Bluerock Homes Trust, Inc. annual report, FY2022

Full document

Bluerock Homes Trust, Inc. — 2022 Form 10-K

Business context and reporting period. The filing covers the year ended December 31, 2022. Bluerock Homes became an independent, publicly traded single-family rental REIT on October 6, 2022, following its separation and spin-off from Bluerock Residential. Results before that date are presented on a carve-out basis and include allocated parent-company costs; management cautions that historical results may not represent the company’s results as an independent business. The company is externally managed and reported 3,977 residential units across 17 investments at year-end, including consolidated operating properties and preferred equity investments.

Financial and operating performance

  • Revenue: Rental and other property revenue was $32.9 million, versus $9.3 million in 2021; total revenue, including loan interest, was $34.1 million versus $14.6 million. Growth largely reflected acquired properties and the full-year impact of 2021 acquisitions.
  • Profit and operating performance: Net loss was $5.9 million; net loss attributable to common stockholders was $1.0 million, or $0.26 per share. Continuing operations produced a $6.2 million loss. By comparison, 2021 net income attributable to common stockholders was $34.3 million, including $110.9 million of discontinued-operations income, principally a $116.7 million gain on sales of multifamily properties. NOI, a non-GAAP measure, rose to $17.7 million from $6.0 million.
  • Costs and margins: Property operating expenses were $15.2 million versus $3.2 million. Depreciation and amortization was $16.0 million versus $5.9 million. Average occupancy was 92.4% for the year, down 340 basis points; average rent increased 4% to $1,447 per occupied unit. Year-end occupancy for consolidated operating investments was 94.8%.
  • FFO and CFFO: FFO attributable to common stockholders and unit holders was $9.9 million ($0.88 per diluted share/unit), compared with $3.7 million ($0.33) in 2021. CFFO was $13.1 million ($1.16), versus $12.7 million ($1.14). These are non-GAAP measures and are not substitutes for GAAP earnings or operating cash flow.
  • Cash flow: Operating activities provided $3.5 million, compared with $9.8 million in 2021. Investing activities used $177.2 million, largely for property acquisitions, joint-venture/loan investments and capital expenditures. Financing activities provided $119.3 million, including parent contributions and new borrowings. Cash and cash equivalents were $78.4 million at year-end; including restricted cash, the balance was $82.6 million.
  • Debt and liquidity: Year-end mortgage debt was approximately $98.2 million and revolving-credit borrowings were $55.0 million, or about $153.2 million combined. The $150 million Deutsche Bank facility was fully drawn based on collateral and covenant ratios; the ILE facility was also fully drawn. Management reported covenant compliance. Contractual principal maturities include $37.5 million in 2026 and $55.0 million thereafter; revolving-facility principal of $55.0 million is due in 2024. Management stated available cash, operating cash flow and financing sources should meet existing-portfolio needs for the next 12 months, while acknowledging access to capital is not assured.
  • Balance sheet: Total assets were $658.9 million, total liabilities $166.9 million and total equity $492.0 million. Stockholders’ equity was $160.0 million; noncontrolling interests were $332.0 million.
  • Distributions: No distributions were paid in 2022 or 2021. Future common dividends are at the board’s discretion. The company intends to qualify as a REIT and generally must distribute at least 90% of REIT taxable income.

Material changes versus the prior comparable period

  • Revenue and NOI increased substantially as the portfolio expanded: the company acquired 551 operating units during 2022 for reported purchase prices totaling $141.3 million, and increased preferred equity investments in development and other ventures.
  • Average occupancy declined from 95.8% to 92.4%, partly because newly acquired scattered homes began with lower occupancy; average rent rose from $1,388 to $1,447.
  • Interest income from loan investments declined to $1.3 million from $5.4 million following loan payoffs. Preferred returns from unconsolidated ventures increased to $8.6 million from $3.2 million.
  • 2021 results included large gains from sales of multifamily properties, while 2022 results reflect the company’s transition to a single-family residential business. The periods are not directly comparable because of the spin-off, carve-out accounting and portfolio changes.

Outlook, commentary, risks and unusual items

  • Management described the financial condition and liquidity as strong and expects results from the existing portfolio to improve with future acquisitions and build-to-rent investments. It gave no specific earnings, revenue or distribution guidance.
  • Development and lease-up investments included 1,041 units under development and 122 units in lease-up at year-end; estimated completion and stabilization dates extend into 2024. Construction cost inflation, delays and lease-up execution are risks.
  • Key risks include rising interest rates and refinancing costs, inflation in property and construction expenses, tenant defaults or turnover, concentrated markets, competition, reliance on the external manager and affiliated parties, joint-venture and preferred-equity repayment risk, and dependence on access to debt and equity capital. REIT qualification and public-company transition controls also require attention.
  • The company had no material pending legal proceedings and recorded no real-estate impairment charges in 2022 or 2021. Its derivatives economically capped or swapped exposure on $74.6 million of floating-rate debt; management estimated a 100-basis-point rate move would change annual interest expense by approximately $0.2 million.
  • A registration statement for a proposed 6.0% Series A Redeemable Preferred Stock offering of up to $500 million had not been declared effective as of the filing date, and no shares were then outstanding. Any offering, proceeds and dividends were not assured. Subsequent to year-end, the company acquired the remaining interests in two joint ventures and partially redeemed its Peak preferred investment.

Important facts for investors to verify

  • Reconcile the carve-out and post-spin results and assess the recurring earnings and expense base of the independent company.
  • Review the debt facilities’ collateral, covenants, variable-rate exposure and 2024–2026 maturities, including the availability of refinancing.
  • Track actual occupancy, rent growth, renovation costs and lease-up against the company’s development timelines and estimates.
  • Assess the collectability, maturity terms and accrued returns of preferred equity investments, particularly investments tied to development projects and Peak Housing.
  • Confirm the status and terms of any preferred-stock offering, actual use of proceeds, and whether future distributions are supported by operating cash flow rather than financing or asset sales.
  • Review related-party management fees, incentive-fee arrangements, equity compensation and the company’s progress establishing effective controls as a newly public issuer.