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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                          to
Commission File Number 000-56274
VINEBROOK HOMES TRUST, INC.
(Exact name of registrant as specified in its charter)
Maryland83-1268857
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification Number)
300 Crescent Court, Suite 700, Dallas, Texas
75201
(Address of principal executive offices)(Zip Code)
Registrants telephone number, including area code: (214) 276-6300
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
N/AN/AN/A
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o


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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FileroAccelerated Filero
Non-Accelerated FilerxSmaller reporting companyo
Emerging growth companyx
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of May 10, 2023, the registrant had 28,624,686 shares of its Class A Common Stock, par value $0.01 per share, and no shares of its Class I Common Stock, par value $0.01 per share, outstanding.


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VineBrook Homes Trust, Inc.
Form 10-Q
Quarter Ended March 31, 2023
INDEX
Page
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q (this “Form 10-Q”) of VineBrook Homes Trust, Inc. (“we”, “us”, “our”, or the “Company”) other than historical facts may be considered forward-looking statements. In particular, statements relating to our business and investment strategies, plans or intentions, our liquidity and capital resources, our performance and results of operations contain forward-looking statements. Furthermore, all statements regarding future financial performance (including market conditions) are forward-looking statements. We caution investors that any forward-looking statements presented in this Form 10-Q are based on management’s beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “would,” “result,” the negative version of these words and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements.
Forward-looking statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you against relying on any of these forward-looking statements.
Some of the risks and uncertainties that may cause our actual results, performance, liquidity or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:
unfavorable changes in economic conditions and their effects on the real estate industry generally and our operations and financial condition, including our ability to access funding and generate returns for stockholders;
risks associated with the COVID-19 pandemic, including unpredictable variants and future outbreak of other highly infectious or contagious diseases;
risks associated with our limited operating history and the possibility that we may not replicate the historical results achieved by other entities managed or sponsored by affiliates of NexPoint Real Estate Advisors V, L.P. (our “Adviser”), members of VineBrook Homes, LLC’s (our “Manager”) management team or their affiliates;
our dependence on our Adviser, Manager and their affiliates and personnel to conduct our day-to-day operations and potential conflicts of interest with our Adviser, Manager and their affiliates and personnel;
risks associated with the Manager’s ability to terminate the Management Agreements (as defined below) and risks associated with any potential internalization of our management functions;
risks associated with the fluctuation in the net asset value (“NAV”) per share amounts;
loss of key personnel of our Adviser and our Manager;
the risk we make significant changes to our strategies in a market downturn, or fail to do so;
risks associated with ownership of real estate, including properties in transition, subjectivity of valuation, environmental matters and lack of liquidity in our assets;
risks associated with acquisitions, including the risk of expanding our scale of operations and acquisitions, which could adversely impact anticipated yields;
risks related to increasing property taxes, homeowner’s associations (“HOAs”) fees and insurance costs may negatively affect our financial results;
risks associated with our ability to identify, lease to and retain quality residents;
risks associated with leasing real estate, including the risks that rents do not increase sufficiently to keep pace with inflation and other rising costs of operations and loss of residents to competitive pressures from other types of properties or market conditions;
ii

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risks related to governmental laws, executive orders, regulations and rules applicable to our properties or that may be passed in the future which may impact operations, costs, revenue, or growth;
risks relating to the timing and costs of the renovation of properties which has the potential to adversely affect our operating results and ability to make distributions;
risks related to our ability to change our major policies, operations and targeted investments without stockholder consent;
risks related to climate change and natural disasters;
risks related to our use of leverage;
risks associated with our substantial current indebtedness and indebtedness we may incur in the future, rising interest rates and the availability of sufficient financing;
risks related to failure to maintain our status as a real estate investment trust (“REIT”);
risks related to failure of our OP (defined below) to be taxable as a partnership for U.S. federal income tax purposes, possibly causing us to fail to qualify for or to maintain REIT status;
risks related to compliance with REIT requirements, which may limit our ability to hedge our liabilities effectively and cause us to forgo otherwise attractive opportunities, liquidate certain of our investments or incur tax liabilities;
the risk that the Internal Revenue Service (“IRS”) may consider certain sales of properties to be prohibited transactions, resulting in a 100% penalty tax on any taxable gain;
the ineligibility of dividends payable by REITs for the reduced tax rates available for some dividends;
risks associated with the stock ownership restrictions of the Internal Revenue Code of 1986, as amended (the “Code”) for REITs and the stock ownership limit imposed by our charter;
recent and potential legislative or regulatory tax changes or other actions affecting REITs;
failure to generate sufficient cash flows to service our outstanding indebtedness or pay distributions at expected levels;
risks associated with the Highland Capital Management, L.P. (“Highland”) bankruptcy, including related litigation and potential conflicts of interest; and
any of the other risks included under Item 1A, “Risk Factors,” in our Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 30, 2023 (our “Annual Report”).
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. They are based on estimates and assumptions only as of the date of this Form 10-Q. We undertake no obligation to update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by law.
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VINEBROOK HOMES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
March 31, 2023December 31, 2022
(unaudited)
ASSETS
Operating real estate investments
Land$617,392 $632,278 
Buildings and improvements3,092,374 3,098,258 
Intangible lease assets368 6,319 
Total gross operating real estate investments3,710,134 3,736,855 
Accumulated depreciation and amortization(196,088)(171,648)
Total net operating real estate investments3,514,046 3,565,207 
Real estate held for sale, net52,007 3,360 
Total net real estate investments3,566,053 3,568,567 
Investments, at fair value2,500 2,500 
Cash48,506 76,751 
Restricted cash33,622 37,998 
Accounts and other receivables12,778 13,292 
Prepaid and other assets25,134 65,466 
Interest rate derivatives, at fair value57,453 70,813 
TOTAL ASSETS$3,746,046 $3,835,387 
LIABILITIES AND EQUITY
Liabilities:
Notes payable, net$954,981 $947,499 
Credit facilities, net1,590,814 1,580,108 
Bridge facility, net74,013 73,622 
Accounts payable and other accrued liabilities47,694 46,055 
Due to Manager (see Note 13)2,947 3,110 
Accrued real estate taxes payable29,222 34,992 
Accrued interest payable17,332 14,945 
Security deposit liability26,492 25,605 
Prepaid rents6,234 5,936 
Total Liabilities2,749,729 2,731,872 
Redeemable Series A preferred stock, $0.01 par value: 16,000,000 shares authorized; 5,000,000 and 5,000,000 shares issued and outstanding, respectively
121,748 121,662 
Redeemable noncontrolling interests in the OP236,384 240,647 
Redeemable noncontrolling interests in consolidated VIEs109,158 112,972 
Stockholders' Equity:
Class A Common stock, $0.01 par value: 300,000,000 shares authorized; 24,769,760 and 24,615,364 shares issued and outstanding, respectively
249 248 
Additional paid-in capital734,748 737,129 
Distributions in excess of retained earnings(250,592)(160,048)
Accumulated other comprehensive income35,937 43,999 
Total Stockholders' Equity520,342 621,328 
Noncontrolling interests in consolidated VIEs8,685 6,906 
TOTAL LIABILITIES AND EQUITY$3,746,046 $3,835,387 
See Accompanying Notes to Consolidated Financial Statements
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VINEBROOK HOMES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share amounts)
(Unaudited)
For the Three Months Ended March 31,
20232022
Revenues
Rental income$84,497 $50,980 
Other income1,608 1,337 
Total revenues86,105 52,317 
Expenses
Property operating expenses17,982 8,687 
Real estate taxes and insurance15,175 9,542 
Property management fees6,295 3,111 
Advisory fees4,846 3,086 
Corporate general and administrative expenses2,896 2,162 
Property general and administrative expenses5,630 2,873 
Depreciation and amortization32,840 15,956 
Interest expense35,323 9,620 
Total expenses120,987 55,037 
 Loss on extinguishment of debt(23) 
(Loss)/gain on sales and impairment of real estate, net(15,853)7 
Investment income75  
Loss on forfeited deposits(41,714) 
Net loss(92,397)(2,713)
Dividends on and accretion to redemption value of Redeemable Series A preferred stock2,207 2,209 
Net loss attributable to redeemable noncontrolling interests in the OP(13,860)(423)
Net loss attributable to redeemable noncontrolling interests in consolidated VIEs(3,213) 
Net loss attributable to noncontrolling interests in consolidated VIEs(312) 
Net loss attributable to common stockholders$(77,219)$(4,499)
Other comprehensive (loss)/income
Unrealized (loss)/gain on interest rate hedges(9,485)16,854 
Total comprehensive (loss)/income(101,882)14,141 
Dividends on and accretion to redemption value of Redeemable Series A preferred stock2,207 2,209 
Comprehensive (loss)/income attributable to redeemable noncontrolling interests in the OP(15,283)2,201 
Comprehensive loss attributable to redeemable noncontrolling interests in consolidated VIEs(3,213) 
Comprehensive loss attributable to noncontrolling interests in consolidated VIEs(312) 
Comprehensive (loss)/income attributable to common stockholders$(85,281)$9,731 
Weighted average common shares outstanding - basic24,607 23,249 
Weighted average common shares outstanding - diluted24,607 23,249 
Loss per share - basic$(3.14)$(0.19)
Loss per share - diluted$(3.14)$(0.19)
See Accompanying Notes to Consolidated Financial Statements
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VINEBROOK HOMES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands, except share and per share amounts)
(Unaudited)
Class A Common Stock
Three Months Ended March 31, 2023Number of
Shares
Par ValueAdditional
Paid-in
Capital
Distributions in Excess of Retained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balances, December 31, 202224,615,364 $248 $737,129 $(160,048)$43,999 $621,328 
Net loss attributable to common stockholders— (77,219)— (77,219)
Issuance of Class A common stock110,107 1 6,726 — — 6,727 
Redemptions of Class A common stock —  — —  
Equity-based compensation44,289 — 857 — — 857 
Common stock dividends declared ($0.5301 per share)
— (13,325)— (13,325)
Other comprehensive loss attributable to common stockholders— — (8,062)(8,062)
Adjustments to reflect redemption value of redeemable noncontrolling interests in the OP(9,964)— — (9,964)
Adjustment to reflect redemption value of redeemable noncontrolling interests in consolidated VIEs — —  
Balances, March 31, 202324,769,760 $249 $734,748 $(250,592)$35,937 $520,342 
Class A Common Stock
Three Months Ended March 31, 2022Number of
Shares
Par ValueAdditional
Paid-in
Capital
Distributions in Excess of Retained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balances, December 31, 202121,814,248 $219 $651,531 $(68,011)$(791)$582,948 
Net loss attributable to common stockholders— (4,499)— (4,499)
Issuance of Class A common stock2,907,334 29 152,091 — — 152,120 
Redemptions of Class A common stock(55,405)(1)(3,001)— — (3,002)
Offering costs(343)— — (343)
Equity-based compensation30,264 — 759 — — 759 
Common stock dividends declared ($0.5301 per share)
— (12,565)— (12,565)
Other comprehensive income attributable to common stockholders— — 14,230 14,230 
Adjustments to reflect redemption value of redeemable noncontrolling interests in the OP(20,649)— — (20,649)
Balances, March 31, 202224,696,441 $247 $780,388 $(85,075)$13,439 $708,999 
See Accompanying Notes to Consolidated Financial Statements
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VINEBROOK HOMES TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
For the Three Months Ended March 31,
20232022
Cash flows from operating activities
Net loss$(92,397)$(2,713)
Adjustments to reconcile net loss to net cash provided by operating activities
Loss/(gain) on sales and impairment of real estate, net15,853 (7)
Depreciation and amortization32,840 15,956 
Non-cash interest amortization2,500 1,526 
Change in fair value of interest rate derivatives included in interest expense3,845 735 
Net cash received/(paid) on derivative settlements7,441 (1,063)
Loss on extinguishment of debt23  
Equity-based compensation1,769 1,455 
Loss on forfeited deposits41,714  
Changes in operating assets and liabilities, net of effects of acquisitions:
Operating assets(2,571)1,657 
Operating liabilities8,125 5,378 
Net cash provided by operating activities19,142 22,924 
Cash flows from investing activities
Investment in unconsolidated entity (100,819)
Net proceeds from sales of real estate14,094 642 
Prepaid acquisition deposits(175)(434)
Insurance proceeds received264 43 
Acquisitions of real estate investments(2,976)(511,369)
Additions to real estate investments(55,445)(34,726)
Net cash used in investing activities(44,238)(646,663)
Cash flows from financing activities
Notes payable proceeds received8,825  
Notes payable payments(1,565)(237)
Credit facilities proceeds received10,500 355,000 
Bridge facilities proceeds received 150,000 
Bridge facilities principal payments (17,352)
Financing costs paid(1,681)(1,124)
Proceeds from issuance of Class A common stock 119,639 
Redemptions of Class A common stock paid(17,094)3,276 
Offering costs paid (600)
Dividends paid to common stockholders(6,345)(5,851)
Payments for taxes related to net share settlement of stock-based compensation (555)
Preferred stock offering costs paid(90) 
Preferred stock dividends paid(2,031)(2,031)
Contributions from redeemable noncontrolling interests in the OP520 4,873 
Distributions to redeemable noncontrolling interests in the OP(54)(1,477)
Contributions from redeemable noncontrolling interests in consolidated VIEs  
Distributions to redeemable noncontrolling interests in consolidated VIEs(601) 
Contributions from noncontrolling interests in consolidated VIEs3,592  
Distributions to noncontrolling interests in consolidated VIEs(1,501) 
Net cash (used in)/provided by financing activities(7,525)603,561 
Change in cash and restricted cash(32,621)(20,178)
Cash and restricted cash, beginning of period114,749 74,997 
Cash and restricted cash, end of period$82,128 $54,819 
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Supplemental Disclosure of Cash Flow Information
Interest paid, net of amount capitalized$32,167 $2,471 
Cash paid for income and franchise taxes2 120 
Supplemental Disclosure of Noncash Activities
Assumed liabilities in asset acquisitions 2,420 
Accrued dividends payable to common stockholders251 219 
Accrued distributions payable to redeemable noncontrolling interests in the OP322 313 
Accrued dividends payable to preferred stockholders2,031 2,031 
Accrued redemptions payable to common stockholders 6,278 
Accrued capital expenditures2,116 885 
Accretion to redemption value of Redeemable Series A preferred stock176 178 
Fair market value adjustment on assumed debt 89 
Assumed debt on acquisitions 13,582 
Offering costs accrued 84 
Issuance of Class A common stock related to DRIP dividends11,774 6,495 
DRIP dividends to common stockholders(11,774)(6,495)
Contributions from redeemable noncontrolling interests in the OP related to DRIP distributions1,973 467 
DRIP distributions to redeemable noncontrolling interests in the OP(1,973)(467)
Contributions from redeemable noncontrolling interests in consolidated VIEs related to DRIP distributions669  
DRIP distributions to redeemable noncontrolling interests in consolidated VIEs(669) 
Contributions from noncontrolling interests in consolidated VIEs related to DRIP distributions56  
DRIP distributions to noncontrolling interests in consolidated VIEs(56) 
See Accompanying Notes to Consolidated Financial Statements
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VINEBROOK HOMES TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Description of Business
VineBrook Homes Trust, Inc. (the “Company”, “we”, “us,” “our”) was incorporated in Maryland on July 16, 2018 and has elected to be taxed as a real estate investment trust (“REIT”). The Company is focused on acquiring, renovating, leasing, maintaining and otherwise managing single family rental (“SFR”) home investments primarily located in large to medium size cities and suburbs located in the midwestern, heartland and southeastern United States and providing our residents with affordable, safe and clean dwellings with a high level of service. Substantially all of the Company’s business is conducted through VineBrook Homes Operating Partnership, L.P. (the “OP”), the Company’s operating partnership, as the Company owns its properties indirectly through the OP. VineBrook Homes OP GP, LLC (the “OP GP”), is the general partner of the OP. As of March 31, 2023, there were a combined 23,615,071 Class A, Class B and Class C units of the OP (collectively, “OP Units”), of which 19,760,146 Class A OP Units, or 83.7%, were owned by the Company, 2,714,660 Class B OP Units, or 11.5%, were owned by NexPoint Real Estate Opportunities, LLC (“NREO”), 90,588 Class C OP Units, or 0.4%, were owned by NRESF REIT Sub, LLC (“NRESF”), 142,957 Class C OP Units, or 0.6%, were owned by GAF REIT, LLC (“GAF REIT”) and 906,720 Class C OP Units, or 3.8%, were owned by limited partners that were sellers in the Formation Transaction (defined below) (and in certain instances affiliated with the equity holders of the Manager) (the “VineBrook Contributors”) or other Company insiders. NREO, NRESF and GAF REIT are noncontrolling limited partners unaffiliated with the Company but are affiliates of the Adviser (defined below). The Second Amended and Restated Limited Partnership Agreement of the OP (the “OP LPA”) generally provides that Class A OP Units and Class B OP Units each have 50.0% of the voting power of the OP Units, including with respect to the election of directors to the Partnership Board (defined below in Note 10), and the Class C OP Units have no voting power. Each Class A OP Unit, Class B OP Unit and Class C OP Unit otherwise represents substantially the same economic interest in the OP.
The Company began operations on November 1, 2018 as a result of the acquisition of various partnerships and limited liability companies owned and operated by the VineBrook Contributors and other third parties, which owned 4,129 SFR assets located in Ohio, Kentucky and Indiana (the “Initial Portfolio”) for a total purchase price of approximately $330.2 million, including closing and financing costs of $6.0 million (the “Formation Transaction”). On November 1, 2018, the Company accepted subscriptions for 1,097,367 shares of its Class A common stock, par value $0.01 (“Shares”), for gross proceeds of approximately $27.4 million in connection with the Formation Transaction. The proceeds from the issuance of Shares were used to acquire OP Units. The OP used the capital contribution from the Company to fund a portion of the purchase price for the Initial Portfolio. The remaining purchase price and closing costs were funded by a capital contribution totaling $70.7 million from NREO, $8.6 million of equity rolled over from VineBrook Contributors, and $241.4 million from a Federal Home Loan Mortgage Corporation (“Freddie Mac”) mortgage (the “Initial Mortgage”) provided by KeyBank N.A. (“KeyBank”). On May 1, 2019 (the “Release Date”), approximately $1.4 million worth of OP Units were released to various VineBrook Contributors from an indemnity reserve escrow that was established at the time the Initial Portfolio was acquired. From the time the escrow reserve was established until the Release Date, no indemnity claims were made against said escrow.
Between November 1, 2018 and March 31, 2023, the Company, through the SPEs (as defined in Note 3) owned by the OP, purchased 20,750 additional homes and sold 352 homes within the VineBrook reportable segment (see Note 15), and through the OP’s consolidated investment in NexPoint Homes (as defined in Note 2) purchased 2,570 additional homes and sold two homes. Together with the Initial Portfolio, the Company, through the OP’s SPEs and its consolidation of NexPoint Homes, indirectly owned an interest in 27,095 homes (the “Portfolio”) in 20 states as of March 31, 2023. The acquisitions of the additional homes in the VineBrook reportable segment were funded by loans (see Note 7), proceeds from the sale of Shares and Preferred Shares (defined below) and excess cash generated from operations.

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The Company is externally managed by NexPoint Real Estate Advisors V, L.P. (the “Adviser”), through an agreement dated November 1, 2018, subsequently amended and restated on May 4, 2020, and amended on October 25, 2022 (the “Advisory Agreement”). The Advisory Agreement will automatically renew on the anniversary of the renewal date for one-year terms thereafter, unless otherwise terminated. The Adviser provides asset management services to the Company. The OP caused the SPEs to retain VineBrook Homes, LLC (the “Manager”), an affiliate of certain VineBrook Contributors, to renovate, lease, maintain, and operate the VineBrook properties under management agreements (as amended, the “Management Agreements”) that generally have an initial three-year term with one-year automatic renewals, unless otherwise terminated. The Management Agreements are supplemented by a side letter (as amended and restated, the “Side Letter”) by and among the Company, the OP, the OP GP, the Manager and certain of its affiliates. Certain SPEs from time to time may have property management agreements with independent third parties that are not the Manager. These are typically the result of maintaining legacy property managers after an acquisition to help transition the properties to the Manager or, in the case of a future sale, to manage the properties until they are sold. All of the Company’s investment decisions are made by employees of the Adviser and the Manager, subject to general oversight by the OP’s investment committee and the Company’s board of directors (the “Board”). Because the equity holders of the Manager own OP Units, the Manager is considered an affiliate for financial reporting disclosure purposes.
The Company’s primary investment objectives are to provide our residents with affordable, safe, clean and functional dwellings with a high level of service through institutional management and a renovation program on the homes purchased, while enhancing the cash flow and value of properties owned. We intend to acquire properties with cash flow growth potential, provide quarterly cash distributions and achieve long-term capital appreciation for our stockholders.
On August 28, 2018, the Company commenced the offering of 40,000,000 Shares through a continuous private placement (the “Private Offering”), under regulation D of the Securities Act of 1933, as amended (the “Securities Act”) (and various state securities law provisions) for a maximum of $1.0 billion of its Shares. The Private Offering closed on September 14, 2022. The initial offering price for Shares sold through the Private Offering was $25.00 per Share. The Company conducted periodic closings and sold Shares at the prior net asset value (“NAV”) per share as determined using the valuation methodology recommended by the Adviser and approved by the pricing committee (the “Pricing Committee”) of the Board (the “Valuation Methodology”), plus applicable fees and commissions. The NAV per share is calculated on a fully diluted basis. NAV may differ from the values of our real estate assets as calculated in accordance with accounting principles generally accepted in the United States (“GAAP”).
NexPoint Securities, Inc. (the “Dealer Manager”), an entity under common ownership with the Adviser, served as the sole dealer manager for the Private Offering and Raymond James & Associates, Inc. (“Raymond James”) and other unaffiliated broker-dealers served as placement agents (the “Placement Agents”) through selling agreements (“Selling Agreements”) between each Placement Agent and the Company.
The Company has adopted a Long-Term Incentive Plan (the “2018 LTIP”) whereby the Board, or a committee thereof, may grant awards of restricted stock units of the Company (“RSUs”) or profits interest units in the OP (“PI Units”) to certain employees of the Adviser and the Manager, or others at the discretion of the Board (including the directors and officers of the Company or other service providers of the Company or the OP). Under the terms of the 2018 LTIP, 426,307 Shares were initially reserved, subject to automatic increase on January 1st of each year beginning with January 1, 2019 by a number equal to 10% of the total number of OP Units and vested PI Units outstanding on December 31st of the preceding year, provided that the Board may act prior to each such January 1st to determine that there will be no increase for such year or that the increase will be less than the number of shares by which the Share Reserve would otherwise increase (the “Share Reserve”). In addition, the Shares available under the 2018 LTIP may not exceed in the aggregate 10% of the number of OP Units and vested PI Units outstanding at the time of measurement (the “Share Maximum”). Grants may be made annually by the Board, or more or less frequently in the Board’s sole discretion. Vesting of grants made under the 2018 LTIP will occur over a period of time as determined by the Board and may include the achievement of performance metrics, also as determined by the Board in its sole discretion.
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2. Summary of Significant Accounting Policies
Basis of Accounting and Use of Estimates
The accompanying unaudited consolidated financial statements are presented in accordance with GAAP and the rules and regulations of the SEC. 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.
The accompanying unaudited consolidated financial statements have been prepared according to the rules and regulations of the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted according to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. References to number of properties are unaudited.
In the opinion of management, all adjustments and eliminations necessary for the fair presentation of the Company’s financial position as of March 31, 2023 and December 31, 2022 and results of operations for the three months ended March 31, 2023 and 2022 have been included. The unaudited information included in these interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2022 and 2021 included in our Annual Report. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2023, or any other future period.
Principles of Consolidation
The Company accounts for subsidiary partnerships, limited liability companies, 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. If the Company determines the entity is not a VIE, it evaluates whether the entity should be consolidated under the voting model. The Company consolidates an entity when it controls the entity through ownership of a majority voting interest. As of March 31, 2023, the Company has determined it must consolidate the OP, its subsidiaries and the OP’s investment in NexPoint Homes Trust, Inc. (“NexPoint Homes”) (see Note 5) under the VIE model as it was determined the Company both controls the direct activities of the OP and its investments, including NexPoint Homes, and has the right to receive benefits that could potentially be significant to the OP, its subsidiaries and its investment in NexPoint Homes. The Company has control to direct the activities of the OP and its subsidiaries because the OP GP must generally receive approval of the Board to take any actions. The Company has control to direct the activities of NexPoint Homes because the OP owns approximately 86% of the outstanding equity of NexPoint Homes and the parties that beneficially own over 99% of the operating partnership of NexPoint Homes are related parties to the Company as of March 31, 2023. The consolidated financial statements include the accounts of the Company and its subsidiaries, including the OP, its subsidiaries and NexPoint Homes. All significant intercompany accounts and transactions have been eliminated in consolidation. OP Units and equity interests in consolidated VIEs that are not owned by the Company are presented as noncontrolling interests in the consolidated financial statements, and income or loss generated is allocated between the Company and the noncontrolling interests based upon their relative ownership percentages. In these consolidated financial statements, redeemable noncontrolling interests in the OP are exclusive of any interests in NexPoint Homes and its SFR OP (as defined in Note 5). Noncontrolling interests in consolidated VIEs are representative of interests in NexPoint Homes and redeemable noncontrolling interests in consolidated VIEs are representative of interests in the SFR OP (as defined in Note 5).
Reclassifications
During the period ended March 31, 2023, the Company reclassified $1.4 million from due from Manager and $4.5 million from accounts payable and other accrued liabilities to due to Manager on the December 31, 2022 consolidated balance sheet to conform to our current presentation.

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Real Estate Investments
Upon acquisition, we evaluate our acquired SFR properties for purposes of determining whether a transaction should be accounted for as an asset acquisition or business combination. Since substantially all of the fair value of our acquired properties is concentrated in a single identifiable asset or group of similar identifiable assets and the acquisitions do not include a substantive process, our purchases of homes or portfolios of homes qualify as asset acquisitions. Accordingly, upon acquisition of a property, the purchase price and related acquisition costs (“Total Consideration”) are allocated to land, buildings, improvements, fixtures, and intangible lease assets based upon their relative fair values.
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 (“ASC 820”) (see Note 8), is based on an independent third-party valuation firm’s estimate of the fair value of the tangible and intangible assets and liabilities acquired or management's internal analysis based on market knowledge obtained from historical transactions. The valuation methodology utilizes market comparable information, depreciated replacement cost and other estimates in allocating value to the tangible assets. The allocation of the Total Consideration to intangible lease assets represents the value associated with the in-place leases, as one month’s worth of effective gross income (rental revenue, less credit loss allowance, plus other income) as the average downtime of the assets in the portfolio is approximately one month and the assets in the portfolio are leased on a gross rental structure. 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 or accreted as interest expense over the life of the debt assumed.
Real estate assets, including land, buildings, improvements, fixtures, 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. The Company also incurs indirect costs to prepare acquired properties for rental. These costs are capitalized to the cost of the property during the period the property is undergoing activities to prepare it for its intended use. We capitalize interest, real estate taxes, insurance, utilities and other indirect costs as costs of the property only during the period for which activities necessary to prepare an asset for its intended use are ongoing, provided that expenditures for the asset have been made and the costs have been incurred. Upon completion of the renovation of our properties, all costs of operations, including repairs and maintenance, are expensed as incurred, unless the renovation meets the Company’s capitalization criteria. Real estate-related depreciation and amortization are computed on a straight-line basis over the estimated useful lives as described in the following table:
LandNot depreciated
Buildings27.5 years
Improvements and other assets
3 - 15 years
Acquired improvements and fixtures
1 - 7 years
Intangible lease assets6 months
As of March 31, 2023, the gross balance and accumulated amortization related to the intangible lease assets was $0.4 million and $0.3 million, respectively. As of December 31, 2022, the gross balance and accumulated amortization related to the intangible lease assets was $6.3 million and $5.1 million, respectively. For the three months ended March 31, 2023 and 2022, the Company recognized approximately $1.2 million and $1.0 million, respectively, of amortization expense related to the intangible lease assets.
Real estate assets are reviewed for impairment quarterly or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Significant indicators of impairment may include, but are not limited to, declines in home values, rental rates or occupancy percentages, as well as significant changes in the economy. In such cases, the Company will evaluate the recoverability of the assets by comparing the estimated future cash flows expected to result from the use and eventual disposition of each asset to its carrying amount and provide for impairment if such undiscounted cash flows are insufficient to recover the carrying amount. If impaired, the real estate asset will be written down to its estimated fair value. The process whereby we assess our SFR homes for impairment requires significant judgment and assessment of factors that are, at times, subject to significant uncertainty. For the three months ended March 31, 2023, the Company recorded approximately $13.1 million of impairment charges on real estate assets, which are included in (loss)/gain on sales and impairment of real estate, net on the consolidated statement of operations and comprehensive income (loss). No significant impairments on real estate assets were recorded during the three months ended March 31, 2022.
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Cash and restricted cash
The Company maintains cash at multiple financial institutions and, at times, these balances exceed federally insurable limits. As a result, there is a concentration of credit risk related to amounts on deposit. We believe any risks are mitigated through the size of the financial institutions at which our cash balances are held.
Restricted cash represents cash deposited in accounts related to security deposits, property taxes, insurance premiums and deductibles and other lender-required escrows. Amounts deposited in the reserve accounts associated with the loans can only be used as provided for in the respective loan agreements, and security deposits held pursuant to lease agreements are required to be segregated.
The following table provides a reconciliation of cash and restricted cash reported on the consolidated balance sheets that sum to the total of such amount shown in the consolidated statements of cash flows (in thousands):
March 31,
20232022December 31, 2022
Cash$48,506 $36,640 $76,751 
Restricted cash33,622 18,179 37,998 
Total cash and restricted cash$82,128 $54,819 $114,749 
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. The Company classifies the SFR property leases as operating leases and elects to not separate the lease component, comprised of rents from SFR properties, from the associated non-lease component, comprised of fees from SFR properties and resident charge-backs. The combined component is accounted for under the new lease accounting standard while certain resident reimbursements are accounted for as variable payments under the revenue accounting guidance. Rental income is recognized when earned. This policy effectively results in income recognition on a straight-line basis over the related terms of the leases. Resident reimbursements and other income consist of charges billed to residents for utilities, resident-caused damages, pets, and administrative, application and other fees and are recognized when earned. Historically, the Company has used a direct write-off method for uncollectible rents; wherein uncollectible rents are netted against rental income. The Company additionally has established a reserve for any accounts receivable that are not expected to be collectible, which are netted against rental income and other income. For the three months ended March 31, 2023 and 2022, rental income includes $2.8 million and $2.2 million of variable lease payments, respectively.
Gains or losses on sales of properties are recognized pursuant to the provisions included in ASC 610-20, Other Income. We recognize a full gain or loss on sale, which is presented in (loss)/gain on sales of real estate on the consolidated statements of operations and comprehensive income (loss), when the derecognition criteria under ASC 610-20 have been met.
Redeemable Securities
Included in the Company’s consolidated balance sheets are redeemable noncontrolling interests in the OP, redeemable noncontrolling interests in consolidated VIEs and 6.50% Series A Cumulative Redeemable Preferred Stock (the “Preferred Shares”). These interests are presented in the “mezzanine” section of the consolidated balance sheets because they do not meet the functional definition of a liability or equity under current accounting literature. The Company accounts for these under the provisions of ASC Topic 480-10-S99-3A, paragraph 15(b).
In accordance with ASC Topic 480-10-S99, since the redeemable noncontrolling interests in the OP and redeemable noncontrolling interests in consolidated VIEs have a redemption feature, they are measured at their redemption value if such value exceeds the carrying value of interests. The redemption value is based on the NAV per unit at the measurement date. The offset to the adjustment to the carrying amount of the redeemable noncontrolling interests in the OP and redeemable noncontrolling interests in consolidated VIEs is reflected in the Company’s additional paid-in capital on the consolidated balance sheets. In accordance with ASC Topic 480-10-S99, the Preferred Shares are measured at their carrying value plus the accretion to their future redemption value on the balance sheet. The accretion is reflected in the Company’s dividends on and accretion to redemption value of Series A redeemable preferred stock on the consolidated statements of operations and comprehensive income (loss).
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Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of shares of the Company’s common stock outstanding, which excludes any unvested RSUs and PI Units issued pursuant to the 2018 LTIP. Diluted earnings (loss) per share is computed by adjusting basic earnings (loss) per share for the dilutive effects of the assumed vesting of RSUs and PI Units and the conversion of OP Units and vested PI Units to Shares. During periods of net loss, the assumed vesting of RSUs and PI Units and the conversion of OP Units and vested PI Units to Shares is anti-dilutive and is not included in the calculation of earnings (loss) per share. The following table sets forth the computation of basic and diluted earnings (loss) per share for the periods presented (in thousands, except per share amounts):
For the Three Months Ended March 31,
20232022
Numerator for loss per share:
Net loss$(92,397)$(2,713)
Less:
Dividends on and accretion to redemption value of Redeemable Series A preferred stock2,207 2,209 
Net loss attributable to redeemable noncontrolling interests in the OP(13,860)(423)
Net loss attributable to redeemable noncontrolling interests in consolidated VIEs(3,213) 
Net loss attributable to noncontrolling interests in consolidated VIEs(312) 
Net loss attributable to common stockholders$(77,219)$(4,499)
Denominator for earnings (loss) per share:
Weighted average common shares outstanding - basic24,607 23,249 
Weighted average unvested RSUs, PI Units, and OP Units (1)  
Weighted average common shares outstanding - diluted24,607 23,249 
Earnings (loss) per weighted average common share:
Basic$(3.14)$(0.19)
Diluted$(3.14)$(0.19)
(1)
For the three months ended March 31, 2023 and 2022, excludes approximately 4,471,500 shares and 4,243,000 shares, respectively, related to the assumed vesting of RSUs and PI Units and the conversion of OP Units and vested PI Units to Shares, as the effect would have been anti-dilutive.
Segment Reporting
Under the provision of ASC 280, Segment Reporting, the Company has determined that it has two reportable segments, VineBrook and NexPoint Homes. Both reportable segments involve activities related to acquiring, renovating, developing, leasing and operating SFR homes as rental properties. The Company’s management allocates resources and evaluates operating performance across the two segments. The VineBrook reportable segment is the legacy reportable segment and represents the majority of the Company’s operations and generally purchases homes to implement a value-add strategy. The NexPoint Homes reportable segment was formed June 8, 2022 and represents a supplemental reportable segment that generally purchases newer homes that require less rehabilitation compared to the VineBrook reportable segment. Within the VineBrook reportable segment, the Company had a geographic market concentration in one market (Cincinnati) that represents more than 10% of the total gross book value of SFR homes as of March 31, 2023.

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Recent Accounting 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 three months ended March 31, 2023, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future London Interbank Offered Rate ("LIBOR") -indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company has elected practical expedients within FASB ASU 2020-04 related to replacing the source of hedged transactions and continues evaluating the impact the adoption of this ASU will have on the Company’s consolidated financial statements.

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 three months ended March 31, 2023.
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3. Investments in Subsidiaries
In connection with its indirect investments in real estate assets acquired, the Company, through its ownership of the OP, indirectly holds a proportional ownership interest in the Portfolio, through the OP’s beneficial ownership of all of the issued and outstanding membership interests in the special purpose limited liability companies (“SPEs”) that directly or indirectly own the Portfolio. All of the properties in the Portfolio 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, except as discussed below. Under the terms of the notes payable, except as discussed below, the lender has a mortgage interest in each real estate asset in the SPE to which the loan is made.
As of March 31, 2023, the Company, through the OP and its SPE subsidiaries, owned the Portfolio, which consisted of 24,527 properties in the VineBrook reportable segment and 2,568 properties in the NexPoint Homes reportable segment, through 13 SPEs and their various subsidiaries and through the consolidated investment in NexPoint Homes. The following table presents the ownership structure of each SPE group that directly or indirectly owns the title to each real estate asset as of March 31, 2023, the number of assets held, the cost of those assets, the resulting debt allocated to each SPE and whether the debt is a mortgage loan. The mortgage loan may be settled from the assets of the below entity or entities to which the loan is made. Loans from the Warehouse Facility (as defined in Note 7) can only be settled from the assets owned by VB One, LLC (dollars in thousands):
VIE NameHomesCost BasisOP Beneficial Ownership % Encumbered by Mortgage (1)Debt Allocated
NREA VB I, LLC65$6,021 100 % Yes $5,005 
NREA VB II, LLC16716,671 100 % Yes 10,681 
NREA VB III, LLC1,322122,346 100 % Yes 70,526 
NREA VB IV, LLC38537,787 100 % Yes 24,060 
NREA VB V, LLC1,828127,781 100 % Yes 107,426 
NREA VB VI, LLC29428,343 100 % Yes 18,503 
NREA VB VII, LLC363,139 100 % Yes 2,963 
True FM2017-1, LLC20919,724 100 % Yes 10,095 
VB One, LLC13,8121,825,589 100 % No 1,270,000 
VB Two, LLC1,844175,007 100 % No 124,046 
VB Three, LLC3,870552,884 100 % No 330,500 
VB Five, LLC17019,194 100 % Yes 8,746 
VB Eight, LLC52574,446 100 %No75,000 
NexPoint Homes2,568753,209 86 %No 476,080 
27,095$3,762,141 $2,533,631 (2)
(1)Assets held, directly or indirectly, by VB One, LLC, VB Two, LLC, VB Three, LLC and VB Eight, LLC are not encumbered by a mortgage. Instead, the lender has an equity pledge in certain assets of the respective SPEs and an equity pledge in the equity of the respective SPEs.
(2)In addition to the debt allocated to the SPEs noted above, as of March 31, 2023, NexPoint Homes had approximately $100.1 million of debt (excluding amounts owed to the OP from NexPoint Homes, as these are eliminated in consolidation) not collateralized directly by homes which reflects the amount outstanding on the SFR OP Convertible Notes (as defined in Note 13) as of March 31, 2023.
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4. Real Estate Assets
As of March 31, 2023, the Company, through the OP and its SPE subsidiaries, owned 27,095 homes, including 24,527 homes in the VineBrook reportable segment and 2,568 homes in the NexPoint Homes reportable segment. As of December 31, 2022, the Company, through the OP and its SPE subsidiaries, owned 27,211 homes, including 24,657 homes in the VineBrook reportable segment and 2,554 homes in the NexPoint Homes reportable segment. The components of the Company’s real estate investments in homes were as follows (in thousands):
LandBuildings and improvements (1)Intangible lease assetsReal estate held for sale, netTotal gross real estateAccumulated depreciation and amortization
Real Estate Balances, December 31, 2022$632,278 $3,098,258 $6,319 $3,360 $3,740,215 $(171,648)
Additions412 59,638 (2)12  60,062 (32,840)
Transfers to held for sale(15,298)(65,389)(39)78,278 (2,448)2,448 
Write-offs  (5,924) (5,924)5,924 
Dispositions   (16,697)(16,697)28 
Impairment (133) (12,934)(13,067) 
Real Estate Balances, March 31, 2023$617,392 $3,092,374 $368 $52,007 $3,762,141 $(196,088)
(1)Includes capitalized interest, real estate taxes, insurance, improvements, and other costs incurred during rehabilitation of the properties.
(2)Includes capitalized interest of approximately $3.8 million and other capitalizable costs outlined in (1) above of approximately $4.2 million.
During the three months ended March 31, 2023 and 2022, the Company recognized depreciation expense of approximately $31.7 million and $15.0 million, respectively.
Acquisitions and dispositions
During the three months ended March 31, 2023, the Company, through the OP, acquired two homes within the VineBrook reportable segment. During the three months ended March 31, 2023, the Company, through its consolidated investment in NexPoint Homes, acquired 16 homes. See Note 5 for additional information about NexPoint Homes.
During the three months ended March 31, 2023, the Company, through the OP, disposed of 132 homes within the VineBrook reportable segment. During the three months ended March 31, 2023, the Company, through its consolidated investment in NexPoint Homes, disposed of two homes. The Company strategically identified these homes for disposal and expects the disposal of these properties to be accretive to the Portfolio’s results of operations and overall performance.
On August 3, 2022, VB Five, LLC (“Buyer”), an indirect subsidiary of the Company, entered into a purchase agreement under which the Buyer agreed to acquire a portfolio of approximately 1,610 SFR homes located in Arizona, Florida, Georgia, Ohio and Texas (the “Tusk Portfolio”). Also on August 3, 2022, the Buyer entered into a purchase agreement under which the Buyer agreed to acquire a portfolio of approximately 1,289 SFR homes located in Arizona, Florida, Georgia, North Carolina, Ohio and Texas (the “Siete Portfolio”). On January 17, 2023, the Company, through its indirect subsidiary, VB Seven, LLC, entered into an agreement under which the acquisition of the Tusk Portfolio was terminated by the seller and the Buyer forfeited its initial deposit of approximately $23.3 million. Additionally, on January 17, 2023, the Company, through its indirect subsidiary, VB Seven, LLC, entered into an agreement under which the acquisition of the Siete Portfolio was terminated by the seller and the Buyer forfeited its initial deposit of approximately $17.7 million. The total initial deposit forfeitures of $41.0 million from the Tusk Portfolio and the Siete Portfolio are included in loss on forfeited deposits on the consolidated statement of operations and comprehensive income (loss) for the three months ended March 31, 2023.

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Held for sale properties
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 separately in its consolidated balance sheet, and the Company ceases recording depreciation and amortization expense related to that property. Real estate held for sale is reported at the lower of its carrying amount or its estimated fair value less estimated costs to sell. For the three months ended March 31, 2023, the Company recorded approximately $13.1 million of impairment charges on real estate assets held for sale, which includes approximately $2.5 million of casualty related impairment, which are included in (loss)/gain on sales and impairment of real estate, net on the consolidated statement of operations and comprehensive income (loss). As of March 31, 2023, there are 576 properties that are classified as held for sale. These held for sale properties have a carrying amount of approximately $52.0 million.
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5. NexPoint Homes Investment
During the year ended December 31, 2022, the Company, through its taxable REIT subsidiary (“the TRS”), invested approximately $100.8 million in Ensign Peak Realty, LLC (“Ensign”), an owner and operator of SFR homes. This investment was redeemed in full on June 8, 2022 in connection with the formation of NexPoint Homes, described below.
Formation of NexPoint Homes - Contribution Agreements
On June 8, 2022, the Company, through the OP, entered into a contribution agreement (the “Contribution Agreement”) with NexPoint Homes, which is externally advised by an affiliate of our Adviser. In accordance with the Contribution Agreement, the OP contributed $50.0 million to NexPoint Homes in exchange for 2,000,000 shares of Class A common stock, par value $0.01 per share of NexPoint Homes (the “NexPoint Homes Class A Shares”). The NexPoint Homes Class A Shares were issued and valued at $25.00 per share. The NexPoint Homes Class A Shares owned by the Company are eliminated in consolidation.
Following the contribution by the OP to NexPoint Homes, NexPoint Homes entered into a contribution agreement (the “SFR OP Contribution Agreement”) with NexPoint SFR Operating Partnership, L.P. (the “SFR OP”), the operating partnership of NexPoint Homes, certain funds managed by affiliates of our Adviser and certain individuals (the “Principals”) affiliated with HomeSource Operations, LLC, the external manager of the SFR OP. In accordance with the SFR OP Contribution Agreement, NexPoint Homes contributed $50.0 million to the SFR OP in exchange for 2,000,000 limited partnership units of the Operating Partnership (“SFR OP Units”). The SFR OP Units owned by NexPoint Homes are eliminated in consolidation.
On June 8, 2022, the OP loaned $50.0 million to NexPoint Homes in exchange for $50.0 million of 7.50% convertible notes of NexPoint Homes (the “NexPoint Homes Convertible Notes”). The NexPoint Homes Convertible Notes bear interest at 7.50%, are interest only during the term of the NexPoint Homes Convertible Notes and mature on June 30, 2027. From August 1, 2022 through March 31, 2027, the NexPoint Homes Convertible Notes are convertible into NexPoint Homes Class A Shares at the election of the OP at the then-current net asset value of NexPoint Homes, subject to certain limitations. Subsequent to June 8, 2022, NexPoint Homes repaid $28.0 million of the NexPoint Homes Convertible Notes and the balance of the NexPoint Homes Convertible Notes was $22.0 million as of March 31, 2023. The NexPoint Homes Convertible Notes held by the Company are eliminated in consolidation.
On June 8, 2022, in connection with the formation of NexPoint Homes, the Company consolidated a note with Metropolitan Life Insurance Company (the “NexPoint Homes MetLife Note 1”). The NexPoint Homes MetLife Note 1 is guaranteed by the OP and bears interest at a fixed rate of 3.72% on the tranche collateralized by stabilized properties and 4.47% on the tranche collateralized by non-stabilized properties. The NexPoint Homes MetLife Note 1 is interest-only and matures and is due in full on March 3, 2027. As of March 31, 2023, the NexPoint Homes MetLife Note 1 had an outstanding principal balance of $239.0 million which is included, net of unamortized deferred financing costs, in notes payable on the consolidated balance sheets.
See Note 7 for more information on the Company’s consolidated debt related to its investment in NexPoint Homes.
Consolidation of NexPoint Homes
Under ASC 810, Consolidation, the Company has determined that NexPoint Homes represents a variable interest entity. Under the VIE model, the Company concluded that the Company both controls and directs the activities of NexPoint Homes and has the right to receive benefits that could potentially be significant to its investment in NexPoint Homes. The Company has control to direct the activities of NexPoint Homes as the OP owns approximately 86% of the outstanding equity of NexPoint Homes as of March 31, 2023 and the parties that beneficially own approximately 99% of the SFR OP are related parties to the Company. As such, the Company determined it is appropriate to consolidate NexPoint Homes. All significant intercompany accounts and transactions have been eliminated in consolidation. As NexPoint Homes continues to raise additional capital, the Company will continue to evaluate whether the entity is a VIE and if the Company is the primary beneficiary of the VIE and should consolidate the entity.
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6. Investments, at Fair Value
On November 22, 2021, the Company, through the TRS, invested $2.5 million in Vesta Ventures Fund I, LP (the “Vesta Fund”). The Vesta Fund is a closed-end fund with an initial seven-year term beginning on February 24, 2021, subject to certain extension provisions, that invests in early and growth stage technology companies that provide solutions to the SFR real estate sector. Vesta Ventures GP, LLC (the “Vesta GP”) is the general partner and managing member of the Vesta Fund and accordingly has the exclusive right to manage and control the Vesta Fund. The TRS is a limited partner in the Vesta Fund with a minority interest and accordingly has no control or influence over the Vesta Fund.
Investments in privately held entities that report NAV, such as our privately held equity investments, are presented at fair value using NAV as a practical expedient, with changes in fair value recognized in net income. We use NAV reported by limited partnerships generally without adjustment, unless we are aware of information indicating that the NAV reported by a limited partnership does not accurately reflect the fair value of the investment at our reporting date. We disclose the timing of liquidation of an investee’s assets and the date when redemption restrictions will lapse (or indicate if this timing is unknown) if the investee has communicated this information to us or has announced it publicly. We recognize both realized and unrealized gains and losses in our consolidated statements of operations. Unrealized gains and losses represent changes in NAV as a practical expedient to estimate fair value for investments in privately held entities that report NAV. Realized gains and losses on our investments represent the difference between proceeds received upon disposition of investments and their historical or adjusted cost. At March 31, 2023, the Company had no material unrealized or realized gains or losses related to the investment.
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7. Debt
As of March 31, 2023, the VineBrook Homes reportable segment had approximately $2.1 billion of debt outstanding, and the NexPoint Homes reportable segment had $576.2 million of debt outstanding. See the summary table below for further information on the Company's outstanding debt. Additionally, we have included a summary of any significant changes in debt agreements during the three months ended March 31, 2023 below.
On March 1, 2021, the Company entered into a non-recourse carveout guaranty and certain wholly owned subsidiaries of VB Three, LLC (as borrowers) entered into a $500.0 million credit agreement with JP Morgan (the “JPM Facility”). The JPM Facility is secured by equity pledges in VB Three, LLC and its wholly owned subsidiaries and bears interest at a variable rate equal to one-month LIBOR plus 2.75%. The JPM Facility is interest-only and originally matured and was due in full on March 1, 2023. On March 10, 2022, the Company entered into Amendment No. 1 to the JPM Facility, wherein each advance under the JPM Facility will bear interest at daily Secured Overnight Financing Rate (“SOFR”) plus 2.85%. The balance of the JPM Facility, net of unamortized deferred financing costs, is included in credit facilities on the consolidated balance sheets. On January 31, 2023, the Company entered into Amendment No. 2 to the JPM Facility, wherein the total facility amount was updated to $350.0 million, and the maturity date was extended to January 31, 2025, which may be extended for 12 months upon submission of an extension request, subject to approval. On March 15, 2023, the Company entered into Amendment No. 3 to the JPM Facility to give the Company credit for pledging an interest rate swap by reducing the interest reserve requirements under the JPM Facility based on the capped rate. As of March 31, 2023, the JPM Facility had $19.5 million in available capacity.
As of March 31, 2023, the Company is in compliance with all debt covenants in all of its debt agreements, with the exception that the NexPoint Homes MetLife Note 2 was not in compliance with the debt service coverage ratio requirement. The Company received a waiver from the lender through May 31, 2023 to either (i) make a principal paydown to bring the debt into compliance or (ii) contribute additional properties as collateral to achieve the required debt service ratio and provide an annual budget to the lender for approval. The Company intends to contribute additional properties as collateral but also has the ability to make the required principal paydown.
The weighted average interest rate of the Company’s debt was 6.4348% as of March 31, 2023 and 6.0684% as of December 31, 2022. As of March 31, 2023 and December 31, 2022, the adjusted weighted average interest rate of the Company’s debt, including the effect of derivative financial instruments, was 5.0363% and 4.9101%, respectively. For purposes of calculating the adjusted weighted average interest rate of the Company’s debt as of March 31, 2023, including the effect of derivative financial instruments, the Company has included the weighted average fixed rate of 1.9508% on its combined $1.3 billion notional amount of interest rate swap and cap agreements, representing a weighted average fixed rate for one-month LIBOR, daily SOFR and one-month term SOFR, which effectively fixes the interest rate on $1.3 billion of the Company’s floating rate indebtedness (see Note 8).
For further descriptions of the debt arrangements not included in this Form 10-Q, please see Note 7 to the consolidated financial statements in our Annual Report.
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