Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion and analysis together with our consolidated financial statements and notes thereto included in this Annual Report on Form 10-K ("Annual Report"). The following information contains forward-looking statements, which are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements. Please see "Special Note Regarding Forward-Looking Statements" before Item 1 of this Annual Report for a description of these risks and uncertainties. Dollar amounts are presented in thousands, except per share data and where indicated in millions. References to quarters are based on calendar quarters.

Overview

Lightstone REIT V was organized as a Maryland corporation on January 9, 2007 and has elected to be taxed, and currently qualifies, as a REIT for U.S. federal income tax purposes.

We were formed primarily to acquire and operate commercial real estate and real estate-related assets on an opportunistic and value-add basis. In particular, we have focused generally on acquiring commercial properties with significant possibilities for capital appreciation, such as those requiring development, redevelopment or repositioning, those located in markets and submarkets with high growth potential, and those available from sellers who were distressed or faced time-sensitive deadlines. In addition, our opportunistic and value-add investment strategy has included investments in real estate-related assets that present opportunities for higher current income. Since our inception, we have acquired a wide variety of commercial properties, including office, industrial, retail, hospitality, multifamily residential and student housing. We have purchased existing, income-producing properties and newly constructed properties. We have also invested in mortgage and mezzanine loans. We have made our investments in or in respect of real estate assets located in the U.S. and other countries based on our view of existing market conditions.

Substantially all of our business is conducted through the Operating Partnership. As of December 31, 2025, our wholly-owned subsidiary, BHO II, Inc., a Delaware corporation, owned a 0.1% partnership interest in the Operating Partnership as its sole general partner. As of December 31, 2025, our wholly-owned subsidiary, BHO Business Trust II, a Maryland business trust, was the sole limited partner of the Operating Partnership and owned the remaining 99.9% interest in the Operating Partnership.

All of our current investments are located in the U.S. We currently intend to hold our various real estate properties until such time as our Board of Directors determines that a sale or other disposition appears to be advantageous to achieve our investment objectives or until it appears that the objectives will not be met. We currently have one operating segment. As of December 31, 2025, we wholly owned and consolidated eight multifamily residential properties containing an aggregate 2,480 apartment units.

Related Parties

Our business is externally managed by the Advisor, an affiliate of Lightstone, which provides advisory services to us and we have no employees. Lightstone is majority owned by David Lichtenstein, a member of the Board of Directors. Pursuant to the terms of an advisory agreement and subject to the oversight of our Board of Directors, the Advisor is responsible for managing our day-to-day affairs and for services related to the management of our assets.

We have agreements with the Advisor and its affiliates to pay certain fees and reimburse certain expenses in connection with services performed and costs incurred by these entities and other related parties. We are dependent on the Advisor and its affiliates for performing a full range of services that are essential to us, including asset management, property management, property management oversight (for those properties which are managed by an unrelated third-party property manager) and acquisition, disposition and financing activities, and other general administrative responsibilities; such as tax, accounting, legal, information technology and investor relations services. If the Advisor and its affiliates are unable to provide these services to us, we would be required to provide the services ourselves or obtain the services from another party or parties.

Concentration of Credit Risk

As of December 31, 2025 and 2024, we had cash deposited in certain financial institutions in excess of U.S. federally insured levels. We regularly monitor the financial stability of these financial institutions and currently believe that we are not exposed to any significant credit risk for our cash and cash equivalents or restricted cash.

Current Environment

Our operating results and financial condition are substantially impacted by the overall health of local, U.S. national and global economies and may be influenced by market and other challenges. Additionally, our business and financial performance may be adversely affected by current and future economic and other conditions; including, but not limited to, new and existing competition, inflation, the impact of tariffs and global trade disruptions, recessionary pressures, supply chain disruptions, wars and acts of war, geopolitical tensions, political upheaval or uncertainty, potential violence, civil unrest, criminal activity or terrorism, the availability and cost of comprehensive insurance coverage, the effects of climate change, environmental liabilities, natural and other disasters, security breaches and cybercrime, any disruptions in the financial markets that may adversely affect the availability or terms of financings, unfavorable changes in laws, ordinances and regulations, technological advances and challenges, such as the use and impact of artificial intelligence and machine learning, and loss of key relationships.

Our overall performance depends in part on worldwide economic and geopolitical conditions and their impacts on consumer behavior. Worsening economic conditions, increases in costs due to inflation or tariffs, higher interest rates, labor and supply chain challenges, and other changes in economic conditions, could adversely affect our future results of operations and financial condition.

We are not currently aware of any other material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from our operations, other than those referred to above or throughout this Annual Report. The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period.

Critical Accounting Estimates and Policies

General

Our consolidated financial statements, included in this Annual Report, include our accounts, the Operating Partnership and its subsidiaries (over which we exercise financial and operating control). All inter-company balances and transactions have been eliminated in consolidation.

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements requires us to make estimates and judgments about the effects of matters or future events that are inherently uncertain. These estimates and judgments may affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an ongoing basis, we evaluate our estimates, including contingencies and litigation. We base these estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

To assist in understanding our results of operations and financial position, we have identified our critical accounting policies and discussed them below. We believe these accounting policies are most important to the portrayal of our results of operations and financial position, either because of the significance of the financial statement items to which they relate or because they require our management's most difficult, subjective or complex judgments.

Investments in Real Estate

We generally record investments in real estate at cost and capitalize improvements and replacements when they extend the useful life or improve the efficiency of the asset. We compute depreciation using the straight-line method over the estimated useful lives of the applicable real estate asset. We generally use estimated useful lives of up to 39 years for buildings, 15 years for land improvements and building improvements and 5 to 10 years for furniture, fixtures and equipment. The value of acquired in-place leases are amortized to expense over the average remaining term of the leases acquired. We expense costs of ordinary repairs and maintenance as incurred.

We make subjective assessments as to the useful lives of our properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in real estate. These assessments have a direct impact on our net income because, if we were to shorten the expected useful lives of our investments in real estate, we would depreciate these investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.

We record assets and groups of assets and liabilities which comprise disposal groups as held for sale when all of the following criteria are met: a decision has been made to sell, the assets are available for sale immediately, the assets are being actively marketed at a reasonable price in relation to the current fair value, a sale has been or is expected to be concluded within twelve months of the consolidated balance sheet date, and significant changes to the plan to sell are not expected. The assets and disposal groups held for sale are valued at the lower of book value or fair value less disposal costs. For sales of real estate or assets classified as held for sale, we evaluate whether a disposal transaction meets the criteria of a strategic shift and will have a major effect on our operations and financial results to determine if the results of operations and gains on sale of real estate will be presented as part of our continuing operations or as discontinued operations in our consolidated statements of operations. If the disposal represents a strategic shift, it will be classified as discontinued operations for all periods presented; if not, it will be presented in continuing operations.

We evaluate the recoverability of our investments in real estate assets at the lowest identifiable level, which is primarily at the individual property level. An impairment loss is recognized only if the carrying amount of a long-lived asset is not expected to be fully recoverable and it exceeds its fair value.

We evaluate the long-lived assets for potential impairment whenever events or changes in circumstances indicate that the total undiscounted projected cash flows are less than the carrying amount for a particular property. No single indicator would necessarily result in us preparing an estimate to determine if a long-lived asset's future undiscounted cash flows are less than its book value. We use judgment to determine if the severity of any single indicator, or the fact there are a number of indicators of less severity that when combined, would result in an indication that a long-lived asset requires an estimate of the undiscounted cash flows to determine if an impairment has occurred. Relevant facts and circumstances include, among others, significant underperformance relative to historical or projected future operating results and significant negative industry or economic trends. The estimated cash flows used for the impairment analysis are subjective and require us to use our judgment and the determination of estimated fair value is based on our plans for the respective assets and our views of market and economic conditions. The estimates consider matters such as future operating income, market and other applicable trends and residual value, as well as the effects of demand, competition, and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in our plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, may be substantial.

Accounting for Asset Acquisitions

The cost of the acquisition in an asset acquisition is allocated to the acquired tangible assets, consisting of land, building and improvements, and any identified intangible assets and liabilities, such as the value of above-market and below-market leases for acquired in-place leases and the value of tenant relationships, and certain liabilities such as assumed debt and contingent liabilities on the basis of their relative fair values. Fees incurred related to asset acquisitions are capitalized as part of the cost of the investment.

Tax Status and Income Taxes

We elected to be taxed as a REIT commencing with the taxable year ended December 31, 2008. As a REIT, we generally will not be subject to U.S. federal income tax on its taxable income or capital gain that it distributes to its stockholders. To maintain our REIT qualification, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our stockholders at least 90% of our REIT taxable income (which does not equal net income, as calculated in accordance with GAAP), determined without regard to the deduction for dividends paid and excluding any net capital gain. If we fail to remain qualified for taxation as a REIT in any subsequent year and do not qualify for certain statutory relief provisions, our income for that year will be taxed at the regular corporate rate, and we may be precluded from qualifying for treatment as a REIT for the four-year period following our failure to qualify as a REIT. Such an event could materially adversely affect our earnings and net cash available for distribution to stockholders. Additionally, even if we continue to qualify as a REIT, we may still be subject to some U.S. federal, state and local taxes on our income and property and to U.S. federal income taxes and excise taxes on our undistributed income, if any.

To maintain our qualification as a REIT, we may engage in certain activities through a wholly-owned taxable REIT subsidiary. As such, we may be subject to U.S. federal and state income and franchise taxes from these activities.

Our income tax expense and benefits are included in other income, net on our consolidated statements of operations. During both of the years ended December 31, 2025 and 2024, we recorded income tax expense of $0.4 million and $0.8 million, respectively.

As of December 31, 2025 and 2024, we had no material uncertain income tax positions.

Liquidity and Capital Resources

As of December 31, 2025, we had cash and cash equivalents of $58.0 million, marketable securities, available for sale of $4.1 million and restricted cash of $5.7 million.

Our principal demands for funds going forward are expected to be for the payment of (a) our anticipated operating expenses, including capital expenditures, and (b) scheduled debt service (excluding any balloon payments due at maturity) on our outstanding indebtedness, including any required replacement interest rate cap contracts. We also may, at our discretion, use funds for (a) tender offers and/or redemptions of our Common Shares, (b) distributions, if any, to our shareholders, and (c) selective acquisitions and/or real estate-related investments. Generally, we expect to meet our cash needs with our cash and cash equivalents and marketable securities on hand along with our cash flow from operations and the release of certain funds held in restricted cash.

However, to the extent that these sources are not sufficient to cover our cash needs, we may use proceeds from additional borrowings and/or selective asset sales to fund such needs.

We have borrowed money to acquire properties and make other investments. Under our charter, the maximum amount of our indebtedness is limited to 300% of our "net assets" (as defined by our charter) as of the date of any borrowing; however, we may exceed that limit if approved by a majority of our independent directors. In addition to our charter limitation, our Board of Directors has adopted a policy to generally limit our borrowings to 75% of the value of our assets unless substantial justification exists that borrowing a greater amount is in our best interests. Our policy limitation, however, does not apply to individual real estate assets.

Acquisition and Disposition Activities during 2024 and 2025

Acquisition of the Discovery at Space Coast Apartments - December 2024

On December 19, 2024, we acquired a 240-unit multifamily residential property located in Rockledge, Florida (the "Discovery at Space Coast Apartments") from an unrelated third party for a contractual purchase price of $63.8 million, plus closing and other acquisition related costs totaling $1.7 million, including the acquisition fee and acquisition expense reimbursements paid to the Advisor as discussed below. The acquisition was funded with $43.7 million of proceeds from a mortgage financing (the "Discovery at Space Coast Apartments Mortgage") and $21.8 million of cash on hand. Additionally, in connection with the acquisition of the Discovery at Space Coast Apartments, the Advisor received an aggregate of $1.6 million, consisting of an acquisition fee of $1.0 million, acquisition expense reimbursements of $0.2 million and a debt financing fee of $0.4 million.

Disposition of the Autumn Breeze Apartments - February 2025

On February 27, 2025, we completed the disposition of a 280-unit multifamily residential property located in Noblesville, Indiana (the "Autumn Breeze Apartments") to an unrelated third-party for a contractual sales price of $59.5 million. In connection with the disposition of the Autumn Breeze Apartments, a non-recourse mortgage loan collateralized by the Autumn Breeze Apartments (the "Autumn Breeze Apartments Mortgage") of $28.8 million was fully defeased at a total cost of $28.1 million. Our net proceeds from the disposition of the Autumn Breeze Apartments were $30.5 million, after the aforementioned defeasance of the Autumn Breeze Apartments Mortgage, pro rations, and closing and other related transaction costs. In connection with the disposition of Autumn Breeze Apartments, we recognized a gain on sale of investment property of $18.1 million during the first quarter of 2025.

In connection with the sale of the Autumn Breeze Apartments, we funded $31.0 million into an escrow account with a qualified intermediary in order to facilitate potential like-kind exchange transactions in accordance with Section 1031 of the Internal Revenue Code, as amended. These funds were subsequently released to us during the second and third quarters of 2025.

The disposition of the Autumn Breeze Apartments did not qualify to be reported as discontinued operations since it did not represent a strategic shift that had a major effect on our operations and financial results. Accordingly, the operating results of the Autumn Breeze Apartments are reflected in our results from continuing operations for all periods presented through its date of disposition.

Debt Financings

From time to time, we have obtained mortgage, bridge, or mezzanine loans for acquisitions and investments, as well as property development, redevelopment and renovations. In the future, we may obtain new financings for such activities or to refinance our existing real estate assets, depending on multiple factors.

Our aggregate notes payable balance was $310.5 million, net of deferred financing fees of $5.3 million, and had a weighted average interest rate of 5.37% as of December 31, 2025. Our aggregate notes payable balance was $323.2 million, net of deferred financing fees of $3.8 million, and had a weighted average interest rate of 4.98% as of December 31, 2024.

Financings Activities during 2024 and 2025

Citadel Apartments Mortgages - Maturity Extension in September 2024

On October 6, 2021, we entered into a non-recourse mortgage loan facility for up to $39.2 million (the "Citadel Apartments Senior Mortgage"). Simultaneously, on October 6, 2021, we also entered into a non-recourse mortgage loan facility for up to $9.8 million (the "Citadel Apartments Junior Mortgage" and together with the Citadel Apartments Senior Mortgage, the "Citadel Apartments Mortgages"). The Citadel Apartments Mortgages require monthly interest-only payments with the unpaid principal balance due upon maturity.

The Citadel Apartments Mortgages were initially scheduled to mature on October 11, 2024, and had two one-year extension options, subject to the satisfaction of certain conditions. The Citadel Apartments Mortgages are both collateralized by a 293-unit multifamily residential property located in Houston, Texas (the "Citadel Apartments"); however, the Citadel Apartments Junior Mortgage is subordinate to the Citadel Apartments Senior Mortgage.

Pursuant to the terms of the Citadel Apartments Mortgages, we were required to enter into one or more interest rate cap contracts in the aggregate notional amount of $49.0 million pursuant to which the SOFR rate was to be capped at 2.00% for as long as the Citadel Apartments Mortgages remain outstanding.

On September 26, 2024, the maturity dates of the Citadel Apartments Mortgages were both extended from October 11, 2024 to October 11, 2026. In connection with these extensions, we made an aggregate principal paydown of $5.0 million, which reduced the outstanding principal balances of the Citadel Apartments Senior Mortgage from $39.2 million to $35.2 million and the Citadel Apartments Junior Mortgage from $9.8 million to $8.8 million. Additionally, the lender agreed to allow for the aggregate notional amount for the interest rate contracts to be reduced from $49.0 million to $44.0 million (as a result of the aggregate principal paydown of $5.0 million) and for SOFR to be capped at 3.00%, rather than 2.00%, through the maturity of the Citadel Apartments Mortgages.

We have maintained interest rate caps pursuant to the requisite terms since the origination of the Citadel Apartments Mortgages. On October 10, 2024, we entered into a one-year term interest rate cap contract with an effective date of October 11, 2024, with an unrelated financial institution at a cost of $0.5 million. This interest rate cap contract replaced an interest rate contract that expired on October 11, 2024 but had a reduced notional amount of $44.0 million and effectively caps SOFR at 3.00% during its term. On October 9, 2025, we extended the maturity date of this interest rate cap contract through October 11, 2026 at a cost of $0.3 million.

As of December 31, 2025, the aggregate outstanding principal balance of the Citadel Apartments Mortgages was $44.0 million

Discovery at Space Coast Apartments Mortgage - Acquisition Financing in December 2024

In connection with our acquisition of the Space Coast Apartment on December 19, 2024, we simultaneously entered into the Discovery at Space Coast Apartments Mortgage. The Discovery at Space Coast Mortgage is a $43.7 million non-recourse mortgage loan which is scheduled to mature on January 1, 2030. The Discovery at Space Coast Apartments Mortgage bears interest at 5.60% and requires monthly interest-only payments through January 1, 2028, monthly principal and interest payments of approximately $0.3 million thereafter, andthe unpaid principal balance due upon maturity. The Discovery at Space Coast Apartments Mortgage is collateralized by the Discovery at Space Coast Apartments. In connection with the Discovery at Space Coast Apartments Mortgage, we paid the Advisor a debt financing fee of $0.4 million.

As of December 31, 2025, the outstanding principal balance of the Discovery at Space Coast Apartments Mortgage was $43.7 million.

Autumn Breeze Apartments Mortgage - Defeasance in February 2025

In connection with the disposition of the Autumn Breeze Apartments on February 27, 2025, the Autumn Breeze Apartments Mortgage of $28.8 million was fully defeased at a total cost of $28.1 million. See "Acquisition and Disposition Activities during 2025 and 2024".

The Aster Apartments Mortgage - Refinancing in May 2025

On May 30, 2025, we entered into a five-year $21.8 million non-recourse mortgage loan ("The Aster Apartments Mortgage") scheduled to mature on June 1, 2030. The Aster Apartments Mortgage bears interest at 5.20% and requires monthly interest-only payments with the unpaid principal balance due upon maturity. The Aster Apartments Mortgage is collateralized by a 240-unit multifamily residential property located in Sugar Land, Texas ( "The Aster Apartments"). A substantial portion of the proceeds from The Aster Apartments Mortgage were used to repay in full prior mortgage indebtedness of $15.9 million, which was also collateralized by The Aster Apartments. In connection with The Aster Apartments Mortgage, we paid the Advisor a debt financing fee of $0.2 million.

As of December 31, 2025, the outstanding principal balance of The Aster Apartments Mortgage was $21.8 million.

BayVue Apartments Mortgage - Refinancing in June 2025

On June 30, 2025, we entered into the BayVue Apartments Mortgage, a five-year $48.2 million non-recourse mortgage loan scheduled to mature on July 1, 2030. The BayVue Apartments Mortgage bears interest at 4.98% and requires monthly interest-only payments through June 30, 2028, monthly principal and interest payments of approximately $0.2 million thereafter, and the unpaid principal balance due upon maturity. The BayVue Apartments Mortgage is collateralized by a 368-unit multifamily residential property located in Tampa, Florida (the "BayVue Apartments"). The majority of the proceeds of the BayVue Apartments Mortgage were used to repay in full prior mortgages indebtedness of $47.4 million, which was also collateralized by the BayVue Apartments. In connection with the BayVue Apartments Mortgage, we paid the Advisor a debt financing fee of $0.5 million.

The above noted prior mortgage loan required us to enter into one or more interest rate cap contracts in the aggregate notional amount of $52.2 million pursuant to which SOFR was capped at 2.50% for as long as it remained outstanding. We maintained interest rate cap contracts pursuant to the requisite terms beginning with the origination of this mortgage loan.

As of December 31, 2025, the outstanding principal balance of the BayVue Apartments Mortgage was $48.2 million.

Arbors Harbor Town Mortgage - Refinancing in December 2025

On December 11, 2025, we entered into a five-year $46.3 million non-recourse mortgage loan (the "Arbor Harbor Town Mortgage") scheduled to mature on January 1, 2031. The Arbors Harbor Town Mortgage bears interest at 5.21% and requires monthly interest-only payments through December 31, 2026, monthly principal and interest payments of approximately $0.3 million thereafter, and the unpaid principal balance due upon maturity. The Arbors Harbor Town Mortgage is collateralized by a 345-unit multifamily residential property located in Memphis, Tennessee (the "Arbors Harbor Town"). A substantial portion of the proceeds from the Arbors Harbor Town Mortgage were used to repay in full existing aggregate mortgage indebtedness of $34.4 million, which was also collateralized by the Arbors Harbor Town. In connection with the Arbors Harbor Town Mortgage, we paid the Advisor a debt financing fee of $0.5 million.

As of December 31, 2025, the outstanding principal balance of the Arbors Harbor Town Mortgage was $46.3 million.

Contractual Mortgage Obligations

One of our principal short-term and long-term liquidity requirements includes the refinancing or repayment of maturing debt. The following table provides information with respect to the contractual maturities and scheduled debt service payments of our indebtedness as of December 31, 2025:

Contractual Obligations		2026				2027				2028				2029				2030				Thereafter				Total
Principal Maturities		$	121,873			$	574			$	1,336			$	1,761			$	146,565			$	43,617			$	315,726
Interest Payments(1)			13,923				10,574				10,555				10,610				4,380				196				50,238
Total Contractual Obligations		$	135,796			$	11,148			$	11,891			$	12,371			$	150,945			$	43,813			$	365,964

Note:

(1)

These amounts represent future interest payments related to notes payable obligations based on the fixed and variable interest rates specified in the associated debt agreement. All variable rate debt agreements are based on the one-month SOFR rate. For purposes of calculating future interest amounts on variable interest rate debt the one-month SOFR rate as of December 31, 2025 was used.

Mortgage Debt Maturities

The following discussion relates to our current intentions with respect to our mortgage debt maturing over the next 12 months from the date of these consolidated financial statements.

Our non-recourse mortgage loan (outstanding principal balance of $43.4 million as of December 31, 2025) collateralized by a 384-unit multifamily residential property located in Ann Arbor, Michigan (the "Valley Ranch Apartments") was scheduled to mature on March 1, 2026. However, on February 27, 2026, we entered into a $60.5 million non-recourse mortgage loan (the "Valley Ranch Apartments Mortgage") scheduled to mature on March 1, 2033. The Valley Ranch Apartments Mortgage bears interest at 5.23% and requires monthly interest-only payments through April 1, 2030, monthly principal and interest payments of approximately $0.3 million thereafter, and the unpaid principal balance due upon maturity. The Valley Ranch Apartments Mortgage is collateralized by the Valley Ranch Apartments. A substantial portion of the proceeds from the Valley Ranch Apartments Mortgage were used to repay in full the prior mortgage indebtedness of $43.4 million. In connection with the Valley Ranch Apartments Mortgage, we paid the Advisor a debt financing fee of $0.6 million.

Our non-recourse mortgage loan (outstanding principal balance of $34.5 million as of December 31, 2025) collateralized by a 345-unit multifamily residential property located in Westmont, Illinois (the "Axis at Westmont") was initially scheduled to mature on February 1, 2026; however, we have obtained from the lender a short-term extension until April 2, 2026 to provide additional time for us to refinance the maturing loan. We currently intend to refinance this mortgage indebtedness on or before its scheduled maturity date.

The Citadel Apartments Mortgages (aggregate outstanding principal balance of $44.0 million as of December 31, 2025) are scheduled to mature on October 11, 2026. We currently intend to refinance the Citadel Apartments Mortgages on or before their scheduled maturity date.

We do not currently expect any issues in extending or refinancing our maturing mortgage indebtedness at favorable terms although there can be no assurances that we will be able to do so. If we are unable to successfully extend or refinance our maturing mortgage indebtedness, we may also consider repaying the then outstanding principal balances due at their respective maturity dates with available cash on hand and/or proceeds from selective asset sales even though such mortgage indebtedness is not recourse to us. Other than the mortgage debt maturities discussed above, we have no additional maturities of mortgage debt over the next 12 months from the date of these consolidated financial statements.

Results of Operations

Our results of operations for the year ended December 31, 2025 compared to the same period in 2024 reflect our acquisition and disposition activities during such periods. Properties which were owned by us during the entire periods presented are referred to as our "Same Store" properties.

The following table provides summary information about our results of operations:

		Year Ended December 31,												Change due to				Change due to				Change due to Same				Percentage of Change due to Same
		2025				2024				Change				Acquisition(1)				Disposition(2)				Store(3)				Store
Rental revenues		$	51,243			$	50,110			$	1,133			$	4,881			$	(4,307	)		$	559				1.2	%
Property operating expenses			16,986				16,138				848				1,678				(1,230	)			400				3.7	%
Real estate taxes			6,507				6,856				(349	)			675				(640	)			(384	)			(6.1	%)
General and administrative			8,392				7,732				660				173				(24	)			511				4.9	%
Depreciation and amortization			16,549				15,396				1,153				3,373				(1,268	)			(952	)			(6.7	%)
Interest expense, net			17,564				15,265				2,299				2,769				(899	)			429				3.0	%

Notes:

(1)	Represents the effect on our operating results for the periods indicated resulting from our acquisition of the Discovery at Space Coast Apartments on December 19, 2024.

(2)	Represents the effect on our results for the periods indicated resulting from our disposition of the Autumn Breeze Apartments on February 27, 2025.

(3)

Represents the change for the year ended December 31, 2025 compared to the same period in 2024 for real estate investments owned by us during the entire periods presented ("Same Store"). We had seven Same Store properties for the periods ended December 31, 2025 and 2024 consisting of Arbors Harbor Town, The Aster, Axis at Westmont, Valley Ranch Apartments, BayVue Apartments, Citadel Apartments and Camellia Apartments.

The following table reflects total rental revenues and total property operating expenses for the years ended December 31, 2025 and 2024 for our (i) Same Store properties, (ii) acquisitions and (iii) dispositions:

		Year Ended December 31,
Description		2025				2024				Change
Rental Revenues:
Same Store		$	45,291			$	44,732			$	559
Acquisition (Discovery at Space Coast Apartments)			5,058				177				4,881
Disposition (Autum Breeze Apartments)			894				5,201				(4,307	)
Total rental revenues		$	51,243			$	50,110			$	1,133
Property operating expenses:
Same Store		$	14,866			$	14,466			$	400
Acquisition (Discovery at Space Coast Apartments)			1,682				4				1,678
Disposition (Autum Breeze Apartments)			438				1,668				(1,230	)
Total property operating expenses		$	16,986			$	16,138			$	848

The table below reflects the occupancy and effective monthly rental rates per unit for our eight wholly owned multifamily residential properties as of December 31, 2025 and 2024, respectively

		Occupancy								Effective Monthly Rent per Unit(1)
		As of December 31,								As of December 31,
Property		2025				2024				2025				2024
Arbors Harbor Town			93	%			91	%		$	1,720			$	1,728
The Astor			91	%			92	%		$	1,487			$	1,481
Axis at Westmont			94	%			97	%		$	1,723			$	1,659
Valley Ranch Apartments			92	%			98	%		$	1,923			$	1,875
BayVue Apartments			91	%			93	%		$	1,568			$	1,601
Citadel Apartments			97	%			97	%		$	1,745			$	1,743
Camellia Apartments			93	%			93	%		$	1,663			$	1,724
Discovery at Space Coast Apartments			92	%			96	%		$	1,897			$	1,965
Weighted average total			93	%			95	%		$	1,722			$	1,722

(1)	Effective monthly rent is calculated as in-place contracted monthly rental revenue, including any premiums due for short-term or month-to-month leases, less any concessions or discounts.

Revenues Rental revenues for the year ended December 31, 2025 were $51.2 million, an increase of $1.1 million, compared to $50.1 million for the same period in 2024. Excluding the effect of our acquisition and disposition activities discussed above, our rental revenues increased by $0.6 million for our Same Store properties during the 2025 period. This increase was primarily as a result of higher monthly rent per unit for Axis at Westmont during the 2025 period.

Property Operating Expenses Property operating expenses for the year ended December 31, 2025 were $17.0 million, an increase of $0.9 million, compared to $16.1 million for the same period in 2024. Excluding the effect of our acquisition and disposition activities discussed above, our property operating expenses increased by $0.4 million for our Same Store properties during the 2025 period. This increase was primarily attributable to higher utilities, insurance and maintenance costs during the 2025 period.

Real Estate Taxes Real estate taxes for the year ended December 31, 2025 were $6.5 million, a decrease of $0.4 million, compared to $6.9 million for the same period in 2024. Excluding the effect of our acquisition and disposition activities discussed above, our real estate taxes decreased by $0.4 million for our Same Store properties during the 2025 period. This decrease was primarily attributable to lower real estate taxes for the Citadel Apartments during the 2025 period.

General and Administrative Expenses General and administrative expenses for the year ended December 31, 2025 were $8.4 million, an increase of $0.7 million, compared to $7.7 million for the same period in 2024. Excluding the effect of our acquisition and disposition activities discussed above, our general and administrative expenses increased by $0.5 million for our Same Store properties during the 2025 period. This increase was primarily attributable to higher asset management fees and loan costs in connection with the mortgage modifications during the 2025 period.

Depreciation and Amortization Depreciation and amortization expense for the year ended December 31, 2025 was $16.5 million, an increase of $1.1 million, compared to $15.4 million for the same period in 2024. Excluding the effect of our acquisition and disposition activities discussed above, our depreciation and amortization expenses decreased by $1.0 million for our Same Store properties during the 2025 period. This decrease was primarily attributable to lower amortization expense associated with in-place lease intangibles during the 2025 period as a result of certain of them becoming fully amortized during the 2024 period.

Interest Expense, Net Interest expense, net for the year ended December 31, 2025 was $17.6 million, an increase of $2.3 million, compared to $15.3 million for the same period in 2024. Interest expense is primarily attributable to the mortgage financings associated with our multifamily residential properties and reflects both changes in market interest rates on our variable rate indebtedness, the amortization of deferred financing costs and the weighted average principal outstanding during each of the periods. Excluding the effect of our acquisition and disposition activities discussed above, interest expense, net increased by $0.4 million for our Same Store properties during the 2025 period compared to the 2024 period. Additionally, during the years ended December 31, 2025 and 2024, we earned $1.0 million and $2.8 million, respectively, from our interest rate cap contracts which is recorded in interest expense, net.

Mark to Market Adjustments on Derivative Financial Instruments During the years ended December 31, 2025 and 2024, we recorded negative mark to market adjustments on derivative financial instruments of $1.0 million and $2.8 million, respectively. These mark to market adjustments represented the changes in the fair value of our interest rate cap contracts during the applicable periods.

Summary of Cash Flows

Operating activities

The net cash provided by operating activities of $4.2 million for the year ended December 31, 2025 consisted of our net income of $5.1 million adjusted to add back depreciation and amortization of $16.5 million, the negative mark to market adjustment on derivative financial instruments of $1.0 million and amortization of deferred financing costs of $1.4 million less the gain on the sale of investment property (Autumn Breeze Apartments) of $18.1 million and the net negative change in operating assets and liabilities of $1.8 million.

Investing activities

The net cash provided by investing activities of $55.1 million for the year ended December 31, 2025 consisted of our proceeds from the sale of investment property (Autumn Breeze Apartments) of $59.2 million less our capital expenditures of $4.0 million.

Financing activities

The net cash used in financing activities of $23.3 million for the year ended December 31, 2025 consisted primarily of the following:

	●	proceeds from notes payable of $116.2 million;

	●	payment of loan fees and expenses of $3.2 million;

	●	principal payments on notes payable of $126.8 million;

	●	redemptions and cancellation of Common Shares of $8.0 million; and

●

distributions to common stockholders of $1.5 million.

Non-GAAP Financial Measures - FFO and MFFO

We believe that the historical cost accounting convention used for real estate assets in accordance with GAAP implicitly assumes that the value of a real estate asset diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe the presentation of operating results for a REIT using the historical accounting convention for depreciation and certain other items may be insufficient by themselves.

The National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has published a standardized non-GAAP measure of performance known as funds from operations ("FFO"), which is used in the REIT industry as a supplemental performance measure. We believe FFO, which excludes certain items such as real estate-related depreciation and amortization, is an appropriate supplemental measure of a REIT's operating performance. However, FFO is not equivalent to our net income or loss as determined under GAAP.

We calculate FFO in accordance with the current NAREIT definition. FFO represents net income or loss computed in accordance with GAAP, excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, income taxes attributable to gains from the sale of certain real estate assets gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.

Our computation of FFO may not be comparable to other REITs that do not compute FFO in accordance with the current NAREIT definition. We believe that the use of FFO provides a more complete understanding of our performance to investors and to management, and reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.

Changes in the accounting rules have resulted in a substantial increase in the number of non-operating and non-cash items included in the calculation of FFO. As a result, As a result, the Investment Program Association (the "IPA"), another industry trade group, published a standardized non-GAAP measure of performance known as modified funds from operations ("MFFO"), which the IPA has recommended as a supplemental measure for publicly registered, non-listed REITs. MFFO excludes from FFO: acquisition fees and expenses (to the extent that such fees and expenses have been recorded as operating expenses); adjustments related to contingent purchase price obligations; amounts relating to straight-line rents and amortization of above- and below-market intangible lease assets and liabilities; accretion of discounts and amortization of premiums on debt investments; amortization of closing costs relating to debt investments; impairments of real estate-related investments; mark-to-market adjustments included in net income; and gains or losses included in net income for the extinguishment or sale of debt or hedges.

MFFO is designed to be reflective of the ongoing operating performance of publicly registered, non-listed REITs by adjusting for those costs that are more reflective of acquisitions and investment activity, along with other items the IPA believes are not indicative of the ongoing operating performance of a publicly registered, non-listed REIT, such as straight-lining of rents as required by GAAP. We believe it is appropriate to use MFFO as another supplemental measure of operating performance because we believe that it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income or loss. However, MFFO is also not equivalent to our net income or loss as determined under GAAP.

We compute MFFO in accordance with the definition included in Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the "Practice Guideline") issued by the IPA in November 2010 as interpreted by management. The Practice Guideline defines MFFO as FFO further adjusted for acquisition and transaction-related fees and expenses and other items. In calculating MFFO, we follow the Practice Guideline and exclude acquisition and transaction-related fees and expenses (which includes costs incurred in connection with strategic alternatives), amounts relating to deferred rent receivables and amortization of market lease and other intangibles, net (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments), accretion of discounts and amortization of premiums on debt investments and borrowings, mark-to-market adjustments included in net income (including gains or losses incurred on assets held for sale), gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. Certain of the above adjustments are also made to reconcile net income or loss to net cash provided by or used in operating activities, such as for the amortization of a premium and accretion of a discount on debt and securities investments, amortization of fees, any unrealized gains or losses on derivatives, securities or other investments, as well as other adjustments.

MFFO excludes non-recurring impairment of real estate-related investments. We assess the credit quality of our investments and adequacy of reserves on a quarterly basis, or more frequently as necessary. Significant judgment is required in this analysis. We consider the estimated net recoverable value of a loan as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the prospects for the borrower and the competitive situation of the region where the borrower does business.

We believe that, because MFFO excludes costs that we consider more reflective of acquisition activities and other non-operating items, MFFO can provide, on a going-forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring properties and once our portfolio is stabilized. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry and allows for an evaluation of our performance against other publicly registered, non-listed REITs.

Not all REITs, including publicly registered, non-listed REITs, calculate FFO and MFFO the same way. Accordingly, comparisons with other REITs, including publicly registered, non-listed REITs, may not be meaningful. Furthermore, FFO and MFFO are not indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income or loss or income or loss from continuing operations as determined under GAAP as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions, if any, to our stockholders. FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance. FFO and MFFO should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or loss or in its applicability in evaluating our operating performance. The methods utilized to evaluate the performance of a publicly registered, non-listed REIT under GAAP should be construed as more relevant measures of operational performance and considered more prominently than the non-GAAP measures, FFO and MFFO, and the adjustments to GAAP in calculating FFO and MFFO.

Neither the SEC, NAREIT, the IPA nor any other regulatory body or industry trade group has passed judgment on the acceptability of the adjustments that we use to calculate our FFO or MFFO. In the future, NAREIT, the IPA or another industry trade group may publish updates to the current definitions of FFO and MFFO or the SEC or another regulatory body could standardize the allowable adjustments across the publicly registered, non-listed REIT industry, and we may have to adjust our calculations and characterizations of FFO or MFFO accordingly.

Our calculations of FFO and MFFO are presented below (dollar amounts and shares in thousands, except per share amounts):

		For the Year Ended December 31,
Description		2025				2024
Net income/(loss)		$	5,114			$	(10,985	)
FFO adjustments:
Depreciation and amortization of real estate assets			16,549				15,396
Income tax expense on sale of real estate			489				675
Gain on sale of investment property			(18,112	)			-
FFO			4,040				5,086
MFFO adjustments:
Mark-to-market adjustments(1)			965				2,797
Non-recurring loss from extinguishment/sale of debt, derivatives or securities holdings(2)			14				8
MFFO - IPA recommended format		$	5,019			$	7,891
Net income/(loss)		$	5,114			$	(10,985	)
Net income/(loss) per common share, basic and diluted		$	0.27			$	(0.57	)
FFO		$	4,040			$	5,086
FFO per common share, basic and diluted		$	0.22			$	0.26
Weighted average number of common shares outstanding, basic and diluted			18,610				19,212

Notes:

(1)

Management believes that adjusting for mark-to-market adjustments is appropriate because they are nonrecurring items that may not be reflective of ongoing operations and reflects unrealized impacts on value based only on then current market conditions, although they may be based upon current operational issues related to an individual property or industry or general market conditions. Mark-to-market adjustments are made for items such as ineffective derivative instruments, certain marketable securities and any other items that GAAP requires we make a mark-to-market adjustment for. The need to reflect mark-to-market adjustments is a continuous process and is analyzed on a quarterly and/or annual basis in accordance with GAAP.

(2)

Management believes that adjusting for gains or losses related to extinguishment/sale of debt, derivatives or securities holdings is appropriate because they are items that may not be reflective of ongoing operations. By excluding these items, management believes that MFFO provides supplemental information related to sustainable operations that will be more comparable between other reporting periods.

Distributions

We made an election to qualify as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2008. U.S. federal tax law requires a REIT to distribute at least 90% of its annual REIT taxable income (which does not equal net income, as calculated in accordance with GAAP determined without regard to the deduction for dividends paid and excluding any net capital gain in order to maintain its REIT status. However, in order to continue to qualify for REIT status, it is possible we may be unable to make any such required distributions if they are in an amount in excess of our available cash.

Our distributions, if any, are authorized at the discretion of our Board of Directors based on their analysis of our performance over the previous periods and expectations of performance for future periods. The Board of Directors considers various factors in its determination, including but not limited to, our sources and availability of capital, our operating and interest expenses, our ability to refinance near-term debt, as well as the Internal Revenue Service's annual distribution requirement that REITs distribute no less than 90% of their taxable income. Although our Board of Directors' decisions will be substantially influenced by the intention to maintain our federal tax status as a REIT, we cannot provide assurance that we will pay distributions at any particular level, or at all.

2025 Special Distribution

On September 29, 2025, our Board of Directors declared a special cash distribution of $0.08 per Common Share payable to stockholders of record as of September 26, 2025 (the "2025 Special Distribution"). The 2025 Special Distribution, which totaled $1.5 million, represented a portion of the net proceeds generated from asset sales, and was paid on or about October 16, 2025.

2024 Special Distribution

On September 27, 2024, our Board of Directors declared a special cash distribution of $0.42 per Common Share payable to stockholders of record as of September 30, 2024 (the "2024 Special Distribution"). The 2024 Special Distribution, which totaled $8.0 million, represented a portion of the net proceeds generated from asset sales, and was paid on or about October 15, 2024.

Tender Offer

On December 30, 2025, our Board of Directors approved an issuer self-tender offer (the "Tender Offer") to commence on or about December 31, 2025, for up to 2.2 million of our Common Shares at a price of $14.08 per Common Share, or approximately $31.0 million.

We commenced the Tender Offer on December 31, 2025 and a total of approximately 3.9 million Common Shares were properly tendered and not withdrawn before the expiration of the Tender Offer on February 13, 2026. In accordance with the terms and conditions of the Tender Offer, on March 5, 2026 we accepted and purchased approximately 2.2 million Common Shares at a purchase price of $14.08 per Common Share, for an aggregate cost of approximately $31.0 million.

Due to the oversubscription of the Tender Offer, we accepted for purchase on a pro rata basis approximately 56.5% of the Common Shares validly tendered and not withdrawn (other than "odd lot" stockholders, whose Common Shares were purchased in full on a priority basis).

Amended SRP

On November 10, 2022, the Board of Directors adopted a Seventh Amended and Restated Share Redemption Program (the "Amended SRP"), which became effective on January 1, 2023. Under the terms of the Amended SRP, any stockholder may request redemption of their Common Shares, subject to significant conditions and limitations. Additionally, under the terms of the Amended SRP, Common Shares are redeemed at 85% of our most recently published NAV per Share (subject to adjustment for any distributions designated as "special distributions" by the Board of Directors), in effect as of the date the redemption request is approved.

Pursuant to the terms of the Amended SRP, any Common Shares approved for redemption are redeemed on a periodic basis as determined by the Board of Directors, generally shortly after the end of each quarterly period. However, we will not redeem, during any year, more than 5% of the number of Common Shares outstanding on last day of the previous year (the "5% Limitation"). The cash available for redemption of Common Shares is set by the Board of Directors not less often than at least annually (the "Funding Limitation" and, together with the 5% Limitation, the "Redemption Limitations"). We may change the amount of the Redemption Limitations upon 10 business days of notice to our stockholders and may provide notice of any change to the Redemption Limitations by either including such information in (a) a current report on Form 8-K, an annual report on Form 10-K or a quarterly report on Form 10-Q, all which are publicly filed with the SEC or (b) a separate mailing to our stockholders.

Redemption requests may be subject to proration due to the above noted Redemption Limitations and are not considered on a first come, first served basis.

The Board of Directors reserves the right in its sole discretion at any time and from time to time, subject to any notice requirements described in our Amended SRP, to (i) reject any request for redemption of Common Shares, (ii) change the purchase price for redemption of Common Shares, (iii) limit the funds to be used for redemption of Common Shares under the Amended SRP or otherwise change the Redemption Limitations, or (iv) amend, suspend (in whole or in part) or terminate the Amended SRP.

The Board of Directors set the amount of cash available for redemption of Common Shares for the year ended December 31, 2024 at $8.0 million, which was generally allocated $2.0 million for each quarterly period. During the year ended December 31, 2024, we redeemed a total of 613,116 Common Shares at an aggregate cost of $8.0 million pursuant to the terms of the Amended SRP at an average price of $13.05 per Common Share. The redemptions processed during 2024 were for the fourth quarter of 2023 ($2.0 million) and the first three quarters of 2024 ($2.0 million per quarter and an aggregate of $6.0 million).

On March 20, 2025, the Board of Directors determined it would consider the amount of cash available for redemption of Common Shares on a quarterly basis throughout 2025. On the same date, the Board of Directors approved that an amount up to $2.0 million would be made available for consideration of redemption requests for the first quarter of 2025. Subsequently, on May 8, 2025 and August 7, 2025, the Board of Directors approved that an amount up to $2.0 million would be made available for consideration of redemption requests for both the second and third quarters of 2025.

In connection with the approval of the Tender Offer and as required by the rules of the Securities Exchange Act of 1934, as amended, the Board of Directors approved the immediate suspension of the Amended SRP effective December 30, 2025. While the Amended SRP is suspended, we will not accept any requests for redemption and any such requests and all pending requests will not be honored or retained. As a result of the termination of the Tender Offer on February 13, 2026, on March 26, 2026, the Board of Directors reinstated the SRP.

On March 26, 2026, the Board of Directors determined it would consider the amount of cash available for redemption of Common Shares on a quarterly basis throughout 2026. On the same date, the Board of Directors approved that an amount up to $2.0 million would be made available for consideration of redemption requests for the second, third and fourth quarters of 2026.

During the year ended December 31, 2025, we redeemed a total of 593,805 Common Shares at an aggregate cost of $8.0 million pursuant to the terms of the Amended SRP at an average price of $13.47 per Common Share. The redemptions processed during 2025 were for the fourth quarter of 2024 ($2.0 million) and the first three quarters of 2025 ($2.0 million per quarter and an aggregate of $6.0 million).

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

New Accounting Pronouncements

See Note 3 of the Notes to Consolidated Financial Statements for further information.