Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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 included herein and with our 2024 Annual Report, filed with the Securities and Exchange Commission (the "SEC") on February 26, 2025. 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 2024 Annual Report.

Overview

As of September 30, 2025, our Portfolio consisted of 35 multifamily properties primarily located in the Southeastern and Southwestern United States encompassing 12,984 units of apartment space that was approximately 93.6% leased with a weighted average monthly effective rent per occupied apartment unit of $1,497. 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, 2025, there were 26,053,988 OP Units outstanding, of which 25,951,154, or 99.6%, were owned by us, and 102,834, or 0.4%, were owned by unaffiliated limited partners (see Note 8 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 24, 2025 for a one-year term. The Adviser is wholly owned by the Sponsor.

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 U.S. 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, 2025 and 2024.

The macroeconomic environment remains challenging. Less available and more expensive debt capital has had pronounced effects on the capital markets, making property acquisitions and other investments harder to finance. Similar factors also impact the timing of and proceeds generated from asset sales and our ability to obtain debt capital. The U.S. government announced a comprehensive set of tariffs in the second quarter. Following the pause of certain of these tariffs, the majority of the previously announced tariffs have been implemented. The U.S. government has indicated that it could impose additional tariffs on particular countries and impose global tariffs on certain goods. Such tariffs could impact our results of operations by increasing the costs of various goods, including construction materials. Management is actively engaged with vendors and business partners to reduce financial risks of tariffs; however, the impact of such tariffs is subject to uncertainties regarding the timing of their implementation, the magnitude of such tariffs and possible exemption for certain goods, among other unknowns.

On October 16, 2019, Highland, a former affiliate of our Sponsor, filed for Chapter 11 bankruptcy protection with the United States Bankruptcy Court for the District of Delaware (the "Highland Bankruptcy"). On October 15, 2021, Marc S. Kirschner, as litigation trustee of a litigation subtrust formed pursuant to Highland's plan of reorganization and disclosure statement which became effective on August 11, 2021, filed a lawsuit (the "Bankruptcy Trust Lawsuit") against various persons and entities, including our Sponsor and James Dondero. On March 24, 2023, the litigation trustee filed a motion for leave to stay the Bankruptcy Trust Lawsuit, which was granted by the bankruptcy court on April 4, 2023. On June 30, 2025, the bankruptcy court approved a settlement agreement between Highland and Hunter Mountain Investment Trust ("HMIT") pursuant to which the claims asserted in the Bankruptcy Trust Lawsuit were assigned to HMIT. HMIT subsequently filed a motion to lift the stay of the Bankruptcy Trust Lawsuit, which was granted and became effective on October 3, 2025. As of the date of this filing, the bankruptcy court has requested briefing from the parties regarding whether the court continues to have jurisdiction over the Bankruptcy Trust Lawsuit given the assignment of claims from Highland to HMIT. Briefs on this matter are due on November 18, 2025.In addition, on February 8, 2023, UBS Securities LLC and UBS AG London (collectively, "UBS") filed a lawsuit in the Supreme Court of the State of New York, County of New York related to a default that occurred in 2009 on a warehouse facility between UBS and funds affiliated with Highland. The lawsuit makes claims against several persons and entities seeking to collect on $1.3 billion in judgments UBS obtained against entities that were managed indirectly by Highland (the "UBS Lawsuit"). On March 7, 2023, the matter was removed to the United States District Court for the Southern District of New York. On April 6, 2023, UBS moved to have the case remanded to New York state court. The federal court remanded the state-law causes of

action and retained and stayed the federal cause of action. On February 26, 2024, several of the respondents, including Mr. Dondero, filed motions in state court to dismiss the UBS Lawsuit on various grounds. A hearing was held on July 8, 2024. The court dismissed the claims against one respondent, CLO HoldCo, Ltd., for lack of personal jurisdiction in a July 12, 2024 order. On March 26, 2025, the court entered an order denying the remaining motions to dismiss and directed the respondents to file an answer to the UBS Lawsuit within 20 days, which they did. Mr. Dondero is appealing the denial of the motion to dismiss to the Appellate Division of the Supreme Court of the State of New York. Neither the Bankruptcy Trust Lawsuit nor the UBS Lawsuit include claims related to our business or our assets. Our Sponsor and Mr. Dondero have informed us they believe the Bankruptcy Trust Lawsuit has no merit, and Mr. Dondero has informed us he believes the UBS Lawsuit has no merit; we have been advised that the defendants named in each of the lawsuits intend to vigorously defend against the claims. We do not expect the Bankruptcy Trust Lawsuit or the UBS Lawsuit will have a material effect on our business, results of operations or financial condition.

Our website is located at nxrt.nexpoint.com. From time to time, we may use our website as a distribution channel for material company information.

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 8 to our consolidated financial statements). Property management fees are primarily based on a component of total revenue.

Advisory and administrative fees.Advisory and administrative fees include the fees paid to our Adviser pursuant to the Advisory Agreement (see Note 9 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, 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 gain. Casualty gain 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, 2025 and 2024

The three months ended September 30, 2025 as compared to the three months ended September 30, 2024

The following table sets forth a summary of our operating results for the three months ended September 30, 2025 and 2024 (in thousands):

The change in our net loss for the three months ended September 30, 2025 as compared to our net loss for the three months ended September 30, 2024 primarily relates to a decrease in total expenses of approximately $3.0 million offset by a decease in total revenues of $1.2 million and an increase in interest expense of $0.9 million.

Revenues

Rental income. Rental income was $60.9 million for the three months ended September 30, 2025 compared to $62.3 million for the three months ended September 30, 2024, which was a decrease of approximately $1.4 million. The decrease between the periods was primarily due to an increase in market rent of $5.9 million offset by a decrease in gain on lease and vacancy loss of $6.5 million and $0.8 million.

Other income.Other income was $1.9 million for the three months ended September 30, 2025 compared to $1.8 million for the three months ended September 30, 2024, which was an increase of approximately $0.1 million. The increase between the periods was primarily due to an increase in interest income of $0.1 million.

Expenses

Property operating expenses.Property operating expenses were $13.4 million for the three months ended September 30, 2025 compared to $15.7 million for the three months ended September 30, 2024, which was a decrease of approximately $2.3 million. The decrease between the periods was primarily due to a decrease in casualty-related expenses of $1.4 million.

Real estate taxes and insurance.Real estate taxes and insurance costs were $7.3 million for the three months ended September 30, 2025 compared to $8.1 million for the three months ended September 30, 2024, which was a decrease of approximately $0.8 million. The decrease between the periods was primarily due to a decrease in property/liability insurance of $0.2 million and a decrease in taxes on real property of $0.3 million.

Property management fees.Property management fees were $1.8 million for the three months ended September 30, 2025 compared to $1.8 million for the three months ended September 30, 2024 which was flat.

Advisory and administrative fees.Advisory and administrative fees were $1.8 million for the three months ended September 30, 2025 compared to $1.7 million for the three months ended September 30, 2024. For the three months ended September 30, 2025 and 2024, our Adviser elected to voluntarily waive advisory and administrative fees of approximately $5.4 million and $5.3 million, respectively, and are considered permanently waived. 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 $4.8 million for the three months ended September 30, 2025 compared to $4.8 million for the three months ended September 30, 2024, which was flat.

Property general and administrative expenses.Property general and administrative expenses were $2.6 million for the three months ended September 30, 2025 compared to $1.7 million for the three months ended September 30, 2024, which was an increase of $0.9 million. The increase between the periods was primarily due to an increase of $1.0 million in franchise tax expenses.

Depreciation and amortization.Depreciation and amortization costs were $23.8 million for the three months ended September 30, 2025 compared to $24.6 million for the three months ended September 30, 2024, which was a decrease of approximately $0.8 million, which was attributable to a decrease in our value-add activities over the prior periods.

Other Income and Expense

Interest expense.Interest expense was $15.5 million for the three months ended September 30, 2025 compared to $14.6 million for the three months ended September 30, 2024, which was an increase of approximately $0.9 million. The increase in interest expense between the periods is primarily attributable to increases in effective interest rate swap expense and amortization of deferred financing costs of $4.8 million and $1.0 million, respectively, offset by a decrease in interest on debt of approximately $5.1 million. The following table details the various costs included in interest expense for the three months ended September 30, 2025 and 2024 (in thousands):

Miscellaneous income. Miscellaneous income was $0.1 million compared to $0.1 million for the three months ended September 30, 2025 and 2024, respectively, which was flat.

The nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024

The following table sets forth a summary of our operating results for the nine months ended September 30, 2025 and 2024 (in thousands):

The change in our net loss for the nine months ended September 30, 2025 as compared to the net income for the nine months ended September 30, 2024 primarily relates to the decrease in gain on sales of real estate of $50.4 million.

Revenues

Rental income. Rental income was $183.6 million for the nine months ended September 30, 2025 compared to $190.3 million for the nine months ended September 30, 2024, which was a decrease of approximately $6.7 million. The decrease between the periods was primarily due to our disposition activity in 2024.

Other income.Other income was $5.6 million for the nine months ended September 30, 2025 compared to $5.6 million for the nine months ended September 30, 2024, which was flat.

Expenses

Property operating expenses.Property operating expenses were $38.4 million for the nine months ended September 30, 2025 compared to $43.2 million for the nine months ended September 30, 2024, which was a decrease of approximately $4.8 million. The decrease between the periods was primarily due to our disposition activity in 2024.

Real estate taxes and insurance.Real estate taxes and insurance costs were $24.8 million for the nine months ended September 30, 2025 compared to $25.6 million for the nine months ended September 30, 2024, which was a decrease of approximately $0.8 million. The decrease between the periods was primarily due to a decrease in property/liability insurance costs of $0.5 million and a decrease in other insurance of $0.3 million.

Property management fees.Property management fees were $5.4 million for the nine months ended September 30, 2025 and $5.7 million for the nine months ended September 30, 2024, which was a decrease of approximately $0.3 million.

Advisory and administrative fees.Advisory and administrative fees were $5.2 million for the nine months ended September 30, 2025 and $5.2 million for the nine months ended September 30, 2024 which was flat. For the nine months ended September 30, 2025 and 2024, our Adviser elected to voluntarily waive advisory and administrative fees of approximately $16.0 million and $16.0 million, respectively, and are considered permanently waived. 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 $13.8 million for the nine months ended September 30, 2025 compared to $14.5 million for the nine months ended September 30, 2024, which was a decrease of approximately $0.7 million. The decrease was primarily due to a decrease in stock compensation expense of $0.5 million.

Property general and administrative expenses.Property general and administrative expenses were $6.7 million for the nine months ended September 30, 2025 compared to $6.6 million for the nine months ended September 30, 2024, which was an increase of approximately $0.1 million. The increase was primarily due to an increase in marketing expense of $0.1 million.

Depreciation and amortization.Depreciation and amortization expense was $72.2 million for the nine months ended September 30, 2025 compared to $73.4 million for the nine months ended September 30, 2024, which was a decrease of approximately $1.2 million. The decrease between the periods was primarily due to a decrease of $1.2 million in depreciation expense, which was primarily due to a decrease in our value-add activities over the prior periods.

Other Income and Expense

Interest expense.Interest expense was $45.0 million for the nine months ended September 30, 2025 compared to $43.0 million for the nine months ended September 30, 2024, which was an increase of approximately $2.0 million. The increase between the periods was primarily due to an increase in amortization of deferred financing costs of $14.9 million and $2.9 million offset by a decrease in interest on debt of $17.1 million, respectively. The following table details the various costs included in interest expense for the nine months ended September 30, 2025 and 2024 (in thousands):

Casualty loss. Casualty loss was $0.2 million and $0.5 million for the nine months ended September 30, 2025 and 2024, respectively. The decrease in casualty loss between periods of $0.3 million is attributable to the Company's casualty events and the timing.

Miscellaneous income. Miscellaneous income was $0.4 million compared to $0.3 million for the nine months ended September 30, 2025 and 2024, respectively. The increase between periods is attributable to an increase in business interruption proceeds.

Gain on sale of real estate. Gain on sale of real estate was $0.0 million compared to $50.4 million for the nine months ended September 30, 2025 and 2024, respectively. The decrease between periods is attributable to no dispositions during the nine months ended September 30, 2025 compared to two during the nine months ended September 30, 2024.

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 as NOI is calculated by adjusting net income (loss) to add back (1) interest expense, (2) advisory and administrative fees, (3) depreciation and amortization expenses, (4) gains or losses from the sale of operating real estate assets that are included in net income (loss) computed in accordance with GAAP, (5) corporate income and corporate general and administrative expenses that are not reflective of operations and properties, (6) other gains and losses that are specific to us including loss on extinguishment of debt and modification costs, (7) casualty-related expenses/(recoveries) and casualty losses (gains), (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 and (9) equity in earnings of affiliates.

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. Advisory and administrative fees and corporate general and administrative expenses 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 on the extinguishment of debt and modification costs are excluded because they do not reflect continuing operating costs of the property owner. Entity level general and administrative expenses incurred at the properties 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. Equity in earnings of affiliates is excluded as its not part of our core operations for the properties. These items 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 (loss) 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 the items noted above, 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, 2025 and 2024

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, 2025 and 2024 to net income (loss), the most directly comparable GAAP financial measure (in thousands):

Net Operating Income for Our Q3 Same Store and Non-Same Store Properties for the Three Months Ended September 30, 2025 and 2024

There are 35 properties encompassing 12,946 units of apartment space in our same store pool for the three months ended September 30, 2025 and 2024 (our "Q3 Same Store" properties). Our Q3 Same Store properties exclude the 38 units that are currently down (see Note 3).

The following table reflects the revenues, property operating expenses and NOI for the three months ended September 30, 2025 and 2024 for our Q3 Same Store and Non-Same Store properties (dollars in thousands):

See reconciliation of net loss to NOI above under "NOI and Same Store NOI for the Three and Nine Months Ended September 30, 2025 and 2024."

Q3 Same Store Results of Operations for the Three Months Ended September 30, 2025 and 2024

As of September 30, 2025, our Q3 Same Store properties were approximately 93.6% leased with a weighted average monthly effective rent per occupied apartment unit of $1,497. As of September 30, 2024, our Q3 Same Store properties were approximately 94.9% leased with a weighted average monthly effective rent per occupied apartment unit of $1,502. For our Q3 Same Store properties, we recorded the following operating results for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024:

Revenues

Rental income. Rental income was $60.9 million for the three months ended September 30, 2025 compared to $61.5 million for the three months ended September 30, 2024, which was a decrease of approximately $0.6 million, or 1.0%. The decrease is attributable to a decrease in weighted average occupancy during the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

Other income.Other income was $1.5 million for the three months ended September 30, 2025, compared to $1.3 million for the three months ended September 30, 2024, which was an increase of $0.2 million. The majority of the increase is related to a $0.3 million increase in internet income.

Expenses

Property operating expenses.Property operating expenses were $13.4 million for the three months ended September 30, 2025 compared to $14.1 million for the three months ended September 30, 2024, which was a decrease of $0.7 million, or 5.1%. The majority of the decrease is related to payroll expense and repairs and maintenance expense decreases of $0.4 million and $0.3 million, respectively.

Real estate taxes and insurance.Real estate taxes and insurance costs were $7.3 million for the three months ended September 30, 2025 compared to $8.2 million for the three months ended September 30, 2024, which is a decrease of $0.9 million. The decrease between periods was primarily due to a decrease in property taxes and insurance of $0.5 million and $0.3 million, respectively.

Property management fees.Property management fees were $1.8 million for the three months ended September 30, 2025 compared to $1.8 million for the three months ended September 30, 2024, which was flat.

Property general and administrative expenses.Property general and administrative expenses were $1.3 million for the three months ended September 30, 2025 compared to $1.3 million for the three months ended September 30, 2024, which was flat.

Net Operating Income for Our Same Store and Non-Same Store Properties for the Nine Months Ended September 30, 2025 and 2024

There are 35 properties encompassing 12,946 units of apartment space in our same store pool for the nine months ended September 30, 2025 and 2024 (our "Same Store" properties). Our Same Store properties exclude 38 units that are currently down (see Note 3).

The following table reflects the revenues, property operating expenses and NOI for the nine months ended September 30, 2025 and 2024 for our Same Store and Non-Same Store properties (dollars in thousands):

See reconciliation of net loss to NOI above under "NOI and Same Store NOI for the Three and Nine Months Ended September 30, 2025 and 2024."

Same Store Results of Operations for the Nine Months Ended September 30, 2025 and 2024

As of September 30, 2025, our Same Store properties were approximately 93.6% leased with a weighted average monthly effective rent per occupied apartment unit of $1,497. As of September 30, 2024, our Same Store properties were approximately 94.9% leased with a weighted average monthly effective rent per occupied apartment unit of $1,502. For our Same Store properties, we recorded the following operating results for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024:

Revenues

Rental income. Rental income was $183.6 million for the nine months ended September 30, 2025 compared to $185.0 million for the nine months ended September 30, 2024, which was a decrease of approximately $1.4 million, or 0.8%. The decrease in rental income between the periods was primarily attributable to a decrease in weighted average occupancy for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.

Other income.Other income was $4.4 million for the nine months ended September 30, 2025 compared to $4.1 million for the nine months ended September 30, 2024, which was an increase of approximately $0.3 million, or 7.3%. The majority of the increase is related to a $0.3 million increase in internet income.

Expenses

Property operating expenses.Property operating expenses were $39.8 million for the nine months ended September 30, 2025 compared to $39.9 million for the nine months ended September 30, 2024, which was a decrease of approximately $0.1 million, or 0.3%. The majority of the decrease is related to a decease in payroll expense of $0.4 million offset by an increase of approximately $0.3 million in utilities.

Real estate taxes and insurance.Real estate taxes and insurance costs were $24.8 million for the nine months ended September 30, 2025 compared to $25.0 million for the nine months ended September 30, 2024, which was a decrease of approximately $0.2 million. The majority of the decrease is related to a decrease in insurance of $0.4 million offset by an increase in real estate taxes of approximately $0.1 million.

Property management fees.Property management fees were $5.4 million for the nine months ended September 30, 2025 compared to $5.5 million for the nine months ended September 30, 2024, which was a decrease of approximately $0.1 million. The majority of the decrease is related to a $0.1 million, or 0.8%, decrease in rental income, which the fee is primarily based on.

Property general and administrative expenses.Property general and administrative expenses were $3.8 million for the nine months ended September 30, 2025 compared to $3.8 million for the nine months ended September 30, 2024, which was flat.

FFO, Core FFO and AFFO

We believe that net income (loss), 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 (loss), as defined by GAAP. FFO is defined by NAREIT as net income (loss) 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 redeemable noncontrolling interests in the OP 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 not representative of the ongoing operating performance of our Portfolio. Core FFO adjusts FFO to remove items such casualty-related expenses and recoveries and gains or losses, (gain) loss on extinguishment of debt and modification costs that are not reflective of continuing operations of the properties, the amortization of deferred financing costs, mark-to-market gains or losses related to interest rate cap agreements not designated as hedges for accounting purposes, 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. Starting in the third quarter of 2024, the Company adjusted Core FFO to remove (1) the amortization of all deferred financing costs instead of those solely related to short-term debt financing and (2) mark-to-market gains or losses related to interest rate cap agreements not designated as hedges for accounting purposes. Prior periods have been recast to conform to current presentations.

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 related 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 8 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 loss, the most directly comparable GAAP financial measure, for the three and nine months ended September 30, 2025 and 2024 (in thousands, except per share amounts):

The three months ended September 30, 2025 as compared to the three months ended September 30, 2024

FFO was $15.9 million for the three months ended September 30, 2025 compared to $15.7 million for the three months ended September 30, 2024, which was an increase of approximately $0.2 million. The change in our FFO between the periods primarily relates to an increase in net income of $1.0 million, offset by a decrease in depreciation and amortization expenses of $0.9 million, respectively.

Core FFO was $17.7 million for the three months ended September 30, 2025 compared to $17.9 million for the three months ended September 30, 2024, which was a decrease of $0.2 million. The change in Core FFO was attributable to an increase in FFO and an increase in amortization of deferred financing costs of $1.0 million offset by a decrease in casualty-related expenses of $1.3 million, respectively.

AFFO was $20.2 million for the three months ended September 30, 2025 compared to $20.6 million for the three months ended September 30, 2024, which was a decrease of $0.4 million. The change in our AFFO between the periods primarily relates to a decrease in Core FFO and a decrease in equity based compensation expense of $0.1 million.

The nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024

FFO was $50.2 million for the nine months ended September 30, 2025 compared to $50.9 million for the nine months ended September 30, 2024, which was a decrease of approximately $0.7 million. The change in our FFO between the periods primarily relates to a decrease in depreciation and amortization expenses of $1.2 million.

Core FFO was $54.8 million for the nine months ended September 30, 2025 compared to $55.5 million for the nine months ended September 30, 2024, which was a decrease of approximately $0.7 million. The change in our Core FFO between the periods primarily relates to a decrease in FFO and a decrease in extinguishment of debt and modification costs of $0.8 million.

AFFO was $62.1 million for the nine months ended September 30, 2025 compared to $63.3 million for the nine months ended September 30, 2024, which was a decrease of approximately $1.2 million. The change in our AFFO between the periods primarily relates to a decrease in Core FFO and a decrease of equity-based compensation expense of $0.5 million.

Liquidity and Capital Resources

Our short-term liquidity requirements consist primarily of funds necessary to pay for operating expenses and other expenditures directly associated with our multifamily properties, including:

We expect to meet our short-term liquidity requirements generally through net cash provided by operations and existing cash balances and any unused capacity on the Credit Facility (as defined below). As of September 30, 2025, we had approximately $3.3 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 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 March 4, 2020, the Company, the OP and the Adviser entered into separate equity distribution agreements with each of the ATM Sales Agents, pursuant to which the Company could issue and sell from time to time when an effective registration statement was available 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"). On March 20, 2025, the equity distribution agreements with each of KeyBanc and SunTrust were terminated. 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 $225,000,000 (see Note 6 to our consolidated financial statements). As of September 30, 2025, the Company has sold $62.3 million under the 2020 ATM Program.

On July 11, 2025, the Company, though the OP, entered into a $200.0 million revolving credit facility with J.P. Morgan Chase Bank, N.A. ("JPMorgan") and the lenders thereto from time to time (the "Credit Facility"). The Credit Facility may be increased by up to an additional $200.0 million if the lenders agree to increase their commitments. The Credit Facility will mature on June 30, 2028, unless the Company exercises its option to extend for a one-year term upon satisfaction of certain criteria and payment of an extension fee of 0.15% of the aggregate amount outstanding under the Credit Facility. As of September 30, 2025, the available amount to borrow under the Credit Facility was $198.0 million, $0.0 million was outstanding under the Credit Facility and a $2.0 million letter of credit was outstanding.

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, 2025.

Cash Flows

The following table presents selected data from our consolidated statements of cash flows for the nine months ended September 30, 2025 and 2024 (in thousands):

Cash flows from operating activities.During the nine months ended September 30, 2025, net cash provided by operating activities was $77.5 million compared to net cash provided by operating activities of $67.1 million for the nine months ended September 30, 2024. The change in cash flows from operating activities was mainly due to an increase in real estate taxes payable of $6.5 million.

Cash flows from investing activities.During the nine months ended September 30, 2025, net cash used in investing activities was $30.6 million compared to net cash provided by investing activities of $114.7 million for the nine months ended September 30, 2024. The change in cash flows from investing activities was mainly due to no dispositions during the nine months ended September 30, 2025 compared to two dispositions for the nine months ended September 30, 2024.

Cash flows from financing activities.During the nine months ended September 30, 2025, net cash used in financing activities was $50.7 million compared to net cash used in financing activities of $166.4 million for the nine months ended September 30, 2024. The change in cash flows from financing activities was mainly due to a net decrease in mortgage payments and credit facilities payments of $112.3 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.

Real Estate Investments Statistics

As of September 30, 2025, the Company was invested in a total of 35 multifamily properties, as listed below:

Debt, Derivatives and Hedging Activity

Mortgage Debt

As of September 30, 2025, our subsidiaries had aggregate mortgage debt outstanding to third parties of approximately $1.5 billion at a weighted average interest rate of 5.37% and an adjusted weighted average interest rate of 3.50%. For purposes of calculating the adjusted weighted average interest rate of our mortgage debt outstanding, we have included the weighted average fixed rate of 1.36% Adjusted SOFR on our combined $0.9 billion notional amount of interest rate swap agreements, which effectively fixes the interest rate on $0.9 billion of our floating rate debt. See Notes 4 and 5 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, 2025, interest rate swap agreements effectively covered 62% of our $1.5 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, 2025, the Company had interest rate cap agreements with a notional value of $2.3 billion outstanding.

LIBOR ceased publication on June 30, 2023. On July 1, 2023, LIBOR rates were replaced with SOFR as the reference rate for most LIBOR debt and derivative instruments. For the Company's interest rate swaps that were entered into before the transition, the reference transitioned from one-month LIBOR to Adjusted SOFR.

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.

Credit Facility

On July 11, 2025, the Company, though the OP, entered into the Credit Facility. The Credit Facility may be increased by up to an additional $200.0 million if the lenders agree to increase their commitments. The Credit Facility will mature on June 30, 2028, unless the Company exercises its option to extend for a one-year term upon satisfaction of certain criteria and payment of an extension fee of 0.15% of the aggregate amount outstanding under the Credit Facility. As of September 30, 2025, the Company had $0.0 million outstanding and $198.0 million available for borrowing under the Credit Facility and a $2.0 million letter of credit outstanding.

The Credit Facility is guaranteed by the Company and the obligations under the Credit Facility are, subject to some exceptions, secured by a security interest in the proceeds of all equity offerings and other capital events by the Company, the OP or their subsidiaries and an equity pledge of each subsidiary of the OP that owns an interest in a mortgaged property.

Advances under the Credit Facility accrue interest at a per annum rate equal to, at the Company's election, either (i) the daily SOFR plus a margin of 1.50% to 2.25%, depending on the Company's total leverage ratio in the immediately preceding quarter, (ii) the term SOFR for the interest period plus a margin of 1.50% to 2.25%, depending on the Company's total leverage ratio in the immediately preceding quarter, or (iii) a base rate determined according to the highest of (a) the prime rate, (b) the federal funds rate plus 0.5%, or (c) the one month term SOFR plus 1.0%, plus a margin of 0.50% to 1.25%, depending on the Company's total leverage ratio in the immediately preceding quarter.

A commitment fee at a rate of 0.20% or 0.30%, depending on the average daily revolving commitment utilization percentage for the calendar quarter, applies to unutilized borrowing capacity under the Credit Facility.

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 five interest rate swap transactions with KeyBank, one with JPMorgan and one with SunTrust Bank (collectively the "Counterparties") with a combined notional amount of $0.9 billion. As of September 30, 2025, the interest rate swaps we have entered into effectively replace the floating interest rate (Adjusted SOFR or SOFR) with respect to $0.9 billion of our floating rate debt outstanding with a weighted average fixed rate of 1.36%. During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 1.36%, on a weighted average basis, on the notional amounts, while the Counterparties are obligated to make monthly floating rate payments based on Adjusted SOFR, other than for the JPMorgan swap which is based on SOFR, 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 4 and 5 to our consolidated financial statements for additional information.

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