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Item 7. 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. 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 annual report. See “Cautionary Statement Regarding Forward-Looking Statements” in this report, and “Risk Factors” in this annual report. Our management believes the assumptions underlying the Company’s financial statements and accompanying notes are reasonable. However, the Company’s financial statements and accompanying notes may not be an indication of our financial condition and results of operations in the future.

Overview

As of December 31, 2022, our portfolio consisted of 40 multifamily properties primarily located in the Southeastern and Southwestern United States encompassing 15,127 units of apartment space that was approximately 94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $1,480. 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 December 31, 2022, there were 26,050,945 OP Units outstanding, of which 25,951,154, or 99.6%, were owned by us and 99,791, or 0.4%, were owned by an unaffiliated limited partners (see Note 10 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 22, 2023 for a one-year term. The Adviser is wholly owned by NexPoint Advisors, L.P. On March 4, 2020, the Company, the OP and the Adviser entered into separate equity distribution agreements with each the ATM Sales Agents, pursuant to the 2020 ATM Program. See Note 8 to our consolidated financial statements.

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 years ended December 31, 2022, 2021 and 2020.

On October 15, 2021, the Bankruptcy Trust Lawsuit was filed by a litigation subtrust formed in connection with the Highland Bankruptcy against various persons and entities, including our Sponsor and James Dondero. In addition, on February 8, 2023, the UBS Lawsuit was filed against Mr. Dondero and a number of other persons and entities. 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.

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 10 to our consolidated financial statements).

Advisory and administrative fees. Advisory and administrative fees include the fees paid to our Adviser pursuant to the Advisory Agreement (see Note 11 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 losses. Casualty losses 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 Years Ended December 31, 2022, 2021 and 2020

The year ended December 31, 2022 as compared to the year ended December 31, 2021

The following table sets forth a summary of our operating results for the years ended December 31, 2022 and 2021 (in thousands):

For the Year Ended December 31,

Loss on extinguishment of debt and modification costs (8,734 ) (912 ) (7,822 )

The change in our net income between the periods primarily relates to an increase in total expenses of approximately $31.4 million and a decrease in gain on sale of real estate of approximately $31.5 million, partially offset by an increase in revenues of approximately $44.7 million. The change in our net income between the periods was also due to our acquisition and disposition activity in 2021 and 2022 and the timing of the transactions (we purchased two properties in the second quarter of 2021, one property in the third quarter of 2021, one property in the fourth quarter of 2021, and disposed of two properties in the fourth quarter of 2021; we purchased two properties in the beginning of the second quarter of 2022, and disposed of one property late in the fourth quarter of 2022).

Revenues

Rental income. Rental income was $257.9 million for the year ended December 31, 2022 compared to $213.5 million for the year ended December 31, 2021, which was an increase of approximately $44.4 million. The increase between the periods was primarily due to a 17.4% increase in the weighted average monthly effective rent per occupied apartment unit in our portfolio to $1,480 as of December 31, 2022 from $1,261 as of December 31, 2021, primarily driven by the value-add program that we have implemented and organic growth in rents.

Other income. Other income was $6.1 million for the year ended December 31, 2022 compared to $5.7 million for the year ended December 31, 2021, which was an increase of approximately $0.4 million. The increase between the periods was primarily due to $0.3 million and $0.2 million increases in non-refundable and application fees, respectively.

Expenses

Property operating expenses. Property operating expenses were $58.2 million for the year ended December 31, 2022 compared to $47.7 million for the year ended December 31, 2021, which was an increase of approximately $10.5 million. The increase between the periods was primarily due to our acquisition and disposition activity in 2021 and 2022 and the timing of the transactions, as described above. The increase was also attributable to a $2.8 million increase in payroll expense, $1.3 million increase in casualty expenses, $1.1 million increase in water and sewer expenses, $0.5 million increase in trash removal services and an increase in all other property operating expenses of approximately $4.8 million.

Real estate taxes and insurance. Real estate taxes and insurance costs were $37.4 million for the year ended December 31, 2022 compared to $33.2 million for the year ended December 31, 2021, which was an increase of approximately $4.2 million. The increase between the periods was primarily due to our acquisition activity in 2022 and 2021 and the timing of the transactions. The increase between the periods was also due to a $3.4 million, or 12.1%, increase in property taxes and a $1.3 million, or 23.5%, increase in property insurance. Property taxes incurred in the first year of ownership may be significantly less than subsequent years since the purchase price of the property may trigger a significant increase in assessed value by the taxing authority in subsequent years,

increasing the costs of real estate taxes.Property management fees. Property management fees were $7.6 million for the year ended December 31, 2022 compared to $6.3 million for the year ended December 31, 2021, which was an increase of approximately $1.3 million. The increase between the periods was primarily due to an increase in total revenues, which the fee is primarily based on.

Advisory and administrative fees. Advisory and administrative fees were $7.5 million for the year ended December 31, 2022 compared to $7.6 million for the year ended December 31, 2021, which was an decrease of approximately $0.1 million. For the years ended December 31, 2022 and 2021, our Adviser elected to voluntarily waive advisory and administrative fees of approximately $21.0 million and $17.3 million 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 $14.7 million for the year ended December 31, 2022 compared to $12.0 million for the year ended December 31, 2021, which was an increase of approximately $2.7 million. The increase was primarily due to increases in stock compensation expense, professional fees, and general liability insurance of $0.9 million, $1.4 million and $0.2 million.

Property general and administrative expenses. Property general and administrative expenses were $9.3 million for the year ended December 31, 2022 compared to $7.3 million for the year ended December 31, 2021, which was an increase of approximately $2.0 million. The increase between the periods was primarily due to increases in professional fees of $0.6 million, centralized marketing services of $0.4 million, legal fees of $0.2 million, and an increase of $0.8 million in all other property general and administrative expenses.

Depreciation and amortization. Depreciation and amortization costs were $97.6 million for the year ended December 31, 2022 compared to $86.9 million for the year ended December 31, 2021, which was an increase of approximately $10.7 million. The increase between the periods was primarily due to an increase of depreciation expense of $10.7 million. The increase between period is mainly attributable to our acquisition of four properties in 2021 and two in 2022.

Other Income and Expense

Interest expense. Interest expense was $50.6 million for the year ended December 31, 2022 compared to $44.6 million for the year ended December 31, 2021, which was an increase of approximately $6.0 million. The increase between the periods was primarily due to an increase in interest on debt of $30.5 million, partially offset by a decrease in interest rate swap expense of $21.6 million for the years ended December 31, 2022 and 2021 (in thousands):

For the Year Ended December 31,

Amortization of deferred financing costs 2,779 2,197 582

Loss on extinguishment of debt and modification costs. Loss on extinguishment of debt and modification costs was $8.7 million for the year ended December 31, 2022 compared to $0.9 million for the year ended December 31, 2021, which was an increase of approximately $7.8 million. The increase between periods was primarily due to an increase in prepayment penalties and defeasance costs of $5.3 million, increase in write-offs of deferred financing costs of $1.5 million and an increase in debt modification and other extinguishment costs of $1.3 million. The following table details the various costs included in loss on extinguishment of debt and modification costs for the years ended December 31, 2022 and 2021 (in thousands):

For the Year Ended December 31,

Prepayment penalties and defeasance costs $ 5,702 $ 407 $ 5,295

Write-off of fair market value adjustment of assumed debt $ (256 ) $ — $ (256 )

Debt modification and other extinguishment costs 1,327 2 1,325

Casualty gains (losses). Casualty gains were $2.5 million for the year ended December 31, 2022 compared to casualty gains of $2.6 million for the year ended December 31, 2021. The decrease between periods was primarily due to damages sustained at Cutter’s Point, Venue 8651, and Timber Creek during the year ended December 31, 2021 (see Note 5 to our consolidated financial statements).

Miscellaneous income. Miscellaneous income was $1.3 million for the year ended December 31, 2022 compared to $1.6 million for the year ended December 31, 2021, which was a decrease of approximately $0.3 million. The decrease between the periods was primarily due to business interruption proceeds received from insurance for lost rents at Cutter’s Point and Venue 8651 (see Note 5 to our consolidated financial statements).

Gain on sales of real estate. Gain on sales of real estate was $14.7 million for the year ended December 31, 2022 compared to $46.2 million for the year ended December 31, 2021, which was a decrease of approximately $31.5 million. During the year ended December 31, 2022, we sold one property; during the year ended December 31, 2021, we sold two properties. The gain on sales of real estate was attributable to the sale of Hollister Place for the year ended December 31, 2022.

The year ended December 31, 2021 as compared to the year ended December 31, 2020

The following table sets forth a summary of our operating results for the years ended December 31, 2021 and 2020 (in thousands):

For the Year Ended December 31,

Loss on extinguishment of debt and modification costs (912 ) (1,470 ) 558

Net income attributable to common stockholders $ 23,037 $ 44,018 $ (20,981 )

The change in our net income between the periods primarily relates to decreases in gain on sales of real estate of $22.9 million and casualty gain of $3.3 million, partially offset by an increase in total revenues of $14.4 million. The change in our net income between the periods was also due to our acquisition and disposition activity in 2020 and 2021 and the timing of the transactions (we disposed of three properties in the first quarter of 2020, one property in the third quarter of 2020, and purchased one property in the fourth quarter of 2020; we purchased two properties in the second quarter of 2021, one property in the third quarter of 2021, one property in the fourth quarter of 2021, and disposed of two properties in the fourth quarter of 2021).

Revenues

Rental income. Rental income was $213.5 million for the year ended December 31, 2021 compared to $199.2 million for the year ended December 31, 2020, which was an increase of approximately $14.3 million. The increase between the periods was primarily due to our acquisition and disposition activity in 2020 and 2021 and the timing of the transactions, as described above, and a 11.8% increase in the weighted average monthly effective rent per occupied apartment unit in our portfolio to $1,261 as of December 31, 2021 from $1,128 as of December 31, 2020, primarily driven by the value-add program that we have implemented and organic growth in rents in the markets where our properties are located.

Other income. Other income was $5.7 million for the year ended December 31, 2021 compared to $5.6 million for the year ended December 31, 2020, which was an increase of approximately $0.1 million. The increase between the periods was primarily due to a $0.2 million decrease in application and administration concessions, partially offset by a $0.1 million decrease in cable tv income.

Expenses

Property operating expenses. Property operating expenses were $47.7 million for the year ended December 31, 2021 compared to $47.2 million for the year ended December 31, 2020, which was an increase of approximately $0.5 million. The increase between

the periods was primarily due to our acquisition and disposition activity in 2020 and 2021 and the timing of the transactions, as described above. The increase between periods was also due to a $0.8 million, or 4.0%, increase in payroll expenses.

Real estate taxes and insurance. Real estate taxes and insurance costs were $33.2 million for the year ended December 31, 2021 compared to $31.7 million for the year ended December 31, 2020, which was an increase of approximately $1.5 million. The increase between the periods was primarily due to a $1.1 million, or 4.0%, increase in property taxes due to higher assessments of value by taxing authorities. The increase between the periods was also due to our acquisition and disposition activity in 2020 and 2021 and the timing of the transactions, as described above.

Property management fees. Property management fees were $6.3 million for the year ended December 31, 2021 compared to $6.0 million for the year ended December 31, 2020, which was an increase of approximately $0.3 million. The increase between the periods was primarily due to an increase in total revenues, which the fee is primarily based on.

Advisory and administrative fees. Advisory and administrative fees were $7.6 million for the year ended December 31, 2021 compared to $7.7 million for the year ended December 31, 2020, which was an decrease of approximately $0.1 million. For the years ended December 31, 2021 and 2020, our Adviser elected to voluntarily waive advisory and administrative fees of approximately $17.3 million and $15.4 million 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 $12.0 million for the year ended December 31, 2021 compared to $10.0 million for the year ended December 31, 2020, which was an increase of approximately $2.0 million. The increase was primarily due to an increase in stock compensation expense of $1.5 million.

Property general and administrative expenses. Property general and administrative expenses were $7.3 million for the year ended December 31, 2021 compared to $6.2 million for the year ended December 31, 2020, which was an increase of approximately $1.1 million. The increase between the periods was primarily due to increases in centralized marketing services of $0.3 million and lead generation expense of $0.1 million.

Depreciation and amortization. Depreciation and amortization costs were $86.9 million for the year ended December 31, 2021 compared to $82.4 million for the year ended December 31, 2020, which was an increase of approximately $4.5 million. The increase between the periods was primarily due to an increase of depreciation expense of $7.2 million, partially offset by the amortization of intangible lease assets of $4.1 million related to five properties for the year ended December 31, 2021 compared to $6.8 million related to six properties for the year ended December 31, 2020, which was a decrease of approximately $2.7 million.

Other Income and Expense

Interest expense. Interest expense was $44.6 million for the year ended December 31, 2021 compared to $44.8 million for the year ended December 31, 2020, which was a decrease of approximately $0.2 million. The decrease between the periods was primarily due to an increase in interest rate swap expense of approximately $5.6 million, partially offset by a decrease in interest on debt of $5.1 million. The following table details the various costs included in interest expense for the years ended December 31, 2021 and 2020 (in thousands):

For the Year Ended December 31,

Amortization of deferred financing costs 2,197 2,837 (640 )

Interest rate caps expense 112 33 79

Loss on extinguishment of debt and modification costs. Loss on extinguishment of debt and modification costs was $0.9 million for the year ended December 31, 2021 compared to $1.5 million for the year ended December 31, 2020, which was a decrease of approximately $0.6 million. The decrease between periods was primarily due to a decrease in prepayment penalties and defeasance costs of $0.3 million and a decrease in write-offs of deferred financing costs of $0.3 million. The following table details the various costs included in loss on extinguishment of debt and modification costs for the years ended December 31, 2021 and 2020 (in thousands):

For the Year Ended December 31,

Prepayment penalties and defeasance costs $ 407 $ 711 $ (304 )

Write-off of deferred financing costs 503 756 (253 )

Write-off of fair market value adjustment of assumed debt $ — $ — $ -

Debt modification and other extinguishment costs 2 3 (1 )

Casualty gains (losses). Casualty gains were $2.6 million for the year ended December 31, 2021 compared to casualty gains of $5.9 million for the year ended December 31, 2020. The decrease between periods was primarily due to significant damages sustained at Cutter’s Point, Venue 8651, and Timber Creek (see Note 5 to our consolidated financial statements).

Miscellaneous income. Miscellaneous income was $1.6 million for the year ended December 31, 2021 compared to $1.8 million for the year ended December 31, 2020, which was a decrease of approximately $0.2 million. The decrease between the periods was primarily due to business interruption proceeds received from insurance for lost rents at Cutter’s Point and Venue 8651 (see Note 5 to our consolidated financial statements).

Gain on sales of real estate. Gain on sales of real estate was $46.2 million for the year ended December 31, 2021 compared to $69.2 million for the year ended December 31, 2020, which was a decrease of approximately $23.0 million. During the year ended December 31, 2021, we sold two properties; during the year ended December 31, 2020, we sold four properties.

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) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (4) corporate general and administrative expenses, (5) other gains and losses that are specific to us including loss on extinguishment of debt and modification costs, (6) casualty-related expenses/(recoveries) and casualty gains (losses), and (7) 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.

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. Corporate general and administrative expenses, pandemic expense, and non-operating fees to affiliates 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 of extinguished debt and modification costsare excluded because they do not reflect continuing operating costs of the property owner.Entity level general and administrative expenses incurred at the properties and pandemic expenses 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. Also, expenses that are incurred upon acquisition of a property do not reflect continuing operating costs of the property owner. These gains and losses 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 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 corporate general and administrative expenses, interest expense, loss on extinguishment of debt and modification costs, acquisition costs, certain fees to affiliates such as advisory and administrative fees, depreciation and amortization expense and gains or losses from the sale of properties, pandemic expenses, and other gains and losses as determined under GAAP, 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 2021-2022 Same Store NOI for the Years Ended December 31, 2022 and 2021

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and our 2021-2022 Same Store NOI for the years ended December 31, 2022 and 2021 to net income, the most directly comparable GAAP financial measure (in thousands):

For the Year Ended December 31,

Adjustments to reconcile net income (loss) to NOI:

Advisory and administrative fees 7,547 7,631

Corporate general and administrative expenses 14,670 11,966

Casualty-related expenses/(recoveries) (1) 1,119 (199 )

Casualty losses (gains) (2,506 ) (2,595 )

Property general and administrative expenses (2) 3,600 2,655

Loss on extinguishment of debt and modification costs 8,734 912

Less Non-Same Store

NOI and 2020-2022 Same Store NOI for the Years Ended December 31, 2022, 2021 and 2020

The following table, which has not been adjusted for the effects of noncontrolling interests, reconciles our NOI and our 2020-2022 Same Store NOI for the years ended December 31, 2022, 2021 and 2020 to net income, the most directly comparable GAAP financial measure (in thousands):

For the Year Ended December 31,

Adjustments to reconcile net income (loss) to NOI:

Casualty-related expenses/(recoveries) (1) 1,119 (199 ) 789

Property general and administrative expenses (2) 3,600 2,655 2,400

Loss on extinguishment of debt and modification costs 8,734 912 1,470

Less Non-Same Store

Net Operating Income for Our 2021-2022 Same Store and Non-Same Store Properties for the Years Ended December 31, 2022 and 2021

There are 31 properties encompassing 12,210 units of apartment space in our same store pool for the years ended December 31, 2022 and 2021 (our “2021-2022 Same Store” properties). Our 2021-2022 Same Store properties exclude the following 9 properties in our portfolio as of December 31, 2022: Cutter’s Point, Old Farm, Stone Creek at Old Farm, The Verandas at Lake Norman, Creekside at Matthews, Six Forks Station, High House at Cary, The Adair, Estates on Maryland as well as the 106 units that are currently down (see Note 5 to our consolidated financial statements).

The following table reflects the revenues, property operating expenses and NOI for the years ended December 31, 2022 and 2021 for our 2021-2022 Same Store and Non-Same Store properties (dollars in thousands):

For the Year Ended December 31,

Revenues

Same Store

Non-Same Store

Operating expenses

Same Store

Non-Same Store

Operating income

Same Store

Non-Same Store

NOI

See reconciliation of net income (loss) to NOI above under “NOI and 2021-2022Same Store NOI for the Years Ended December 31, 2022 and 2021.”

2021-2022 Same Store Results of Operations for the Years Ended December 31, 2022 and 2021

As of December 31, 2022, our 2021-2022 Same Store properties were approximately 94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $1,493. As of December 31, 2021, our 2021-2022 Same Store properties were approximately 94.3% leased with a weighted average monthly effective rent per occupied apartment unit of $1,267. For our 2021-2022 Same Store properties, we recorded the following operating results for the year ended December 31, 2022 as compared to the year ended December 31, 2021:

Revenues

Rental income. Rental income was $210.2 million for the year ended December 31, 2022 compared to $183.7 million for the year ended December 31, 2021, which was an increase of approximately $26.5 million, or 14.4%. The majority of the increase is related to a 17.8% increase in the weighted average monthly effective rent per occupied apartment unit to $1,493 as of December 31, 2022 from $1,267 as of December 31, 2021.

Other income. Other income was $5.5 million for the year ended December 31, 2022 compared to $5.4 million for the year ended December 31, 2021, which was an increase of $0.1 million. The increase between period is attributable to an $0.1 million increase in application fees.

Expenses

Property operating expenses. Property operating expenses were $46.6 million for the year ended December 31, 2022 compared to $41.0 million for the year ended December 31, 2021, which was an increase of approximately $5.6 million, or 13.7%. The majority of the increase is related to a $3.1 million, or 19.8%, increase in repairs and maintenance expense.

Real estate taxes and insurance. Real estate taxes and insurance costs were $29.7 million for the year ended December 31, 2022 compared to $28.1 million for the year ended December 31, 2021, which was an increase of approximately $1.6 million, or 5.9%. The majority of the increase is related to a $1.1 million, or 4.8%, increase in property taxes and a $0.5 million, or 11.8%, increase in insurance expense.

Property management fees. Property management fees were $6.2 million for the year ended December 31, 2022 compared to $5.4 million for the year ended December 31, 2021, which was an increase of approximately $0.8 million, or 14.7%. The majority of the increase is related to an increase in total revenues,which the fee is primarily based on.

Property general and administrative expenses. Property general and administrative expenses were $4.5 million for the year ended December 31, 2022 compared to $3.9 million for the year ended December 31, 2021, which was an increase of approximately $0.6 million, or 16.4%. The majority of the increase is related to a $0.5 million, or 18.1%, increase in office operations expense and a $0.1 million increase in marketing expenses, or 9.5%.

Net Operating Income for Our 2020-2022 Same Store and Non-Same Store Properties for the Years Ended December 31, 2022, 2021 and 2020

There are 30 properties encompassing 11,858 units of apartment space in our same store pool for the years ended December 31, 2022, 2021 and 2020 (our “2020-2022 Same Store” properties). Our 2020-2022 Same Store properties exclude the following 10 properties in our portfolio as of December 31, 2022: Cutter’s Pointe, Old Farm, Stone Creek at Old Farm, Fairways at San Marcos, The Verandas at Lake Norman, Creekside at Matthews, Six Forks Station, High House at Cary, The Adair, Estates on Maryland, as well as 106 units that are currently down (see Note 5 to our consolidated financial statements).

The following table reflects the revenues, property operating expenses and NOI for the years ended December 31, 2022, 2021 and 2020 for our 2020-2022 Same Store and Non-Same Store properties (dollars in thousands):

Revenues

Same Store

Non-Same Store

Operating expenses

Same Store

Non-Same Store

Operating income

Same Store

Non-Same Store

NOI

See reconciliation of net income to NOI above under “NOI and 2020-2022 Same Store NOI for the Years Ended December 31, 2022, 2021 and 2020.”

2020-2022 Same Store Results of Operations for the Years Ended December 31, 2022 and 2021

As of December 31, 2022, our 2020-2022 Same Store properties were approximately 94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $1,489. As of December 31, 2021, our 2020-2022 Same Store properties were approximately 94.2% leased with a weighted average monthly effective rent per occupied apartment unit of $1,262. For our 2020-2022 Same Store properties, we recorded the following operating results for the year ended December 31, 2022 as compared to the year ended December 31, 2021:

Revenues

Rental income. Rental income was $203.3 million for the year ended December 31, 2022 compared to $177.9 million for the year ended December 31, 2021, which was an increase of approximately $25.4 million, or 14.3%. The majority of the increase is related to a 18.0% increase in the weighted average monthly effective rent per occupied apartment unit to $1,489 as of December 31, 2022 from $1,262 as of December 31, 2021.

Other income. Other income was $5.4 million for the year ended December 31, 2022 compared to $5.4 million for the year ended December 31, 2021, which was flat.

Expenses

Property operating expenses. Property operating expenses were $45.5 million for the year ended December 31, 2022 compared to $40.0 million for the year ended December 31, 2021, which was an increase of approximately $5.4 million, or 13.6%. The majority of the increase is related to an increase in repairs and maintenance costs of $2.9 million and increases in other property operating expenses of $2.6 million.

Real estate taxes and insurance. Real estate taxes and insurance costs were $29.3. million for the year ended December 31, 2022 compared to $27.7 million for the year ended December 31, 2021, which was an increase of approximately $1.6 million, or 5.9%. The majority of the increase is related to a $1.2 million, or 4.9%, increase in property taxes.

Property management fees. Property management fees were $6.0 million for the year ended December 31, 2022 compared to $5.3 million for the year ended December 31, 2021, which was an increase of approximately $0.7 million, or 14.5%. The majority of the increase is related to an increase in total revenues, which the fee is primarily based on.

Property general and administrative expenses. Property general and administrative expenses were $4.4 million for the year ended December 31, 2022 compared to $3.8 million for the year ended December 31, 2021, which was an increase of approximately $0.6 million, or 16.9%. The majority of the increase is related to a $0.5 million increase in office operations.

2020-2022 Same Store Results of Operations for the Years Ended December 31, 2022 and 2020

As of December 31, 2022, our 2020-2022 Same Store properties were approximately 94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $1,489. As of December 31, 2020, our 2020-2022 Same Store properties were approximately 94.1% leased with a weighted average monthly effective rent per occupied apartment unit of $1,132. For our 2020-2022 Same Store properties, we recorded the following operating results for the year end December 31, 2022 as compared to the year ended December 31, 2020:

Revenues

Rental income. Rental income was $203.3 million for the year ended December 31, 2022 compared to $168.6 million for the year ended December 31, 2020, which was an increase of approximately $34.7 million, or 20.6%. The majority of the increase is related to a 31.5% increase in the weighted average monthly effective rent per occupied apartment unit to $1,489 as of December 31, 2022 from 1,132 as of December 31, 2020.

Other income. Other income was $5.4 million for the year ended December 31, 2022 compared to $5.3 million for the year ended December 31, 2020. The increase in other income is attributable to an increase in non-refundable fees of $0.1 million.

Expenses

Property operating expenses. Property operating expenses were $45.5 million for the year ended December 31, 2022 compared to $38.9 million for the year ended December 31, 2020, which was increase of approximately $6.6 million, or 17.0%. The majority of the increase is related to a $4.0 million, or 27.4%, increase in repair and maintenance expenses.

Real estate taxes and insurance. Real estate taxes and insurance costs were $29.3 million for the year ended December 31, 2022 compared to $25.9 million for the year ended, which was increase of approximately $3.4 million, or 13.0%. The increase is related to increases in property taxes of $2.4 million, or 10.8%.

Property management fees. Property management fees were $6.0 million for the year ended December 31, 2022 to $5.0 million for the year ended December 31, 2020, which was an increase of approximately $1.0 million, or 20.6%. The majority of the increase is related to an increase in total revenues, which the fee is primarily based on.

Property general and administrative expenses. Property general and administrative expenses were $4.4 million for the year ended December 31, 2022 compared to $3.1 million for the year ended December 31, 2020, which was an increase of approximately $1.3 million. The majority of the increase is related to $0.8 million increase in office operations.

FFO, Core FFO and AFFO

We believe that net income, 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, as defined by GAAP. FFO is defined by NAREIT as net income 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 noncontrolling interests and we show the 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 either not likely to occur on a regular basis or are otherwise not representative of the ongoing operating performance of our portfolio. Core FFO adjusts FFO to remove items such as losses on extinguishment of debt and modification costs (including prepayment penalties and defeasance costs incurred on the early repayment of debt, 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-related expenses and recoveries and gains or losses, pandemic expenses, the amortization of deferred financing costs incurred in connection with obtaining short-term debt financing, 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.

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 amortization of deferred financing costs incurred in connection with obtaining long-term debt financing, and the 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 10 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 income, the most directly comparable GAAP financial measure, for the years ended December 31, 2022, 2021 and 2020 (in thousands, except per share amounts):

For the Year Ended December 31,

Casualty-related expenses/(recoveries) 1,119 (200 ) 790 N/M 41.7 %

Pandemic expense (1) 4 50 510 N/M N/M

Adjustment for noncontrolling interests (31 ) 4 6 -875.0 % -616.7 %

Adjustment for noncontrolling interests (37 ) (25 ) (21 ) 49.1 % 77.5 %

The year ended December 31, 2022 as compared to the year ended December 31, 2021

FFO was $73.4 million for the year ended December 31, 2022 compared to $63.6 million for the year ended December 31, 2021, which was an increase of approximately $9.8 million. The change in our FFO between the periods primarily relates to an increase in total revenues of $44.8 million, partially offset by an increase in total property operating expenses of $18.0 million, an increase in interest expense of $6.0 million, and an increase in debt and modification costs of $7.8 million.

Core FFO was $81.8 million for the year ended December 31, 2022 compared to $62.5 million for the year ended December 31, 2021, which was an increase of approximately $19.3 million. The change in our Core FFO between the periods primarily relates to an increase in FFO, an increase in loss on extinguishment of debt and modification costs of $7.8 million and an increase is casualty-related expenses of $1.3 million.

AFFO was $91.4 million for the year ended December 31, 2022 compared to $70.9 million for the year ended December 31, 2021, which was an increase of approximately $20.5 million. The change in our AFFO between the periods primarily relates to increases in Core FFO of $19.4 million and equity-based compensation expense of $0.9 million.

The year ended December 31, 2022 as compared to the year ended December 31, 2020

FFO was $73.4 million for the year ended December 31, 2022 compared to $57.2 million for the year ended December 31, 2020, which was an increase of approximately $16.2 million. The change in our FFO between the periods primarily relates to an increase in total revenues of $59.2 million, partially offset by a decrease in gain on sale of real estate of $54.5 million.

Core FFO was $81.8 million for the year ended December 31, 2022 compared to $55.5 million for the year ended December 31, 2020, which was an increase of approximately $26.4 million. The change in our Core FFO between the periods primarily relates to an increase in FFO $16.2 million and an increase in loss on extinguishment of debt and medication costs of $7.3 million.

AFFO was $91.4 million for the year ended December 31, 2022 compared to $62.4 million for the year ended December 31, 2020, which was an increase of approximately $29.4 million. The change in our AFFO between the periods primarily relates to increases in Core FFO of $26.8 million and equity-based compensation expense of $2.4 million.

Liquidity and Capital Resources

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

• recurring maintenance necessary to maintain our multifamily properties;

• distributions necessary to qualify for taxation as a REIT;

• acquisition of additional properties;

• advisory and administrative fees payable to our Adviser;

• general and administrative expenses;

• reimbursements to our Adviser; and

• property management fees payable to BH.

We expect to meet our short-term cash requirements generally through net cash provided by operations and existing cash balances and any unused capacity on the Corporate Credit Facility. As of December 31, 2022, we had approximately $11.9 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 cash 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 cash 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 Company continues to monitor the impact on COVID-19 and its impact on future rent collections, valuation of real estate investments, impact on cash flow and ability to refinance or repay debt.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 may issue and sell from time to time 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”). 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 8 to our consolidated financial statements).

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 December 31, 2022. We believe that our sources of long-term cash will be sufficient for our needs thereafter.

Cash Flows

The following table presents selected data from our consolidated statements of cash flows for the years ended December 31, 2022, 2021 and 2020 (in thousands):

For the Year Ended December 31,

The year ended December 31, 2022 as compared to the year ended December 31, 2021

Cash flows from operating activities. During the year ended December 31, 2022, net cash provided by operating activities was $79.1 million compared to net cash provided by operating activities of $73.3 million for the year ended December 31, 2021. The change in cash flows from operating activities was mainly due to an increase in total revenues of $44.8 million between the periods and an increase in total operating expenses of $18.0 million.

Cash flows from investing activities. During the year ended December 31, 2022, net cash used in investing activities was $162.3 million compared to net cash used in investing activities of $235.9 million for the year ended December 31, 2021. The change in cash flows from investing activities was mainly due to our acquisition and disposition activity in 2022 and 2021 and the timing of the transactions.

Cash flows from financing activities. During the year ended December 31, 2022, net cash provided by financing activities was $46.3 million compared to net cash provided by financing activities of $194.3 million for the year ended December 31, 2021. The change in cash flows from financing activities was mainly due to a net decrease in debt of approximately $89.7 million between the periods.

The year endedDecember 31, 2021as compared to the year endedDecember 31, 2020

Cash flows from operating activities. During the year ended December 31, 2021, net cash provided by operating activities was $73.3 million compared to net cash provided by operating activities of $57.2 million for the year ended December 31, 2020. The change in cash flows from operating activities was mainly due to an increase in total revenues of $14.4 million.

Cash flows from investing activities. During the year ended December 31, 2021, net cash used in investing activities was $235.9 million compared to net cash provided by investing activities of $11.5 million for the year ended December 31, 2020. The change in cash flows from investing activities was mainly due to our acquisition and disposition activity in 2021 and 2020 and the timing of the transactions.

Cash flows from financing activities. During the year ended December 31, 2021, net cash provided by financing activities was $194.3 million compared to net cash used in financing activities of $82.9 million for the year ended December 31, 2020. The change in cash flows from financing activities was mainly due to a decrease in payments on the credit facility of $173.0 million between the periods.

Debt, Derivatives and Hedging Activity

Mortgage Debt

As of December 31, 2022, our subsidiaries had aggregate mortgage debt outstanding to third parties of approximately $1.6 billion at a weighted average interest rate of 5.71% and an adjusted weighted average interest rate of 3.29%. For purposes of calculating the adjusted weighted average interest rate of our mortgage debt outstanding, we have included the weighted average fixed rate of 1.0682% for one-month LIBOR on our combined $1.2 billion notional amount of interest rate swap agreements, which effectively fix the interest rate on $1.2 billion of our floating rate mortgage debt. See Notes 6 and 7 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 December 31, 2022, interest rate swap agreements effectively covered 74% of our $1.6 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 December 31, 2022, interest rate cap agreements covered $1.3 billion of our $1.6 billion of floating rate mortgage debt outstanding, which effectively cap one-month SOFR on $1.3 billion of our floating rate mortgage debt at a weighted average rate of 5.81%.

On November 30, 2022, the Company entered into an agreement with KeyBank as a Freddie Mac servicer to refinance $760.7 million of its first mortgage debt relating to 18 properties that had original loan maturities ranging from July 1, 2024 to July 1, 2028. The new loan matures on December 1, 2032 and bears interest at an annual rate of 30-day average SOFR plus 155 basis points. The loans will begin amortizing after the first 5 years.

On December 1, 2022, the Company entered into an agreement with KeyBank as a Freddie Mac servicer to refinance $46.8 million of its first mortgage debt relating to Cornerstone original loan maturity on July 1, 2024. The new loan matures on December 1, 2032 and bears interest at an annual rate of 30-day average SOFR plus 209 basis points. The loan will begin amortizing after the first 5 years.

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.

Corporate Credit Facility

On June 30, 2021, the Company, through the OP, entered into a secured $250.0 million credit facility with Truist Bank (“Truist Bank”), as administrative agent, and the lenders from time to time party thereto (the “Corporate Credit Facility”). $225 million of the Corporate Credit Facility was a revolving credit facility and $25 million of the Amended and Restated Corporate Credit Facility was a term loan. In addition, on June 30, 2021, in connection with entering into the Amended and Restated Corporate Credit Facility, the Company, through the OP, terminated its prior $225.0 million revolving credit facility with Truist Bank, as administrative agent, and the lenders from time to time party thereto, prior to the maturity date of January 28, 2022. Subject to conditions provided in the Amended and Restated Corporate Credit Facility, the Amended and Restated Corporate Credit Facility may be increased up to an additional $100.0 million (the “Accordion Feature”) if the lenders agree to increase their commitments or if the lenders agree for the increase to be funded by any additional lender proposed by the Company, through the OP.

On March 25, 2022, the Company entered into a loan modification agreement by and among the Company, the OP, Truist Bank and the Lenders party thereto, which modified the Company’s Corporate Credit Facility. Subject to conditions provided in the Corporate Credit Facility, the commitments under Corporate Credit Facility may be increased up to an additional $150.0 million if the lenders agree to increase their commitments or if the lenders agree for the increase to be funded by any additional lender proposed by the Company, through the OP. The Corporate Credit Facility will mature on June 30, 2025 with respect to the revolving commitments, unless the Company exercises its option to voluntarily and permanently reduce all of the revolving commitments before the maturity date or elects to exercise its right and option to extend the facility with respect to the revolving commitments for a single one-year term. See Note 6 for additional information.

The Corporate Credit Facility is a non-recourse obligation and contains customary events of default, including defaults in the payment of principal or interest, defaults in compliance with the covenants contained in the document evidencing the loan, defaults in payments under any other security instrument, and bankruptcy or other insolvency events. As of December 31, 2022, the Company believes it is compliant with all provisions. For additional information regarding our Corporate Credit Facility, see Note 6 to our consolidated financial statements.

Advances under the Amended and RestatedCorporate Credit Facility accrue interest at a per annum rate equal to, at the Company’s election, either LIBOR plus a margin of 1.90% to 2.40%, depending on the Company’s total leverage ratio, or a base rate determined according to the highest of (a) the prime rate, (b) the federal funds rate plus 0.50%, (c) LIBOR plus 1.0% or (d) 0.0% plus a margin of 0.90% to 1.40%, depending on the Company’s total leverage ratio. An unused commitment fee at a rate of 0.15% or 0.25%, depending on the outstanding aggregate revolving commitments, applies to unutilized borrowing capacity under the Amended and RestatedCorporate Credit Facility. Amounts owing under the Amended and RestatedCorporate Credit Facility may be prepaid at any time without premium or penalty. The Amended and RestatedCorporate Credit Facility is guaranteed by the Company and the obligations under the Amended and RestatedCorporate Credit Facility are, subject to some exceptions, secured by a continuing security interest in substantially all of the assets of the Company. The Company is in compliance with all the covenants in itsCorporate 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 six interest rate swap transactions with KeyBank and four with Truist Bank (collectively the “Counterparties”) with a combined notional amount of $1.2 billion which are effective as of December 31, 2022. As of December 31, 2022, the interest rate swaps we have entered into effectively replace the floating interest rate (one-month LIBOR) with respect to $1.6 billion of our floating rate mortgage debt outstanding with a weighted average fixed rate of 1.0682%. During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 1.0682%, on a weighted average basis, on the notional amounts, while the Counterparties are obligated to make monthly floating rate payments based on one-month LIBOR 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 6 and 7 to our consolidated financial statements for additional information.

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

Effective Date Termination Date Counterparty Notional Fixed Rate (1)

(2) Represents the weighted average fixed rate of the interest rate swaps.

As of December 31, 2022, the Company had the following outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk with future effective dates (dollars in thousands):

Effective Date Termination Date Counterparty Notional Amount Fixed Rate (1)

Obligations and Commitments

The following table summarizes our contractual obligations and commitments as of December 31, 2022 for the next five calendar years subsequent to December 31, 2022. We used one-month LIBOR as of December 31, 2022 to calculate interest expense due by period on our floating rate debt and net interest expense due by period on our interest rate swaps.

Payments Due by Period (in thousands)

Operating Properties Mortgage Debt

Held For Sale Properties Mortgage Debt

Principal payments $ 68,160 $ — $ 68,160 $ — $ — $ — $ —

Credit Facility

Principal payments $ 74,500 $ — $ — $ 74,500 $ — $ — $ —

Corporate Credit Facility

The Corporate Credit Facility will mature on June 30, 2025 with respect to the revolving commitments, unless the Company exercises its option to voluntarily and permanently reduce all of the revolving commitments before the maturity date or elects to exercise its right and option to extend the facility with respect to the revolving commitments for a single one-year term. See Note 6 to our consolidated financial statements.

Advisory Agreement

Our Advisory Agreement requires that we pay our Adviser an annual advisory and administrative fee of 1.2%. The advisory and administrative fees paid to the Adviser on the Contributed Assets (as defined in the Advisory Agreement) are subject to an annual cap of approximately $5.4 million. For the years ended December 31, 2022 and 2021, the Company incurred advisory and administrative fees of $7.5 million and $7.6 million, respectively.

NLMF Holdco, LLC

The Company’s agreement with NLMF Holdco, LLC may result in additional funding requirements to cover future project costs. The maximum exposure of potential commitments is expected to be no more than $4.0 million. We expect that these actions will provide faster, more reliable and lower cost internet to our residents. As of December 31, 2022, the Company has funded approximately $0.3 million to NLMF Holdco, LLC which is included in prepaid and other assets on the consolidated balance sheet of the Company. For the year ended December 31, 2022, the Company incurred expenses of $0.1 million for fiber internet service which is included in property operating expenses on the consolidated statement of operations and comprehensive income (loss).

Capital Expenditures and Value-Add Program

We anticipate incurring average annual repairs and maintenance expense of $575 to $725 per apartment unit in connection with the ongoing operations of our business. These expenditures are expensed as incurred. In addition, we reserve, on average, approximately $250 to $350 per apartment unit for non-recurring capital expenditures and/or lender required replacement reserves. When incurred, these expenditures are either capitalized or expensed, in accordance with GAAP, depending on the type of the expenditure. Although we will continuously monitor the adequacy of this average, we believe these figures to be sufficient to maintain the properties at a high level in the markets in which we operate. A majority of the properties in our portfolio were underwritten and acquired with the premise that we would invest $4,000 to $10,000 per unit in the first 36 months of ownership, in an effort to add value to the asset’s exterior and interiors. In many cases, we reserve cash at the closing of each acquisition to fund these planned capital expenditures and value-add improvements. As of December 31, 2022, we had approximately $11.9 million of renovation value-add reserves for our planned capital expenditures and other expenses to implement our value-add program, which will complete approximately 14,203 planned interior rehabs. The following table sets forth a summary of our capital expenditures related to our value-add program for the years ended December 31, 2022, 2021 and 2020 (in thousands):

For the Year Ended December 31,

Income Taxes

We anticipate that we will continue to qualify to be taxed as a REIT for U.S. federal income tax purposes, and we intend to continue to be organized and to operate in a manner that will permit us to qualify as a REIT. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to 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. 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 years ended December 31, 2022, 2021 and 2020.

If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax on our taxable income at corporate income tax rates, and dividends paid to our stockholders would not be deductible by us in computing taxable income. Any resulting corporate liability could be substantial and could materially and adversely affect our net income and net cash available for distribution to stockholders. Unless we were entitled to relief under certain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT.

We evaluate the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are “more-likely-than-not” (greater than 50 percent probability) of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Our management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. We have no examinations in progress and none are expected at this time.

We recognize our tax positions and evaluate them using a two-step process. First, we determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, we will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement.

We had no material unrecognized tax benefit or expense, accrued interest or penalties as of December 31, 2022. We and our subsidiaries are subject to U.S. federal income tax as well as income tax of various state and local jurisdictions. The 2021, 2020 and 2019 tax years remain open to examination by tax jurisdictions to which our subsidiaries and we are subject. When applicable, we recognize interest and/or penalties related to uncertain tax positions on our consolidated statements of operations and comprehensive income (loss).

Dividends

We intend to make regular quarterly dividend payments to holders of our common stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains. 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 intend to make regular quarterly dividend payments of all or substantially all of our taxable income to holders of our common stock out of assets legally available for this purpose, if and to the extent authorized by our Board. Before we make any dividend payments, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our debt payable. If our cash available for distribution is less than our taxable income, we could be required to sell assets, borrow funds or raise additional capital to make cash dividends or we may make a portion of the required dividend in the form of a taxable distribution of stock or debt securities.

We will make dividend payments based on our estimate of taxable earnings per share of common stock, but not earnings calculated pursuant to GAAP. Our dividends and taxable income and GAAP earnings will typically differ due to items such as depreciation and amortization, fair value adjustments, differences in premium amortization and discount accretion, and non-deductible general and administrative expenses. Our quarterly dividends per share may be substantially different than our quarterly taxable earnings and GAAP earnings per share. Our Board declared our fourth quarterly dividend of 2022 of $0.42 per share on October 24, 2022, which was paid on December 30, 2022 and funded out of cash flows from operations.

Off-Balance Sheet Arrangements

As of December 31, 2022, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires our management to make judgments, assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate these judgments, assumptions and estimates for changes that would affect the reported amounts. These estimates are based on management’s historical industry experience and on various other judgments and assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these judgments, assumptions and estimates. Below is a discussion of the accounting policies that we consider critical to understanding our financial condition or results of operations where there is uncertainty or where significant judgment is required. A discussion of recent accounting pronouncements and our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included in this annual report.

Purchase Price Allocation

Upon acquisition of a property considered to be an asset acquisition, the purchase price and related acquisition costs (“total consideration”) are allocated to land, buildings, improvements, furniture, fixtures, and equipment, and intangible lease assets based on relative fair value in accordance with FASB ASC 805, Business Combinations. Acquisition costs are capitalized in accordance with FASB ASC 805.

The allocation of total consideration, which is determined using inputs that are classified within Level 3 of the fair value hierarchy established by FASB ASC 820, Fair Value Measurement and Disclosures (see Note 7 to our consolidated financial statements), is based on management’s estimate of the property’s “as-if” vacant fair value and is calculated by using all available information such as the replacement cost of such asset, appraisals, property condition reports, market data and other related information. If any debt is assumed in an acquisition, the difference between the fair value, which is estimated using inputs that are classified within Level 2 of the fair value hierarchy, and the face value of debt is recorded as a premium or discount and amortized as interest expense over the life of the debt assumed.

Impairment

Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The key inputs into our impairment analysis include, but are not limited to, the holding period, net operating income, and capitalization rates.In such cases, we will evaluate the recoverability of such real estate assets based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate asset. If impaired, the real estate asset will be written down to its estimated fair value. The Company’s impairment analysis identifies and evaluates events or changes in circumstances that indicate the carrying amount of a real estate investment may not be recoverable, including determining the period the Company will hold the rental property, net operating income, and the estimated capitalization rate for each respective real estate investment.

Inflation

The real estate market has not been directly affected by inflation in the past several years due to increases in rents nationwide. The majority of our lease terms are for a period of one year or less and reset to market if renewed. The majority of our leases also contain protection provisions applicable to reimbursement billings for utilities. Due to the short-term nature of our leases, we do not believe our results will be materially affected.

Inflation may also affect the overall cost of debt, as the implied cost of capital increases. Currently the Federal Reserve, is raising interest rates in response to or in anticipation of continued inflation concerns. We intend to mitigate these risks through long-term fixed interest rate loans and interest rate hedges, which to date have included interest rate cap and interest rate swap agreements.

REIT Tax Election

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,” as defined by the Code, to our stockholders. 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 theyears ended December 31, 2022, 2021 and 2020. 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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the adverse effect on the value of assets and liabilities that results from a change in market conditions. Our primary market risk exposure is interest rate risk with respect to our indebtedness and counterparty credit risk with respect to our interest rate derivatives. In order to minimize counterparty credit risk, we enter into and expect to enter into hedging arrangements only with major financial institutions that have high credit ratings. As of December 31, 2022, we had total indebtedness of $1.7 billion at a weighted average interest rate of 5.74%, of which $1.6 billion was debt with a floating interest rate. The interest rate swap agreements we have entered into effectively fix the interest rate on 74% of our $1.6 billion of floating rate mortgage debt outstanding (see below) and 0.0% of our $74.5 million floating rate Credit Facility. As of December 31, 2022, the adjusted weighted average interest rate of our total indebtedness was 3.38%. For purposes of calculating the adjusted weighted average interest rate of the total indebtedness, we have included the weighted average fixed rate of 1.0682% for one-month LIBOR on the $1.2 billion notional amount of interest rate swap agreements that we have entered into as of December 31, 2022, which effectively fix the interest rate on $1.2 billion of our floating rate mortgage debt outstanding.

An increase in interest rates could make the financing of any acquisition by us costlier. Rising interest rates could also limit our ability to refinance our debt when it matures or cause us to pay higher interest rates upon refinancing and increase interest expense on refinanced indebtedness. We may manage, or hedge, interest rate risks related to our borrowings by means of interest rate cap and interest rate swap agreements. As of December 31, 2022, the interest rate cap agreements we have entered into effectively cap one-month LIBOR on $1.3 billion of our floating rate mortgage debt at a weighted average rate of 5.81% for the term of the agreements, which is generally three to four years. We also expect to manage our exposure to interest rate risk by maintaining a mix of fixed and floating rates for our indebtedness.

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 eleven interest rate swap transactions with the Counterparties with a combined notional amount of $1.2 billion. The interest rate swaps we have entered into effectively replace the floating interest rate (one-month LIBOR) with respect to that amount with a weighted average fixed rate of 1.0682%. During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 1.0682%, on a weighted average basis, on the notional amounts, while the Counterparties are obligated to make monthly floating rate payments based on one-month LIBOR to us referencing the same notional amounts. We have designated these interest rate swaps as cash flow hedges of interest rate risk.

Until our interest rates reach the caps provided by our interest rate cap agreements, each quarter point change in LIBOR would result in an approximate increase to annual interest expense costs on our floating rate indebtedness, reduced by any payments due from the Counterparties under the terms of the interest rate swap agreements we had entered into as of December 31, 2022, of the amounts illustrated in the table below for our indebtedness as of December 31, 2022 (dollars in thousands):

Change in Interest Rates Annual Increase to Interest Expense

There is no assurance that we would realize such expense as such changes in interest rates could alter our liability positions or strategies in response to such changes.

We may also be exposed to credit risk in the derivative financial instruments we use. Credit risk is the failure of the Counterparties to perform under the terms of the derivative financial instruments. If the fair value of a derivative financial instrument is positive, the Counterparties will owe us, which creates credit risk for us. If the fair value of a derivative financial instrument is negative, we will owe the Counterparties and, therefore, do not have credit risk. We seek to minimize the credit risk in derivative financial instruments by entering into transactions with major financial institutions that have high credit ratings.

In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee (“ARRC”) has proposed that the Secured Overnight Financing Rate(“SOFR”) is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR. We have material contracts that are indexed to USD-LIBOR and are monitoring this activity and evaluating the related risks.

Item 8. Financial Statements and Supplementary Data

The information required by this Item 8 is included in our consolidated financial statements and the notes thereto beginning on page F-1 in this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) and Rule 15d-15(b) under the Exchange Act, our management, including our President and Chief Financial Officer, evaluated, as of December 31, 2022, the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2022, to provide reasonable assurance that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act and is accumulated and communicated to management, including the President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls systems are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) and for our assessment of the effectiveness of internal control over financial reporting. Our internal control over financial reporting is a process designed under the supervision of our President and our Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, including our President and Chief Financial Officer, has conducted an assessment regarding the effectiveness of our internal control over financial reporting as of December 31, 2022, based on the framework established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment under the criteria described above, management has concluded that our internal control over financial reporting was effective as of December 31, 2022.

Changes in Internal Control over Financial Reporting

There has been no change in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of the Independent Registered Public Accounting Firm

The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Item 9B. Other Information

On February 22, 2023, the Board approved and adopted an amendment and restatement of the Company’s Bylaws (the “Amended and Restated Bylaws”). Among other things, the Amended and Restated Bylaws:

The preceding summary of the Amended and Restated Bylaws does not purport to be complete and is qualified in its entirety by reference to, and should be read in connection with, the full text of the Amended and Restated Bylaws attached hereto as Exhibit 3.2 to this Form 10-K, which is incorporated herein by reference.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required in response to this Item 10 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 11. Executive Compensation

The information required in response to this Item 11 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required in response to this Item 12 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required in response to this Item 13 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Item 14. Principal Accountant Fees and Services

The information required in response to this Item 14 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this Report:

1. Financial Statements. See Index to Consolidated Financial Statements and Schedules of NexPoint Residential Trust, Inc. on page F-1 of this Report.

2. Financial Statement Schedules. See Index to Consolidated Financial Statements and Schedules of NexPoint Residential Trust, Inc. on page S-43 of this Report. All other schedules are omitted because they are not required, are inapplicable, or the required information is included in the financial statements or notes thereto.

3. Exhibits. The exhibits filed with this Report are set forth in the Exhibit Index.

EXHIBIT INDEX

Exhibit Number Description

3.2* Amended and Restated Bylaws of NexPoint Residential Trust, Inc.

21.1* List of Subsidiaries of NexPoint Residential Trust, Inc.

23.1* Consent of KPMG LLP

101.SCH* Inline XBRL Taxonomy Extension Schema

101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB* Inline XBRL Taxonomy Extension Label Linkbase

* Filed herewith.

+ Furnished herewith.

† Management contract, compensatory plan or other arrangement

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NEXPOINT RESIDENTIAL TRUST, INC.

/s/ Jim Dondero

President (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ Jim Dondero President and Director February 23, 2023

Jim Dondero (Principal Executive Officer)

/s/ Brian Mitts Chief Financial Officer and Director February 23, 2023

Brian Mitts (Principal Financial Officer and Principal Accounting Officer)

/s/ Edward Constantino Director February 23, 2023

Edward Constantino

/s/ Dr. Arthur Laffer Director February 23, 2023

Dr. Arthur Laffer

/s/ Scott Kavanaugh Director February 23, 2023

Scott Kavanaugh

/s/ Dr. Carol Swain Director February 23, 2023

Dr. Carol Swain

/s/ Catherine Wood Director February 23, 2023

Catherine Wood

INDEX TO FINANCIAL STATEMENTS

Page

Financial Statements

NexPoint Residential Trust, Inc.—Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID # 185) F-2

Consolidated Balance Sheets as of December 31, 2022 and 2021 F-5

Notes to Consolidated Financial Statements F-10

Financial Statements Schedules

Schedule III—Real Estate and Accumulated Depreciation S-1

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

NexPoint Residential Trust, Inc.:

Opinion on the ConsolidatedFinancial Statements

We have audited the accompanying consolidated balance sheets of NexPoint Residential Trust, Inc., and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes and financial statement Schedule III Real Estate and Accumulated Depreciation (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

F-2

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allocation of purchase price to land in asset acquisitions

As discussed in Notes 2 and 5 to the consolidated financial statements, the Company acquired certain real estate properties and accounted for them as asset acquisitions during the year ended December 31, 2022. The purchase price in each asset acquisition was allocated to the assets acquired and liabilities assumed based on their relative fair values.

We identified the evaluation of the allocation of purchase price to land in asset acquisitions as a critical audit matter. Specifically, there was a high degree of subjective auditor judgment and specialized skills and knowledge involved in evaluating the relevance of comparable land sales used by the Company to determine the fair values of land.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s purchase price allocation process, including a control related to the evaluation of publicly available comparable land sales used to determine the fair value of land. We also involved valuation professionals with specialized skills and knowledge who assisted in assessing the relevance of the Company’s selected comparable land sales and comparing them to publicly available data for other comparable land sales.

/s/ KPMG LLP

We have served as the Company’s auditor since 2014.

Dallas, Texas

February 23, 2023

F-3

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

NexPoint Residential Trust, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited NexPoint Residential Trust, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes and financial statement Schedule III Real Estate and Accumulated Depreciation (collectively, the consolidated financial statements), and our report dated February 23, 2023 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

/s/ KPMG LLP

Dallas, Texas

February 23, 2023

F-4

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

ASSETS

Operating Real Estate Investments

Intangible lease assets — 2,576

Accumulated depreciation and amortization (349,276 ) (287,096 )

Fair market value of interest rate swaps 103,440 3,526

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Mortgages payable held for sale, net 68,016 —

Accounts payable and other accrued liabilities 12,325 12,590

Accrued real estate taxes payable 7,232 13,182

Redeemable noncontrolling interests in the Operating Partnership 5,631 6,139

Stockholders' Equity:

Accumulated other comprehensive income 102,155 2,578

See Notes to Consolidated Financial Statements

F-5

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share amounts)

For the Year Ended December 31,

Revenues

Expenses

Property general and administrative expenses 9,298 7,332 6,239

Loss on extinguishment of debt and modification costs (8,734 ) (912 ) (1,470 )

Other comprehensive income (loss)

Unrealized gains (losses) on interest rate derivatives 99,915 47,073 (46,961 )

Earnings (loss) per share - basic $ (0.36 ) $ 0.92 $ 1.78

Earnings (loss) per share - diluted $ (0.36 ) $ 0.89 $ 1.74

See Notes to Consolidated Financial Statements

F-6

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in thousands, except share and per share amounts)

Net income attributable to common stockholders — — — — — 44,018 — — 44,018

Repurchases of common stock — — — — — — — (44,530 ) (44,530 )

Common stock dividends declared — — — — — (32,564 ) — — (32,564 )

Other comprehensive loss — — — — — — (46,820 ) — (46,820 )

Net income attributable to common stockholders — — — — — 23,037 — — 23,037

Repurchases of common stock —

Retirement of common stock held in treasury —

Common stock dividends declared — — — — — (36,243 ) — — (36,243 )

Other comprehensive income — — — — — — 46,932 — 46,932

Net loss attributable to common stockholders — — — — — (9,260 ) — — (9,260 )

Repurchases of common stock — — — — — — — (11,127 ) (11,127 )

Common stock dividends declared — — — — — (40,809 ) — — (40,809 )

Other comprehensive income — — — — — — 99,577 — 99,577

See Notes to Consolidated Financial Statements

F-7

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the Year Ended December 31,

Cash flows from operating activities

Amortization/write-off of deferred financing costs 11,513 3,131 4,354

Net cash received (paid) on derivative settlements 2,329 (14,909 ) (7,859 )

Insurance proceeds received for business interruption 681 1,457 1,468

Insurance proceeds paid for business interruption — — (605 )

Changes in operating assets and liabilities, net of effects of acquisitions:

Cash flows from investing activities

Self-insurance paid for casualty loss (1,819 ) (1,591 ) (1,495 )

Insurance proceeds received from casualty losses 5,957 8,792 7,544

Cash flows from financing activities

Interest rate cap fees paid (3,925 ) (372 ) (35 )

Prepayment penalties on extinguished debt (5,704 ) (407 ) (711 )

See Notes to Consolidated Financial Statements

F-8

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Supplemental Disclosure of Cash Flow Information

Supplemental Disclosure of Noncash Activities

Other assets acquired from acquisitions 168 164 31

Liabilities assumed from acquisitions 358 571 44

Increase in dividends payable upon vesting of restricted stock units 170 439 268

Write-off of deferred financing costs 1,961 503 756

See Notes to Consolidated Financial Statements

F-9

NEXPOINT RESIDENTIAL TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business

NexPoint Residential Trust, Inc. (the “Company”, “we”, “our”) was incorporated in Maryland on September 19, 2014, and has elected to be taxed as a real estate investment trust (“REIT”). The Company is focused on “value-add” multifamily investments primarily located in the Southeastern and Southwestern United States. Substantially all of the Company’s business is conducted through NexPoint Residential Trust Operating Partnership, L.P. (the “OP”), the Company’s operating partnership. The Company owns its properties (the “portfolio”) through the OP and its wholly owned taxable REIT subsidiary (“TRS”). The OP owns approximately 99.9% of the portfolio; the TRS owns approximately 0.1% of the portfolio. The Company’s wholly owned subsidiary, NexPoint Residential Trust Operating Partnership GP, LLC (the “OP GP”), is the sole general partner of the OP. As of December 31, 2022, there were 26,050,945 common units in the OP (“OP Units”) outstanding, of which 25,951,154, or 99.6%, were owned by the Company and 99,791, or 0.4%, were owned by a noncontrolling limited partner (see Note 10 to our consolidated financial statements).

The Company is externally managed by NexPoint Real Estate Advisors, L.P. (the “Adviser”), through an agreement dated March 16, 2015, as amended, and renewed on February 22, 2023 for a one-year term (the “Advisory Agreement”), by and among the Company, the OP and the Adviser. The Adviser conducts substantially all of the Company’s operations and provides asset management services for its real estate investments. The Company expects it will only have accounting employees while the Advisory Agreement is in effect. All of the Company’s investment decisions are made by the Adviser, subject to general oversight by the Adviser’s investment committee and the Company’s board of directors (the “Board”). The Adviser is wholly owned by NexPoint Advisors, L.P. (the “Sponsor”).

The Company’s investment objectives are to maximize the cash flow and value of properties owned, acquire properties with cash flow growth potential, provide quarterly cash distributions and achieve long-term capital appreciation for its stockholders through targeted management and a value-add program. Consistent with the Company’s policy to acquire assets for both income and capital gain, the Company intends to hold at least majority interests in its properties for long-term appreciation and to engage in the business of 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 consistent with its investment objectives. Economic and market conditions may influence the Company to hold properties for different periods of time. From time to time, the Company may sell a property if, among other deciding factors, the sale would be in the best interest of its stockholders.

The Company may allocate up to 30% of the portfolio to investments in real estate-related debt and securities with the potential for high current income or total returns. These allocations may include first and second mortgages and subordinated, bridge, mezzanine, construction and other loans, as well as debt securities related to or secured by multifamily real estate and common and preferred equity securities, which may include securities of other REITs or real estate companies.

2. Summary of Significant Accounting Policies

Basis of Accounting

The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States (“GAAP”). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the consolidated financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates. All significant intercompany accounts and transactions have been eliminated in consolidation. There have been no significant changes to the Company’s significant accounting policies during the year ended December 31, 2022.

Principles of Consolidation

The Company accounts for subsidiary partnerships, joint ventures and other similar entities in which it holds an ownership interest in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation. The Company first evaluates whether each entity is a variable interest entity (“VIE”). Under the VIE model, the Company consolidates an entity when it has control to direct the activities of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, the Company consolidates an entity when it controls the entity through ownership of a majority voting interest. The consolidated financial statements include the accounts of the Company and its subsidiaries, including the OP and its subsidiaries.

F-10

Revenue Recognition

The Company’s primary operations consist of rental income earned from its residents under lease agreements typically with terms of one year or less. Rental income is recognized when earned. This policy effectively results in income recognition on the straight-line method over the related terms of the leases. The Company records an allowance to reflect revenue that may not be collectable. This is recorded through a provision for bad debts which is included in rental income in the accompanying consolidated statements of operations and comprehensive income (loss). Resident reimbursements and other income consist of charges billed to residents for utilities, carport and garage rental, and pets, administrative, application and other fees and are recognized when earned.

Purchase Price Allocation

Upon acquisition of a property considered to be an asset acquisition, the purchase price and related acquisition costs (“total consideration”) are allocated to land, buildings, improvements, furniture, fixtures, and equipment, and intangible lease assets in accordance with FASB ASC 805, Business Combinations. Acquisition costs are capitalized in accordance with FASB ASC 805.

The allocation of total consideration, which is determined using inputs that are classified within Level 3 of the fair value hierarchy established by FASB ASC 820, Fair Value Measurement and Disclosures (“ASC 820”) (see Note 7 to our consolidated financial statements), is based on management’s estimate of the property’s “as-if” vacant fair value and is calculated by using all available information such as the replacement cost of such asset, appraisals, property condition reports, market data and other related information. The allocation of the total consideration to intangible lease assets represents the value associated with the in-place leases, which may include lost rent, leasing commissions, legal and other related costs, which the Company, as buyer of the property, did not have to incur to obtain the residents. If any debt is assumed in an acquisition, the difference between the fair value, which is estimated using inputs that are classified within Level 2 of the fair value hierarchy, and the face value of debt is recorded as a premium or discount and amortized as interest expense over the life of the debt assumed.

Real estate assets, including land, buildings, improvements, furniture, fixtures and equipment, and intangible lease assets are stated at historical cost less accumulated depreciation and amortization. Costs incurred in making repairs and maintaining real estate assets are expensed as incurred. Expenditures for improvements, renovations, and replacements are capitalized at cost. Real estate-related depreciation and amortization are computed on a straight-line basis over the estimated useful lives as described in the following table:

Land Not depreciated

Buildings 30 years

Improvements 15 years

Furniture, fixtures, and equipment 3 years

Intangible lease assets 6 months

Construction in progress includes the cost of renovation projects being performed at the various properties. Once a project is complete, the historical cost of the renovation is placed into service in one of the categories above depending on the type of renovation project and is depreciated over the estimated useful lives as described in the table above.

Impairment

Real estate assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The key inputs into our impairment analysis include, but are not limited to, the holding period, net operating income, and capitalization rates. In such cases, the Company will evaluate the recoverability of such real estate assets based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate asset. If impaired, the real estate asset will be written down to its estimated fair value. The Company’s impairment analysis identifies and evaluates events or changes in circumstances that indicate the carrying amount of a real estate investment may not be recoverable, including determining the period the Company will hold the rental property, net operating income, and the estimated capitalization rate for each respective real estate investment. As of December 31, 2022, the Company has not recorded any impairment on its real estate assets.

Held for Sale

The Company periodically classifies real estate assets as held for sale when certain criteria are met, in accordance with GAAP. At that time, the Company presents the net real estate assets and the net debt associated with the real estate held for sale separately in its consolidated balance sheet, and the Company ceases recording depreciation and amortization expense related to that property. Real

F-11

estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell. As of December 31, 2022, there are two properties held for sale.In addition to the net real estate and mortgages payable held for sale, the consolidated balance sheet also includes approximately $0.7 million of accounts receivable and prepaid and other assets, and approximately $4.0 million of accounts payable, real estate taxes payable, security deposits, prepaid rents, and other accrued liabilities.

Income Taxes

The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), and expects to continue to qualify as a REIT. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute annually at least 90% of its “REIT taxable income,” as defined by the Code, to its stockholders. As a REIT, the Company will be subject to U.S. federal income tax on its undistributed REIT taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which distributions it pays with respect to any calendar year are less than the sum of (1) 85% of its ordinary income, (2) 95% of its capital gain net income and (3) 100% of its undistributed income from prior years. The Company intends to operate in such a manner so as to qualify as a REIT, but no assurance can be given that the Company 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. The Company had no significant taxes associated with its TRS for the years ended December 31, 2022, 2021 and 2020.

If the Company fails to meet these requirements, it could be subject to U.S. federal income tax on all of the Company’s taxable income at corporate rates for that year. The Company would not be able to deduct distributions paid to stockholders in any year in which it fails to qualify as a REIT. Additionally, the Company will also be disqualified from electing to be taxed as a REIT for the four taxable years following the year during which qualification was lost unless the Company is entitled to relief under specific statutory provisions. As of December 31, 2022, the Company believes it is in compliance with all applicable REIT requirements.

The Company evaluates the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” (greater than 50 percent probability) of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. The Company’s management is required to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions, which include federal and certain states. The Company has no examinations in progress and none are expected at this time.

The Company recognizes its tax positions and evaluates them using a two-step process. First, the Company determines whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Second, the Company will determine the amount of benefit to recognize and record the amount that is more likely than not to be realized upon ultimate settlement.

The Company had no material unrecognized tax benefit or expense, accrued interest or penalties as of December 31, 2022. The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of various state and local jurisdictions. The 2021, 2020 and 2019 tax years remain open to examination by tax jurisdictions to which the Company and its subsidiaries are subject. When applicable, the Company recognizes interest and/or penalties related to uncertain tax positions on its consolidated statements of operations and comprehensive income (loss).

RecentAccounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2022, the Company transitioned a portion its debt to one-month term SOFR (“Term SOFR”). During the fourth quarter of 2022, the Company completed a refinance on approximately $509 million of its one-month LIBOR mortgage debt in which increased the principal balance on the mortgage debt to approximately $808 million and transitioned the debt to one-month term SOFR (“Term SOFR”). The Company has taken the ASC 848 elections needed to allow for the hedged forecasted transactions to transition while not discontinuing the associated hedge accounting designations. Application of these hedged accounting expedients preserves the presentation of derivatives consistent with past presentation. The Company will continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

F-12

In December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848 ("ASU 2022-06") which was issued to defer the sunset date of Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform to December 31, 2024. ASU 2022-06 is effective immediately for all companies. ASU 2022-06 will have no impact on the Company’s consolidated financial statements for the year ended December 31, 2022.

3. Investments in Subsidiaries

The Company conducts its operations through the OP, which owns properties through single asset limited liability companies that are special purpose entities (“SPEs”). The Company consolidates the SPEs that it controls as well as any VIEs where it is the primary beneficiary. The Company controls and consolidates the OP as a VIE. In connection with its indirect equity investments in the properties acquired, the Company, through the OP and the TRS, directly or indirectly holds 100% of the membership interests in SPEs that directly own the properties. All of the properties the SPEs own are consolidated in the Company’s consolidated financial statements. The assets of each entity can only be used to settle obligations of that particular entity, and the creditors of each entity have no recourse to the assets of other entities or the Company.

Additionally, the Company has in the past and may in the future enter into purchase and sale transactions structured as reverse like-kind exchanges (“Reverse 1031 Exchanges”) under Section 1031 of the Code. For a Reverse 1031 Exchange in which the Company purchases a new property prior to selling the property to be matched in the like-kind exchange (the Company refers to the new property being acquired in the Reverse 1031 Exchange prior to the sale of the related property as a “Parked Asset”), legal title to the Parked Asset is held by an Exchange Accommodation Titleholder (“EAT”) engaged to execute the Reverse 1031 Exchange until the sale transaction and the Reverse 1031 Exchange are completed. The Company, through a wholly owned subsidiary, enters into a master lease agreement with the EAT whereby the EAT leases the acquired property and all other rights acquired in connection with the acquisition to the Company. The term of the master lease agreement is the earlier of the completion of the Reverse 1031 Exchange or 180 days from the date that the property was acquired. The EAT is classified as a VIE as it does not have sufficient equity investment at risk to finance its activities without additional subordinated financial support. The Company consolidates the EAT as its primary beneficiary because it has the ability to control the activities that most significantly impact the EAT’s economic performance and the Company retains all of the legal and economic benefits and obligations related to the Parked Assets prior to completion of the Reverse 1031 Exchange. As such, the Parked Assets are included in the Company’s consolidated financial statements as VIEs until legal title and control is transferred to the Company upon either completion of the Reverse 1031 Exchange or termination of the master lease agreement, at which time they will be consolidated as wholly owned subsidiaries.

F-13

As of December 31, 2022, the Company, through the OP and the wholly owned TRS, owned 40 properties through SPEs. The following table represents the Company’s ownership in each property by virtue of its 100% ownership of the SPEs that directly own the title to each property as of December 31, 2022 and 2021:

Effective Ownership Percentage at December 31,

Property Name Location Year Acquired 2022 2021

Arbors on Forest Ridge Bedford, Texas 2014 100 % 100 %

The Summit at Sabal Park Tampa, Florida 2014 100 % 100 %

Radbourne Lake Charlotte, North Carolina 2014 100 % 100 %

Timber Creek Charlotte, North Carolina 2014 100 % 100 %

Sabal Palm at Lake Buena Vista Orlando, Florida 2014 100 % 100 %

The Preserve at Terrell Mill Marietta, Georgia 2015 100 % 100 %

The Venue on Camelback Phoenix, Arizona 2016 100 % 100 %

Stone Creek at Old Farm (1) Houston, Texas 2016 100 % 100 %

Hollister Place (2) Houston, Texas 2017 — 100 %

Rockledge Apartments Marietta, Georgia 2017 100 % 100 %

Brandywine I & II Nashville, Tennessee 2018 100 % 100 %

Residences at Glenview Reserve Nashville, Tennessee 2019 100 % 100 %

Residences at West Place Orlando, Florida 2019 100 % 100 %

Avant at Pembroke Pines Pembroke Pines, Florida 2019 100 % 100 %

Arbors of Brentwood Nashville, Tennessee 2019 100 % 100 %

Torreyana Apartments Las Vegas, Nevada 2019 100 % 100 %

Fairways at San Marcos Chandler, Arizona 2020 100 % 100 %

The Verandas at Lake Norman (3) Charlotte, North Carolina 2021 100 % 100 %

Creekside at Matthews (3) Charlotte, North Carolina 2021 100 % 100 %

Six Forks Station Raleigh, North Carolina 2021 100 % 100 %

High House at Cary Cary, North Carolina 2021 100 % 100 %

The Adair (4) Sandy Springs, Georgia 2022 100 % —

Estates on Maryland (4) Phoenix, Arizona 2022 100 % —

(1) Properties classified as held for sale as of December 31, 2022.

(2) Property was sold in 2022.

F-14

4. Real Estate Investments Statistics

As of December 31, 2022, the Company was invested in a total of 40 multifamily properties, as listed below:

* Information is unaudited.

F-15

(4) Properties classified as held for sale as of December 31, 2022.

(5) Properties were acquired in 2022.

NXRT US Equity

NXRT · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

NXRT US Equity☆

NXRT · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

NXRT US Equity