8-K: Bluerock Homes Trust Sets Series A Preferred Stock Value at $25 Plus Accreted Dividends

Bluerock Homes Trust estimates the value of its Series A Preferred Stock at $25.00 per share plus accreted dividends, based on the fair value of its real estate portfolio as of September 30, 2024.

Summary

• Bluerock Homes Trust's board of directors established an estimated value of $25.00 per share plus accreted dividends for its Series A redeemable preferred stock.
• The valuation is based on the fair value of the company's equity interest in its real estate portfolio, net of mortgage liabilities, as of September 30, 2024.
• Kroll, LLC was engaged to assist with the valuation, estimating the as-is market value of the portfolio.
• Kroll used income capitalization and sales comparison approaches to value the properties.
• The portfolio consists of 20 real estate investments with 4,000 residential units.
• Kroll did not verify the information provided by the company, including ownership interests and promote/waterfall models.
• The company adjusted the portfolio equity and cash to reflect other liabilities as of September 30, 2024.
• The board of directors approved the valuation after reviewing Kroll's report and considering management's recommendation.
• The company acknowledges that the valuation is based on assumptions and estimates that may not be accurate or complete, and different parties could derive different values.
• The estimated value is not audited and does not represent fair value based on GAAP or liquidation value.

Sentiment

Score: 7

Explanation: The sentiment is neutral to slightly positive. The company is providing a valuation update, which is generally a positive sign of transparency. However, the document also includes disclaimers and limitations, which temper the overall sentiment.

Positives

• The adjusted portfolio equity significantly exceeds the Series A Preferred Stock liquidation value.
• Kroll, an independent valuation firm, was engaged to assist with the valuation process.
• The board of directors actively oversaw the valuation process and approved the estimated value per share.
• A sensitivity analysis suggests that the valuation is robust to changes in discount rates.

Negatives

• The valuation is based on assumptions and estimates that may not be accurate or complete.
• Kroll did not verify the information provided by the company, including ownership interests and promote/waterfall models.
• The estimated value is not audited and does not represent fair value based on GAAP or liquidation value.
• The company acknowledges that different parties could derive different values using different assumptions or methodologies.

Risks

• Changes in the value of individual assets in the portfolio or changes in valuation assumptions could significantly impact the value of the Series A Preferred Stock.
• The estimated value does not take into account debt prepayment penalties or restrictions on the assumption of debt.
• The company can give no assurance that a stockholder would be able to resell their shares at the estimated value or that the shares would trade at that value on a national securities exchange.
• The company can give no assurance that the methodologies used to calculate the estimated value per share of Series A Preferred Stock would be acceptable to FINRA or for compliance with ERISA reporting requirements.

Future Outlook

The company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events, or changes to future operating results over time, unless required by law.

Management Comments

• The board of directors unanimously agreed to approve the estimated value per share of Series A Preferred Stock of $25.00 plus accreted dividends as of September 30, 2024, which determination was ultimately and solely the responsibility of the Board of Directors.

Industry Context

This announcement is typical for REITs that issue preferred stock, as they need to provide valuations to assist broker-dealers with customer account statement reporting obligations.

Comparison to Industry Standards

• The valuation methodologies used, including income capitalization and sales comparison approaches, are standard practices in the real estate industry.
• Engaging an independent valuation firm like Kroll is also a common practice to ensure objectivity and credibility.
• Comparable companies like Invitation Homes (INVH) and American Homes 4 Rent (AMH) also periodically provide updates on their asset valuations.

Stakeholder Impact

• The estimated value per share is intended to assist broker-dealers in meeting their customer account statement reporting obligations.
• Stockholders are cautioned that they may not be able to resell their shares at the estimated value and that the estimated value does not represent a guarantee of future distributions or trading prices.

Key Dates

Keywords

Series A Preferred Stock, Valuation, Real Estate Portfolio, Kroll, Fair Value, Bluerock Homes Trust