Bluerock Homes Trust, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. The company owns and operates single-family rental homes and invests in build-to-rent developments and preferred equity interests, primarily in Sunbelt and Western U.S. markets. At quarter-end it held 4,160 units across 17 investments; consolidated operating properties were 94.5% occupied.
Financial and operating performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Total revenue | $10.1 million | $7.7 million |
| Rental and other property revenue | $10.1 million | $6.9 million |
| Net operating income (NOI) | $5.6 million | $4.1 million |
| Operating loss | $4.8 million | $1.8 million |
| Net loss | $5.3 million | $1.2 million |
| Net loss attributable to common stockholders | $1.5 million; $0.40 per share | $0.2 million; $0.04 per share |
| Cash from operating activities | $(2.2) million | $4.4 million |
| Cash, cash equivalents and restricted cash at quarter-end | $63.1 million | $216.4 million |
| Debt at quarter-end | $146.9 million principal: $97.9 million mortgages and $49.0 million revolver borrowings | — |
| Total assets / total equity | $643.0 million / $484.7 million | — |
Property revenue increased 48%, average rent per occupied unit rose 14.7% to $1,542, and average occupancy improved 150 basis points to 94.2%. NOI increased 37.1%; NOI was approximately 55% of property revenue. FFO attributable to common stockholders and unit holders was a loss of $1.1 million, versus income of $3.1 million; adjusted CFFO was $4.6 million, versus $3.9 million. These are non-GAAP measures and are not substitutes for GAAP results or cash flow.
Comparability is limited: 2023 reflects the company as an independent public company, while Q1 2022 is a carve-out of Bluerock Residential’s historical business before the October 2022 spin-off. The filing cautions that prior-period allocated expenses and reported results may not represent standalone costs or be directly comparable.
Balance sheet, liquidity and capital
- Cash and cash equivalents were $58.7 million, down from $78.4 million at December 31, 2022. Operating, investing and financing activities used $2.2 million, $11.0 million and $6.2 million, respectively.
- Debt principal totaled approximately $146.9 million, compared with $153.2 million at year-end 2022. The DB revolving facility carried a 7.47% rate and $29 million outstanding; the ILE facility carried 7.83% and was fully drawn at $20 million. The DB facility matures April 2024; the ILE facility matures December 2024.
- Mortgages included fixed-rate debt and floating-rate borrowings. The company reported that interest-rate caps and swaps covered $68.6 million of debt. A 100-basis-point rate change was estimated to change quarterly interest expense by about $62,000.
- No revolving-credit availability existed at March 31, 2023. Management expected to add collateral and increase availability to more than $50 million during 2023, but this was not assured. Management stated available cash and anticipated funding sources should meet existing-portfolio liquidity needs for the next 12 months.
- Contractual commitments to fund preferred equity and joint-venture investments were $4.1 million. No dividends were declared or paid in Q1.
Changes, outlook and risks
- Revenue growth reflected 569 more homes in the portfolio than at the start of 2022, rent growth and operating improvements. Property operating expenses increased 63.9%; the company cited portfolio growth and repairs and maintenance during lease-up and stabilization.
- Q1 included $1.9 million of related-party management fees and $1.5 million of acquisition and other transaction costs, the latter associated with transitioning property management for more than 1,000 homes. Management fees did not occur in the 2022 comparison period.
- The company acquired 18 Savannah, Georgia homes for approximately $4.2 million and bought out partners’ interests in Savannah-84 and Indy-Springfield for approximately $5.0 million combined. It also increased preferred equity commitments at two developments and received a $4.1 million partial redemption from Peak Housing.
- A lender waived the DB facility’s minimum debt-service-coverage covenant during the period in exchange for reducing the outstanding balance. The filing says the facility was drawn to its then-available maximum at quarter-end.
- The company had filed to register up to $500 million of 6.0% Series A redeemable preferred stock. The registration statement was not yet effective as of the filing, and there was no assurance the offering would proceed or be fully sold.
- Management expects existing-portfolio results to improve with anticipated acquisitions, investments and development, but provided no quantified earnings or operating guidance. Key risks include inflation, rising rates, tighter credit, higher construction and operating costs, rent collection and occupancy, development and lease-up execution, access to financing, and maintaining REIT qualification.
- Management reported effective disclosure controls as of March 31, 2023 and no material change in internal control over financial reporting. The filing reported no material legal proceedings and no material change to the previously disclosed risk factors.
Important facts for investors to verify
- Whether the planned additional revolver collateral actually creates more than $50 million of borrowing availability, and whether the covenant waiver or other covenant terms change.
- Liquidity and refinancing plans for the revolving facilities, including the April 2024 DB maturity and December 2024 ILE maturity.
- Progress, costs, lease-up, occupancy and expected returns for development and preferred-equity investments, including the $4.1 million unfunded commitment.
- Whether the Series A preferred-stock registration becomes effective, the offering launches, and what proceeds and financing terms result.
- How much Q1 revenue and NOI growth persists after accounting for portfolio growth, standalone management costs, transition costs and interest expense.