Basis of Presentation and Summary of Significant Accounting Policies

Consolidated Investments in Real Estate, Preferred Equity Investments, Notes Receivable and Unconsolidated Funds

The Company first analyzes an investment to determine if it is a variable interest entity (“VIE”) in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810: Consolidation and, if so, whether the Company is the primary beneficiary requiring consolidation of the entity. A VIE is an entity that has (i) insufficient equity to permit it to finance its activities without additional subordinated financial support or (ii) equity holders that lack the characteristics of a controlling financial interest. VIEs are consolidated by the primary beneficiary, which is the entity that has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that potentially could be significant to the entity. Variable interests in a VIE are contractual, ownership, or other financial interests in a VIE that change in value with changes in the fair value of the VIE’s net assets. The Company continuously re-assesses at each level of the investment whether (i) the entity is a VIE, and (ii) the Company is the primary beneficiary of the VIE. If it was determined that an entity in which the Company holds an interest qualified as a VIE and the Company was the primary beneficiary, the entity would be consolidated.

If, after consideration of the VIE accounting literature, the Company has determined that an entity is not a VIE, the Company assesses the need for consolidation under all other provisions of ASC 810. These provisions provide for consolidation of majority-owned entities through a majority voting interest held by the Company providing control.

In assessing whether the Company is in control of and requiring consolidation of the limited liability company and partnership venture structures, the Company evaluates the respective rights and privileges afforded each member or partner (collectively referred to as “member”). The Company’s member would not be deemed to control the entity if any of the other members has either (i) substantive kickout rights providing the ability to dissolve (liquidate) the entity or otherwise remove the managing member or general partner without cause or (ii) substantive participating rights in the entity. Substantive participating rights (whether granted by contract or law) provide for the ability to effectively participate in significant decisions of the entity that would be expected to be made in the ordinary course of business.

The Company analyzes each investment that involves real estate acquisition, development, and construction to consider whether the investment qualifies as an investment in a real estate acquisition, development, and construction arrangement. The Company has evaluated its real estate investments as required by ASC 310-10 Receivables and concluded that no investments are considered an investment in a real estate acquisition, development, or construction arrangement. As such, the Company next evaluates if these investments are considered a security under ASC 320 Investments – Debt Securities.

For investments that meet the criteria of a security under ASC 320 Investments – Debt Securities, the Company classifies each investment as an available-for-sale (“AFS”) debt security as it does not have the positive intent to hold all investments to maturity. The Company accounts for these investments as preferred equity investments in its consolidated balance sheets, and it earns a fixed return on these investments which is included within income from preferred equity investments in its consolidated statements of operations and comprehensive income (loss). AFS debt securities are carried at fair value in the Company’s consolidated balance sheets, and any unrealized gains or losses on AFS debt securities are reported as a component of accumulated other comprehensive income in its consolidated balance sheets, and as a component of other comprehensive income in its consolidated statements of operations and comprehensive income (loss). The Company evaluates each AFS debt security that has an unrealized loss recorded at the reporting date for a provision for credit loss, as applicable. Refer to the Current Expected Credit Losses (“CECL”) section of this Note for further information regarding CECL and the Company’s provision for credit losses.

Prior to the fourth quarter 2024, the Company previously classified its preferred equity investments as held-to-maturity debt securities as the investments met the criteria of a security under ASC 320 Investments – Debt Securities. As of December 31, 2024, the Company did not have the positive intent to hold all the securities to maturity, and as such, the Company reclassified all its previously held-to-maturity debt securities to AFS debt securities. As of December 31, 2025, the Company continues to not have the positive intent to hold all the securities to maturity due to the sale of two preferred equity investments (refer to Note 8 for further information).

For investments that do not meet the criteria of a security under ASC 320 Investments – Debt Securities, the Company evaluates the characteristics and the facts and circumstances to determine if loan accounting treatment is appropriate. If loan accounting treatment is deemed appropriate, the Company recognizes interest income on its notes receivable on the accrual method unless a significant uncertainty of collection exists. If a significant uncertainty exists, interest income is recognized as collected. Costs incurred to originate its notes receivable are deferred and amortized using the effective interest method over the term of the related note receivable.

In circumstances where the Company does have significant influence in the investment, however the Company determines that the investment does not meet the criteria of a security under ASC 320 Investments – Debt Securities and that loan accounting treatment is not appropriate, the Company generally accounts for these investments under the equity method. The equity method of accounting requires these investments to be initially recorded at cost and subsequently increased (decreased) for the Company’s share of net income (loss), and increased (decreased) for contributions (distributions). The proportionate share of the results of operations of these investments is recognized on a one-quarter lag and is recorded in the Company’s earnings or losses.

Real Estate Assets

Real Estate Purchase Price Allocations

Upon acquisition, the Company evaluates its acquired residential properties for purposes of determining whether a transaction should be accounted for as an asset acquisition or business combination. Purchases of residential properties are treated as asset acquisitions and, as such, are recorded at their purchase price, including acquisition costs, which is allocated to land and building based upon their relative fair values at the date of acquisition. Acquisition costs typically include legal fees, broker commissions and title fees, as well as other closing costs. In making estimates of fair values for purposes of allocating the purchase price of acquired properties, the Company utilizes various sources including its own market knowledge obtained from historical transactions, published market data, and independent appraisers. In this regard, the Company may also utilize information obtained from county tax assessment records to assist in the determination of the fair value of the land and building.

Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, property operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, prevailing interest rates and the number of years the property will be held for investment. The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets and assumed liabilities, which could impact the amount of the Company’s net income (loss). Differences in the amount attributed to the fair value estimate of the various assets acquired can be significant based upon the assumptions made in calculating these estimates.

Capital Additions, Depreciation and Amortization

The Company capitalizes costs incurred in connection with its capital additions activities, including redevelopment, development and construction projects, other tangible improvements, and replacements of existing components. Repair and maintenance and tenant turnover costs are expensed as incurred. Repair and maintenance and tenant turnover costs include all costs that do not extend the useful life of the real estate asset. Accordingly, many factors are considered as part of the Company’s evaluation processes with no one factor necessarily determinative. Depreciation and amortization expense are computed on the straight-line method over the asset’s estimated useful life. The Company considers the period of future benefit of an asset to determine its appropriate useful life and anticipates the estimated useful lives of assets by class to be generally as follows:


Buildings		30 – 40 years
Building improvements		5 – 15 years
Land improvements		5 – 15 years
Furniture, fixtures and equipment		3 – 8 years
In-place leases		6 months

Intangible Assets

In-place leases - The value of in-place leases represents the estimated fair value of the net cash flows of leases in place at the time of acquisition, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up. The Company records the value of in-place leases within other intangible assets, net on its consolidated balance sheets. The Company amortizes the value of in-place leases to expense over the remaining non-cancelable term of the respective leases, which is on average six months. Amortization expense related to in-place leases was $4.6 million and $2.5 million for the years ended December 31, 2025 and 2024, respectively.

The following table summarizes the Company’s in-place lease intangible assets at December 31, 2025 and 2024 (amounts in thousands):


		2025			2024
Gross carrying value		$	13,359		$	9,757
Accumulated amortization			(11,295)			(7,008)
Net carrying value		$	2,064		$	2,749

The following table summarizes the Company’s in-place lease activity for the years ended December 31, 2025 and 2024 (amounts in thousands):


		2025		2024
Beginning balances as of January 1, 2025 and 2024, respectively		$	2,749	$	—
Acquisitions			3,905		5,309
Amortization			(4,590)		(2,560)
In-place lease intangible assets, net, end of period		$	2,064	$	2,749

At December 31, 2025, the Company’s estimated aggregate amortization of its in-place lease intangible assets for the next five years is $2.1 million, with the full amount expected to be incurred in 2026 and no amount thereafter.

Real estate tax abatement - In connection with the acquisition of Skytop Apartments in September 2025 (refer to Note 3 for further information), the Company allocated approximately $5.5 million of the purchase price to a real estate tax abatement, which is recorded within other intangible assets, net on the Company’s consolidated balance sheets. The tax abatement is being amortized on a straight-line basis over its estimated remaining useful life of approximately 13.0 years. During the year ended December 31, 2025, the Company recorded amortization expense of $0.1 million related to the tax abatement.

The following table summarizes the real estate tax abatement at December 31, 2025 (amounts in thousands):


		2025
Gross carrying value		$	5,534
Accumulated amortization			(104)
Net carrying value		$	5,430

The following table presents the estimated future amortization expense of the real estate tax abatement as of December 31, 2025 (amounts in thousands):


Year		Total
2026		$	418
2027			418
2028			418
2029			418
2030			418
Thereafter			3,340
		$	5,430

Impairment of Operating Real Estate Assets

The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its operating real estate and related intangible assets may not be recoverable. The evaluation of real estate assets for potential impairment requires the Company’s management to exercise significant judgement and make certain key assumptions, including the following: (i) capitalization rate, (ii) discount rate, (iii) number of years the property will be held, (iv) property operating revenue including occupancy and market rental rates, and (v) property operating expenses. There are inherent uncertainties in making these estimates such as market conditions, and performance and sustainability of property operations. When indicators of potential impairment suggest that the carrying value of operating real estate and related intangible assets may not be recoverable, the Company assesses the recoverability of the assets by estimating whether it will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the operating real estate and related intangible assets, the Company will record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the operating real estate and related intangible assets. Fair value is determined by using valuation techniques appropriate to the specific operating asset, which may include discounted cash flow analysis or a broker’s opinion of value. During the year ended December 31, 2025, the Company recognized an impairment loss of $3.8 million related to its Peak JV 2 portfolio, which is included in its scattered single-family homes segment. Of the total impairment loss, approximately $3.5 million was attributable to a revised hold period assessment for 75 units within the portfolio that are now expected to be sold in the near term. The remaining $0.3 million impairment loss was driven by deterioration in submarket conditions. During 2024, the Lubbock, Texas submarket experienced deterioration, and as a result, the Company recorded a $1.4 million impairment loss on the Peak JV 2 portfolio as of December 31, 2024. The impairment losses for 2025 and 2024 are recorded within (impairment) and gain on sale of real estate investments, net on its consolidated statements of operations and comprehensive income (loss).

Held for Sale Real Estate Assets

Real estate assets are classified as held for sale when they meet the applicable GAAP criteria in accordance with ASC 360-10 Property, Plant, and Equipment - Overall, including, but not limited to, the availability of the real estate asset for immediate sale in its present condition, the existence of an active program to locate a buyer, the probable sale of the real estate asset within one year, and actions required to complete the sale of the real estate asset are likely to occur. Real estate assets classified as held for sale are reported at the lower of their carrying value or estimated fair value less costs to sell and are presented separately within operating real estate held for sale, net on the consolidated balance sheets. At December 31, 2025 and 2024, the Company had 107 units and 167 units, respectively, classified as held for sale, and for the years ended December 31, 2025 and 2024, the Company recorded impairments related to held for sale units of $2.1 million and $3.3 million, respectively, which is included in (impairment) and gain on sale of real estate investments, net on its consolidated statements of operations and comprehensive income (loss).

Restricted Cash

Restricted cash includes amounts established pursuant to various agreements which limit the use of funds for specific purposes related to property preservation and compliance, such as lender-imposed escrow accounts for replacement reserves, tenant deposits, real estate taxes and insurance.

Rents and Other Receivables

The Company will periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. The Company exercises judgment in establishing these allowances and considers payment history and current credit status of tenants in developing these estimates.

Partially Owned Properties' Noncontrolling Interests

Partially Owned Properties’ Noncontrolling Interests

Partially owned properties’ noncontrolling interests are comprised of the Company’s joint venture partners’ interests in consolidated joint ventures. The Company reports its joint venture partners’ interest in its consolidated real estate 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 investments’ net income or loss and equity contributions and distributions. 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 pursuant to each joint venture’s operating agreement.

Stock-Based Compensation

Stock-Based Compensation

The Company expenses the fair value of share awards in accordance with the fair value recognition requirements of ASC Topic 718 Compensation-Stock Compensation. ASC Topic 718 requires companies to measure the cost of the recipient services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. The cost of the share award is expensed over the requisite service period (usually the vesting period).

Income Taxes

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, and has qualified since the taxable year ended December 31, 2022. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants it relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income (loss) and net cash available for distribution to stockholders; however, the Company intends to continue to organize and operate in such a manner as to remain qualified for treatment as a REIT.

The Company incurred federal, state, and local income taxes primarily from its taxable REIT subsidiaries (“TRS”) which manage the non-REIT activities. The Company’s operating partnerships are flow-through entities which are generally not subject to income taxes. The following is a summary of the income tax expense recorded by the Company for the year ended December 31, 2025 (amounts in thousands). The Company incurred no income tax expense for the year ended December 31, 2024.


		2025
Current Income Tax Expense
U.S. federal		$	1,299
State and local			333
Total current income tax expense			1,632
Deferred Income Tax Expense (Benefit)			—
Total income tax expense		$	1,632

The income tax expense is computed by applying the U.S. federal statutory rate of 21% to pretax loss for the years ended December 31, 2025 and 2024 as follows (amounts in thousands):


		2025						2024
		Amount			Percentage		Amount			Percentage
U.S. federal statutory tax rate		$	(6,503)		21.00	%	$	(2,539)		21.00	%
State and local income taxes, net of federal tax effect			264		(0.85)	%		—		—
Benefit of non-taxable entities			7,714		(24.91)	%		2,539		(21.00)	%
Changes in valuation allowance			55		(0.18)	%		—		—
Other non-taxable or non-deductible items			102		(0.33)	%		—		—
Total income tax expense and effective tax rate		$	1,632		(5.27)	%	$	—		—

As of December 31, 2025, the Company had federal and state net operating loss carryovers of $0.6 million. The Company had no deferred tax assets and liabilities for the years ended December 31, 2025 and 2024.

During the year ended December 31, 2025, the Company paid the following amounts related to income taxes (amounts in thousands). The Company paid no amounts related to income taxes in the year ended December 31, 2024.


		2025
U.S. federal income taxes		$	1,052
State and local income taxes			84
Total income taxes paid		$	1,136

The Company has not identified any uncertain tax positions for the years ended December 31, 2025 or 2024. The Company does not anticipate that the total amount of the unrecognized tax benefits will change significantly within the next twelve months. The Company has analyzed its filing positions in all of the jurisdictions where it is required to file income tax returns, as well as all open years in these jurisdictions. Generally, tax years open for examination by the Internal Revenue Service and various state tax jurisdictions include the years 2022, 2023 and 2024.

Lessee Accounting

In accordance with ASC Topic 842 Leases, the Company determines whether an arrangement is a lease at inception. For operating leases with a term of greater than one year, a lease liability and a right-of-use asset are recognized and recorded in the Company’s consolidated balance sheets. The lease liability represents the Company’s obligation to make lease payments arising from a lease and is measured as the present value of the lease payments at the commencement date. As the rate implicit in a lease may not be known at lease commencement, the Company will use its incremental borrowing rate to discount its lease obligation. The right-of-use asset represents the Company’s right to use a specified asset for the lease term and is determined as the initial measurement of the lease liability, adjusted for any lease payments made at or before the commencement date, less any lease incentives received, plus any initial direct costs incurred by the Company. By way of practical expedient, the Company elects to account for lease and non-lease components as a single lease component in its consolidated statements of operations and comprehensive income (loss). The Company recognizes the single lease component on a straight-line basis over the term of the lease, and expenses that are non-components of the lease, such as real estate taxes for which the Company is not a direct beneficiary of the arrangement, are expensed in the period in which the obligation for those payments are incurred. Refer to Note 16 for further information about the Company’s current lease for separate corporate space in which it is the lessee.

New Accounting Pronouncements

In December 2023, the FASB issued Accounting Standards Update No. 2023-09 “Improvements to Income Tax Disclosures (Topic 740)” (“ASU 2023-09”). The amendments in ASU 2023-09 require additional disclosure with respect to the effective tax rate reconciliation and information on income taxes paid. The amendments in ASU 2023-09 are effective for the Company for annual reporting periods beginning after December 15, 2024. The Company evaluated the impact of ASU 2023-09 on its financial disclosures and has included additional income tax disclosures as applicable in the notes to its consolidated financial statements.

In November 2024, the FASB issued Accounting Standards Update No. 2024-03 “Disaggregation of Income Statement Expenses (Subtopic 220-40)” (“ASU 2024-03”). The amendments in ASU 2024-03 require additional disclosure of specified information about certain costs and expenses within the notes to the financial statements. The amendments in ASU 2024-03 are effective for the Company for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of adopting ASU 2024-03 on its financial disclosures.

In November 2025, the FASB issued Accounting Standards Update No. 2025 - 08, “Financial Instruments – Credit Losses (Topic 326)” (“ASU 2025 - 08”). The amendments in ASU 2025 - 08 expand the use of the gross - up approach for the recognition of expected credit losses on certain acquired loans, requiring that loans deemed “purchased seasoned loans” be accounted for similarly to purchased financial assets with credit deterioration at the acquisition date. The amendments are effective for the Company for annual reporting periods beginning after December 15, 2026. The Company is currently evaluating the impact of adopting ASU 2025 - 08 on its consolidated financial statements.

In December 2025, the FASB issued Accounting Standards Update No. 2025 - 11, “Interim Reporting (Topic 270)” (“ASU 2025 - 11”). The amendments in ASU 2025 - 11 clarify which disclosures are required in interim reporting periods and introduce a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments also clarify the types of interim reporting and the form and content of interim financial statements. The amendments are effective for the Company for interim reporting periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of adopting ASU 2025 - 11 on its interim financial statement disclosures.

Significant Risks and Uncertainties

Significant Risks and Uncertainties

Uncertainty Due to Economic Volatility

The Company’s results of operations in the future may be directly or indirectly affected by uncertainties such as the effects of inflation and related volatility in the market. As inflation accelerated rapidly in the first half of 2023, the Federal Reserve increased interest rates a total of four times during 2023 to curb the effects of rising inflation. While the Federal Reserve reduced interest rates by an aggregate of 100-basis points during 2024 and by an aggregate of 75-basis points during 2025, there can be no assurances that interest rates will not rise again, and the Company’s operating costs, including utilities and payroll, may increase as a result of increases in inflation. Rising interest rates cause uncertainty in credit and capital markets which could have material and adverse effects on the Company’s financial condition, results of operations and cash flows. In addition, any tariffs imposed by the current administration or other countries may cause further inflationary pressures in the economy, uncertainty and volatility of debt and equity markets, and a slowdown in the U.S. and global economies. The announced tariffs are likely to increase construction costs and further reduce already constrained new supply starts, which could adversely impact the timing of actual completion and/or stabilization of build-to-rent communities, including potential delays due to supply shortages and labor shortages. The long-term impact of these economic developments will largely depend on any future action by the Federal Reserve, future laws that may be enacted, the impact on job growth and the broader economy, and reactions by consumers, companies, governmental entities and capital markets. The Company continues to closely monitor the impact of economic volatility on all aspects of its business.