Bluerock Homes Trust Inc. filed SEC Form 8-K: Completion of Acquisition or Disposition of Assets, Financial Statements and Exhibits
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| ITEM 2.01 | COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS |
On March 25, 2024, Bluerock Homes Trust, Inc., a Maryland corporation (the “Company”), through a 95% owned joint venture entity of its operating partnership, Bluerock Residential Holdings, L.P., a Delaware limited partnership, acquired a 294-unit residential community located in Houston, Texas known as Villas at Huffmeister for a total purchase price of approximately $41.2 million, inclusive of a $3.1 million fair value reduction related to assumed debt. The sale was based on arm’s length negotiations with an unaffiliated seller. In evaluating Villas at Huffmeister as a potential investment, the Company considered a variety of factors, including overall valuation of net rental income, expected capital expenditures, submarket demographics, community features and amenities, location, price per unit, and occupancy.
Senior Loan Financing for the Acquisition of Villas at Huffmeister
The acquisition of Villas at Huffmeister was funded with approximately $18.1 million of cash funded by the Company, inclusive of certain adjustments typical in such real estate transactions, and a senior loan assumption in the principal amount of approximately $24.3 million (the “Villas Senior Loan”), inclusive of a fair value debt adjustment. The Villas Senior Loan is secured by Villas at Huffmeister and bears interest at a fixed rate of 3.56%, with monthly payments of principal and interest based on thirty-year amortization; previously, monthly payments were interest-only through October 2024. The Villas Senior Loan matures on October 1, 2029 and can be prepaid, in whole, subject to a prepayment premium if prepayment occurs before June 29, 2029; if prepayment of the Villas Senior Loan occurs after such date, no prepayment penalty or premium is payable.
| ITEM 9.01 | FINANCIAL STATEMENETS AND EXHIBITS |
| (a) |
Financial Statements of Real Estate Acquired
Villas at Huffmeister
Independent Auditor’s Report Statement of Revenues and Certain Operating Expenses for the Year Ended December 31, 2023 Notes to Statement of Revenues and Certain Operating Expenses |
| (b) |
Pro Forma Financial Information
Bluerock Homes Trust, Inc.
Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2023 (unaudited)
Notes to Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2023 (unaudited)
Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2023 (unaudited)
Notes to Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2023 (unaudited) |
Statements in this Current Report on Form 8-K, including intentions, beliefs, expectations or projections relating to items such as the long-term performance of the Company’s portfolio are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based on current expectations and assumptions with respect to, among other things, future economic, competitive and market conditions, and future business decisions that may prove incorrect or inaccurate. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the risks described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K filed with the SEC on March 12, 2024 and its other filings with the SEC.
| (c) | Exhibit No. | Description |
| 23.1 | Consent of Plante Moran, PC |
Independent Auditor’s Report
To the Board of Directors and Stockholders
Bluerock Homes Trust, Inc.
Opinion
We have audited the accompanying statements of revenues and certain operating expenses of Villas at Huffmeister (the "Property") for the year ended December 31, 2023 and the related notes thereto (“the Statements”).
In our opinion, the accompanying Statements present fairly, in all material respects, the revenue and certain operating expenses of the Property described in Note 2 of the Statements for the year ended December 31, 2023 in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Statements section of our report. We are required to be independent of the Property and to meet our ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter – Purpose of the Presentation
We draw attention to Note 2 to the Statements, which describes that the Statements have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Form 8-K of Bluerock Homes Trust, Inc. and is not intended to be a complete presentation of the Property's revenue and expenses. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Statements
Management is responsible for the preparation and fair presentation of the Statements in accordance with accounting principles generally accepted in the United States of America and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibilities for the Audit of the Statements
Our objectives are to obtain reasonable assurance about whether the Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a guarantee that an audit conducted in accordance with generally accepted auditing standards (“GAAS”) will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the Statements.
In performing an audit in accordance with GAAS, we:
| · | Exercise professional judgment and maintain professional skepticism throughout the audit. |
| · | Identify and assess the risks of material misstatement of the Statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the Statements. |
| · | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Property's internal control. Accordingly, no such opinion is expressed. |
| · | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the Statements. |
| · | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Property's ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
| /s/ Plante Moran, PC |
| East Lansing, Michigan |
| November 14, 2024 |
VILLAS AT HUFFMEISTER
STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
(In thousands)
Year Ended December 31, 2023 | ||||
| Revenues | ||||
| Rental and other property revenues | $ | 5,516 | ||
| Total revenues | 5,516 | |||
| Certain Operating Expenses | ||||
| Property operating expenses | 2,594 | |||
| Total certain operating expenses | 2,594 | |||
| Revenues in Excess of Certain Operating Expenses | $ | 2,922 | ||
See accompanying notes to statement of revenues and certain operating expenses
VILLAS AT HUFFMEISTER
NOTES TO STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
Note 1 – Business
Villas at Huffmeister (the “Property”) was acquired pursuant to a purchase agreement between an affiliate of Bluerock Residential Holdings, L.P. (Bluerock Homes Trust, Inc.’s operating partnership) and SIR Huffmeister Villas LLC on March 25, 2024.
Note 2 – Basis of Presentation
The accompanying statement of revenues and certain operating expenses has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X of the United States Securities and Exchange Commission promulgated under the Securities Act of 1933, as amended. Accordingly, the statement is not representative of the actual operations for the period presented as revenues, and certain operating expenses, which may not be directly attributable to the revenues and expenses expected to be incurred in the future operations of the Property, have been excluded.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reporting and disclosure of revenues and certain expenses during the reporting period to present the statement of revenues and certain operating expenses. Actual results could differ from those estimates.
Note 3 – Revenues
The Property is located in Houston, Texas and contains 294 residential units that are rented to tenants under various lease agreements that are generally one year in length. All leases are accounted for as operating leases. The Property recognizes rental revenue on a straight-line basis over the terms of the rental agreements and in accordance with ASC Topic 842 Leases. Rental revenue is recognized on an accrual basis and when the collectability of the amounts due from tenants is deemed probable. Rental revenue is included within rental and other property revenues on the Property’s statement of revenues and certain operating expenses.
Tenant reimbursements for common area maintenance and other recoverable expenses, such as pet, administrative, application and other fees, are recognized when the services are provided and the performance obligations are satisfied. Tenant reimbursements are included within rental and other property revenues on the Property’s statement of revenues and certain operating expenses.
Note 4 – Certain Operating Expenses
Certain operating expenses include only those costs expected to be comparable to the proposed future operations of the Property. Property operating expenses include administrative, repairs and maintenance, marketing, payroll, utilities, taxes, and insurance. Expenses such as depreciation, amortization, and interest are excluded.
Note 5 – Commitments and Contingencies
The Property is subject to various legal actions and claims arising in the ordinary course of business. Although the outcome of any legal matter cannot be predicted with certainty, management does not believe that any of these legal proceedings or matters will have a material adverse effect on the financial position or results of operations or liquidity of the Property.
Note 6 – Subsequent Events
The Property evaluated subsequent
events through November 14, 2024, the date the financial statements were available to be issued.
BLUEROCK HOMES TRUST, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INFORMATION
The following unaudited pro forma condensed consolidated financial statements of Bluerock Homes Trust, Inc. (together with its consolidated subsidiaries, the “Company,” “we,” “our” or “us”) should be read in conjunction with our historical audited consolidated financial statements as of and for the year ended December 31, 2023, and the related notes thereto.
The unaudited pro forma condensed consolidated balance sheet as of December 31, 2023, and unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2023, have been prepared to provide pro forma financial information with regard to the Villas at Huffmeister acquisition on March 25, 2024, which the Company expects to consolidate.
The pro forma condensed consolidated balance sheet at December 31, 2023 assumes that the Villas at Huffmeister acquisition referred to above occurred on January 1, 2023.
The pro forma condensed consolidated statement of operations assume the transaction referred to above occurred on January 1, 2023.
Our pro forma financial information is not necessarily indicative of what our actual financial position and results of operations would have been as of the date and for the periods indicated, nor does it purport to represent our future financial position or results of operations.
All completed acquisitions are accounted for as asset acquisitions. The purchase prices were allocated to the acquired assets and assumed liabilities based on their estimated fair values at the dates of acquisition.
These unaudited pro forma condensed consolidated financial statements are prepared for informational purposes only. In management’s opinion, all material adjustments necessary to reflect the effects of the transactions referred to above have been made. Our unaudited pro forma condensed consolidated financial statements are based on assumptions and estimates considered appropriate by the Company’s management. However, they are not necessarily indicative of what our consolidated financial condition or results of operations would have been assuming the transactions referred to above had occurred as of the dates indicated, nor do they purport to represent our consolidated financial position or results of operations for future periods.
BLUEROCK HOMES TRUST, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2023
(In thousands, except share and per share amounts)
| Pro Forma Adjustments | ||||||||||||
Bluerock Homes (a) | Villas at (b) | Pro Forma Total | ||||||||||
| ASSETS | ||||||||||||
| Net Real Estate Investments | ||||||||||||
| Land | $ | 70,637 | $ | 7,950 | $ | 78,587 | ||||||
| Buildings and improvements | 394,548 | 32,198 | 426,746 | |||||||||
| Furniture, fixtures and equipment | 13,277 | 620 | 13,897 | |||||||||
| Total Gross Operating Real Estate Investments | 478,462 | 40,768 | 519,230 | |||||||||
| Accumulated depreciation | (32,452 | ) | — | (32,452 | ) | |||||||
| Total Net Operating Real Estate Investments | 446,010 | 40,768 | 486,778 | |||||||||
| Operating real estate held for sale, net | 18,890 | — | 18,890 | |||||||||
| Total Net Real Estate Investments | 464,900 | 40,768 | 505,668 | |||||||||
| Cash and cash equivalents | 80,163 | (16,959 | ) | 63,204 | ||||||||
| Restricted cash | 6,221 | — | 6,221 | |||||||||
| Notes and accrued interest receivable, net | 17,797 | — | 17,797 | |||||||||
| Accounts receivable, prepaids and other assets, net | 21,383 | — | 21,383 | |||||||||
| Preferred equity investments, net | 81,156 | — | 81,156 | |||||||||
| In-place lease intangible assets, net | — | 1,018 | 1,018 | |||||||||
| TOTAL ASSETS | $ | 671,620 | $ | 24,827 | $ | 696,447 | ||||||
| LIABILITIES AND EQUITY | ||||||||||||
| Mortgages payable | $ | 96,670 | $ | 23,935 | $ | 120,605 | ||||||
| Revolving credit facilities | 70,000 | — | 70,000 | |||||||||
| Accounts payable | 691 | — | 691 | |||||||||
| Other accrued liabilities | 9,438 | — | 9,438 | |||||||||
| Due to affiliates | 3,509 | — | 3,509 | |||||||||
| Distributions payable | 12,440 | — | 12,440 | |||||||||
| Total Liabilities | 192,748 | 23,935 | 216,683 | |||||||||
| 6.0% Series A Redeemable Preferred Stock, liquidation preference $25.00 per share, 30,000,000 shares authorized; 436,675 shares issued and outstanding at December 31, 2023 | 8,273 | — | 8,273 | |||||||||
| Equity | ||||||||||||
| Stockholders’ Equity | ||||||||||||
| Preferred stock, $0.01 par value, 220,000,000 shares authorized; no shares issued and outstanding at December 31, 2023 | — | — | — | |||||||||
| Common stock - Class A, $0.01 par value, 562,500,000 shares authorized; 3,871,265 shares issued and outstanding at December 31, 2023, historical and pro forma | 39 | — | 39 | |||||||||
| Common stock - Class C, $0.01 par value, 187,500,000 shares authorized; 8,489 shares issued and outstanding at December 31, 2023, historical and pro forma | — | — | — | |||||||||
| Additional paid-in-capital | 122,369 | — | 122,369 | |||||||||
| Retained earnings | 24,943 | — | 24,943 | |||||||||
| Total Stockholders’ Equity | 147,351 | — | 147,351 | |||||||||
| Noncontrolling Interests | ||||||||||||
| Operating partnership units | 307,945 | — | 307,945 | |||||||||
| Partially owned properties | 15,303 | 892 | 16,195 | |||||||||
| Total Noncontrolling Interests | 323,248 | 892 | 324,140 | |||||||||
| Total Equity | 470,599 | 892 | 471,491 | |||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 671,620 | $ | 24,827 | $ | 696,447 | ||||||
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
BLUEROCK HOMES TRUST, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2023
| (a) | Historical consolidated financial information derived from the Company’s Annual Report on Form 10-K as of December 31, 2023. |
| (b) | The purchase of a 95% direct interest in Villas at Huffmeister for a purchase price of $41.2 million, inclusive of a $3.1 million fair value reduction related to assumed debt, which the Company consolidated on its balance sheet. The Company also assumed a $27.4 million mortgage loan associated with this acquisition. The carrying value of the loan includes ($3.1) million of a fair value debt adjustment and ($0.4) million of deferred financing costs related to this acquisition. |
BLUEROCK HOMES TRUST, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2023
(In thousands, except share and per share amounts)
Pro Forma Adjustments | ||||||||||||
Bluerock Homes Historical (a) | Villas at Huffmeister (b) | Pro Forma Total | ||||||||||
| Revenues | ||||||||||||
| Rental and other property revenues | $ | 40,999 | $ | 5,516 | $ | 46,515 | ||||||
| Interest income from loan investments | 94 | — | 94 | |||||||||
| Total revenues | 41,093 | 5,516 | 46,609 | |||||||||
| Expenses | ||||||||||||
| Property operating | 19,164 | 2,594 | 21,758 | |||||||||
| Property management and asset management fees | 4,416 | 143 | (c) | 4,559 | ||||||||
| General and administrative | 8,004 | — | 8,004 | |||||||||
| Management fees to related party | 7,922 | — | 7,922 | |||||||||
| Acquisition and other transaction costs | 1,820 | — | 1,820 | |||||||||
| Weather-related losses, net | (17 | ) | — | (17 | ) | |||||||
| Depreciation and amortization | 16,178 | 2,238 | (d) | 18,416 | ||||||||
| Total expenses | 57,487 | 4,975 | 62,462 | |||||||||
| Other income (expense) | ||||||||||||
| Other income, net | 679 | — | 679 | |||||||||
| Income from preferred equity investments | 11,632 | — | 11,632 | |||||||||
| Provision for credit losses, net | (174 | ) | — | (174 | ) | |||||||
| Impairment of real estate investments, net | (1,017 | ) | — | (1,017 | ) | |||||||
| Interest expense, net | (13,102 | ) | (1,618 | )(e) | (14,720 | ) | ||||||
| Interest income | 2,609 | — | 2,609 | |||||||||
| Total other income (expense) | 627 | (1,618 | ) | (991 | ) | |||||||
| Net loss | (15,767 | ) | (1,077 | ) | (16,844 | ) | ||||||
| Preferred stock dividends | (130 | ) | — | (130 | ) | |||||||
| Net loss attributable to noncontrolling interests | ||||||||||||
| Operating partnership units | (8,996 | ) | (682 | ) | (9,678 | ) | ||||||
| Partially owned properties | (2,398 | ) | (54 | ) | (2,452 | ) | ||||||
| Net loss attributable to noncontrolling interests | (11,394 | ) | (736 | ) | (12,130 | ) | ||||||
| Net loss attributable to common stockholders | $ | (4,503 | ) | $ | (341 | ) | $ | (4,844 | ) | |||
| Loss per common share (f) | ||||||||||||
| Net loss per common share – Basic | $ | (1.30 | ) | $ | (1.11 | ) | ||||||
| Net loss per common share – Diluted | $ | (1.30 | ) | $ | (1.11 | ) | ||||||
| Weighted average basic common shares outstanding | 3,845,349 | 3,845,349 | ||||||||||
| Weighted average diluted common shares outstanding | 3,845,349 | 3,845,349 | ||||||||||
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
BLUEROCK HOMES TRUST, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2023
| (a) | Historical consolidated financial information derived from the Company’s Annual Report on Form 10-K as of December 31, 2023. |
| (b) | Represents adjustments to historical operations of the Company to give effect to the purchase of Villas at Huffmeister on March 25, 2024 as if these assets had been acquired on January 1, 2023. Adjustments were derived directly from the property’s actual results of operations, including pro forma adjustments for the year ended December 31, 2023. Pro forma adjustments to historical results included: increasing property management and asset management fees $0.14 million, increasing depreciation and amortization $2.24 million, increasing interest expense $1.62 million, and adjusting the operating partnership units’ interest in the consolidated property’s net loss. |
| (c) | Represents property management and asset management fees estimated to have been incurred for Villas at Huffmeister. Property management and asset management fees are calculated as 2.75% of property revenues less certain adjustments, as applicable, per the property management agreement. |
| (d) | Represents depreciation and amortization expense adjustment to historical results for the year ended December 31, 2023 based on the allocation of the purchase price. Depreciation expense is calculated using the straight-line method over the asset’s estimated useful life as follows: 30-40 years for the building, 5-15 years for building and land improvements, and 3-8 years for furniture, fixtures and equipment. Amortization expense relates to the Company’s identifiable intangible assets and consists of the value of in-place leases. In-place leases are amortized using the straight-line method over the remaining non-cancelable term of the respective leases, which is on average six months. |
| (e) | Represents interest expense for the Villas at Huffmeister acquisition estimated to have been incurred on the $27.4 million mortgage loan, which bears a fixed interest rate of 3.56% and matures on October 1, 2029, calculated as if the loan was entered into on January 1, 2023, and a fair value adjustment and deferred financing costs which are recognized at acquisition and amortized using the straight-line method over the remaining life of the loan. The mortgage balance assumed in the pro forma balance sheet is presented at fair value less unamortized deferred financing costs. |
| (f) | Earnings per share is calculated in accordance with Accounting Standards Codification 260 – “Earnings per Share.” The historical earnings per share amounts are the amounts reported in the Registrant’s Form 10-K for the year ended December 31, 2023. |
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.
| BLUEROCK HOMES TRUST, INC. | |||
| DATE: | November 14, 2024 | By: | /s/ Christopher J. Vohs |
| Christopher J. Vohs | |||
| Chief Financial Officer and Treasurer | |||
Exhibit Index
| Exhibit No. | Exhibit | |
| 23.1 | Consent of Plante Moran, PC |