss) attributable to redeemable noncontrolling interests in the Operating Partnership

 

 

(16

)

 

 

89

 

 

 

(47

)

 

 

145

 

Net income (loss) attributable to common stockholders

 

$

(5,391

)

 

$

29,552

 

 

$

(15,678

)

 

$

48,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

25,175

 

 

 

24,372

 

 

 

25,128

 

 

 

24,688

 

Denominator for basic earnings (loss) per share

 

 

25,175

 

 

 

24,372

 

 

 

25,128

 

 

 

24,688

 

Weighted average unvested restricted stock units

 

 

613

 

 

 

554

 

 

 

596

 

 

 

506

 

Denominator for diluted earnings per share

(1)

 

25,175

 

 

 

24,926

 

 

 

25,128

 

 

 

25,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per weighted average common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.21

)

 

$

1.21

 

 

$

(0.62

)

 

$

1.95

 

Diluted

 

$

(0.21

)

 

$

1.19

 

 

$

(0.62

)

 

$

1.91

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Numerator for loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(599

)

 

$

(5,407

)

 

$

(13,093

)

 

$

(15,725

)

Net loss attributable to redeemable noncontrolling interests in the Operating Partnership

 

 

(2

)

 

 

(16

)

 

 

(46

)

 

 

(47

)

Net loss attributable to common stockholders

 

$

(597

)

 

$

(5,391

)

 

$

(13,047

)

 

$

(15,678

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator for loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

25,598

 

 

 

25,175

 

 

 

25,630

 

 

 

25,128

 

Denominator for basic loss per share

 

 

25,598

 

 

 

25,175

 

 

 

25,630

 

 

 

25,128

 

Weighted average unvested restricted stock units

 

 

529

 

 

 

613

 

 

 

547

 

 

 

596

 

Denominator for diluted earnings per share

(1)

 

25,598

 

 

 

25,175

 

 

 

25,630

 

 

 

25,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per weighted average common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.02

)

 

$

(0.21

)

 

$

(0.51

)

 

$

(0.62

)

Diluted

 

$

(0.02

)

 

$

(0.21

)

 

$

(0.51

)

 

$

(0.62

)

 

(1)

If the Company sustains a net loss for the period presented, unvested restricted stock units are not included in the diluted earnings per share calculation.

 

10. Noncontrolling Interests

Redeemable Noncontrolling Interests in the OP

Interests in the OP held by limited partners are represented by OP Units. Net income (loss) is allocated to holders of OP Units based upon net income (loss) attributable to common stockholders and the weighted average number of OP Units outstanding to total common shares plus OP Units outstanding during the period. Capital contributions, distributions, and profits and losses are allocated to OP Units in accordance with the terms of the partnership agreement of the OP. Each time the OP distributes cash to the Company, outside limited partners of the OP receive their pro-rata share of the distribution. Redeemable noncontrolling interests in the OP have a redemption feature and are marked to their redemption value if such value exceeds the carrying value of the redeemable noncontrolling interests in the OP.

On June 30, 2017,April 1, 2022, the Company acquired The Adair and Estates on Maryland, from investors in a Delaware Statutory Trust managed by an entity affiliated with the OP entered into a contribution agreement with BH Equities, LLC and its affiliates (collectively, “BH Equity”), whereby the Company purchased 100% of the joint venture interests in the Portfolio owned by BH Equity, representing approximately 8.4% ownership in the Portfolio (the “BH Buyout”),Adviser, for total consideration of approximately $51.7$143.4 million (the “Purchase Amount”Price”). The Purchase AmountPrice consisted of approximately $49.7 million in cash that was paid on June 30, 2017 and 73,23326,558 OP Units (initially valued(valued at $2.0$2.6 million) that were issued on AugustApril 1, 2017.2022 and approximately $71.1 million in cash. The number of OP Units issued was calculated by dividing $2.0 million by the midpoint of the range of the Company’s net assetfair value as publicly disclosed in connection with the Company’s release of its second quarter of 2017 earnings results, which was $27.31 per share.


In connection with the issuance of OP Units to BH Equity on August 1, 2017, the Company and the OP amended the partnership agreement of the OP (the “Amendment”). Pursuant toUnits was determined based on the Amendment, limited partners holding OP Units have the right to causeApril 1, 2022 share price of NXRT as the OP to redeem their units at a redemption price equalare convertible to and in the form of the Cash Amount (as defined in the partnership agreement of the OP), provided that such OP Units have been outstanding for at least one year. The Company, through the OP GP, as the general partner of the OP may, in its sole discretion, purchase the OP Units by paying to the limited partner either the Cash Amount or the REIT Share Amount (one share of common stock of the Company for each OP Unit), as defined in the partnership agreement of the OP. Notwithstanding the foregoing,on a limited partner will not be entitledone to exercise its redemption right to the extent the issuance of the Company’s common stock to the redeeming limited partner would (1) be prohibited, as determined in the Company’s sole discretion, under the Company’s charter or (2) cause the acquisition of common stock by such redeeming limited partner to be “integrated” with any other distribution of the Company’s common stock for purposes of complying with the Securities Act. Accordingly, the Company records the OP Units held by noncontrolling limited partners outside of permanent equity and reports the OP Units at the greater of their carrying value or their redemption value using the Company’s stock price at each balance sheet date.one basis.

The following table sets forth the redeemable noncontrolling interests in the OP for the nine months ended September 30, 20212022 (in thousands):

 

Redeemable noncontrolling interests in the OP, December 31, 2020

 

$

3,098

 

Redeemable noncontrolling interests in the OP, December 31, 2021

 

$

6,139

 

Net loss attributable to redeemable noncontrolling interests in the OP

 

 

(47

)

 

 

(46

)

Other comprehensive income attributable to redeemable noncontrolling interests in the OP

 

 

93

 

 

 

365

 

Contributions from redeemable noncontrolling interests in the OP

 

 

11

 

 

 

(562

)

Distributions to redeemable noncontrolling interests in the OP

 

 

(78

)

 

 

85

 

Issuance of operating partnership units for purchase of noncontrolling interests

 

 

2,444

 

Adjustment to reflect redemption value of redeemable noncontrolling interests in the OP

 

 

1,455

 

 

 

(2,597

)

Redeemable noncontrolling interests in the OP, September 30, 2021

 

$

4,532

 

Redeemable noncontrolling interests in the OP, September 30, 2022

 

$

5,828

 

 

Noncontrolling Interests

Noncontrolling interests have in the past and may in the future be comprised of joint venture partners’ interests in joint ventures the Company consolidates. When applicable, the Company reports its joint venture partners’ interests in its consolidated joint ventures and other subsidiary interests held by third parties as noncontrolling interests. The Company records these noncontrolling interests at their initial fair value, adjusting the basis prospectively for their share of the respective consolidated investment’s net income or loss, equity contributions, return of capital, and distributions. The adjustment to reflect redemption value of redeemable noncontrolling interests in the OP records the OP Units at the greater of their carrying value or their redemption value using the Company’s stock price


at each balance sheet date. Generally, these noncontrolling interests are not redeemable by the equity holders and are presented as part of permanent equity. Income and losses are allocated to the noncontrolling interest holder based on its economic ownership percentage.

 

Fees and Reimbursements to BH and its Affiliates

The Company has entered into management agreements with BH Management Services, LLC (“BH”), the Company’s property manager and an independently owned third party, who manages the Company’s properties and supervises the implementation of the Company’s value-add program. BH is an affiliate of BH Equity, who was a noncontrolling interest member of the Company’s joint ventures prior to the BH Buyout on June 30, 2017. Through BH Equity’s noncontrolling interests in such joint ventures, BH Equity was deemed to be a related party. With the completion of the BH Buyout, BH Equity is no longer deemed to be a related party. BH Equity became a noncontrolling limited partner of the OP upon execution of the Amendment. BH and its affiliates do not have common ownership in any joint venture with the Adviser; there is also no common ownership between BH and its affiliates and the Adviser.


The property management fee paid to BH is approximately 3% of the monthly gross income from each property managed. Currently, BH manages all of the Company’s properties. Additionally, the Company may pay BH certain other fees, including: (1) a fee of $15-25 per unit for the one-time setup and inspection of properties, (2) a construction supervision fee of 5-6% of total project costs, which is capitalized, (3) acquisition fees and due diligence costs reimbursements, and (4) other owner approved fees at $55 per hour. 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. The following is a summary of fees that the properties incurred to BH and its affiliates, as well as reimbursements paid to BH from the properties for various operating expenses, for the three and nine months ended September 30, 20212022 and 20202021 (in thousands):

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

Fees incurred

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property management fees

(1)

$

1,632

 

 

$

1,484

 

 

$

4,621

 

 

$

4,487

 

 

(1)

$

1,953

 

 

$

1,632

 

 

$

5,607

 

 

$

4,621

 

 

Construction supervision fees

(2)

 

276

 

 

 

374

 

 

 

832

 

 

 

1,421

 

 

(2)

 

606

 

 

 

276

 

 

 

1,371

 

 

 

832

 

 

Design fees

(2)

 

6

 

 

 

99

 

 

 

84

 

 

 

612

 

 

(2)

 

96

 

 

 

6

 

 

 

142

 

 

 

84

 

 

Acquisition fees

(3)

 

183

 

 

 

—

 

 

 

458

 

 

 

—

 

 

(3)

 

—

 

 

 

183

 

 

 

231

 

 

 

458

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reimbursements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payroll and benefits

(4)

 

4,581

 

 

 

4,814

 

 

 

13,638

 

 

 

13,470

 

 

(4)

 

5,250

 

 

 

4,581

 

 

 

16,053

 

 

 

13,638

 

 

Other reimbursements

(5)

 

865

 

 

 

784

 

 

 

2,547

 

 

 

2,469

 

 

(5)

 

1,265

 

 

 

865

 

 

 

3,426

 

 

 

2,547

 

 

 

(1)

Included in property management fees on the consolidated statements of operations and comprehensive income (loss).

(2)

Capitalized on the consolidated balance sheets and reflected in buildings and improvements.

(3)

Includes due diligence costs. Acquisition fees are capitalized to real estate assets on the consolidated balance sheets.

(4)

Included in property operating expenses on the consolidated statements of operations and comprehensive income (loss).

(5)

Includes property operating expenses such as repairs and maintenance costs and certain property general and administrative expenses, which are included on the consolidated statements of operations and comprehensive income (loss).

11. Related Party Transactions

Advisory and Administrative Fee

In accordance with the Advisory Agreement, the Company pays the Adviser an advisory fee equal to 1.00% of the Average Real Estate Assets (as defined below). The duties performed by the Company’s Adviser under the terms of the Advisory Agreement include, but are not limited to: providing daily management for the Company, selecting and working with third party service providers, managing the Company’s properties or overseeing the third party property manager, formulating an investment strategy for the Company and selecting suitable properties and investments, managing the Company’s outstanding debt and its interest rate exposure through derivative instruments, determining when to sell assets, and managing the value-add program or overseeing a third party vendor that implements the value-add program. “Average Real Estate Assets” means the average of the aggregate book value of Real Estate Assets 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. “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). The advisory fee is payable monthly in arrears in cash, unless the Adviser elects, in its sole discretion, to receive all or a portion of the advisory fee in shares of common stock, subject to certain limitations.

In accordance with the Advisory Agreement, the Company also pays the Adviser an administrative fee equal to 0.20% of the Average Real Estate Assets. The administrative fee is payable monthly in arrears in cash, unless the Adviser elects, in its sole discretion, to receive all or a portion of the administrative fee in shares of common stock, subject to certain limitations.


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 “Contributed Assets Cap”) (see “Expense Cap” below).

Pursuant to the terms of the Advisory Agreement, the Company will reimburse the Adviser for all documented Operating Expenses and Offering Expenses it incurs on behalf of the Company. “Operating Expenses” include legal, accounting, financial and due diligence services performed by the Adviser that outside professionals or outside consultants would otherwise perform, the Company’s pro rata share of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Adviser required for the Company’s operations, and compensation expenses under the 2016 LTIP. Operating Expenses do not include expenses for the advisory and administrative services described in the Advisory Agreement. Certain Operating Expenses, such as the Company’s ratable share of rent, telephone, utilities, office furniture, equipment, machinery and other


office, internal and overhead expenses incurred by the Adviser or its affiliates that relate to the operations of the Company, may be billed monthly to the Company under a shared services agreement. “Offering Expenses” include all expenses (other than underwriters’ discounts) in connection with an offering, including, without limitation, legal, accounting, printing, mailing and filing fees and other documented offering expenses. For the nine months ended September 30, 20212022 and 2020,2021, the Adviser did not bill any Operating Expenses or Offering Expenses to the Company and any such expenses the Adviser incurred during the periods are considered to be permanently waived.

Expense Cap

Pursuant to the terms of the Advisory Agreement, expenses paid or incurred by the Company for operating expenses and advisory and administrative fees payable to the Adviser and Operating Expenses will not exceed 1.5% of Average Real Estate Assets per calendar year (or part thereof that the Advisory Agreement is in effect (the “Expense Cap”)). The Expense Cap does not limit the reimbursement of expenses related to Offering Expenses. The Expense Cap also does not apply to legal, accounting, financial, due diligence and other service fees incurred in connection with mergers and acquisitions, extraordinary litigation or other events outside the Company’s ordinary course of business or any out-of-pocket acquisitions or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets. Also, advisory and administrative fees are further limited on Contributed Assets to approximately $5.4 million in any calendar year. Contributed Assets refers to all Real Estate Assets contributed to the Company as part of its spin-off. The Contributed Assets Cap is not reduced for dispositions of such assets subsequent to its spin-off. Advisory and administrative fees on New Assets are not subject to the above limitation and are based on an annual rate of 1.2% on Average Real Estate Assets, but are subject to the Expense Cap. New Assets are all Real Estate Assets that are not Contributed Assets.

For the three months ended September 30, 20212022 and 2020,2021, the Company incurred advisory and administrative fees of $1.9 million and $2.0$1.9 million, respectively. For the three months ended September 30, 20212022 and 2020,2021, the Adviser elected to voluntarily waive the advisory and administrative fees of $4.5approximately $5.5 million and $3.8 million, respectively, and are considered to be permanently waived. For the nine months ended September 30, 2021 and 2020, the Company incurred advisory and administrative fees of $5.7 million and $5.8$4.5 million, respectively. For the nine months ended September 30, 2022 and 2021, the Company incurred advisory and 2020,administrative fees of $5.6 million and $5.7 million, respectively. For the nine months ended September 30, 2022 and 2021, the Adviser elected to voluntarily waive the advisory and administrative fees of $15.5 million and $12.6 million, respectively. The advisory and $11.5 million, respectively, andadministrative fees waived by the Adviser are considered to be permanently waived.waived for the periods. The Adviser is not contractually obligated to waive fees on New Assets in the future and may cease waiving fees on New Assets at its discretion.

Other Related Party Transactions

The Company has in the past, and may in the future, utilize the services of affiliated parties. For the nine months ended September 30, 20212022 and 2020,2021, the Company paid approximately $0.0$0.1 million and $0.2$0.0 million, respectively, to NexBank Title, Inc. (“NexBank Title”). NexBank Title is an affiliate of the Adviser through common beneficial ownership. NexBank Title provides title insurance and work related to providing title insurance on properties related to acquisitions, dispositions and refinancing transactions. These amounts are either capitalized as real estate assets or deferred financing costs, expensed as loss on extinguishment of debt and modification costs, or expensed as selling costs when determining gain (loss) on sales of real estate, depending on the appropriate accounting as determined for each specific transaction. The Company holds multiple operating accounts at NexBank Capital, Inc. (“NexBank”), an affiliate of the Adviser through common beneficial ownership.

On July 30, 2021, 3three of our property-owning subsidiaries entered into agreements in the form of Exhibit 10.1, with NLMF Holdco, LLC, an entity under common control with our Adviser and in which we own a 10% equity interest. As of September 30, 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. For the nine months ended September 30, 2022, the Company incurred expenses of $0.1 million for fiber internet service which is included in property operating expenses on the consolidated statement of operations and comprehensive loss.  Additionally, on July 30, 2021, we entered into agreements in the form of Exhibit 10.2, with NLMF Leaseco, LLC, which is controlled by Matt McGraner, one of our officers. We expect that these actions will provide faster, more reliable and lower cost internet to our residents. We expect


On April 1, 2022, the Company acquired The Adair and Estates on Maryland, from investors in a Delaware Statutory Trust managed by an entity affiliated with the Adviser, for total consideration of $143.4 million (the “Purchase Price”). The Purchase Price consisted of 26,558 OP Units (valued at $2.6 million) that were issued on April 1, 2022 and approximately $71.1 million in cash. The fair value of the OP Units was determined based on the April 1, 2022 share price of NXRT as the OP units are convertible to roll out this servicecommon stock on a one to our other properties in the future. The foregoing description does not purport to be complete and is qualified in its entirety by the form agreements, which are attached hereto as Exhibit 10.1 and Exhibit 10.2 and are incorporated herein by reference.one basis.

12. Commitments and Contingencies

Commitments

In the normal course of business, the Company enters into various rehabilitation construction related purchase commitments with parties that provide these goods and services. In the event the Company were to terminate rehabilitation construction services prior to the completion of projects, the Company could potentially be committed to satisfy outstanding or uncompleted purchase orders with such parties. As of September 30, 2021,2022, management does not anticipate any material deviations from schedule or budget related to rehabilitation projects currently in process.

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. As of September 30, 2021,2022, the Company has funded approximately $0.2$0.3 million to NLMF Holdco, LLC which is included in prepaid and other assets on the consolidated balance sheet of the Company.


Contingencies

In the normal course of business, the Company is subject to claims, lawsuits, and legal proceedings. While it is not possible to ascertain the ultimate outcome of all such matters, management believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the consolidated balance sheets or consolidated statements of operations and comprehensive income (loss) of the Company. The Company is not involved in any material litigation nor, to management’s knowledge, is any material litigation currently threatened against the Company or its properties or subsidiaries.

Environmental liabilities could have a material adverse effect on the Company’s business, assets, cash flows or results of operations. As of September 30, 2021,2022, the Company was 0tnot aware of any environmental liabilities. There can be no assurance that material environmental liabilities do not exist.

Self-Insurance Program

Effective March 1, 2019, the Company maintains a partial self-insurance program for property and casualty claims whereby it incurs the “first-loss” portion of a claim up to an aggregate loss amount.  Claims resulting in losses in excess of a $100,000 per occurrence property deductible will be paid by the Company up to an aggregate amount of $1.2 million (the “2019 Aggregate Amount”).  For the period from March 1, 2019 to February 29, 2020, the Company incurred a claim related to Cutter’s Point (see Note 5) as part of the 2019 Aggregate Amount.  The claim related to Cutter’s Point required the Company to fund the full 2019 Aggregate Amount with $0.6 million being funded in December 2019 and the remaining $0.6 million funded during the three months ended March 31, 2020. For the period from March 1, 2019 to February 29, 2020, there were 0 other potential claims, besides the claim involving Cutter’s Point, that met the criteria as set forth under ASC 450-20.

On March 1, 2020, the Adviser entered into a new policy resulting in a new aggregate amount of $2,365,000 (the “2020 Aggregate Amount”) which is allocated across properties managed by the Adviser with approximately $1.5 million being allocated to the Company. As of December 30, 2020, all of the $1.5 million of the 2020 Aggregate Amount allocated to the Company has been funded. Under ASC 450-20 “Loss Contingencies”, the Company does 0t reserve for the 2020 Aggregate Amount or any portion thereof until a claim is made and the amount of the claim and the timing of payment on the claim can be reasonably estimated. For the period from March 1, 2020 to February 28, 2021, the Company fully funded the 2020 Aggregate Amount for claims related to Venue 8651 and Timber Creek (see Note 5).

On March 1, 2021, the Adviser entered into a newself-insurance policy resulting in a newan aggregate amount of $2,468,750 (the “2021 Aggregate Amount”) which is allocated across properties managed by the Adviser with approximately $1.6 million being allocated to the Company. As of September 30,December 31, 2021, all of the $1.6 million of the 2021 Aggregate Amount allocated to the Company has been prepaid. Under ASC 450-20 “Loss Contingencies”, the Company does 0tnot reserve for the 2021 Aggregate Amount or any portion thereof until a claim is made and the amount of the claim and the timing of payment on the claim can be reasonably estimated.  For the period from March 1, 2021 to September 30, 2021,February 28, 2022, the Company hasincurred claims related to its entire allocated 2021 Aggregate Amount at Old Farm and Silverbrook.

On March 1, 2022, the Adviser entered into a new policy resulting in a new aggregate amount of $2,497,500 (the “2022 Aggregate Amount”) which is allocated across properties managed by the Adviser with approximately $1.8 million being allocated to the Company. Under ASC 450-20 “Loss Contingencies”, the Company does not incurred any claims underreserve for the 2021 Aggregate Amount.Amount or any portion thereof until a claim is made and the amount of the claim and the timing of payment on the claim can be reasonably estimated.  For the period from March 1, 2022 to September 30, 2022, the Company incurred claims at Six Forks Station, Parc500, Hollister Place, Versailles and Arbors of Brentwood totaling approximately $1.5 million.


13. Subsequent Events

Dividends Declared

 

On October 29, 2021,24, 2022, the Company’s Board approved a quarterly dividend of $0.38$0.42 per share, payable on December 30, 20212022 to stockholders of record on December 15, 2021.2022.

Sale of Multifamily Properties

The Company sold its two held-for-sale properties, Beechwood Terrace and Cedar Pointe, on November 1, 2021 for a combined sales price of approximately $91.3 million.

Principal Paydown on Term LoansCredit Facility Extension

 

On November 3, 2021,October 24, 2022, the Company made a $50.0 million principal payment on the term loans using the net cash proceeds from the dispositions ofexercised its held-for-sale properties, Beechwood Terrace and Cedar Pointe, resulting in $225.0 million in aggregate principal outstanding onoption to extend the Corporate Credit Facility. AsFacility with respect to the revolving commitments for a single one-year term resulting in a maturity date of November 3, 2021, 0 principal was outstanding onJune 30, 2025.

Share Repurchase Program

On October 25, 2022, the Company announced that the Board has increased its share repurchase program authorization to a total of $100.0 million. The Board also extended the term loans maturingof the share repurchase authorization to October 24, 2024.

19-Property Refinance

On October 4, 2022, the Company entered into an agreement with KeyBank as a Freddie Mac servicer to refinance $790.5 million of its first mortgage debt relating to 19 properties that had original loan maturities ranging from July 1, 2024 to July 1, 2028.  The new loan is expected to have a 10-year term and bear interest at an annual rate of 30-day average SOFR plus 155 basis points.  The loan will begin amortizing after the first 5 years.  The loan is expected to close on December 31, 2021.or before November 30, 2022.


Item 2. 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.notesincluded herein and with our annual report on Form 10-K for the year ended December 31, 2021 (our “Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on February 18, 2022. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted, or expected in these forward-looking statements as a result of various factors, including, but not limited to, those discussed below and elsewhere in this quarterly report. See “Cautionary Statement Regarding Forward-Looking Statements” in this report, and “Risk Factors” in Part I, Item 1A, “Risk Factors” of our annual report on Form 10-K (our “Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2021.Annual Report.

Overview

As of September 30, 2021,2022, our Portfolio consisted of 4041 multifamily properties primarily located in the Southeastern and Southwestern United States encompassing 15,03215,387 units of apartment space that was approximately 95.3%94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $1,204.$1,446. Substantially all of our business is conducted through the OP. We own the Portfolio through the OP and our TRS. The OP owns approximately 99.9% of the Portfolio; our TRS owns approximately 0.1% of the Portfolio. The OP GP is the sole general partner of the OP. As of September 30, 2021,2022, there were 23,819,40226,050,945 OP Units outstanding, of which 23,746,169,25,951,154, or 99.7%99.6%, were owned by us, and 73,233,99,791, or 0.3%0.4%, were owned by an unaffiliated limited partnerpartners (see Note 10 to our consolidated financial statements).

We are primarily focused on directly or indirectly acquiring, owning, and operating well-located multifamily properties with a value-add component in large cities and suburban submarkets of large cities, primarily in the Southeastern and Southwestern United States. We generate revenue primarily by leasing our multifamily properties. We intend to employ targeted management and a value-add program at a majority of our properties in an attempt to improve rental rates and the net operating income (“NOI”) at our properties and achieve long-term capital appreciation for our stockholders. We are externally managed by the Adviser through the Advisory Agreement, by and among the OP, the Adviser and us. The Advisory Agreement was renewed on February 15, 202114, 2022 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 of Jefferies LLC (“Jefferies”), Raymond James & Associates, Inc. (“Raymond James”), KeyBanc Capital Markets Inc. (“KeyBanc”) and Truist Securities (f/k/a SunTrust Robinson Humphrey, Inc., “SunTrust,” and together with Jefferies, Raymond James and KeyBanc, the “ATM Sales Agents”), pursuant to which the Company may issue and sell from time-to-timetime 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.$225,000,000 (the “2020 ATM Program”).  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.  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, or their respective affiliates, through the 2020 ATM Program.  During the nine months ended September 30, 2021, 101,5872022, the Company issued 52,091 shares were issued under the 2020 ATM Program of common stock at an average price of $66.36$83.16 per share for gross proceeds of $6.7$4.3 million. The 2020 ATM Program may be terminated by the Company at any time and expires automatically once aggregate sales under the 2020 ATM Program reach $225,000,000Program. The Company paid approximately $0.1 million in fees to the 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 (see Note 8 to our consolidated financial statements).

We have elected to be taxed as a REIT under Sections 856 through 860 of the Code, and expect to continue to qualify as a REIT. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our REIT taxable income to our stockholders. As a REIT, we will be subject to federal income tax on our undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions we pay with respect to any calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3) 100% of our undistributed income from prior years. We believe we qualify for taxation as a REIT under the Code, and we intend to continue to operate in such a manner, but no assurance can be given that we will operate in a manner so as to qualify as a REIT. Taxable income from certain non-REIT activities is managed through a TRS and is subject to applicable federal, state, and local income and margin taxes. We had no significant taxes associated with our TRS for the nine months ended September 30, 20212022 and 2020.

For information on the effects the COVID-19 pandemic has had on our business, see Note 2 “Coronavirus (‘COVID-19’)” to our consolidated financial statements.2021.

On October 15, 2021, a lawsuit was filed by a trust set up in connection with the bankruptcy of Highland Capital Management, L.P.bankruptcy in the United States Bankruptcy Court for the Northern District of Texas. The lawsuit makes claims against a number of entities, including our Sponsor the parent of our Advisor, and James Dondero. The lawsuit does not include claims related to our business or our assets or operations. Our Sponsor and Mr. Dondero have informed us that they believe the lawsuit has no merit and they intend to vigorously defend against the claims. We do not expect that the lawsuit will have a material effect on our business, results of operations or financial condition.


Components of Our Revenues and Expenses

Revenues

Rental income. Our earnings are primarily attributable to the rental revenue from our multifamily properties. We anticipate that the leases we enter into for our multifamily properties will typically be for one year or less on average. Also included are utility reimbursements, late fees, pet fees, and other rental fees charged to tenants.

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. Property operating expenses include property maintenance costs, salary and employee benefit costs, utilities, casualty-related expenses and recoveries and other property operating costs.

Real estate taxes and insurance. Real estate taxes include the property taxes assessed by local and state authorities depending on the location of each property. 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. 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. Corporate general and administrative expenses include, but are not limited to, audit fees, legal fees, listing fees, board of director fees, equity-based compensation expense, investor relations costs and payments of reimbursements to our Adviser for operating expenses. Corporate general and administrative expenses and the advisory and administrative fees paid to our Adviser (including advisory and administrative fees on properties defined in the Advisory Agreement as New Assets) will not exceed 1.5% of Average Real Estate Assets per calendar year (or part thereof that the Advisory Agreement is in effect), calculated in accordance with the Advisory Agreement, (the “Expense Cap”).or the Expense Cap. The Expense Cap does not limit the reimbursement by us of expenses related to securities offerings paid by our Adviser. The Expense Cap also does not apply to legal, accounting, financial, due diligence, and other service fees incurred in connection with mergers and acquisitions, extraordinary litigation, or other events outside our ordinary course of business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of real estate assets.  Additionally, in the sole discretion of the Adviser, the Adviser may elect to waive certain advisory and administrative fees otherwise due.  If advisory and administrative fees are waived in a period, the waived fees for that period are considered to be waived permanently and the Adviser may not be reimbursed in the future.

Property general and administrative expenses. Property general and administrative expenses include the costs of marketing, professional fees, general office supplies, and other administrative related costs of each property.

Depreciation and amortization. Depreciation and amortization costs primarily include depreciation of our multifamily properties and amortization of acquired in-place leases.

Other Income and Expense

Interest expense. Interest expense primarily includes the cost of interest expense on debt, the amortization of deferred financing costs and the related impact of interest rate derivatives used to manage our interest rate risk.

Loss on extinguishment of debt and modification costs. Loss on extinguishment of debt and modification costs includes prepayment penalties and defeasance costs, 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 losses. Casualty losses include expenses resulting from damages from an unexpected and unusual event such as a natural disaster. Expenses can include additional payments on insurance premiums, impairment recognized on a property, and other abnormal expenses arising from the related event.  

Miscellaneous income. Miscellaneous income includes proceeds received from insurance for business interruption involving the loss of rental income at a property that has temporarily suspended operations due to an unexpected and unusual event.


Gain on sales of real estate. Gain on sales of real estate includes the gain recognized upon sales of properties. 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.

Results of Operations for the Three and Nine Months Ended September 30, 20212022 and 20202021

The three months ended September 30, 20212022 as compared to the three months ended September 30, 20202021

The following table sets forth a summary of our operating results for the three months ended September 30, 20212022 and 20202021 (in thousands):

 

 

 

For the Three Months Ended September 30,

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

Total revenues

 

$

56,384

 

 

$

50,990

 

 

$

5,394

 

Total expenses

 

 

(50,825

)

 

 

(45,146

)

 

 

(5,679

)

Operating income before gain on sales of real estate

 

 

5,559

 

 

 

5,844

 

 

 

(285

)

Gain on sales of real estate

 

 

—

 

 

 

30,160

 

 

 

(30,160

)

Operating income

 

 

5,559

 

 

 

36,004

 

 

 

(30,445

)

Interest expense

 

 

(11,531

)

 

 

(11,049

)

 

 

(482

)

Casualty gain (loss)

 

 

—

 

 

 

4,960

 

 

 

(4,960

)

Miscellaneous income

 

 

565

 

 

 

322

 

 

 

243

 

Loss on extinguishment of debt and modification costs

 

 

—

 

 

 

(596

)

 

 

596

 

Net income (loss)

 

 

(5,407

)

 

 

29,641

 

 

 

(35,048

)

Net income (loss) attributable to redeemable noncontrolling interests in the Operating Partnership

 

 

(16

)

 

 

89

 

 

 

(105

)

Net income (loss) attributable to common stockholders

 

$

(5,391

)

 

$

29,552

 

 

$

(34,943

)

 

 

For the Three Months Ended September 30,

 

 

 

 

 

 

 

2022

 

 

2021

 

 

$ Change

 

Total revenues

 

$

68,051

 

 

$

56,384

 

 

$

11,667

 

Total expenses

 

 

(57,082

)

 

 

(50,825

)

 

 

(6,257

)

Operating income

 

 

10,969

 

 

 

5,559

 

 

 

5,410

 

Interest expense

 

 

(11,766

)

 

 

(11,531

)

 

 

(235

)

Miscellaneous income

 

 

198

 

 

 

565

 

 

 

(367

)

Net loss

 

 

(599

)

 

 

(5,407

)

 

 

4,808

 

Net loss attributable to redeemable noncontrolling interests in the Operating Partnership

 

 

(2

)

 

 

(16

)

 

 

14

 

Net loss attributable to common stockholders

 

$

(597

)

 

$

(5,391

)

 

$

4,794

 

 

The change in our net loss for the three months ended September 30, 20212022 as compared to our net incomeloss for the three months ended September 30, 20202021 primarily relates to decreasesan increase in casualty gain and gain on sales of real estate,total revenues, partially offset by an increase in total revenues.operating expenses.

Revenues

Rental income. Rental income was $66.5 million for the three months ended September 30, 2022 compared to $54.9 million for the three months ended September 30, 2021, compared to $49.6 million for the three months ended September 30, 2020, which was an increase of approximately $5.3$11.6 million. The increase between the periods was primarily due to a 7.3%20.1% increase in the weighted average monthly effective rent per occupied apartment unit in our Portfolio to $1,204$1,446 as of September 30, 20212022 from $1,122$1,204 as of September 30, 2020.2021. The increase in effective rent was primarily driven by the value-add program that we have implemented and organic growth in rents.

Other income. Other income was $1.6 million for the three months ended September 30, 2022 compared to $1.5 million for the three months ended September 30, 2021, compared to $1.4 million for the three months ended September 30, 2020, which was an increase of approximately $0.1 million. The increase between the periods was primarily due to a decreasean increase in application and administration fee concessionsfees of approximately $0.1 million.

Expenses

Property operating expenses. Property operating expenses was $12.4 million for the three months ended September 30, 2022 compared to $12.8 million for the three months ended September 30, 2021, compared to $11.9 for the three months ended September 30, 2020, which was an increasea decrease of approximately $0.9$0.4 million. The increasedecrease between periods was primarily due to $0.5a $2.7 million decrease in casualty losses and an increase of approximately $2.3 million in payrollall other property operating expenses.

Real estate taxes and insurance. Real estate taxes and insurance costs were $9.4 million for the three months ended September 30, 2022 compared to $7.6 million for the three months ended September 30, 2021, compared to $7.7 million for the three months ended September 30, 2020, which was a decreasean increase of approximately $0.1$1.8 million. The decreaseincrease between the periods was primarily due to our acquisition and disposition activity in 20212022 and 20202021 and the timing of the transactions. The decreaseincrease between the periods was also due to a $0.2$1.5 million, or 2.8%24%, decreaseincrease in property taxes partially offset byand a $0.2 million, or 18.8%21.8%, increase in property 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, increasing the costs of real estate taxes.

Property management fees. Property management fees were $2.0 million for the three months ended September 30, 2022 compared to $1.6 million for the three months ended September 30, 2021 compared to $1.5 for the three months ended September 30, 2020 which was an increase of $0.1$0.4 million. Property management fees are primarily based on total revenues.


Advisory and administrative fees. Advisory and administrative fees were $1.9 million for the three months ended September 30, 20212022 compared to $2.0$1.9 million for the three months ended September 30, 2020.2021. For the three months ended September 30, 20212022 and 2020,2021, our Adviser elected to voluntarily waive the advisory and administrative fees of approximately $4.5$5.5 million and $3.8$4.5 million. Our Adviser is not contractually obligated to waive fees on New Assets in the future and may cease waiving fees on New Assets at its discretion. Advisory and administrative fees may increase in future periods as we acquire additional properties, which will be classified as New Assets.

Corporate general and administrative expenses. Corporate general and administrative expenses were $3.8 million for the three months ended September 30, 2022 compared to $3.2 million for the three months ended September 30, 2021, compared to $2.8 million for the three months ended September 30, 2020, which was an increase of approximately $0.4$0.6 million. The increase between the periods was primarily due to an increaseincreases of $0.4$0.2 million in stock compensation expense.expense and a $0.2 million increase in other professional fees.

Property general and administrative expenses. Property general and administrative expenses were $2.4 million for the three months ended September 30, 2022 compared to $2.1 million for the three months ended September 30, 2021, compared to $1.6 million for the three months ended September 30, 2020, which was an increase of approximately $0.5$0.3 million. The increase between the periods was primarily due to a $0.1 million increase in professional fees.fees and a $0.1 million increase in other entity expense.

Depreciation and amortization. Depreciation and amortization costs were $25.2 million for the three months ended September 30, 2022 compared to $21.6 million for the three months ended September 30, 2021, compared to $17.7 million for the three months ended September 30, 2020, which was an increase of approximately $3.9$3.6 million.  The increase between the periods was primarily due to an increase of $1.2$0.1 million in amortization of intangible lease assets and an increase in depreciation expense of approximately $2.7$3.5 million, which was primarily due to our acquisition activity in 20212022 and 20202021 and the timing of the transactions. The amortization of intangible lease assets over a six-month period from the date of acquisition is expected to increase the amortization expense during the initial year of operations for each property.

Other Income and Expense

Interest expense. Interest expense was $11.8 million for the three months ended September 30, 2022 compared to $11.5 million for the three months ended September 30, 2021 compared to $11.0 million for the three months ended September 30, 2020, which2021. There was an increase of approximately $0.5 million. The increase between the periods was primarily due to an increase in interest on debt of approximately $0.6$9.4 million partially offset byas a decreaseresult of increased interest rates and decreases in amortization of deferred financing costsinterest rate swap expense and interest rate caps expense of approximately $0.2 million.$7.2 million and $2.2 million, respectively. The following table details the various costs included in interest expense for the three months ended September 30, 20212022 and 20202021 (in thousands):

 

 

For the Three Months Ended September 30,

 

 

 

 

 

 

For the Three Months Ended September 30,

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

2022

 

 

2021

 

 

$ Change

 

Interest on debt

 

$

7,239

 

 

$

6,666

 

 

$

573

 

 

$

16,661

 

 

$

7,239

 

 

$

9,422

 

Amortization of deferred financing costs

 

 

525

 

 

 

702

 

 

 

(177

)

 

 

734

 

 

 

525

 

 

 

209

 

Interest rate swap expense

 

 

3,744

 

 

 

3,653

 

 

 

91

 

 

 

(3,468

)

 

 

3,744

 

 

 

(7,212

)

Interest rate caps expense

 

 

23

 

 

 

28

 

 

 

(5

)

 

 

(2,161

)

 

 

23

 

 

 

(2,184

)

Total

 

$

11,531

 

 

$

11,049

 

 

$

482

 

 

$

11,766

 

 

$

11,531

 

 

$

235

 

 

The nine months ended September 30, 20212022 as compared to the nine months ended September 30, 20202021

The following table sets forth a summary of our operating results for the nine months ended September 30, 20212022 and 20202021 (in thousands):

 

 

For the Nine Months Ended September 30,

 

 

 

 

 

 

For the Nine Months Ended September 30,

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

2022

 

 

2021

 

 

$ Change

 

Total revenues

 

$

160,743

 

 

$

154,252

 

 

$

6,491

 

 

$

194,603

 

 

$

160,743

 

 

$

33,860

 

Total expenses

 

 

(147,194

)

 

 

(145,200

)

 

 

(1,994

)

 

 

(173,775

)

 

 

(147,194

)

 

 

(26,581

)

Operating income before gain on sales of real estate

 

 

13,549

 

 

 

9,052

 

 

 

4,497

 

Gain on sales of real estate

 

 

—

 

 

 

69,151

 

 

 

(69,151

)

Operating income

 

 

13,549

 

 

 

78,203

 

 

 

(64,654

)

 

 

20,828

 

 

 

13,549

 

 

 

7,279

 

Interest expense

 

 

(32,830

)

 

 

(33,704

)

 

 

874

 

 

 

(34,804

)

 

 

(32,830

)

 

 

(1,974

)

Casualty gain (loss)

 

 

2,379

 

 

 

3,932

 

 

 

(1,553

)

Casualty gains

 

 

357

 

 

 

2,379

 

 

 

(2,022

)

Miscellaneous income

 

 

1,505

 

 

 

1,401

 

 

 

104

 

 

 

526

 

 

 

1,505

 

 

 

(979

)

Loss on extinguishment of debt and modification costs

 

 

(328

)

 

 

(1,470

)

 

 

1,142

 

 

 

—

 

 

 

(328

)

 

 

328

 

Net income (loss)

 

 

(15,725

)

 

 

48,362

 

 

 

(64,087

)

Net income (loss) attributable to redeemable noncontrolling interests in the Operating Partnership

 

 

(47

)

 

 

145

 

 

 

(192

)

Net income (loss) attributable to common stockholders

 

$

(15,678

)

 

$

48,217

 

 

$

(63,895

)

Net loss

 

 

(13,093

)

 

 

(15,725

)

 

 

2,632

 

Net loss attributable to redeemable noncontrolling interests in the Operating Partnership

 

 

(46

)

 

 

(47

)

 

 

1

 

Net loss attributable to common stockholders

 

$

(13,047

)

 

$

(15,678

)

 

$

2,631

 


 

The change in our net loss for the nine months ended September 30, 20212022 as compared to the net incomeloss for the nine months ended September 30, 20202021 primarily relates to decreasesa decrease in casualty gaingains and gain on sales of real estate,increases in operating expenses and interest expense, partially offset by an increase in total revenues.

Revenues

Rental income. Rental income was $189.9 million for the nine months ended September 30, 2022 compared to $156.3 million for the nine months ended September 30, 2021, compared to $149.9 million for the nine months ended September 30, 2020, which was an increase of approximately $6.4$33.6 million. The increase between the periods was primarily due to a 7.3%20.1% increase in the weighted average monthly effective rent per occupied apartment unit in our Portfolio to $1,204$1,446 as of September 30, 20212022 from $1,122$1,204 as of September 30, 2020.2021. The increase in effective rent was primarily driven by the value-add program that we have implemented and organic growth in rents in the markets where our properties are located.

Other income. Other income was $4.7 million for the nine months ended September 30, 2022 compared to $4.4 million for the nine months ended September 30, 2021, compared to $4.3 million for the nine months ended September 30, 2020, which was an increase of approximately $0.1$0.3 million. The increase between the periods was primarily due to a $0.1$0.3 million decreaseincrease in application and administration concessions.non-refundable fees.

Expenses

Property operating expenses. Property operating expenses were $42.7 million for the nine months ended September 30, 2022 compared to $35.1 million for the nine months ended September 30, 2021, compared to $35.6 million for the nine months ended September 30, 2020, which was a decreasean increase of approximately $0.5$7.6 million. The decreaseincrease between the periods was primarily due to our acquisition and disposition activity in 20212022 and 20202021 and the timing of the transactions. The decreaseincrease between the periods was also due to a $0.9 million increase in casualty losses, $0.8 million increase in water and sewer, $0.4 million decreaseincrease in pandemic expense which represents additional cleaning, disinfectingbonuses for leasing and renewal, and approximately $5.5 million increase in all other costs incurred at the properties related to COVID-19.property operating expenses combined.

Real estate taxes and insurance. Real estate taxes and insurance costs were $27.7 million for the nine months ended September 30, 2022 compared to $24.9 million for the nine months ended September 30, 2021, compared to $23.5 million for the nine months ended September 30, 2020, which was an increase of approximately $1.4$2.8 million. The increase between the periods was primarily due to a $1.2$2.2 million, or 5.8%10.4%, increase in property taxes.taxes and a $0.6 million, or 22.6%, increase in property 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, increasing the cost of real estate taxes.

Property management fees. Property management fees were $5.6 million for the nine months ended September 30, 2022 and $4.6 million for the nine months ended September 30, 2021 and $4.5 for the nine months ended September 30, 2020.2021. Property management fees are primarily based on total revenues.

Advisory and administrative fees. Advisory and administrative fees were $5.6 million for the nine months ended September 30, 2022 and $5.7 million for the nine months ended September 30, 2021 and $5.8 million for the nine months ended September 30, 2020 which was a decrease of approximately $0.1 million. For the nine months ended September 30, 20212022 and 2020,2021, our Adviser elected to voluntarily waive the advisory and administrative fees of approximately $12.6$15.5 million and $11.5$12.6 million. Our Adviser is not contractually obligated to waive fees on New Assets in the future and may cease waiving fees on New Assets at its discretion. Advisory and administrative fees may increase in future periods as we acquire additional properties, which will be classified as New Assets.

Corporate general and administrative expenses. Corporate general and administrative expenses were $11.1 million for the nine months ended September 30, 2022 compared to $9.1 million for the nine months ended September 30, 2021, compared to $8.4 million for the nine months ended September 30, 2020, which was an increase of approximately $0.7$2.0 million. The increase was primarily due to an increaseincreases in other professional fees of $0.9 million and stock compensation expense of $1.1 million, partially offset by a decrease in audit fees of $0.1 million and filing fees of $0.1$0.7 million.

Property general and administrative expenses. Property general and administrative expenses were $6.6 million for the nine months ended September 30, 2022 compared to $5.5 million for the nine months ended September 30, 2021, compared to $4.9 million for the nine months ended September 30, 2020, which was an increase of approximately $0.6$1.3 million. The increase was primarily due to an increase in lead generation expensecentralized services, other entity expenses, and professional fees of $0.3 million, $0.2 million, and $0.1 million.million, respectively.

Depreciation and amortization. Depreciation and amortization costs were $74.5 million for the nine months ended September 30, 2022 compared to $62.3 million for the nine months ended September 30, 2021, compared to $62.5 million for the nine months ended September 30, 2020, which was a decreasean increase of approximately $0.2$12.2 million. The decreaseincrease between the periods was primarily due a decreasean increase in amortization of intangible lease assets of $3.9$1.8 million partially offset byand an increase of $3.8$10.3 million in depreciation expense, which was primarily due to our acquisition activity in 20212022 and 20202021 and the timing of the transactions. The amortization of intangible lease assets over a six-month period from the date of acquisition is expected to increase the amortization expense during the initial year of operations for each property.


Other Income and Expense

Interest expense. Interest expense was $34.8 million for the nine months ended September 30, 2022 compared to $32.8 million for the nine months ended September 30, 2021, compared to $33.7 million for the nine months ended September 30, 2020, which was a decreasean increase of approximately $0.9$2.0 million. The decreaseincrease between the periods was primarily due a decreasean increase in interest on debt of $5.9$15.1 million as a result of increased interest rates, partially offset by an increasedecreases in interest rate swap expenseand interest rate caps expenses of approximately $5.5$10.0 million and $3.6 million. The following table details the various costs included in interest expense for the nine months ended September 30, 20212022 and 20202021 (in thousands):

 

 

For the Nine Months Ended September 30,

 

 

 

 

 

 

For the Nine Months Ended September 30,

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

2022

 

 

2021

 

 

$ Change

 

Interest on debt

 

$

20,030

 

 

$

25,912

 

 

$

(5,882

)

 

$

35,136

 

 

$

20,030

 

 

$

15,106

 

Amortization of deferred financing costs

 

 

1,581

 

 

 

2,141

 

 

 

(560

)

 

 

2,033

 

 

 

1,581

 

 

 

452

 

Interest rate swap expense

 

 

11,153

 

 

 

5,651

 

 

 

5,502

 

 

 

1,160

 

 

 

11,153

 

 

 

(9,993

)

Interest rate caps expense

 

 

66

 

 

 

—

 

 

 

66

 

 

 

(3,525

)

 

 

66

 

 

 

(3,591

)

Total

 

$

32,830

 

 

$

33,704

 

 

$

(874

)

 

$

34,804

 

 

$

32,830

 

 

$

1,974

 

 

Loss on extinguishment of debt and modification costs.  There was a $0.3 millionwere no loss on extinguishment of debt and modification costs for the nine months ended September 30, 20212022 compared to a $1.5$0.3 million loss for the nine months ended September 30, 2020,2021, which was a decrease of approximately $1.1$0.3 million. The decrease between the periods was primarily due to a decrease in prepayment penalties and defeasance costs of $0.7 million and a decrease in write-off of deferred financing costs of approximately $0.4$0.3 million. The following table details the various costs included in loss on extinguishment of debt and modification costs for the nine months ended September 30, 20212022 and 20202021 (in thousands):

 

 

For the Nine Months Ended September 30,

 

 

 

 

 

 

For the Nine Months Ended September 30,

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

2022

 

 

2021

 

 

$ Change

 

Prepayment penalties and defeasance costs

 

$

—

 

 

$

711

 

 

$

(711

)

 

$

—

 

 

$

—

 

 

$

—

 

Write-off of deferred financing costs

 

 

328

 

 

 

757

 

 

 

(429

)

 

 

—

 

 

 

328

 

 

 

(328

)

Debt modification and other extinguishment costs

 

 

—

 

 

 

2

 

 

 

(2

)

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

328

 

 

$

1,470

 

 

$

(1,142

)

 

$

—

 

 

$

328

 

 

$

(328

)

Gain on sales of real estate. Gain on sale of real estate was $0.0 million during the nine months ended September 30, 2021 compared to $69.2 million for the nine months ended September 30, 2020, which was a decrease of approximately $69.2 million. The decrease between the periods was primarily due to our acquisition and disposition activity in 2021 and 2020 and the timing of the transactions.

Non-GAAP Measurements

Net Operating Income and Same Store Net Operating Income

NOI is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties to other comparable properties, to determine trends in earnings and to compute the fair value of our properties.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), (7) pandemic expenses that are not reflective of continuing operations of the propertiesexpense and (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.

The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital, which may have changed or may change in the future. Non-operatingCorporate general and administrative expenses, pandemic expense, and non-operating fees to affiliates are eliminated because they do not reflect continuing operating costs of the property owner. Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale, which will usually change from period to period. Casualty-related expenses and recoveries, casualty gains and losses, and losses of extinguished debt and modification costs are excluded because they do not reflect continuing operating costs of the property owner. CorporateEntity level general and administrative expenses are eliminated because they do not reflect the operating activity performed at the properties. Entity level general and


administrative expenses incurred at the properties and pandemic expenses are eliminated as they are specific to the way in which we have chosen to hold our properties and are the result of our ownership structuring. Also, expenses that are incurred upon acquisition of a property do not reflect continuing operating costs of the property owner. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these items from net income is useful because the resulting measure captures the actual ongoing revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.


However, the usefulness of NOI is limited because it excludes corporate general and administrative expenses, interest expense, loss on extinguishment of debt and modification costs, acquisition costs, certain fees to affiliates such as advisory and administrative fees, depreciation and amortization expense and gains or losses from the sale of properties, pandemic expenses, and other gains and losses as determined under GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income, which further limits its usefulness.

NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. 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. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

We define “Same Store NOI” as NOI for our properties that are comparable between periods. We view Same Store NOI as an important measure of the operating performance of our properties because it allows us to compare operating results of properties owned for the entirety of the current and comparable periods and therefore eliminates variations caused by acquisitions or dispositions during the periods.

NOI and Same Store NOI for the Three and Nine Months Ended September 30, 20212022 and 20202021

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and our Same Store NOI for the three and nine months ended September 30, 20212022 and 20202021 to net income (loss),loss, the most directly comparable GAAP financial measure (in thousands):

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

(5,407

)

 

$

29,641

 

 

$

(15,725

)

 

$

48,362

 

 

Adjustments to reconcile net income (loss) to NOI:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(599

)

 

$

(5,407

)

 

$

(13,093

)

 

$

(15,725

)

Adjustments to reconcile net loss to NOI:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory and administrative fees

 

 

1,938

 

 

 

1,976

 

 

 

5,706

 

 

 

5,777

 

 

 

 

1,904

 

 

 

1,938

 

 

 

5,615

 

 

 

5,706

 

Corporate general and administrative expenses

 

 

3,152

 

 

 

2,807

 

 

 

9,070

 

 

 

8,440

 

 

 

 

3,818

 

 

 

3,152

 

 

 

11,116

 

 

 

9,070

 

Casualty-related expenses/(recoveries)

(1)

 

120

 

 

 

(47

)

 

 

(272

)

 

 

726

 

 

(1)

 

(2,976

)

 

 

120

 

 

 

666

 

 

 

(272

)

Casualty gain

 

 

—

 

 

 

(4,960

)

 

 

(2,379

)

 

 

(3,932

)

 

 

 

—

 

 

 

—

 

 

 

(357

)

 

 

(2,379

)

Pandemic expense

(2)

 

11

 

 

 

191

 

 

 

46

 

 

 

475

 

 

 

 

—

 

 

 

11

 

 

 

—

 

 

 

46

 

Property general and administrative expenses

(3)

 

712

 

 

 

482

 

 

 

1,660

 

 

 

1,500

 

 

(2)

 

728

 

 

 

712

 

 

 

2,035

 

 

 

1,660

 

Depreciation and amortization

 

 

21,591

 

 

 

17,723

 

 

 

62,335

 

 

 

62,479

 

 

 

 

25,224

 

 

 

21,591

 

 

 

74,490

 

 

 

62,335

 

Interest expense

 

 

11,531

 

 

 

11,049

 

 

 

32,830

 

 

 

33,704

 

 

 

 

11,766

 

 

 

11,531

 

 

 

34,804

 

 

 

32,830

 

Loss on extinguishment of debt and modification costs

 

 

—

 

 

 

596

 

 

 

328

 

 

 

1,470

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

328

 

Gain on sales of real estate

 

 

—

 

 

 

(30,160

)

 

 

—

 

 

 

(69,151

)

 

NOI

 

$

33,648

 

 

$

29,298

 

 

$

93,599

 

 

$

89,850

 

 

 

$

39,865

 

 

$

33,648

 

 

$

115,276

 

 

$

93,599

 

Less Non-Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

(4,196

)

 

 

(1,449

)

 

 

(7,421

)

 

 

(6,296

)

 

 

 

(6,155

)

 

 

(2,570

)

 

 

(21,647

)

 

 

(8,467

)

Operating expenses

 

 

1,034

 

 

 

854

 

 

 

2,211

 

 

 

3,321

 

 

 

 

2,361

 

 

 

1,033

 

 

 

7,882

 

 

 

3,412

 

Operating income

 

 

(226

)

 

 

(322

)

 

 

(872

)

 

 

(1,401

)

 

 

 

(16

)

 

 

(226

)

 

 

(30

)

 

 

(872

)

Same Store NOI

 

$

30,260

 

 

$

28,381

 

 

$

87,517

 

 

$

85,474

 

 

 

$

36,055

 

 

$

31,885

 

 

$

101,481

 

 

$

87,672

 

 

(1)

Adjustment to net income (loss)loss to exclude certain property operating expenses that are casualty-related expenses/(recoveries).

(2)

Represents additional cleaning, disinfecting and other costs incurred at the properties related to COVID-19.

(3)

Adjustment to net income (loss)loss to exclude certain property general and administrative 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.


Net Operating Income for Our Q3 Same Store and Non-Same Store Properties for the Three Months Ended September 30, 20212022 and 20202021

There are 3536 properties encompassing 13,57613,930 units of apartment space in our same store pool for the three months ended September 30, 20212022 and 20202021 (our “Q3 Same Store” properties). Our Q3 Same Store properties exclude the following five properties in our Portfolio as of September 30, 2021:2022: Cutter’s PointFairways at San Marcos, The Verandas at Lake Norman, Creekside at Matthews,, Six Forks Station, High House at Cary, The Adair and Cutter’s PointEstates on Maryland as well as the 8174 units that are currently down (see Note 5) that are currently down..

The following table reflects the revenues, property operating expenses and NOI for the three months ended September 30, 20212022 and 20202021 for our Q3 Same Store and Non-Same Store properties (dollars in thousands):

 

 

For the Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

50,815

 

 

$

48,147

 

 

$

2,668

 

 

 

5.5

%

 

$

60,407

 

 

$

52,441

 

 

$

7,966

 

 

 

15.2

%

Other income

 

 

1,373

 

 

 

1,394

 

 

 

(21

)

 

 

-1.5

%

 

 

1,489

 

 

 

1,373

 

 

 

116

 

 

 

8.4

%

Same Store revenues

 

 

52,188

 

 

 

49,541

 

 

 

2,647

 

 

 

5.3

%

 

 

61,896

 

 

 

53,814

 

 

 

8,082

 

 

 

15.0

%

Non-Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

 

4,103

 

 

 

1,431

 

 

 

2,672

 

 

 

186.7

%

 

 

6,093

 

 

 

2,477

 

 

 

3,616

 

 

N/M

 

Other income

 

 

93

 

 

 

18

 

 

 

75

 

 

 

416.7

%

 

 

62

 

 

 

93

 

 

 

(31

)

 

 

-33.3

%

Non-Same Store revenues

 

 

4,196

 

 

 

1,449

 

 

 

2,747

 

 

 

189.6

%

 

 

6,155

 

 

 

2,570

 

 

 

3,585

 

 

N/M

 

Total revenues

 

 

56,384

 

 

 

50,990

 

 

 

5,394

 

 

 

10.6

%

 

 

68,051

 

 

 

56,384

 

 

 

11,667

 

 

 

20.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses (1)

 

 

11,882

 

 

 

11,299

 

 

 

583

 

 

 

5.2

%

 

 

14,037

 

 

 

11,982

 

 

 

2,055

 

 

 

17.2

%

Real estate taxes and insurance

 

 

7,613

 

 

 

7,393

 

 

 

220

 

 

 

3.0

%

 

 

8,682

 

 

 

7,433

 

 

 

1,249

 

 

 

16.8

%

Property management fees (2)

 

 

1,518

 

 

 

1,437

 

 

 

81

 

 

 

5.6

%

 

 

1,783

 

 

 

1,561

 

 

 

222

 

 

 

14.2

%

Property general and administrative expenses (3)

 

 

1,254

 

 

 

1,031

 

 

 

223

 

 

 

21.6

%

 

 

1,521

 

 

 

1,292

 

 

 

229

 

 

 

17.7

%

Same Store operating expenses

 

 

22,267

 

 

 

21,160

 

 

 

1,107

 

 

 

5.2

%

 

 

26,023

 

 

 

22,268

 

 

 

3,755

 

 

 

16.9

%

Non-Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses (4)

 

 

770

 

 

 

463

 

 

 

307

 

 

 

66.3

%

 

 

1,309

 

 

 

670

 

 

 

639

 

 

N/M

 

Real estate taxes and insurance

 

 

33

 

 

 

293

 

 

 

(260

)

 

 

-88.7

%

 

 

737

 

 

 

213

 

 

 

524

 

 

N/M

 

Property management fees (2)

 

 

121

 

 

 

52

 

 

 

69

 

 

 

132.7

%

 

 

177

 

 

 

78

 

 

 

99

 

 

N/M

 

Property general and administrative expenses (5)

 

 

110

 

 

 

46

 

 

 

64

 

 

 

139.1

%

 

 

138

 

 

 

72

 

 

 

66

 

 

N/M

 

Non-Same Store operating expenses

 

 

1,034

 

 

 

854

 

 

 

180

 

 

 

21.1

%

 

 

2,361

 

 

 

1,033

 

 

 

1,328

 

 

N/M

 

Total operating expenses

 

 

23,301

 

 

 

22,014

 

 

 

1,287

 

 

 

5.8

%

 

 

28,384

 

 

 

23,301

 

 

 

5,083

 

 

 

21.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Miscellaneous income

 

 

339

 

 

 

—

 

 

 

339

 

 

 

0.0

%

 

 

182

 

 

 

339

 

 

 

(157

)

 

 

-46.3

%

Non-Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Miscellaneous income

 

 

226

 

 

 

322

 

 

 

(96

)

 

 

-29.8

%

 

 

16

 

 

 

226

 

 

 

(210

)

 

N/M

 

Total operating income

 

 

565

 

 

 

322

 

 

 

243

 

 

 

75.5

%

 

 

198

 

 

 

565

 

 

 

(367

)

 

 

-65.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store

 

 

30,260

 

 

 

28,381

 

 

 

1,879

 

 

 

6.6

%

 

 

36,055

 

 

 

31,885

 

 

 

4,170

 

 

 

13.1

%

Non-Same Store

 

 

3,388

 

 

 

917

 

 

 

2,471

 

 

 

269.5

%

 

 

3,810

 

 

 

1,763

 

 

 

2,047

 

 

 

116.1

%

Total NOI

 

$

33,648

 

 

$

29,298

 

 

$

4,350

 

 

 

14.8

%

 

$

39,865

 

 

$

33,648

 

 

$

6,217

 

 

 

18.5

%

(1)

For the three months ended September 30, 20212022 and 2020,2021, excludes approximately $136,000$(1,822,000) and $700,000,$136,000, respectively, of casualty-related expenses.expenses/(recoveries).

(2)

Fees incurred to an unaffiliated third party that is an affiliate of the noncontrolling limited partner of the OP.

(3)

For the three months ended September 30, 20212022 and 2020,2021, excludes approximately $677,000$634,000 and $455,000,$599,000, 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.


(4)

For the three months ended September 30, 20212022 and 2020,2021, excludes approximately $5,000$1,154,000 and $556,000,$5,000, respectively, of casualty-related recoveries.

(5)

For the three months ended September 30, 20212022 and 2020,2021, excludes approximately $35,000$94,000 and $27,000,$113,000, 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.

See reconciliation of net income (loss)loss to NOI above under “NOI and Same Store NOI for the Three and Nine Months Ended September 30, 20212022 and 2020.2021.”

Q3 Same Store Results of Operations for the Three Months Ended September 30, 20212022 and 20202021

As of September 30, 2021,2022, our Q3 Same Store properties were approximately 95.4%94.0% leased with a weighted average monthly effective rent per occupied apartment unit of $1,198.$1,445. As of September 30, 2020,2021, our Q3 Same Store properties were approximately 95.0%95.3% leased with a weighted average monthly effective rent per occupied apartment unit of $1,122.$1,210. For our Q3 Same Store properties, we recorded the following operating results for the three months ended September 30, 20212022 as compared to the three months ended September 30, 2020:2021:

Revenues

Rental income. Rental income was $50.8$60.4 million for the three months ended September 30, 2022 compared to $52.4 million for the three months ended September 30, 2021, compared to $48.1 million for the three months ended September 30, 2020, which was an increase of approximately $2.7$8.0 million, or 5.5%15.2%. The majority of the increase is related to a 6.8%19.4% increase in the weighted average monthly effective rent per occupied apartment unit to $1,198$1,445 as of September 30, 2022 from $1,210 as of September 30, 2021, from $1,122 as of September 30, 2020, andpartially offset by a 0.4% increase1.3% decrease in occupancy.

Other income. Other income was $1.4$1.5 million for the three months ended September 30, 2021,2022, compared to $1.4 million for the three months ended September 30, 2020.2021.

Expenses

Property operating expenses. Property operating expenses were $11.9$14.0 million for the three months ended September 30, 2022 compared to $12.0 million for the three months ended September 30, 2021, compared to $11.3 million for the three months ended September 30, 2020, which was an increase of $0.6$2.0 million, or 5.2%17.2%. The majority of the increase is related to a $0.3$2.4 million, or 8.2%19.3% increase in repair and maintenance costs and a $0.2 million, or 3.5% increase in payroll costs.

Real estate taxes and insurance. Real estate taxes and insurance costs were $7.6$8.7 million for the three months ended September 30, 20212022 compared to $7.4 million for the three months ended September 30, 2020,2021, which was an increase of approximately $0.2$1.3 million, or 3.0%16.8%. The increase is primarily related to a $0.1$0.6 million, or 1.9%2.9%, increase in property taxes.taxes and a $0.4 million, or 11.9% increase in insurance expense.

Property management fees. Property management fees were $1.5$1.8 million for the three months ended September 30, 2022 compared to $1.6 million for the three months ended September 30, 2021, compared to $1.4 million for the three months ended September 30, 2020, which was an increase of approximately $0.1$0.2 million. The increase between the periods was primarily due to an increase in revenues, which the fee is primarily based on.

Property general and administrative expenses. Property general and administrative expenses were $1.5 million for the three months ended September 30, 2022 compared to $1.3 million for the three months ended September 30, 2021, compared to $1.0 million for the three months ended September 30, 2020, which was an increase of approximately $0.3$0.2 million. The majority of the increase iswas related to a $0.2 million increaseincreases in office operation expenses.professional fees, licenses fees, and locator fees.



Net Operating Income for Our Same Store and Non-Same Store Properties for the Nine Months Ended September 30, 20212022 and 20202021

There are 3534 properties encompassing 13,57613,426 units of apartment space in our same store pool for the nine months ended September 30, 20212022 and 20202021 (our “Same Store” properties). Our Same Store properties exclude the following fiveseven properties in our Portfolio as of September 30, 2021: Fairways at San Marcos,2022: Cutter’s Point, The Verandas at Lake Norman, Creekside at Matthews, Six Forks Station, High House at Cary, The Adair and Cutter’s PointEstates on Maryland as well as the 8174 units that are currently down (see Note 5) that are currently down..


The following table reflects the revenues, property operating expenses and NOI for the nine months ended September 30, 20212022 and 20202021 for our Same Store and Non-Same Store properties (dollars in thousands):

 

 

For the Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

149,027

 

 

$

143,716

 

 

$

5,311

 

 

 

3.7

%

 

$

168,628

 

 

$

148,005

 

 

$

20,623

 

 

 

13.9

%

Other income

 

 

4,295

 

 

 

4,240

 

 

 

55

 

 

 

1.3

%

 

 

4,328

 

 

 

4,271

 

 

 

57

 

 

 

1.3

%

Same Store revenues

 

 

153,322

 

 

 

147,956

 

 

 

5,366

 

 

 

3.6

%

 

 

172,956

 

 

 

152,276

 

 

 

20,680

 

 

 

13.6

%

Non-Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

 

7,278

 

 

 

6,229

 

 

 

1,049

 

 

 

16.8

%

 

 

21,321

 

 

 

8,300

 

 

 

13,021

 

 

N/M

 

Other income

 

 

143

 

 

 

67

 

 

 

76

 

 

 

113.4

%

 

 

326

 

 

 

167

 

 

 

159

 

 

N/M

 

Non-Same Store revenues

 

 

7,421

 

 

 

6,296

 

 

 

1,125

 

 

 

17.9

%

 

 

21,647

 

 

 

8,467

 

 

 

13,180

 

 

N/M

 

Total revenues

 

 

160,743

 

 

 

154,252

 

 

 

6,491

 

 

 

4.2

%

 

 

194,603

 

 

 

160,743

 

 

 

33,860

 

 

 

21.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses (1)

 

 

33,910

 

 

 

32,542

 

 

 

1,368

 

 

 

4.2

%

 

 

37,783

 

 

 

33,180

 

 

 

4,603

 

 

 

13.9

%

Real estate taxes and insurance

 

 

24,534

 

 

 

22,436

 

 

 

2,098

 

 

 

9.4

%

 

 

25,152

 

 

 

24,129

 

 

 

1,023

 

 

 

4.2

%

Property management fees (2)

 

 

4,419

 

 

 

4,273

 

 

 

146

 

 

 

3.4

%

 

 

5,011

 

 

 

4,382

 

 

 

629

 

 

 

14.4

%

Property general and administrative expenses (3)

 

 

3,575

 

 

 

3,231

 

 

 

344

 

 

 

10.6

%

 

 

4,025

 

 

 

3,546

 

 

 

479

 

 

 

13.5

%

Same Store operating expenses

 

 

66,438

 

 

 

62,482

 

 

 

3,956

 

 

 

6.3

%

 

 

71,971

 

 

 

65,237

 

 

 

6,734

 

 

 

10.3

%

Non-Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses (4)

 

 

1,432

 

 

 

1,848

 

 

 

(416

)

 

 

-22.5

%

 

 

4,220

 

 

 

2,162

 

 

 

2,058

 

 

N/M

 

Real estate taxes and insurance

 

 

342

 

 

 

1,049

 

 

 

(707

)

 

 

-67.4

%

 

 

2,518

 

 

 

747

 

 

 

1,771

 

 

N/M

 

Property management fees (2)

 

 

221

 

 

 

231

 

 

 

(10

)

 

 

-4.3

%

 

 

618

 

 

 

258

 

 

 

360

 

 

N/M

 

Property general and administrative expenses (5)

 

 

216

 

 

 

193

 

 

 

23

 

 

 

11.9

%

 

 

526

 

 

 

245

 

 

 

281

 

 

N/M

 

Non-Same Store operating expenses

 

 

2,211

 

 

 

3,321

 

 

 

(1,110

)

 

 

-33.4

%

 

 

7,882

 

 

 

3,412

 

 

 

4,470

 

 

N/M

 

Total operating expenses

 

 

68,649

 

 

 

65,803

 

 

 

2,846

 

 

 

4.3

%

 

 

79,853

 

 

 

68,649

 

 

 

11,204

 

 

 

16.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Miscellaneous income

 

 

633

 

 

 

—

 

 

 

633

 

 

 

0.0

%

 

 

496

 

 

 

633

 

 

 

(137

)

 

 

-21.6

%

Non-Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Miscellaneous income

 

 

872

 

 

 

1,401

 

 

 

(529

)

 

 

-37.8

%

 

 

30

 

 

 

872

 

 

 

(842

)

 

N/M

 

Total operating income

 

 

1,505

 

 

 

1,401

 

 

 

104

 

 

 

7.4

%

 

 

526

 

 

 

1,505

 

 

 

(979

)

 

 

-65.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOI

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store

 

 

87,517

 

 

 

85,474

 

 

 

2,043

 

 

 

2.4

%

 

 

101,481

 

 

 

87,672

 

 

 

13,809

 

 

 

15.8

%

Non-Same Store

 

 

6,082

 

 

 

4,376

 

 

 

1,706

 

 

 

39.0

%

 

 

13,795

 

 

 

5,927

 

 

 

7,868

 

 

N/M

 

Total NOI

 

$

93,599

 

 

$

89,850

 

 

$

3,749

 

 

 

4.2

%

 

$

115,276

 

 

$

93,599

 

 

$

21,677

 

 

 

23.2

%

 

(1)

For the nine months ended September 30, 20212022 and 2020,2021, excludes approximately $(226,000)$3,137,000 and $222,000,$232,000, respectively, of casualty-related expenses/(recoveries).recoveries.


(2)

Fees incurred to an unaffiliated third party that is an affiliate of the noncontrolling limited partner of the OP.

(3)

For the nine months ended September 30, 20212022 and 2020,2021, excludes approximately $1,562,000$1,811,000 and $1,323,000,$1,399,000, 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 and franchise tax fees.

(4)

For the nine months ended September 30, 20212022 and 2020,2021, excludes approximately $316$(66,000) and $(21,000),$6,000, respectively, of casualty-related recoveries.  

(5)

For the nine months ended September 30, 20212022 and 2020,2021, excludes approximately $99,000$224,000 and $177,000,$261,000, 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.

See reconciliation of net income (loss)loss to NOI above under “NOI and Same Store NOI for the Three and Nine Months Ended September 30, 20212022 and 2020.2021.”


Same Store Results of Operations for the Nine Months Ended September 30, 20212022 and 20202021

As of September 30, 2022, our Same Store properties were approximately 94.0% leased with a weighted average monthly effective rent per occupied apartment unit of $1,448. As of September 30, 2021, our Same Store properties were approximately 95.4% leased with a weighted average monthly effective rent per occupied apartment unit of $1,198. As of September 30, 2020, our Same Store properties were approximately 95.0% leased with a weighted average monthly effective rent per occupied apartment unit of $1,122.$1,208. For our Same Store properties, we recorded the following operating results for the nine months ended September 30, 20212022 as compared to the nine months ended September 30, 2020:2021:

Revenues

Rental income. Rental income was $149.0$168.6 million for the nine months ended September 30, 2022 compared to $148.0 million for the nine months ended September 30, 2021, compared to $143.7 million for the nine months ended September 30, 2020, which was an increase of approximately $5.3$20.6 million, or 3.7%13.9%. The majority of the increase is related to a 6.8%19.9% increase in the weighted average monthly effective rent per occupied apartment unit to $1,198$1,448 as of September 30, 2022 from $1,208 as of September 30, 2021, from $1,122 as of September 30, 2020, andpartially offset by a 0.4% increase1.4% decrease in occupancy.

Other income. Other income was $4.3 million for the nine months ended September 30, 20212022 compared to $4.2$4.3 million for the nine months ended September 30, 2020, which was an increase of approximately $0.1 million, or 1.3%. The majority of the increase is related to a $0.1 million decrease in application and administration concessions.2021.

Expenses

Property operating expenses. Property operating expenses were $33.9$37.8 million for the nine months ended September 30, 2022 compared to $33.2 million for the nine months ended September 30, 2021, compared to $32.5 million for the nine months ended September 30, 2020, which was an increase of approximately $1.4$4.6 million, or 4.2%13.9%. The majority of the increase is related to a $1.0$2.4 million, or 8.3%19.3%, increase in repairs and maintenance and a $0.3$1.2 million, or 3.4%9.0%, increase in utilities.payroll.

Real estate taxes and insurance. Real estate taxes and insurance costs were $24.5$25.2 million for the nine months ended September 30, 2022 compared to $24.1 million for the nine months ended September 30, 2021, compared to $22.4 million for the nine months ended September 30, 2020, which was an increase of approximately $2.1$1.1 million, or 9.4%4.2%. The majority of the increase is related to a $1.6$0.6 million, or 8.4%2.9%, increase in property taxes due to higher assessments of valuetax. Additionally, insurance expense increased by taxing authorities and a $0.5$0.4 million, or 15.2%, increase in insurance.11.9%.

Property management fees. Property management fees were $5.0 million for the nine months ended September 30, 2022 compared to $4.4 million for the nine months ended September 30, 2021, compared to $4.3 million for the nine months ended September 30, 2020, which was an increase of approximately $0.1$0.6 million, or 3.4%14.4%. The majority of the increase is related to a $5.3$20.6 million, or 3.7%13.9%, increase in rental income, which the fee is primarily based on.

Property general and administrative expenses. Property general and administrative expenses were $3.6$4.0 million for the nine months ended September 30, 2022 compared to $3.5 million for the nine months ended September 30, 2021, compared to $3.2 million for the nine months ended September 30, 2020, which was an increase of approximately $0.4$0.5 million. The majority of the increase iswas related to a $0.3increases in professional fees, licenses fees, and locator fees of approximately $0.1 million, increase in office operation expenses.$0.1 million, and $0.1 million, respectively.  


FFO, Core FFO and AFFO

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

Since the historical cost accounting convention used for real estate assets requires depreciation except on land, such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP. FFO is defined by NAREIT as net income computed in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization. We compute FFO attributable to common stockholders in accordance with NAREIT’s definition. Our presentation differs slightly in that we begin with net income (loss) before adjusting for amounts attributable to noncontrolling interests and we show the combined amounts attributable to such noncontrolling interests as an adjustment to arrive at FFO attributable to common stockholders.

Core FFO makes certain adjustments to FFO, which are either not likely to occur on a regular basis or are otherwise not representative of the ongoing operating performance of our portfolio. 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. We believe Core FFO is useful to investors as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other REITs that are not as involved in the aforementioned activities.

AFFO makes certain adjustments to Core FFO in order to arrive at a more refined measure of the operating performance of our Portfolio. There is no industry standard definition of AFFO and practice is divergent across the industry. AFFO adjusts Core FFO to remove items such as equity-based compensation expense and the amortization of deferred financing costs incurred in connection with obtaining long-term debt financing, and the noncontrolling interests (as described above) related to these items. We believe AFFO is useful to investors as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other REITs that are not as involved in the aforementioned activities.

The effect of the conversion of OP Units held by noncontrolling limited partners is not reflected in the computation of basic and diluted FFO, Core FFO and AFFO per share, as they are exchangeable for common stock on a one-for-one basis. 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 10 to our consolidated financial statements for additional information.

We believe that the use of FFO, Core FFO and AFFO, combined with the required GAAP presentations, improves the understanding of operating results of REITs among investors and makes comparisons of operating results among such companies more meaningful. While FFO, Core FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations or net income (loss) as defined by GAAP and should not be considered as an alternative or substitute to those measures in evaluating our liquidity or operating performance. FFO, Core FFO and AFFO do not purport to be indicative of cash available to fund our future cash requirements. Further, our computation of FFO, Core FFO and AFFO may not be comparable to FFO, Core FFO and AFFO reported by other REITs that do not define FFO in accordance with the current NAREIT definition or that interpret the current NAREIT definition or define Core FFO or AFFO differently than we do.


The following table reconciles our calculations of FFO, Core FFO and AFFO to net income (loss),loss, the most directly comparable GAAP financial measure, for the three and nine months ended September 30, 20212022 and 20202021 (in thousands, except per share amounts):

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

 

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

 

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

% Change (1)

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

% Change (1)

 

 

Net income (loss)

 

$

(5,407

)

 

$

29,641

 

 

$

(15,725

)

 

$

48,362

 

 

N/M

 

 

Net loss

 

$

(599

)

 

$

(5,407

)

 

$

(13,093

)

 

$

(15,725

)

 

 

-16.7

%

 

Depreciation and amortization

 

 

21,591

 

 

 

17,723

 

 

 

62,335

 

 

 

62,479

 

 

 

-0.2

%

 

 

 

25,224

 

 

 

21,591

 

 

 

74,490

 

 

 

62,335

 

 

 

19.5

%

 

Gain on sales of real estate

 

 

—

 

 

 

(30,160

)

 

 

—

 

 

 

(69,151

)

 

N/M

 

 

Adjustment for noncontrolling interests

 

 

(49

)

 

 

(52

)

 

 

(140

)

 

 

(125

)

 

 

12.0

%

 

 

 

(99

)

 

 

(49

)

 

 

(228

)

 

 

(140

)

 

N/M

 

 

FFO attributable to common stockholders

 

 

16,135

 

 

 

17,152

 

 

 

46,470

 

 

 

41,565

 

 

 

11.8

%

 

 

 

24,526

 

 

 

16,135

 

 

 

61,169

 

 

 

46,470

 

 

 

31.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO per share - basic

 

$

0.64

 

 

$

0.70

 

 

$

1.85

 

 

$

1.68

 

 

 

10.1

%

 

 

$

0.96

 

 

$

0.64

 

 

$

2.39

 

 

$

1.85

 

 

 

29.2

%

 

FFO per share - diluted

 

$

0.64

 

 

$

0.69

 

 

$

1.85

 

 

$

1.65

 

 

 

12.1

%

 

 

$

0.96

 

 

$

0.64

 

 

$

2.39

 

 

$

1.85

 

 

 

29.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on extinguishment of debt and modification costs

 

 

—

 

 

 

596

 

 

 

328

 

 

 

1,470

 

 

N/M

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

328

 

 

N/M

 

 

Casualty-related expenses/(recoveries)

 

 

120

 

 

 

(47

)

 

 

(272

)

 

 

726

 

 

N/M

 

 

 

 

(2,976

)

 

 

120

 

 

 

666

 

 

 

(272

)

 

N/M

 

 

Casualty gains

 

 

—

 

 

 

(4,960

)

 

 

(2,379

)

 

 

(3,932

)

 

 

-39.5

%

 

 

 

—

 

 

 

—

 

 

 

(357

)

 

 

(2,379

)

 

N/M

 

 

Pandemic expense

(2)

 

11

 

 

 

191

 

 

 

46

 

 

 

475

 

 

N/M

 

 

 

 

—

 

 

 

11

 

 

 

—

 

 

 

46

 

 

N/M

 

 

Amortization of deferred financing costs - acquisition term notes

 

 

150

 

 

 

345

 

 

 

499

 

 

 

1,039

 

 

N/M

 

 

 

 

281

 

 

 

150

 

 

 

786

 

 

 

499

 

 

N/M

 

 

Adjustment for noncontrolling interests

 

 

—

 

 

 

11

 

 

 

6

 

 

 

2

 

 

N/M

 

 

 

 

11

 

 

 

—

 

 

 

(3

)

 

 

6

 

 

N/M

 

 

Core FFO attributable to common stockholders

 

 

16,416

 

 

 

13,288

 

 

 

44,698

 

 

 

41,345

 

 

 

8.1

%

 

 

 

21,842

 

 

 

16,416

 

 

 

62,261

 

 

 

44,698

 

 

 

39.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core FFO per share - basic

 

$

0.65

 

 

$

0.55

 

 

$

1.78

 

 

$

1.67

 

 

 

6.6

%

 

 

$

0.85

 

 

$

0.65

 

 

$

2.43

 

 

$

1.78

 

 

 

36.5

%

 

Core FFO per share - diluted

 

$

0.65

 

 

$

0.53

 

 

$

1.78

 

 

$

1.64

 

 

 

8.5

%

 

 

$

0.85

 

 

$

0.65

 

 

$

2.43

 

 

$

1.78

 

 

 

36.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of deferred financing costs - long term debt

 

 

375

 

 

 

357

 

 

 

1,082

 

 

 

1,102

 

 

 

-1.8

%

 

 

 

453

 

 

 

375

 

 

 

1,247

 

 

 

1,082

 

 

 

15.2

%

 

Equity-based compensation expense

 

 

1,807

 

 

 

1,434

 

 

 

5,211

 

 

 

4,069

 

 

 

28.1

%

 

 

 

2,025

 

 

 

1,807

 

 

 

5,906

 

 

 

5,211

 

 

 

13.3

%

 

Adjustment for noncontrolling interests

 

 

(7

)

 

 

(5

)

 

 

(19

)

 

 

(15

)

 

 

26.7

%

 

 

 

(10

)

 

 

(7

)

 

 

(27

)

 

 

(19

)

 

 

42.1

%

 

AFFO attributable to common stockholders

 

 

18,591

 

 

 

15,074

 

 

 

50,972

 

 

 

46,501

 

 

 

9.6

%

 

 

 

24,310

 

 

 

18,591

 

 

 

69,387

 

 

 

50,972

 

 

 

36.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AFFO per share - basic

 

$

0.74

 

 

$

0.62

 

 

$

2.03

 

 

$

1.88

 

 

 

8.0

%

 

 

$

0.95

 

 

$

0.74

 

 

$

2.71

 

 

$

2.03

 

 

 

33.5

%

 

AFFO per share - diluted

 

$

0.74

 

 

$

0.60

 

 

$

2.03

 

 

$

1.85

 

 

 

9.7

%

 

 

$

0.95

 

 

$

0.74

 

 

$

2.71

 

 

$

2.03

 

 

 

33.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

 

 

25,175

 

 

 

24,372

 

 

 

25,128

 

 

 

24,688

 

 

 

1.8

%

 

Weighted average common shares outstanding - diluted

 

 

25,175

 

 

 

24,926

 

 

 

25,128

 

 

 

25,194

 

 

 

-0.3

%

 

Weighted average common stock outstanding - basic

 

 

25,598

 

 

 

25,175

 

 

 

25,630

 

 

 

25,128

 

 

 

2.0

%

 

Weighted average common stock outstanding - diluted

 

 

25,598

 

 

 

25,175

 

 

 

25,630

 

 

 

25,128

 

 

 

2.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.34125

 

 

$

0.3125

 

 

$

1.0238

 

 

$

0.938

 

 

 

9.1

%

 

 

$

0.38

 

 

$

0.34

 

 

$

1.14

 

 

$

1.02

 

 

 

11.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO Coverage - diluted

(3)

1.88x

 

 

2.20x

 

 

1.81x

 

 

1.76x

 

 

 

2.73

%

 

(2)

2.52x

 

 

1.88x

 

 

2.10x

 

 

1.81x

 

 

 

16.02

%

 

Core FFO Coverage - diluted

(3)

1.91x

 

 

1.71x

 

 

1.74x

 

 

1.75x

 

 

 

-0.55

%

 

(2)

2.25x

 

 

1.91x

 

 

2.13x

 

 

1.74x

 

 

 

22.60

%

 

AFFO Coverage - diluted

(3)

2.16x

 

 

1.94x

 

 

1.98x

 

 

1.97x

 

 

 

0.54

%

 

(2)

2.50x

 

 

2.16x

 

 

2.38x

 

 

1.98x

 

 

 

19.88

%

 

 

(1)

Represents the percentage change for the nine months ended September 30, 20212022 compared to the nine months ended September 30, 2020.2021.

(2)

Represents additional cleaning, disinfecting and other costs incurred at the properties related to COVID-19.

(3)

Indicates coverage ratio of FFO/Core FFO/AFFO per common share (diluted) over dividends declared per common share during the period.


The three months ended September 30, 20212022 as compared to the three months ended September 30, 20202021

FFO was $24.5 million for the three months ended September 30, 2022 compared to $16.1 million for the three months ended September 30, 2021, compared to $17.2 million for the three months ended September 30, 2020, which was a decreasean increase of approximately $1.1$8.4 million. The change in our FFO between the periods primarily relates to a decrease in casualty gains of $5.0 million and increase in property operating expenses of $0.9 million, partially offset by an increase in total revenues of $5.4 million.$11.7 million, partially offset by increases in operating expenses.

Core FFO was $21.8 million for the three months ended September 30, 2022 compared to $16.4 million for the three months ended September 30, 2021, compared to $13.3 million for the three months ended September 30, 2020, which was an increase of approximately $3.1$5.4 million. The change in our Core FFO between the periods primarily relates to decrease in casualty gains of $5.0 million andan increase in total revenues,FFO, partially offset by a decreasean increase in FFO.casualty-related recoveries gains of $3.0 million.

AFFO was $24.3 million for the three months ended September 30, 2022 compared to $18.6 million for the three months ended September 30, 2021, compared to $15.1 million for the three months ended September 30, 2020, which was an increase of approximately $3.5$5.7 million. The change in our AFFO between the periods primarily relates to an increase in Core FFO and an increase in equity-based compensation expense of $0.4$0.2 million.

The nine months ended September 30, 20212022 as compared to the nine months ended September 30, 20202021

FFO was $61.2 million for the nine months ended September 30, 2022 compared to $46.5 million for the nine months ended September 30, 2021, compared to $41.6 million for the nine months ended September 30, 2020, which was an increase of approximately $4.9$14.7 million. The change in our FFO between the periods primarily relates to an increase in total revenues of $6.5 million.$33.9 million, partially offset by an increase in operating expenses.

Core FFO was $62.3 million for the nine months ended September 30, 2022 compared to $44.7 million for the nine months ended September 30, 2021, compared to $41.3 million for the nine months ended September 30, 2020, which was an increase of approximately $3.4$17.6 million. The change in our Core FFO between the periods primarily relates to an increase in FFO and decreasean increase in casualty gainsrelated expenses of $1.6$0.9 million, partially offset by a decreaseand an increase in loss on extinguishmentamortization of debt and modificationdeferred financing costs - acquisition term notes of approximately $1.1$0.3 million.

AFFO was $69.4 million for the nine months ended September 30, 2022 compared to $51.0 million for the nine months ended September 30, 2021, compared to $46.5 million for the nine months ended September 30, 2020, which was an increase of approximately $4.5$18.4 million. The change in our AFFO between the periods primarily relates to an increase in Core FFO and an increase of equity-based compensation expense of $1.1$0.7 million.

Liquidity and Capital Resources

Our short-term liquidity 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;

 

•

acquisitionsacquisition 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.

We expect to meet our short-term liquidity requirements generally through net cash provided by operations and existing cash balances.balances and any unused capacity on the Corporate Credit Facility. As of September 30, 2021,2022, we had approximately $14.5$15.3 million of renovation value-add reserves for our planned capital expenditures to implement our value-add program. Renovation value-add reserves are not required to be held in escrow by a third party. We may reallocate these funds, at our discretion, to pursue other investment opportunities or meet our short-term liquidity requirements.

Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional multifamily properties, renovations and other capital expenditures to improve our multifamily properties and scheduled debt payments and distributions. We expect to meet our long-term liquidity 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. However, there are a number of factors that may have a material adverse effect on our ability to access these capital sources, including the state of overall equity and credit markets, our degree of leverage, our unencumbered asset base and borrowing restrictions imposed by lenders (including as a


result of any failure to comply with financial covenants in our existing and future indebtedness), general market conditions for REITs, our operating


performance and liquidity, market perceptions about us and restrictions on sales of properties under the Code. The Company continues to monitor the impact on COVID-19 and its impact on future rent collections, valuation of real estate investments, impact on cash flow and ability to refinance or repay debt. The success of our business strategy will depend, in part, on our ability to access these various capital sources.

In addition to our value-add program, our multifamily properties will require periodic capital expenditures and renovation to remain competitive. Also, acquisitions, redevelopments, or expansions of our multifamily properties will require significant capital outlays. Long-term, we may not be able to fund such capital improvements solely from net cash provided by operations because we must distribute annually at least 90% of our REIT taxable income, determined without regard to the deductions for dividends paid and excluding net capital gains, to qualify and maintain our qualification as a REIT, and we are subject to tax on any retained income and gains. As a result, our ability to fund capital expenditures, acquisitions, or redevelopment through retained earnings long-term is limited. Consequently, we expect to rely heavily upon the availability of debt or equity capital for these purposes. If we are unable to obtain the necessary capital on favorable terms, or at all, our financial condition, liquidity, results of operations, and prospects could be materially and adversely affected.

On February 20, 2019, the Company, the OP and the Adviser entered into separate equity distribution agreements with each of Jefferies, Raymond James and Truist (collectively, the “2019 ATM Sales Agents”), pursuant to which the Company could 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 $100,000,000 (the “2019 ATM Program”).  Sales of shares of common stock, if any, could be made in transactions that were 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.  In addition to the issuance and sale of shares of common stock, the Company could enter into forward sale agreements with each of Jefferies and Raymond James, or their respective affiliates, through the 2019 ATM Program. During the three months ended March 31, 2021, the Company issued 560,000 shares of common stock at an average price of $50.00 per share for gross proceeds of $28.0 million under the 2019 ATM Program. The Company paid approximately $0.4 million in fees to the 2019 ATM Sales Agents with respect to such sales and incurred other issuance costs of approximately $0.4 million, both of which were netted against the gross proceeds and recorded in additional paid in capital. On February 27, 2020, the 2019 ATM Program reached aggregate sales of $100,000,000 and therefore expired.

On March 4, 2020, the Company, the OP and the Adviser entered into separate equity distribution agreements with each of Jefferies, Raymond James, KeyBanc and Truistthe 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.$225,000,000 (the “2020 ATM Program”).  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.  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, or their respective affiliates, through the 2020 ATM Program.  During the yearnine months ended December 31, 2020,September 30, 2022, the Company issued 718,30652,091 shares of common stock at an average price of $43.92$83.16 per share for gross proceeds of $31.5$4.3 million under the 2020 ATM Program. The Company paid approximately $0.5$0.1 million in fees to the 2020 ATM Sales Agents with respect to such sales and incurred other issuance costs of approximately $0.6$0.3 million, both of which were netted against the gross proceeds and recorded in additional paid in capital. During the nine months ended September 30, 2021, the Company issued 101,587 shares of common stock at an average price of $66.36 per share for gross proceeds of $6.7 million under the 2020 ATM Program. The 2020 ATM Program may be terminated by the Company at any time and expires automatically once aggregate sales under the 2020 ATM Program reach $225,000,000capital (see Note 8 to our consolidated financial statements).

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 September 30, 2021.2022.


Cash Flows

The following table presents selected data from our consolidated statements of cash flows for the nine months ended September 30, 20212022 and 20202021 (in thousands):

 

 

For the Nine Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Net cash provided by operating activities

 

$

57,914

 

 

$

46,524

 

 

$

69,582

 

 

$

57,914

 

Net cash provided by (used in) investing activities

 

 

(222,955

)

 

 

99,399

 

Net cash provided by (used in) financing activities

 

 

175,310

 

 

 

(108,489

)

Net cash used in investing activities

 

 

(179,536

)

 

 

(222,955

)

Net cash provided by financing activities

 

 

87,873

 

 

 

175,310

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

10,269

 

 

 

37,434

 

 

 

(22,081

)

 

 

10,269

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

57,015

 

 

 

71,182

 

 

 

88,696

 

 

 

57,015

 

Cash, cash equivalents and restricted cash, end of period

 

$

67,284

 

 

$

108,616

 

 

$

66,615

 

 

$

67,284

 


 

Cash flows from operating activities. During the nine months ended September 30, 2021,2022, net cash provided by operating activities was $57.9$69.6 million compared to net cash provided by operating activities of $46.5$57.9 million for the nine months ended September 30, 2020.2021. The change in cash flows from operating activities was mainly due to an increase in total revenues and a decrease in property operating expenses.revenues.

Cash flows from investing activities. During the nine months ended September 30, 2021,2022, net cash used in investing activities was $223.0$179.5 million compared to net cash provided byused in investing activities of $99.4$223.0 million for the nine months ended September 30, 2020.2021. The change in cash flows from investing activities was mainly due to our acquisition activity in 2022 and 2021 and disposition activity in 2020 partially offset by an increaseand a decrease in insurance proceeds received from casualty losses of $6.8 million.losses.

Cash flows from financing activities. During the nine months ended September 30, 2021,2022, net cash provided by financing activities was $175.3$87.9 million compared to net cash used inprovided by financing activities of $108.5$175.3 million for the nine months ended September 30, 2020.2021. The change in cash flows from financing activities was mainly due to a netan increase in debtrepurchases of approximately $274.1common stock of $11.1 million, a decrease in common stock repurchasesmortgage proceeds received of approximately $44.5$29.7 million, and a decrease in credit facilities proceeds received of $230 million, partially offset by a decrease in proceeds from the issuancecredit facility payments of common stock of approximately $30.7 million (net of Sales Agents fees and other legal fees) between the periods.$193 million.

Debt, Derivatives and Hedging Activity

Mortgage Debt

As of September 30, 2021,2022, our subsidiaries had aggregate mortgage debt outstanding to third parties of approximately $1.3$1.4 billion at a weighted average interest rate of 1.77%4.58% and an adjusted weighted average interest rate of 2.93%2.80%. For purposes of calculating the adjusted weighted average interest rate of our mortgage debt outstanding, we have included the weighted average fixed rate of 1.3461%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. 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. The interest rate swap agreements generally have a term of four to five years and effectively establish a fixed interest rate on debt on the underlying notional amounts. 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 September 30, 2021,2022, interest rate swap agreements effectively covered 97%91% of our $1.2$1.3 billion of floating rate mortgage debt outstanding.

The interest rate cap agreements generally have a term of three to four years, cover the outstanding principal amount of the underlying debt and are generally required by our lenders. Under the interest rate cap agreements, we pay a fixed fee in exchange for the counterparty to pay any interest above a maximum rate. As of September 30, 2021,2022, interest rate cap agreements covered $412.2$537.1 million of our $1.2$1.3 billion of floating rate mortgage debt outstanding. These interest rate cap agreements effectively cap one-month LIBOR on $412.2$537.1 million of our floating rate mortgage debt at a weighted average rate of 5.02%4.67%.

On October 4, 2022, the Company entered into an agreement with KeyBank as a Freddie Mac servicer to refinance $790.5 million of its first mortgage debt relating to 19 properties that had original loan maturities ranging from July 1, 2024 to July 1, 2028.  The new loan is expected to have a 10-year term and bear interest at an annual rate of 30-day average SOFR plus 155 basis points.  The loan will begin amortizing after the first 5 years.  The loan is expected to close on or before November 30, 2022.

We intend to invest in additional multifamily properties as suitable opportunities arise and adequate sources of equity and debt financing are available. We expect that future investments in properties, including any improvements or renovations of current or newly acquired properties, will depend on and will be financed by, in whole or in part, our existing cash, future borrowings and the proceeds from additional issuances of common stock or other securities or property dispositions.


Although we expect to be subject to restrictions on our ability to incur indebtedness, we expect that we will be able to refinance existing indebtedness or incur additional indebtedness for acquisitions or other purposes, if needed. 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.

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.


Corporate Credit Facility

 

On March 25, 2022, the Company entered into a loan modification agreement by and among the Company, the OP, Truist Bank and the Lenders party thereto, which modified the Company’s existing credit agreement, dated as of June 30, 2021 the Company, through the OP, entered into a secured $250.0 million credit facility with Truist Bank (“Truist”), as administrative agent,(as amended and supplemented, the lenders from time to time party thereto (the “Corporate Credit Facility”). $225As of September 30, 2022, there was $350.0 million ofavailable for borrowing under 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 Corporate Credit Facility, the Company, through the OP, terminated its $225.0 million revolving credit facility with Truist, as administrative agent, and the lenders from time to time party thereto, prior to the maturity date of January 28, 2022.Facility. Subject to conditions provided in the Corporate Credit Facility, the commitments under Corporate Credit Facility may be increased up to an additional $100.0$150.0 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. The Corporate Credit Facility will mature on June 30, 2024 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 and on December 31, 2021 with respect to the term loan. On September 9, 2021, the Company, through the OP, modified the Corporate Credit Facility to provide for an additional $35.0 million term loan with a maturity dateterm. As of December 31, 2021, increasing the Corporate Credit Facility from $250 million to $285 million. In conjunction with the increase in the facility, the Company incurred costs of $0.3 million in obtaining the additional financing through the modification (see “Deferred Financing Costs” below). On September 30, 2021, the Company made a $10.0 million principal payment on the term loans resulting in $275.02022, there was $335.0 million in aggregate principal outstanding as of September 30, 2021 on the Corporate Credit Facility, with $50.0 million of the term loans maturing on December 31, 2021. The Company intends on using the net cash proceeds from the dispositions of its held-for-sale properties, Beechwood Terrace and Cedar Pointe, to repay the remaining $50.0 million term loans that mature on December 31, 2021 (see Note 12).

Advances under the 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. 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.

The Corporate Credit Facility is guaranteed bya 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 September 30, 2022, the Company and the obligations under thebelieves it is compliant with all provisions. For additional information regarding our Corporate Credit Facility, are, subject to some exceptions, secured by a continuing security interest in substantially all of the assets of the Company. The Company is in compliance with all the covenants in its Corporate Credit Facility.see Note 6.

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 nineeleven interest rate swap transactions with KeyBank and two with Truist (collectively the “Counterparties”) with a combined notional amount of $1.2 billion which are effective as of September 30, 2021.billion. As of September 30, 2021,2022, the interest rate swaps we have entered into effectively replace the floating interest rate (one-month LIBOR) with respect to $1.2 billion of our floating rate mortgage debt outstanding with a weighted average fixed rate of 1.3461%1.0682%. During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 1.3461%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. 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 6 and 7 to our consolidated financial statements for additional information.


The following table contains summary information regarding our outstanding interest rate swaps (dollars in thousands):

 

Effective Date

 

Termination Date

 

Counterparty

 

Notional Amount

 

 

Fixed Rate (1)

 

 

 

Termination Date

 

Counterparty

 

Notional Amount

 

 

Fixed Rate (1)

 

 

April 1, 2017

 

April 1, 2022

 

KeyBank

 

$

100,000

 

 

 

1.9570

%

 

May 1, 2017

 

April 1, 2022

 

KeyBank

 

 

50,000

 

 

 

1.9610

%

 

July 1, 2017

 

July 1, 2022

 

KeyBank

 

 

100,000

 

 

 

1.7820

%

 

June 1, 2019

 

June 1, 2024

 

KeyBank

 

 

50,000

 

 

 

2.0020

%

 

 

June 1, 2024

 

KeyBank

 

 

50,000

 

 

 

2.0020

%

 

June 1, 2019

 

June 1, 2024

 

Truist

 

 

50,000

 

 

 

2.0020

%

 

 

June 1, 2024

 

Truist

 

 

50,000

 

 

 

2.0020

%

 

September 1, 2019

 

September 1, 2026

 

KeyBank

 

 

100,000

 

 

 

1.4620

%

 

 

September 1, 2026

 

KeyBank

 

 

100,000

 

 

 

1.4620

%

 

September 1, 2019

 

September 1, 2026

 

KeyBank

 

 

125,000

 

 

 

1.3020

%

 

 

September 1, 2026

 

KeyBank

 

 

125,000

 

 

 

1.3020

%

 

January 3, 2020

 

September 1, 2026

 

KeyBank

 

 

92,500

 

 

 

1.6090

%

 

 

September 1, 2026

 

KeyBank

 

 

92,500

 

 

 

1.6090

%

 

March 4, 2020

 

June 1, 2026

 

Truist

 

 

100,000

 

 

 

0.8200

%

 

 

June 1, 2026

 

Truist

 

 

100,000

 

 

 

0.8200

%

 

June 1, 2021

 

September 1, 2026

 

KeyBank

 

 

200,000

 

 

 

0.8450

%

 

 

September 1, 2026

 

KeyBank

 

 

200,000

 

 

 

0.8450

%

 

June 1, 2021

 

September 1, 2026

 

KeyBank

 

 

200,000

 

 

 

0.9530

%

 

 

September 1, 2026

 

KeyBank

 

 

200,000

 

 

 

0.9530

%

 

March 1, 2022

 

March 1, 2025

 

Truist

 

 

145,000

 

 

 

0.5730

%

 

March 1, 2022

 

March 1, 2025

 

Truist

 

 

105,000

 

 

 

0.6140

%

 

 

 

 

 

 

$

1,167,500

 

 

 

1.3461

%

(2)

 

 

 

 

 

 

1,167,500

 

 

 

1.0682

%

(2)

 

(1)

The floating rate option for the interest rate swaps is one-month LIBOR. As of September 30, 2021,2022, one-month LIBOR was 0.08025%3.14%.

(2)

Represents the weighted average fixed rate of the interest rate swaps.

 

As of September 30, 2021,2022, 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)

 

 

 

Termination Date

 

Counterparty

 

Notional Amount

 

 

Fixed Rate (1)

 

 

March 1, 2022

 

March 1, 2025

 

Truist

 

$

145,000

 

 

 

0.5730

%

 

March 1, 2022

 

March 1, 2025

 

Truist

 

 

105,000

 

 

 

0.6140

%

 

September 1, 2026

 

January 1, 2027

 

KeyBank

 

 

92,500

 

 

 

1.7980

%

 

 

January 1, 2027

 

KeyBank

 

$

92,500

 

 

 

1.7980

%

 

 

 

 

 

 

$

342,500

 

 

 

0.9164

%

(2)

 

(1)

The floating rate option for the interest rate swaps is one-month LIBOR. As of September 30, 2021,2022, one-month LIBOR was 0.08025%3.14%.


(2)

Represents the weighted average fixed rate of the forward interest rate swaps.

Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of September 30, 20212022 for the next five calendar years subsequent to September 30, 2021.2022. We used one-month LIBOR as of September 30, 20212022 to calculate interest expense due by period on our floating rate debt and net interest expense due by period on our interest rate swaps.

 

 

 

Payments Due by Period (in thousands)

 

 

 

Payments Due by Period (in thousands)

 

 

 

Total

 

 

2021

 

 

2022

 

 

2023

 

 

2024

 

 

2025

 

 

Thereafter

 

 

 

Total

 

 

Remainder of 2022

 

 

2023

 

 

2024

 

 

2025

 

 

2026

 

 

Thereafter

 

Operating Properties Mortgage Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal payments

 

 

$

1,234,836

 

 

$

315

 

 

$

1,508

 

 

$

21,252

 

 

$

395,098

 

 

$

205,227

 

 

$

611,436

 

 

 

$

1,275,372

 

 

$

313

 

 

$

20,925

 

 

$

326,697

 

 

$

191,105

 

 

$

423,149

 

 

$

313,183

 

Interest expense

(1)

 

 

127,194

 

 

 

5,660

 

 

 

23,301

 

 

 

27,500

 

 

 

26,943

 

 

 

21,535

 

 

 

22,255

 

(1)

 

 

121,328

 

 

 

8,699

 

 

 

33,758

 

 

 

26,951

 

 

 

21,989

 

 

 

16,182

 

 

 

13,750

 

Total

 

 

$

1,362,030

 

 

$

5,975

 

 

$

24,809

 

 

$

48,752

 

 

$

422,041

 

 

$

226,762

 

 

$

633,691

 

 

 

$

1,396,700

 

 

$

9,012

 

 

$

54,683

 

 

$

353,648

 

 

$

213,094

 

 

$

439,331

 

 

$

326,933

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held For Sale Property Mortgage Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal payments

 

 

$

40,665

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

40,665

 

 

$

—

 

 

 

$

82,971

 

 

$

—

 

 

$

—

 

 

$

68,160

 

 

$

14,811

 

 

$

—

 

 

$

—

 

Interest expense

 

 

 

3,502

 

 

 

155

 

 

 

652

 

 

 

852

 

 

 

1,060

 

 

 

783

 

 

 

—

 

 

 

 

7,856

 

 

 

1,010

 

 

 

4,006

 

 

 

2,337

 

 

 

503

 

 

 

—

 

 

 

—

 

Total

 

 

$

44,167

 

 

$

155

 

 

$

652

 

 

$

852

 

 

$

1,060

 

 

$

41,448

 

 

$

—

 

 

 

$

90,827

 

 

$

1,010

 

 

$

4,006

 

 

$

70,497

 

 

$

15,314

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Facility

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal payments

 

 

$

275,000

 

 

$

50,000

 

 

$

—

 

 

$

—

 

 

$

225,000

 

 

$

—

 

 

$

—

 

 

 

$

335,000

 

 

$

—

 

 

$

—

 

 

$

335,000

 

 

$

—

 

 

$

—

 

 

$

—

 

Interest expense

 

 

 

18,548

 

 

 

1,753

 

 

 

5,891

 

 

 

6,994

 

 

 

3,910

 

 

 

—

 

 

 

—

 

 

 

 

32,932

 

 

 

4,733

 

 

 

18,851

 

 

 

9,348

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

 

$

293,548

 

 

$

51,753

 

 

$

5,891

 

 

$

6,994

 

 

$

228,910

 

 

$

—

 

 

$

—

 

 

 

$

367,932

 

 

$

4,733

 

 

$

18,851

 

 

$

344,348

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total contractual obligations and commitments

 

 

$

1,699,745

 

 

$

57,883

 

 

$

31,352

 

 

$

56,598

 

 

$

652,011

 

 

$

268,210

 

 

$

633,691

 

(2)

 

$

1,855,459

 

 

$

14,755

 

 

$

77,540

 

 

$

768,493

 

 

$

228,408

 

 

$

439,331

 

 

$

326,933

 

 

(1)

Interest expense obligations includes the impact of expected settlements on interest rate swaps which have been entered into in order to fix the interest rate on the hedged portion of our floating rate debt obligations. As of September 30, 2021,2022, we had entered into eleven interest rate swap transactions with a combined notional amount of $1.2 billion. 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 September 30, 20212022 to determine our expected settlements through the terms of the interest rate swaps.

Corporate Credit Facility

The Corporate Credit Facility will mature on June 30, 2024 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.

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. For the three months ended September 30, 2022 and 2021, the Company incurred advisory and administrative fees of $1.9 million and $1.9 million, respectively. For the nine months ended September 30, 2022 and 2021, advisory and administrative fees were $5.6 million and $5.7 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. We expect to roll out this service to our other properties in the future. As of September 30, 2021,2022, the Company has funded approximately $0.2$0.3 million to NLMF Holdco, LLC which is included in prepaid and other assets on the consolidated balance sheet of the Company. For the nine months ended September 30, 2022, the Company incurred expenses of $0.1 million for fiber internet service which is included in property operating expenses on the consolidated statement of operations and comprehensive income (loss).

 


Capital Expenditures and Value-Add Program

We anticipate incurring average annual repairs and maintenance expense of $575 to $725 per apartment unit in connection with the ongoing operations of our business. These expenditures are expensed as incurred. In addition, we reserve, on average, approximately $250 to $350 per apartment unit for non-recurring capital expenditures and/or lender required replacement reserves. When incurred, these expenditures are either capitalized or expensed, in accordance with GAAP, depending on the type of the expenditure. Although we will continuously monitor the adequacy of this average, we believe these figures to be sufficient to maintain the properties at a high level in the markets in which we operate. A majority of the properties in our Portfolio were underwritten and acquired with the premise that we would invest $4,000 to $10,000 per unit in the first 36 months of ownership, in an effort to add value to the asset’s exterior and interiors. In many cases, we reserve cash at the closing of each acquisition to fund these planned capital expenditures and value-add improvements. As of September 30, 2021,2022, we had approximately $14.5$15.3 million of renovation value-add reserves for our planned capital expenditures and other expenses to implement our value-add program, which will complete approximately 1,751 planned interior rehabs.program. The following table sets forth a summary of our capital expenditures related to our value-add program for the three and nine months ended September 30, 20212022 and 20202021 (in thousands):

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

Rehab Expenditures

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Interior

(1)

$

2,739

 

 

$

2,310

 

 

$

8,098

 

 

$

7,433

 

(1)

$

6,946

 

 

$

2,739

 

 

$

17,584

 

 

$

11,278

 

Exterior and common area

 

 

1,498

 

 

 

4,474

 

 

 

6,779

 

 

 

15,432

 

 

 

3,519

 

 

 

1,498

 

 

 

6,874

 

 

 

7,773

 

Total rehab expenditures

 

$

4,237

 

 

$

6,784

 

 

$

14,877

 

 

$

22,865

 

 

$

10,465

 

 

$

4,237

 

 

$

24,458

 

 

$

19,051

 

 

(1)

Includes total capital expenditures during the period on completed and in-progress interior rehabs. For the nine months ended September 30, 20212022 and 2020,2021, we completed full and partial interior rehabs on 9111,830 and 1,368911 units, respectively.  

Freddie Mac Multifamily Green Advantage Program

In order to obtain more favorable pricing on our mortgage debt financing with Freddie Mac, the Company decided to participate in Freddie Mac’s Multifamily Green Advantage program (the “Green Program”). As of September 30, 2021, the Company has completed its Green Program improvements on all but one property, which is expected to be completed in 2021. We expect to reduce water/sewer costs at each property where the Green Program is implemented by at least 15% through the replacement of showerheads, plumbing fixtures and toilets with modern energy efficient upgrades. Due to changes in Freddie Mac’s requirements to participate in the Green Program, we are not implementing this on acquisitions going forward.

Income Taxes

We anticipate that we will continue to qualify to be taxed as a REIT for U.S. federal income tax purposes, and we intend to continue to be organized and to operate in a manner that will permit us to qualify as a REIT. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders. As a REIT, we will be subject to 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. 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 nine months ended September 30, 20212022 and 2020.2021.


If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax on our taxable income at regular corporate income tax rates, and dividends paid to our stockholders would not be deductible by us in computing taxable income. Any resulting corporate liability could be substantial and could materially and adversely affect our net income (loss) and net cash available for distribution to stockholders. Unless we were entitled to relief under certain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT.

We evaluate the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are “more-likely-than-not” (greater than 50 percent probability) of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Our management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. We have no examinations in progress and none are expected at this time.


We recognize our tax positions and evaluate them using a two-step process. First, we determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. 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 September 30, 2021.2022. We and our subsidiaries are subject to federal income tax as well as income tax of various state and local jurisdictions. The 2021, 2020 2019 and 20182019 tax years remain open to examination by tax jurisdictions to which our subsidiaries and we are subject. 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. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains. As a REIT, we will be subject to 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 intend to make regular quarterly dividend payments of all or substantially all of our taxable income to holders of our common stock out of assets legally available for this purpose, if and to the extent authorized by our Board. Before we make any dividend payments, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our debt payable. 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.

We will make dividend payments based on our estimate of taxable earnings per share of common stock, but not earnings calculated pursuant to GAAP. Our dividends and taxable income and GAAP earnings will typically differ due to items such as depreciation and amortization, fair value adjustments, differences in premium amortization and discount accretion, and non-deductible general and administrative expenses. Our quarterly dividends per share may be substantially different than our quarterly taxable earnings and GAAP earnings per share. Our Board declared our third quarterly dividend of 20212022 of $0.34125$0.38 per share on July 26, 202125, 2022 which was paid on September 30, 20212022 and funded out of cash flows from operations.

Off-Balance Sheet Arrangements

As of September 30, 20212022 and December 31, 2020,2021, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our management to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate these judgments, assumptions and estimates for changes that would affect the reported amounts. These estimates are based on management’s historical industry experience and on various other judgments and assumptions that are believed to be reasonable under the circumstances. Actual results may differ from


these judgments, assumptions and estimates. Below is a discussion of the accounting policies that we consider critical to understanding our financial condition or results of operations where there is uncertainty or where significant judgment is required. 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 quarterly report.

Purchase Price Allocation

Upon acquisition of a property considered to be an asset acquisition, the purchase price and related acquisition costs (“total consideration”) are allocated to land, buildings, improvements, furniture, fixtures, and equipment, and intangible lease assets based on relative fair value in accordance with FASB ASC 805, Business Combinations. Acquisition costs are capitalized in accordance with FASB ASC 805.


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. If any debt is assumed in an acquisition, the difference between the fair value, which is estimated using inputs that are classified within Level 2 of the fair value hierarchy, and the face value of debt is recorded as a premium or discount and amortized as interest expense over the life of the debt assumed.

Impairment

Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The key inputs into our impairment analysis include, but are not limited to, the holding period, net operating income, and capitalization rates. In such cases, we will evaluate the recoverability of such real estate assets based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate asset. If impaired, the real estate asset will be written down to its estimated fair value. The Company’s impairment analysis identifies and evaluates events or changes in circumstances that indicate the carrying amount of a real estate investment may not be recoverable, including determining the period the Company will hold the rental property, net operating income, and the estimated capitalization rate for each respective real estate investment.

Inflation

The real estate market has not been affected significantly by inflation in the past several years due to a relatively low inflation rate.increases in rents nationwide. The majority of our lease terms are for a period of one year or less and reset to market if renewed. The majority of our leases also contain protection provisions applicable to reimbursement billings for utilities. Should inflation return, dueDue to the short-term nature of our leases, we do not believe our results will be materially affected.

Inflation may also affect the overall cost of debt, as the implied cost of capital increases. Currently, the Federal Reserve is raising interest rates in response to or in anticipation of continued inflation concerns. We intend to mitigate these risks through long-term fixed interest rate loans and interest rate hedges, which to date have included interest rate cap and interest rate swap agreements.

REIT Tax Election

We have elected to be taxed as a REIT under Sections 856 through 860 of the Code and expect to continue to qualify as a REIT. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute at least 90% of our “REIT taxable income,” as defined by the Code, to our stockholders. 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 nine months ended September 30, 20212022 and 2020.2021. 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.


Item 3. 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. 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 September 30, 2021,2022, we had total indebtedness of $1.6$1.7 billion at a weighted average interest rate of 1.82%4.72%, of which $1.5$1.6 billion was debt with a floating interest rate. TheAs of September 30, 2022, interest rate swap agreements we have entered into effectively fix the interest rate on 97%covered 91% of our $1.2$1.3 billion of floating rate mortgage debt outstanding (see below). As of September 30, 2021, the adjusted weighted average interest rateand 0.0% of our total indebtedness was 2.82%.$335.0 million floating rate Credit Facility. For purposes of calculating the adjusted weighted average interest rate of the total indebtedness, we have included the weighted average fixed rate of 1.3461%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 September 30, 2021.2022.

An increase in interest rates could make the financing of any acquisition by us costlier.more costly. 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. We may manage, or hedge, interest rate risks related to our borrowings by means of interest rate cap and interest rate swap agreements. As of September 30, 2021,2022, the interest rate cap agreements we have entered into effectively cap one-month LIBOR on $412.2$537.1 million of our floating rate mortgage debt at a weighted average rate of 5.02%4.67% for the term of the agreements, which is generally 3three to 4four years. We also expect to manage our exposure to interest rate risk by maintaining a mix of fixed and floating rates for our indebtedness.

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 thirteen interest rate swap transactions with the Counterparties with a combined notional amount of $1.2 billion. 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 1.3461%1.0682%. During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 1.3461%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. We have designated these interest rate swaps as cash flow hedges of interest rate risk.

Until our interest rates reach the caps provided by our interest rate cap agreements, each quarter point change in LIBORreference rates 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 September 30, 2021,2022, of the amounts illustrated in the table below for our indebtedness as of September 30, 20212022 (dollars in thousands):

 

Change in Interest Rates

 

Annual Increase to Interest Expense

 

 

Annual Increase to Interest Expense

 

0.25%

 

$

780

 

 

$

1,140

 

0.50%

 

 

1,560

 

 

 

2,280

 

0.75%

 

 

2,340

 

 

 

3,420

 

1.00%

 

 

3,120

 

 

 

4,560

 

 

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.

We may also be exposed to credit risk in the derivative financial instruments we use. Credit risk is the failure of the counterpartyCounterparties to perform under the terms of the derivative financial instruments. If the fair value of a derivative financial instrument is positive, the counterpartyCounterparties will owe us, which creates credit risk for us. If the fair value of a derivative financial instrument is negative, we will owe the counterpartyCounterparties 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.

In July 2017, the Financial Conduct Authority of the U.K. (the “FCA”) (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee (“ARRC”) has proposed that the SOFRSecured 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. 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. Although SOFR appears to be the preferred replacement rate for U.S. dollar LIBOR, at this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates, whether the COVID-19 outbreak will have further effect on LIBOR transition timelines or plans, or other reforms to LIBOR that may be enacted in the United States, United Kingdom or elsewhere. Furthermore, on November 30, 2020, the ICE Benchmark Administration Limited, with the support of the FCA and the U.S. Federal Reserve, announced plans to consult on ceasing publication of LIBOR on December 31, 2021 for only the one-week and two-month LIBOR tenors, and on June 30, 2023 for all other LIBOR tenors. While this announcement extends the transition period to June 2023, the U.S. Federal Reserve concurrently issued a statement advising banks to stop new LIBOR issuances by the end of 2021. On March 5, 2021, the FCA confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative: (a) immediately after December 31, 2021, in the case of the one-week and two-month U.S. dollar settings; and (b) immediately after June 30, 2023, in the case of the remaining U.S. dollar settings. We have material contracts that are indexed to USD-LIBOR and are monitoring this activity and evaluating the related risks.


Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) and Rule 15d-15(b) under the Exchange Act, our management, including our President and Chief Financial Officer, evaluated, as of September 30, 2021,2022, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2021,2022, to provide reasonable assurance that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including the President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

There has been no change in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 20212022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


PART II—OTHER INFORMATION

From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Management 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 1A. Risk Factors

Macroeconomic trends including inflation and rising interest rates 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. Inflation in the United States has recently accelerated and is currently expected to continue at an elevated level in the near-term. Rising inflation could have an adverse impact on our operating expenses and our floating rate mortgages and credit facilities, as these costs could increase at a rate higher than our rental and other revenue. There is no guarantee we will be able to mitigate the impact of rising inflation. The Federal Reserve has recently started raising interest rates to combat inflation and restore price stability and it is expected that rates will continue to rise throughout the remainder of 2022. In addition, 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, such increases will result in higher debt service costs which will adversely affect our cash flows. We cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings. Such future constraints could increase our borrowing costs, which would make it more difficult or expensive to obtain additional financing or refinance existing obligations and commitments, which could slow or deter future growth.

Except as noted above, there have been no material changes to the risk factors previously disclosed under Part I, Item 1A, “Risk Factors” in our Annual Report, filed with the SEC on February 22, 2021.18, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Repurchase of Shares

On June 15, 2016, we announced that our Board authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate market value of up to $30.0 million during a two-year period that was set to expire on June 15, 2018 (the “Share Repurchase Program”).  On April 30, 2018, our Board increased the Share Repurchase Program from $30.0 million to up to $40.0 million and extended it by an additional two years to June 15, 2020. On March 13, 2020, the Board increased the Share Repurchase Program from $40.0 million to up to $100.0 million and extended it to March 12, 2023. During the nine months ended September 30, 2021,2022, the Company repurchased no168,473 shares of its common stock. During the nine months ended September 30, 2020,2021, the Company repurchased 1,644,697no shares of its common stock. Since the inception of the Share Repurchase Program through September 30, 2021,2022, the Company had repurchased 2,382,1552,550,628 shares of its common stock, par value $0.01 per share, at a total cost of approximately $61.2$72.4 million, or $25.70$28.37 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)

 

 

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

 

 

2,382,155

 

 

$

25.70

 

 

 

2,382,155

 

 

$

38.8

 

 

 

2,451,722

 

 

$

25.70

 

 

 

2,451,722

 

 

$

33.6

 

July 1 – July 31

 

 

—

 

 

 

—

 

 

 

—

 

 

 

38.8

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

33.6

 

August 1 – August 31

 

 

—

 

 

 

—

 

 

 

—

 

 

 

38.8

 

 

 

98,906

 

 

 

60.57

 

 

 

98,906

 

 

 

27.6

 

September 1 – September 30

 

 

—

 

 

 

—

 

 

 

—

 

 

 

38.8

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

27.6

 

Total as of September 30, 2021

 

 

2,382,155

 

 

$

25.70

 

 

 

2,382,155

 

 

$

38.8

 

Total as of September 30, 2022

 

 

2,550,628

 

 

$

28.37

 

 

 

2,550,628

 

 

$

27.6

 

 

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.


Item 5. Other Information

None.


Item 6. Exhibits

EXHIBIT INDEX

 

Exhibit

Number

 

Description

  10.1

Form of Easement (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 filed with the SEC on July 30, 2021)

  10.2

Form of Onboarding Agreement** (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 filed with the SEC on July 30, 2021)

  10.3*

September 2021 Modification of Loan Documents, dated September 9, 2021, by and among NexPoint Residential Trust Operating Partnership, L.P., NexPoint Residential Trust, Inc., Truist Bank and the pledgors and lenders party to thereto

 

 

 

  31.1*

 

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

  31.2*

 

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

 

  32.1+

 

Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002

 

 

 

101.INS*

 

Inline XBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document)

 

 

 

101.SCH*

 

Inline XBRL Taxonomy Extension Schema

 

 

 

101.CAL*

 

Inline XBRL Taxonomy Extension Calculation Linkbase

 

 

 

101.DEF*

 

Inline XBRL Taxonomy Extension Definition Linkbase

 

 

 

101.LAB*

 

Inline XBRL Taxonomy Extension Label Linkbase

 

 

 

101.PRE*

 

Inline XBRL Taxonomy Extension Presentation Linkbase

 

 

 

104*

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

*

Filed herewith.

+

Furnished herewith.

**

Portions of the exhibit have been redacted

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

NEXPOINT RESIDENTIAL TRUST, INC.

 

Signature

  

Title

 

Date

 

 

 

 

 

/s/ Jim Dondero

 

President and Director

 

November 3, 2021October 26, 2022

Jim Dondero

 

(Principal Executive Officer)

 

 

 

 

 

 

 

/s/ Brian Mitts

  

Chief Financial Officer and Director

 

November 3, 2021October 26, 2022

Brian Mitts

 

(Principal Financial Officer and Principal Accounting Officer)

 

 

 

56