vhti20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐	TRANSITION 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)


Maryland		83-1268857
(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)

Registrant’s telephone number, including area code: (214) 276-6300

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
N/A	N/A	N/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 ☒ No ☐

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 ☒ No ☐

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 Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	Smaller reporting company	☒
Emerging growth company	☒

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 5, 2022, the registrant had 25,145,132 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 June 30, 2022

INDEX

	Page


Cautionary Note Regarding Forward-Looking Statements	ii
Part I
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021	1
Consolidated Unaudited Statements of Operations and Comprehensive Income (Loss)	2
Consolidated Unaudited Statements of Stockholders' Equity	3
Consolidated Unaudited Statements of Cash Flows	5
Notes to Consolidated Unaudited Financial Statements	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3. Quantitative and Qualitative Disclosures About Market Risk	58
Item 4. Controls and Procedures	58
Part II
Item 1. Legal Proceedings	59
Item 1A. Risk Factors	59
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3. Defaults Upon Senior Securities	59
Item 4. Mine Safety Disclosures	59
Item 5. Other Information	59
Item 6. Exhibits	60
Signatures	61

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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:

•

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;

•

loss of key personnel of our Adviser and our Manager;

•

risks associated with the fluctuation in the net asset value (“NAV”) per share amounts;

•

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;

•

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 related to increasing property taxes, homeowner’s associations (“HOAs”) fees and insurance costs may negatively affect our financial results;

•

risks associated with acquisitions, including the risk of expanding our scale of operations and acquisitions, which could adversely impact anticipated yields;

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•

risks associated with leasing real estate, including the risks that rents do not increase sufficiently to keep pace with rising costs of operations and competitive pressures from other types of properties or market conditions that incentivize tenants to purchase their residences;

•

risks related to tenant relief laws, including laws regulating evictions, rent control laws, executive orders, administrative orders and other regulations that may impact our rental income and profitability;

•

risks related to governmental laws, regulations and rules applicable to our properties or that may be passed in the future;

•

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 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 amended and restated 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 purchasing single-family rental (“SFR”) properties through the foreclosure auction process;

•

damage associated with SFR properties sold through short sales or foreclosure sales may require extensive renovation;

•

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 February 23, 2022 (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.

iii

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VINEBROOK HOMES TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	*June 30, 2022*			*December 31, 2021*
	(unaudited)
ASSETS
Operating real estate investments
Land	$	534,217		$	334,191
Buildings and improvements		2,383,412			1,391,786
Intangible lease assets		4,158			971
Total gross operating real estate investments		2,921,787			1,726,948
Accumulated depreciation and amortization		(116,002	)		(76,789	)
Total net operating real estate investments		2,805,785			1,650,159
Real estate held for sale, net		2,166			81
Total net real estate investments		2,807,951			1,650,240
Investments, at fair value		2,500			2,500
Cash		81,793			54,104
Restricted cash		21,560			20,893
Accounts and other receivables		13,760			8,327
Due from Manager (see Note 13)		663			2,909
Prepaid and other assets		54,261			19,352
Interest rate derivatives, at fair value		36,662			—
TOTAL ASSETS	$	3,019,150		$	1,758,325

LIABILITIES AND EQUITY
Liabilities:
Notes payable, net	$	711,498		$	376,842
Credit facilities, net		1,054,667			391,703
Accounts payable and other accrued liabilities		50,911			47,208
Accrued real estate taxes payable		24,985			19,450
Accrued interest payable		8,230			1,690
Security deposit liability		20,467			14,295
Prepaid rents		4,975			3,341
Interest rate derivatives, at fair value		—			3,590
Total Liabilities		1,875,733			858,119

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		121,261			120,896
Redeemable noncontrolling interests in the OP		234,713			196,362
Redeemable noncontrolling interests in consolidated VIEs		95,937			—
Stockholders' Equity:
Class A Common stock, $0.01 par value: 300,000,000 shares authorized; 24,960,485 and 21,814,248 shares issued and outstanding, respectively		250			219
Additional paid-in capital		780,111			651,531
Distributions in excess of retained earnings		(109,628	)		(68,011	)
Accumulated other comprehensive income/(loss)		20,773			(791	)
Total Stockholders' Equity		691,506			582,948
TOTAL LIABILITIES AND EQUITY	$	3,019,150		$	1,758,325

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 June 30,*						*For the Six Months Ended June 30,*
	*2022*			*2021*			*2022*			*2021*
Revenues
Rental income	$	59,442		$	39,112		$	110,422		$	69,248
Other income		2,862			709			4,199			1,201
Total revenues		62,304			39,821			114,621			70,449
Expenses
Property operating expenses		12,357			6,007			21,044			11,160
Real estate taxes and insurance		10,914			7,644			20,456			13,938
Property management fees		3,408			2,587			6,519			4,560
Advisory fees		3,844			2,010			6,930			3,301
Corporate general and administrative expenses		2,478			1,837			4,640			3,318
Property general and administrative expenses		4,625			1,332			7,498			2,655
Depreciation and amortization		24,207			12,507			40,163			20,551
Interest expense		11,155			7,688			20,775			12,814
Loss on extinguishment of debt		1,001			—			1,001			—
Total expenses		73,989			41,612			129,026			72,297
Gain/(loss) on sales of real estate		100			(123	)		216			(198	)
Casualty loss, net of insurance proceeds		(53	)		(93	)		(162	)		(102	)
Net loss		(11,638	)		(2,007	)		(14,351	)		(2,148	)
Dividends on and accretion to redemption value of Redeemable Series A preferred stock		2,219			2,207			4,428			4,413
Net loss attributable to redeemable noncontrolling interests in the OP		(1,771	)		(466	)		(2,194	)		(501	)
Net loss attributable to redeemable noncontrolling interests in consolidated VIEs		(1,191	)		—			(1,191	)		—
Net loss attributable to common stockholders	$	(10,895	)	$	(3,748	)	$	(15,394	)	$	(6,060	)
Other comprehensive income/(loss)
Unrealized gain/(loss) on interest rate hedges		8,656			(65	)		25,510			6,306
Total comprehensive (loss)/income		(2,982	)		(2,072	)		11,159			4,158
Dividends on and accretion to redemption value of Redeemable Series A preferred stock		2,219			2,207			4,428			4,413
Comprehensive (loss)/income attributable to redeemable noncontrolling interests in the OP		(449	)		(482	)		1,752			1,064
Comprehensive loss attributable to redeemable noncontrolling interests in consolidated VIEs		(1,191	)		—			(1,191	)		—
Comprehensive (loss)/income attributable to common stockholders	$	(3,561	)	$	(3,797	)	$	6,170		$	(1,319	)

Weighted average common shares outstanding - basic		25,241			12,812			24,250			11,621
Weighted average common shares outstanding - diluted		25,241			12,812			24,250			11,621

Loss per share - basic	$	(0.43	)	$	(0.29	)	$	(0.63	)	$	(0.52	)
Loss per share - diluted	$	(0.43	)	$	(0.29	)	$	(0.63	)	$	(0.52	)

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 June 30, 2022	*Number of Shares*			*Par Value*			*Additional Paid-in Capital*			*Distributions in Excess of Retained Earnings*			*Accumulated Other Comprehensive Income (Loss)*		*Total*
Balances, March 31, 2022		24,696,441		$	247		$	780,388		$	(85,075	)	$	13,439	$	708,999
Net loss attributable to common stockholders								—			(10,895	)		—		(10,895	)
Issuance of Class A common stock		682,149			7			40,567			—			—		40,574
Redemptions of Class A common stock		(437,357	)		(4	)		(26,260	)		—			—		(26,264	)
Offering costs								(1,150	)		—			—		(1,150	)
Equity-based compensation		19,252			—			916			—			—		916
Common stock dividends declared ($0.5301 per share)								—			(13,658	)		—		(13,658	)
Other comprehensive income attributable to common stockholders								—			—			7,334		7,334
Adjustments to reflect redemption value of redeemable noncontrolling interests in the OP								(13,159	)		—			—		(13,159	)
Adjustment to reflect redemption value of redeemable noncontrolling interests in consolidated VIEs								(1,191	)		—			—		(1,191	)
Balances, June 30, 2022		24,960,485		$	250		$	780,111		$	(109,628	)	$	20,773	$	691,506

	*Class A Common Stock*
Six Months Ended June 30, 2022	*Number of Shares*			*Par Value*			*Additional Paid-in Capital*			*Distributions in Excess of Retained Earnings*			*Accumulated Other Comprehensive Income (Loss)*			*Total*
Balances, December 31, 2021		21,814,248		$	219		$	651,531		$	(68,011	)	$	(791	)	$	582,948
Net loss attributable to common stockholders								—			(15,394	)		—			(15,394	)
Issuance of Class A common stock		3,589,483			36			192,658			—			—			192,694
Redemptions of Class A common stock		(492,762	)		(5	)		(29,261	)		—			—			(29,266	)
Offering costs								(1,493	)		—			—			(1,493	)
Equity-based compensation		49,516			—			1,675			—			—			1,675
Common stock dividends declared ($1.0602 per share)								—			(26,223	)		—			(26,223	)
Other comprehensive income attributable to common stockholders								—			—			21,564			21,564
Adjustments to reflect redemption value of redeemable noncontrolling interests in the OP								(33,808	)		—			—			(33,808	)
Adjustment to reflect redemption value of redeemable noncontrolling interests in consolidated VIEs								(1,191	)		—			—			(1,191	)
Balances, June 30, 2022		24,960,485		$	250		$	780,111		$	(109,628	)	$	20,773		$	691,506

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 June 30, 2021	*Number of Shares*			*Par Value*			*Additional Paid-in Capital*			*Distributions in Excess of Retained Earnings*			*Accumulated Other Comprehensive Income (Loss)*			*Total*
Balances, March 31, 2021		11,499,045		$	115		$	291,305		$	(34,060	)	$	(5,360	)	$	252,000
Net loss attributable to common stockholders								—			(3,748	)		—			(3,748	)
Issuance of Class A common stock		2,499,331			25			93,290			—			—			93,315
Redemptions of Class A common stock		(133,303	)		(1	)		(5,155	)		—						(5,156	)
Offering costs								(944	)		—			—			(944	)
Equity-based compensation		26,642			—			626			—			—			626
Common stock dividends declared ($0.5301 per share)								—			(6,993	)		—			(6,993	)
Other comprehensive loss attributable to common stockholders								—			—			(49	)		(49	)
Adjustment to reflect redemption value of redeemable noncontrolling interests in the OP								(16,957	)		—			—			(16,957	)
Balances, June 30, 2021		13,891,715		$	139		$	362,165		$	(44,801	)	$	(5,409	)	$	312,094

	*Class A Common Stock*
Six Months Ended June 30, 2021	*Number of Shares*			*Par Value*			*Additional Paid-in Capital*			*Distributions in Excess of Retained Earnings*			*Accumulated Other Comprehensive Income (Loss)*			*Total*
Balances, December 31, 2020		9,260,795		$	93		$	210,381		$	(26,002	)	$	(10,150	)	$	174,322
Net loss attributable to common stockholders								—			(6,060	)		—			(6,060	)
Issuance of Class A common stock		4,741,008			47			174,119			—			—			174,166
Redemptions of Class A common stock		(136,730	)		(1	)		(5,281	)		—			—			(5,282	)
Offering costs								(1,240	)		—			—			(1,240	)
Equity-based compensation		26,642			—			1,140			—			—			1,140
Common stock dividends declared ($1.0602 per share)								—			(12,739	)		—			(12,739	)
Other comprehensive income attributable to common stockholders								—			—			4,741			4,741
Adjustments to reflect redemption value of redeemable noncontrolling interests in the OP								(16,954	)		—			—			(16,954	)
Balances, June 30, 2021		13,891,715		$	139		$	362,165		$	(44,801	)	$	(5,409	)	$	312,094

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 Six Months Ended June 30,*
	*2022*			*2021*
Cash flows from operating activities
Net loss	$	(14,351	)	$	(2,148	)
Adjustments to reconcile net loss to net cash provided by operating activities
(Gain)/loss on sales of real estate		(216	)		198
Depreciation and amortization		40,163			20,551
Non-cash interest amortization		3,330			1,612
Change in fair value on derivative instruments included in interest expense		(389	)		1,749
Net cash paid on derivative settlements		(2,426	)		(2,109	)
Loss on extinguishment of debt		1,001			—
Equity-based compensation		3,072			2,073
Casualty loss, net of insurance proceeds		162			102
Changes in operating assets and liabilities, net of effects of acquisitions:
Operating assets		(1,026	)		(6,206	)
Operating liabilities		15,932			8,785
Net cash provided by operating activities		45,252			24,607

Cash flows from investing activities
Investment in unconsolidated entity		(100,819	)		—
Redemption of investment in unconsolidated entity		100,819			—
Acquisition of NexPoint Homes through VIE consolidation, net of cash received		(47,022	)		—
Net proceeds from sales of real estate		7,117			1,033
Prepaid acquisition deposits		(5,673	)		(1,020	)
Insurance proceeds received		255			319
Acquisitions of real estate investments		(763,563	)		(640,265	)
Additions to real estate investments		(84,038	)		(36,370	)
Net cash used in investing activities		(892,924	)		(676,303	)

Cash flows from financing activities
Notes payable proceeds received		42,746			125,049
Notes payable payments		(389	)		(148	)
Credit facilities proceeds received		665,000			405,001
Credit facilities principal payments		—			(35,000	)
Bridge facility proceeds received		150,000			—
Bridge facility principal payments		(150,000	)		—
NREO Note repayment		—			(1,250	)
Financing costs paid		(6,269	)		(7,811	)
Interest rate cap premium paid		(12,673	)		—
Proceeds from issuance of Class A common stock		153,167			167,833
Redemptions of Class A common stock paid		(3,002	)		(126	)
Offering costs paid		(1,850	)		(1,276	)
Dividends paid to common stockholders		(12,201	)		(6,049	)
Payments for taxes related to net share settlement of stock-based compensation		(555	)		(46	)
Proceeds from issuance of redeemable Series A preferred stock, net of offering costs		—			35,213
Preferred stock dividends paid		(4,063	)		(2,031	)
Contributions from redeemable noncontrolling interests in the OP		4,974			2,640
Distributions to redeemable noncontrolling interests in the OP		(2,954	)		(2,983	)
Contributions from redeemable noncontrolling interests in consolidated VIEs		54,097			—
Net cash provided by financing activities		876,028			679,016

Change in cash and restricted cash		28,356			27,320
Cash and restricted cash, beginning of period		74,997			37,096
Cash and restricted cash, end of period	$	103,353		$	64,416

Supplemental Disclosure of Cash Flow Information
Interest paid, net of amount capitalized	$	6,376		$	6,669
Cash paid for income and franchise taxes		259			101

Supplemental Disclosure of Noncash Activities
Assumed liabilities in asset acquisitions		2,420			4,898
Accrued dividends payable to common stockholders		481			357
Accrued distributions payable to redeemable noncontrolling interests in the OP		626			315
Accrued dividends payable to preferred stockholders		4,063			4,063
Accrued redemptions payable to common stockholders		26,264			5,156
Accrued capital expenditures		898			—
Accretion to redemption value of Redeemable Series A preferred stock		365			350
Fair market value adjustment on assumed debt		89			—
Assumed debt on acquisitions		13,582			—
Offering costs accrued		(16	)		69
Issuance of Class A common stock related to DRIP dividends		13,541			6,333
DRIP dividends to common stockholders		(13,541	)		(6,333	)
Contributions from redeemable noncontrolling interests in the OP related to DRIP distributions		968			765
DRIP distributions to redeemable noncontrolling interests in the OP		(968	)		(765	)
Real estate investments assumed in acquisition of NexPoint Homes through VIE consolidation		326,432			—
Earnest money deposits assumed in acquisition of NexPoint Homes through VIE consolidation		36,838			—
Other assets assumed in acquisition of NexPoint Homes through VIE consolidation		8,729			—
Notes payable assumed in acquisition of NexPoint Homes through VIE consolidation		278,530			—
Other liabilities assumed in acquisition of NexPoint Homes through VIE consolidation		4,607			—
Noncontrolling interests assumed in acquisition of NexPoint Homes through VIE consolidation		41,150			—

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 18, 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. 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 June 30, 2022, there were a combined 24,990,807 Class A, Class B and Class C units of the OP (collectively, “OP Units”), of which 21,250,366 Class A OP Units, or 85.0%, were owned by the Company, 2,691,330 Class B OP Units, or 10.8%, were owned by NexPoint Real Estate Opportunities, LLC (“NREO”), 88,268 Class C OP Units, or 0.4%, were owned by NRESF REIT Sub, LLC (“NRESF”), 139,296 Class C OP Units, or 0.6%, were owned by GAF REIT, LLC (“GAF REIT”) and 821,547 Class C OP Units, or 3.2%, 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 June 30, 2022, the Company, through the SPEs (as defined in Note 3) owned by the OP, purchased 17,998 additional homes and sold 184 homes within the VineBrook reportable segment, and through the OP’s consolidated investment in NexPoint Homes (as defined in Note 2), purchased 1,731 additional homes (see Note 4). Together with the Initial Portfolio, the Company, through the OP’s SPEs and NexPoint Homes, indirectly owned an interest in 23,674 homes (the “Portfolio”) in 20 states as of June 30, 2022. 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.

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 renewed on November 1, 2021 (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 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 renovation program for the homes acquired.

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 expires on November 1, 2023 and will close upon the completion of certain share issuances expected to be completed by September 30, 2022. The initial offering price for Shares sold through the Private Offering was $25.00 per Share. The Company conducts periodic closings and sells 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 serve 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 outstanding on December 31st of the preceding year of the number of outstanding OP Units and vested PI Units, 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. There have been no significant changes to the Company’s significant accounting policies during the six months ended June 30, 2022.

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 June 30, 2022 and December 31, 2021 and results of operations for the three and six months ended June 30, 2022 and 2021 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, 2021 and 2020 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, 2022, 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 June 30, 2022, 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 over 99% 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 June 30, 2022. 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.

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:

Land		Not depreciated
Buildings		27.5 years
Improvements and other assets		3 - 15 years
Intangible lease assets		6 months

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As of June 30, 2022, the gross balance and accumulated amortization related to the intangible lease assets was $4.2 million and $2.6 million, respectively. As of December 31, 2021, the gross balance and accumulated amortization related to the intangible lease assets was $1.0 million and $0.5 million, respectively. For the three months ended June 30, 2022 and 2021, the Company recognized approximately $2.0 million and $2.6 million, respectively, of amortization expense related to the intangible lease assets. For the six months ended June 30, 2022 and 2021, the Company recognized approximately $2.9 million and $3.6 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. No significant impairments on operating properties were recorded during the three and six months ended June 30, 2022 and 2021.

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):

	*June 30,*
	*2022*		*2021*		*December 31, 2021*
Cash	$	81,793	$	43,901	$	54,104
Restricted cash		21,560		20,515		20,893
Total cash and restricted cash	$	103,353	$	64,416	$	74,997

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. As a result of the adoption of ASC 842, Leases, on January 1, 2019, 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 tenant 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 uncollectable rents; wherein uncollectible rents are netted against rental income. In response to the COVID-19 pandemic, the Company additionally has established a reserve for any accounts receivable that are not expected to be collectible, which are netted against rental income. For the three months ended June 30, 2022 and 2021, rental income includes $2.5 million and $1.3 million of variable lease payments, respectively. For the six months ended June 30, 2022 and 2021, rental income includes $4.7 million and $2.4 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 gain/(loss) 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.

In April 2020, the FASB issued a Staff Q&A on accounting for leases during the COVID-19 pandemic, focused on the application of lease guidance in ASC 842. The Q&A states that some lease contracts may contain explicit or implicit enforceable rights and obligations that require lease concessions if certain circumstances arise that are beyond the control of the parties to the contract. Therefore, entities would need to perform a lease-by-lease analysis to determine whether contractual provisions in an existing lease agreement provide enforceable rights and obligations related to lease concessions. The FASB determined it would be acceptable for entities to not perform a lease-by-lease analysis regarding rent concessions resulting from COVID-19, and to instead make a policy election regarding rent concessions, which would give entities the option to account or not to account for these rent concessions as lease modifications if the total payments required by the modified contract are substantially the same or less than the total payments required by the original contract. Entities making the election to account for these rent concessions as lease modifications would recognize the effects of rent abatements and rent deferrals on a prospective straight-line basis over the remainder of the modified contract. We have made the election to not perform a lease-by-lease analysis to determine whether contractual provisions in an existing lease agreement provide enforceable rights and obligations related to payment plans. By electing the FASB relief, we have also made an accounting policy election to not account for rent deferrals provided to lessees due to the COVID-19 pandemic as lease modifications. Lessees are required to pay the full outstanding balance of the rent deferred over the period of the payment plan.

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).

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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).

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 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 June 30,*						*For the Six Months Ended June 30,*
	*2022*			*2021*			*2022*			*2021*
Numerator for loss per share:
Net loss	$	(11,638	)	$	(2,007	)	$	(14,351	)	$	(2,148	)
Less:
Dividends on and accretion to redemption value of Redeemable Series A preferred stock		2,219			2,207			4,428			4,413
Net loss attributable to redeemable noncontrolling interests in the OP		(1,771	)		(466	)		(2,194	)		(501	)
Net loss attributable to redeemable noncontrolling interests in consolidated VIEs		(1,191	)		—			(1,191	)		—
Net loss attributable to common stockholders	$	(10,895	)	$	(3,748	)	$	(15,394	)	$	(6,060	)

Denominator for earnings (loss) per share:
Weighted average common shares outstanding - basic		25,241			12,812			24,250			11,621
Weighted average unvested RSUs, PI Units, and OP Units (1)		—			—			—			—
Weighted average common shares outstanding - diluted		25,241			12,812			24,250			11,621

Earnings (loss) per weighted average common share:
Basic	$	(0.43	)	$	(0.29	)	$	(0.63	)	$	(0.52	)
Diluted	$	(0.43	)	$	(0.29	)	$	(0.63	)	$	(0.52	)

(1)

For the three months ended June 30, 2022 and 2021, excludes approximately 4,337,000 shares and 4,049,000 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. For the six months ended June 30, 2022 and 2021, excludes approximately 4,287,000 shares and 3,970,000 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 segment, the Company had geographic market concentrations in two markets (Cincinnati and Dayton) that represent more than 10% of the total gross book value of SFR homes as of June 30, 2022.

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 six months ended June 30, 2022, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future 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 ASC 848 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.

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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 June 30, 2022, the Company, through the OP and its SPE subsidiaries, owned the Portfolio, which consisted of 21,943 VineBrook properties and 1,731 NexPoint Homes properties, through 14 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 June 30, 2022, 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 Name	*Homes*		*Cost Basis*		*OP Beneficial Ownership %*			*Encumbered by Mortgage (1)*	*Debt Allocated*
NREA VB I, LLC		66	$	6,026		100	%	Yes	$	5,048
NREA VB II, LLC		167		16,523		100	%	Yes		10,742
NREA VB III, LLC		1,322		121,252		100	%	Yes		71,115
NREA VB IV, LLC		385		37,345		100	%	Yes		24,283
NREA VB V, LLC		1,829		126,777		100	%	Yes		108,384
NREA VB VI, LLC		302		27,898		100	%	Yes		18,661
NREA VB VII, LLC		36		3,059		100	%	Yes		2,989
True FM2017-1, LLC		211		18,735		100	%	Yes		10,312
SMP Homes 3B, LLC		160		17,318		100	%	No		—
SMP Homes 5B, LLC		46		4,770		100	%	Yes		2,319
VB One, LLC		11,408		1,329,924		100	%	No		750,000
VB Two, LLC		1,853		167,544		100	%	No		124,554
VB Three, LLC		3,890		538,680		100	%	No		315,000
VB Five, LLC		268		25,825		100	%	Yes		13,470
NexPoint Homes		1,731		482,277		99	%	No		221,488
		23,674	$	2,923,953					$	1,678,365	(2)

(1)

Assets held, directly or indirectly, by VB One, LLC, VB Two, LLC and VB Three, 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 June 30, 2022, NexPoint Homes had approximately $100.1 million of debt not collateralized directly by homes which reflects the amount outstanding on the SFR OP Convertible Notes (as defined in Note 13) as of June 30, 2022.

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4. Real Estate Assets

As of June 30, 2022, the Company, through the OP and its SPE subsidiaries, owned 23,674 SFR homes, including 21,943 homes in the VineBrook reportable segment and 1,731 homes in the NexPoint Homes reportable segment. As of December 31, 2021, the Company only had one reportable segment, VineBrook, and through the OP and its SPE subsidiaries, owned 16,891 SFR homes. The components of the Company’s real estate investments in SFR homes were as follows (in thousands):

	*Land*		*Buildings and improvements (1)*				*Intangible lease assets*			*Real estate held for sale, net*			*Total*
Gross Real Estate, December 31, 2021	$	334,191	$	1,391,786			$	971		$	81		$	1,727,029
Additions		200,026		991,626		(2)		3,986			8,986			1,204,624
Write-offs		—		—				(799	)		—			(799	)
Dispositions		—		—				—			(6,901	)		(6,901	)
Gross Real Estate, June 30, 2022		534,217		2,383,412				4,158			2,166			2,923,953
Accumulated depreciation and amortization		—		(113,383	)			(2,619	)		—			(116,002	)
Net Real Estate, June 30, 2022	$	534,217	$	2,270,029			$	1,539		$	2,166		$	2,807,951

(1)

Includes capitalized interest, real estate taxes, insurance and other costs incurred during rehabilitation of the properties.

(2)

Includes capitalized interest of approximately $4.9 million and other capitalizable costs of approximately $3.9 million.

During the three months ended June 30, 2022 and 2021, the Company recognized depreciation expense of approximately $22.2 million and $9.9 million, respectively. During the six months ended June 30, 2022 and 2021, the Company recognized depreciation expense of approximately $37.2 million and $16.9 million, respectively.

Acquisitions and dispositions

During the six months ended June 30, 2022, the Company, through the OP, acquired 5,126 homes, including the homes in the portfolios discussed below, and disposed of 74 homes within the VineBrook reportable segment. On June 8, 2022, the Company, through its consolidated investment in NexPoint Homes, assumed 1,242 homes, and NexPoint Homes subsequently acquired 489 homes. As of June 30, 2022, NexPoint Homes owns 1,731 homes. See Note 5 for additional information about NexPoint Homes.

On February 8, 2022, the Company, through the OP, purchased 2,842 homes, located across eight states, with the largest concentration in the southeastern United States (the “Prager Portfolio”). The gross purchase price was approximately $352.7 million, in addition to approximately $31.4 million in debt extinguishment costs and $3.7 million in other closing costs. See the table below for more information about the Prager Portfolio as of the acquisition date:

Market	*State*	*# of Homes*
Memphis	TN, MS		743
Atlanta	GA		741
Saint Louis	MO		308
Pensacola	FL		300
Raeford	NC		250
Kansas City	MO		230
Portales	NM		150
Augusta	GA, SC		67
Jacksonville	FL		53
Total			2,842

On March 18, 2022, the Company, through the OP, purchased 170 homes located in Memphis, Tennessee for approximately $17.1 million (the “CrestCore Portfolio”).

Held for sale properties

The Company periodically classifies real estate assets as held for sale when certain criteria are met, in accordance with GAAP. Once the Company begins marketing an asset or determines that it will pursue marketing an asset, the asset becomes classified as held for sale. 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. As of June 30, 2022, there are 28 properties that are classified as held for sale. These held for sale properties have a carrying amount of approximately $2.2 million.

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5. NexPoint Homes Investment

During the six months ended June 30, 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 Shares”). The NexPoint Homes Shares were issued and valued at $25.00 per share.

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”).

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 Note and mature on June 30, 2027. From August 1, 2022 through March 31, 2027, the NexPoint Homes Convertible Notes are convertible into NexPoint Homes Shares at the election of the OP at the then-current net asset value of NexPoint Homes, subject to certain limitations.

On June 8, 2022, in connection with the formation of NexPoint Homes, the Company assumed a note with Metropolitan Life Insurance Company (the “NexPoint Homes MetLife Note 1”). The NexPoint Homes MetLife Note 1 is secured 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 June 30, 2022, the NexPoint Homes MetLife Note 1 had an outstanding principal balance of $221.5 million which is included, net of unamortized deferred financing costs, in notes payable on the consolidated balance sheets. The OP is the guarantor of the NexPoint Homes MetLife Note 1.

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 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 over 99% 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 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. As of June 30, 2022, the OP owns approximately 99.2% of the outstanding NexPoint Homes Shares.

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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 June 30, 2022, the Company had no material unrealized or realized gains or losses related to the investment.

7. Debt

On November 1, 2018, the OP (as guarantor) and some of the SPEs (as borrowers) entered into the $241.4 million Initial Mortgage with KeyBank. The Initial Mortgage is secured by certain properties in the Initial Portfolio and equity pledges of the SPEs and bears interest at a variable rate equal to the 30-day London InterBank Offered Rate (“one-month LIBOR”) plus 1.55%. The Initial Mortgage is interest-only for the first 48 months of the term and principal amortizes at a rate of 30 years over the last 36 months of the term. The Initial Mortgage matures and is due in full on December 1, 2025. The balance of the Initial Mortgage, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets.

On September 20, 2019, the OP (as guarantor) and VB One, LLC (as borrower) entered into a credit facility (the “Warehouse Facility”) with KeyBank. The Warehouse Facility is secured by an equity pledge in certain assets of VB One, LLC and an equity pledge in the equity of VB One, LLC. On November 3, 2021, the Company (as guarantor), the OP (as parent borrower), and each of (i) VB OP Holdings, LLC and (ii) VB One, LLC and certain of its subsidiaries (as subsidiary borrowers), entered into an amended and restated credit agreement to recast the Warehouse Facility, which was subsequently amended on December 9, 2021, April 8, 2022 and May 20, 2022. The amended recast Warehouse Facility is a full-term, interest-only facility with an initial 36-month term ending November 3, 2024, has one 12-month extension option, and bears interest at a variable rate equal to the forward-looking term rate based on the Secured Overnight Financing Rate (“SOFR”) for the applicable interest period (“one-month term SOFR”) plus a margin of 0.1% plus an applicable rate ranging from 1.6% to 2.45% depending on the Company’s consolidated total leverage ratio. Under the amended recast Warehouse Facility, the OP has the right to increase the total commitments available for borrowing, which may take the form of an increase in revolving commitments or one or more tranches of term loan commitments, up to $1.2 billion. As of June 30, 2022, $750.0 million was drawn on the Warehouse Facility. The balance of the Warehouse Facility, net of unamortized deferred financing costs, is included in credit facilities on the consolidated balance sheets.

On September 30, 2019, in connection with the acquisition of a 954-home portfolio (the “TrueLane Portfolio”), the OP (as guarantor) assumed an approximately $10.8 million Freddie Mac mortgage loan (the “TrueLane Mortgage”) with Berkadia Commercial Mortgage LLC as a result of the OP’s acquisition of True FM 2017-1, LLC. The TrueLane Mortgage is secured by some of our properties and an equity pledge in True FM 2017-1, LLC and bears interest at a fixed rate equal to 5.35%. The TrueLane Mortgage matures and is due in full on February 1, 2028 and requires monthly principal and interest payments. The balance of the TrueLane Mortgage, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets.

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On December 28, 2020, in connection with the acquisition of a 45-home portfolio, the OP provided a non-recourse carveout guaranty related to an approximately $2.4 million mortgage loan assumed by a subsidiary of the OP (the “CoreVest Note”) with CoreVest American Finance Lender LLC as a result of the OP’s acquisition of SMP Homes 5B, LLC. The CoreVest Note is secured by the properties in SMP Homes 5B, LLC and an equity pledge in SMP Homes 5B, LLC and bears interest at a fixed rate equal to 6.12%. The CoreVest Note matures and is due in full on January 9, 2023 and requires monthly principal and interest payments. The balance of the CoreVest Note, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets. On July 11, 2022, the OP repaid the full balance of the CoreVest Note, which extinguished the CoreVest Note.

On January 6, 2021, the Company (as guarantor) and VB Two, LLC (as borrower) entered into a $125.0 million note with Metropolitan Life Insurance (the “MetLife Note”). The MetLife Note is secured by equity pledges in VB Two, LLC and its wholly owned subsidiaries and bears interest at a fixed rate of 3.25%. The MetLife Note is interest-only and matures and is due in full on January 31, 2026. The MetLife Note, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets.

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 matures and is 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 a daily SOFR plus 2.85%. As of June 30, 2022, the JPM Facility has $185.0 million of available capacity. The balance of the JPM Facility, net of unamortized deferred financing costs, is included in credit facilities on the consolidated balance sheets.

On January 13, 2022, in connection with the acquisition of a 98-home portfolio, the OP (as guarantor) assumed an approximately $4.6 million Freddie Mac mortgage loan (the “Hatchway Broadmoor Mortgage”) with Arbor Agency Lending, LLC as a result of the OP’s acquisition of Hatchway Broadmoor, LLC. The Hatchway Broadmoor Mortgage is secured by properties in Hatchway Broadmoor, LLC and an equity pledge in Hatchway Broadmoor, LLC and bears interest at a fixed rate equal to 5.35%. The Hatchway Broadmoor Mortgage matures and is due in full on February 1, 2029 and requires monthly principal and interest payments. The balance of the Hatchway Broadmoor Mortgage, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets.

On February 8, 2022, in connection with the acquisition of the Prager Portfolio, the Company entered into a bridge credit agreement through the OP with KeyBank National Association, and borrowed $150.0 million (the “Bridge Facility”). On April 8, 2022, the Company repaid the outstanding principal balance on the Bridge Facility, which extinguished the Bridge Facility. In connection with the extinguishment of the Bridge Facility, the Company incurred a loss on extinguishment of debt of approximately $1.0 million, which is presented on the consolidated statements of operations and comprehensive income (loss).

On March 18, 2022, in connection with the acquisition of an 88-home portfolio, the OP provided a non-recourse carveout guaranty related to an approximately $4.7 million mortgage loan assumed by a subsidiary of the OP (the “Crestcore II Note”) with CoreVest American Finance Lender LLC as a result of the OP’s acquisition of Crestcore II, LLC. The Crestcore II Note is secured by the properties in Crestcore II, LLC and an equity pledge in Crestcore II, LLC and bears interest at a fixed rate equal to 5.12%. The Crestcore II Note matures and is due in full on July 9, 2029 and requires monthly principal and interest payments. The balance of the Crestcore II Note, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets.

On March 18, 2022, in connection with the acquisition of an 82-home portfolio, the OP provided a non-recourse carveout guaranty related to an approximately $4.2 million mortgage loan assumed by a subsidiary of the OP (the “Crestcore IV Note”) with CoreVest American Finance Lender LLC as a result of the OP’s acquisition of Crestcore IV, LLC. The Crestcore IV Note is secured by the properties in Crestcore IV, LLC and an equity pledge in Crestcore IV, LLC and bears interest at a fixed rate equal to 5.12%. The Crestcore IV Note matures and is due in full on July 9, 2029 and requires monthly principal and interest payments. The balance of the Crestcore IV Note, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets.

In addition to the debt agreements discussed above for the VineBrook reportable segment, as of June 30, 2022, the NexPoint Homes reportable segment had $321.6 million of debt outstanding included in notes payable on the consolidated balance sheets of which $221.5 million was the NexPoint Homes MetLife Note 1 and $100.1 million was SFR OP Convertible Notes (as defined in Note 13).

As of June 30, 2022, the Company is in compliance with all debt covenants in all of its debt agreements.

The weighted average interest rate of the Company’s debt was 3.8895% as of June 30, 2022 and 2.3707% as of December 31, 2021. As of June 30, 2022 and December 31, 2021, the adjusted weighted average interest rate of the Company’s debt, including the effect of derivative financial instruments, was 4.0931% and 2.9171%, respectively. For purposes of calculating the adjusted weighted average interest rate of the Company’s debt, including the effect of derivative financial instruments, the Company has included the weighted average fixed rate of 2.0217% on its combined $870.0 million notional amount of interest rate swap agreements, representing a weighted average fixed rate for one-month LIBOR and daily SOFR, which effectively fixes the interest rate on $870.0 million of the Company’s floating rate indebtedness (see Note 8).

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The following table contains summary information concerning the Company’s debt as of June 30, 2022 and December 31, 2021 (dollars in thousands):

		*Outstanding Principal as of*
	*Type*	*June 30, 2022*			*December 31, 2021*			*Interest Rate (1)*			*Maturity*
Initial Mortgage	Floating	$	241,222		$	241,269			3.34	%	12/1/2025
Warehouse Facility	Floating		750,000			160,000			3.49	%	11/3/2024	(3)
JPM Facility	Floating		315,000			240,000			4.35	%	3/1/2023
MetLife Note	Fixed		124,554			124,689			3.25	%	1/31/2026
TrueLane Mortgage	Fixed		10,312			10,387			5.35	%	2/1/2028
CoreVest Note	Fixed		2,319			2,338			6.12	%	1/9/2023
Crestcore II Note	Fixed		4,691			—			5.12	%	7/9/2029
Crestcore IV Note	Fixed		4,170			—			5.12	%	7/9/2029
Hatchway Broadmoor Mortgage	Fixed		4,609			—			5.35	%	2/1/2029
NexPoint Homes MetLife Note 1	Fixed		221,488			—			3.76	%	3/3/2027
SFR OP Convertible Notes	Fixed		100,100			—			7.50	%	6/30/2027
		$	1,778,465		$	778,683
Debt premium, net (2)			457			416
Deferred financing costs, net of accumulated amortization of $8,519 and $5,325, respectively			(12,757	)		(10,554	)
		$	1,766,165		$	768,545

(1)

Represents the interest rate as of June 30, 2022. Except for fixed rate debt, the interest rate is one-month LIBOR, daily SOFR or one-month term SOFR, plus an applicable margin. One-month LIBOR as of June 30, 2022 was 1.7867%, daily SOFR as of June 30, 2022 was 1.5000% and one-month term SOFR as of June 30, 2022 was 1.6860%.

(2)

The Company reflected valuation adjustments on its assumed fixed rate debt to adjust it to fair market value on the dates of acquisition for the difference between the fair value and the assumed principal amount of debt. The difference is amortized into interest expense over the remaining terms of the debt.

(3)

This is the stated maturity for the Warehouse Facility, but it is subject to a 12-month extension option.

Schedule of Debt Maturities

The aggregate scheduled maturities, including amortizing principal payments, of total debt for the next five calendar years subsequent to June 30, 2022 are as follows (in thousands):

	*Total*
2022	$	927
2023		326,300
2024		8,617
2025		974,208	(1)
2026		125,052
Thereafter		343,361
Total	$	1,778,465

(1)

Assumes the Company exercises the 12-month extension option on the Warehouse Facility.

Deferred Financing Costs

The Company defers costs incurred in obtaining financing and amortizes the costs over the term of the related debt using the straight-line method, which approximates the effective interest method. Deferred financing costs, net of amortization, are recorded as a reduction from the related debt on the Company’s consolidated balance sheets. Upon repayment of, or in conjunction with, a material change in the terms of the underlying debt agreement, any unamortized costs are charged to loss on extinguishment of debt and any prepayment penalty resulting from the early repayment of the debt is recorded as interest expense in the period incurred. For the three months ended June 30, 2022 and 2021, amortization of deferred financing costs of approximately $1.8 million and $1.1 million, respectively, are included in interest expense on the consolidated statements of operations and comprehensive income (loss). For the six months ended June 30, 2022 and 2021, amortization of deferred financing costs of approximately $3.3 million and $1.6 million, respectively, are included in interest expense on the consolidated statements of operations and comprehensive income (loss).

Loss on Extinguishment of Debt

Loss on extinguishment of debt includes prepayment penalties and defeasance costs incurred on the early repayment of debt and other costs incurred in a debt extinguishment. Upon repayment of or in conjunction with a material change in the terms of the underlying debt agreement, any unamortized costs are charged to loss on extinguishment of debt. For the six months ended June 30, 2022 and 2021, the Company wrote-off deferred financing costs of approximately $1.0 million and $0.0 million, respectively, which is included in loss on extinguishment of debt on the consolidated statements of operations and comprehensive income (loss).

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8. Fair Value of Derivatives and Financial Instruments

Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy):

●

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.

●

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals.

●

Level 3 inputs are the unobservable inputs for the asset or liability, which are typically based on an entity’s own assumption, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on input from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

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The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The Company utilizes independent third parties to perform the allocation of value analysis for each property acquisition and to perform the market valuations on its derivative financial instruments and has established policies, as described above, processes and procedures intended to ensure that the valuation methodologies for investments and derivative financial instruments are fair and consistent as of the measurement date.

Derivative Financial Instruments and Hedging Activities

The Company manages interest rate risk primarily by managing the amount, sources, and duration of its debt funding and the use of derivative financial instruments. Specifically, the Company has entered into an interest rate cap and interest rate swaps to manage exposures that arise from changes in interest rates. The Company’s derivative financial instruments are used to manage the Company’s risk of increased cash outflows from the floating rate loans that may result from rising interest rates, in particular the reference rate for the loans, which include one-month LIBOR, daily SOFR and one-month term SOFR. In order to minimize counterparty credit risk, the Company has entered into and expects to enter in the future into hedging arrangements and intends to only transact with major financial institutions that have high credit ratings.

The Company utilizes an independent third party to perform the market valuations on its derivative financial instruments. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair value of the interest rate cap is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the cap. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. To comply with the provisions of ASC 820, the Company incorporates credit valuation adjustments to appropriately reflect both the Company’s own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of the Company’s derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with the Company’s derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. The Company has determined that the significance of the impact of the credit valuation adjustments made to its derivative contracts, which determination was based on the fair value of each individual contract, was not significant to the overall valuation. As a result, all of the Company’s derivatives held as of June 30, 2022 and December 31, 2021 were classified as Level 2 of the fair value hierarchy.

The changes in the fair value of derivative financial instruments that are designated as cash flow hedges are recorded in other comprehensive income (loss) and are subsequently reclassified into net income (loss) in the period that the hedged forecasted transaction affects earnings. Amounts reported in other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s floating rate debt. Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements but either do not meet the strict requirements to apply hedge accounting in accordance with FASB ASC 815, Derivatives and Hedging, or the Company has elected not to designate such derivatives as hedges. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in net income (loss) as interest expense.

In order to fix a portion of, and mitigate the risk associated with, the Company’s floating rate indebtedness, the Company, through the OP, has entered into 11 interest rate swap transactions with KeyBank and Mizuho Capital Markets LLC (“Mizuho”) with a combined notional amount of $870.0 million. The interest rate swaps the Company has entered into effectively replace the floating interest rate (one-month LIBOR or daily SOFR) with respect to those amounts with a weighted average fixed rate of 2.0217%. The Company has designated these interest rate swaps as cash flow hedges of interest rate risk.

As of June 30, 2022, the Company had the following outstanding interest rate swaps that were designated as cash flow hedges of interest rate risk (dollars in thousands):

Effective Date	Expiration Date	Counterparty	Index (1)	Notional		Fixed Rate
7/1/2019	7/1/2024	KeyBank	One-Month LIBOR	$	100,000		1.6290	%
9/1/2019	12/21/2025	KeyBank	One-Month LIBOR		100,000		1.4180	%
9/1/2019	12/21/2025	KeyBank	One-Month LIBOR		50,000		1.4190	%
2/3/2020	2/1/2025	KeyBank	One-Month LIBOR		50,000		1.2790	%
3/2/2020	3/3/2025	KeyBank	One-Month LIBOR		20,000		0.9140	%
				$	320,000		1.4309	%	(2)

Effective Date	Expiration Date	Counterparty	Index (1)	Notional		Fixed Rate
3/31/2022	11/1/2025	KeyBank	Daily SOFR	$	100,000		1.5110	%
3/31/2022	11/1/2025	KeyBank	Daily SOFR		100,000		1.9190	%
3/31/2022	11/1/2025	KeyBank	Daily SOFR		50,000		2.4410	%
6/1/2022	11/1/2025	Mizuho	Daily SOFR		100,000		2.6284	%
6/1/2022	11/1/2025	Mizuho	Daily SOFR		100,000		2.9413	%
6/1/2022	11/1/2025	Mizuho	Daily SOFR		100,000		2.7900	%
				$	550,000		2.3655	%	(2)

(1)

As of June 30, 2022, one-month LIBOR was 1.7867% and daily SOFR was 1.5000%.

(2)

Represents the weighted average fixed rate of the interest rate swaps for one-month LIBOR interest rate swaps and daily SOFR interest rate swaps, respectively, which have a combined weighted average fixed rate of 2.0217%.

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For the three months ended June 30, 2022 and 2021, on the consolidated statements of operations and comprehensive income (loss), the Company recognized approximately $8.7 million of unrealized gain and $0.1 million of unrealized loss, respectively, related to the change in fair value of the interest rate hedges. For the six months ended June 30, 2022 and 2021, on the consolidated statements of operations and comprehensive income (loss), the Company recognized approximately $25.5 million and $6.3 million of unrealized gain, respectively, related to the change in fair value of the interest rate hedges.

Interest rate caps involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. On April 13, 2022, the Company, through the OP, paid a premium of approximately $12.7 million and entered into an interest rate cap transaction with Goldman Sachs Bank USA (“Goldman”) with a notional amount of $300.0 million. The interest rate cap effectively caps one-month term SOFR on $300.0 million of floating rate debt. The interest rate cap expires on November 1, 2025.

As of June 30, 2022, the Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (dollars in thousands):

Derivative		*Notional*			*Hedged Floating Rate Debt*		*Index*		*Index as of June 30, 2022*				*Strike Rate*
Interest Rate Cap		$	300,000		Warehouse Facility		One-Month Term SOFR			1.6860	%			1.50	%

For the three and six months ended June 30, 2022, on the consolidated statements of operations and comprehensive income (loss), the Company recognized a $2.1 million reduction in interest expense, related to the interest rate cap.

The table below presents the fair value of the Company’s derivative financial instruments, which are presented in a net position on the consolidated balance sheets as of June 30, 2022 and December 31, 2021 (in thousands):

		*Asset Derivatives*				*Liability Derivatives*
	*Balance Sheet Location*	*June 30, 2022*		*December 31, 2021*		*June 30, 2022*		*December 31, 2021*
Derivatives designated as hedging instruments:
Interest rate swaps	Interest rate derivatives, at fair value	$	22,237	$	—	$	318	$	3,590

Derivatives not designated as hedging instruments:
Interest rate caps	Interest rate derivatives, at fair value		14,743		—		—		—
Total		$	36,980	$	—	$	318	$	3,590

Financial assets and liabilities for which the carrying values approximate their fair values include cash, restricted cash, accounts receivable, accounts payable, and security deposits. Generally, these assets and liabilities are short‑term in duration and are recorded at fair value on the consolidated balance sheets. The Company believes the carrying value of each outstanding loan approximates fair value based on the nature, term and interest rate of each loan.

9. Stockholders’ Equity

The Company issues Shares under the Private Offering as well as under the Company’s distribution reinvestment program (the “DRIP”). Shares issued under the DRIP are issued at a 3% discount to the then-current NAV per share. The following table details all Share issuances under the Private Offering and the DRIP for the six months ended June 30, 2022 (dollars in thousands):

Quarter Ended	*Shares issued*		*Proceeds*		*DRIP reinvestment*
March 31, 2022		2,907,334	$	149,369	$	6,495
June 30, 2022		682,149		32,079		7,046
Total		3,589,483	$	181,448	$	13,541

The following table provides detail on cash dividends declared on Shares as well as reinvested dividends as part of the Company’s DRIP for the six months ended June 30, 2022 (dollars in thousands):

Quarter Ended	*DRIP Shares Issued*		*DRIP Dividend*		*Cash Dividend*		*Cash Dividend Accrued on RSUs (1)*		*Total Dividend*
March 31, 2022		123,665	$	6,495	$	5,816	$	219	$	12,530
June 30, 2022		120,496		7,046		6,385		262		13,693
Total		244,161	$	13,541	$	12,201	$	481	$	26,223

(1)

Included in accounts payable and other accrued liabilities on the consolidated balance sheets.

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Long-Term Incentive Plan

The Company adopted the 2018 LTIP whereby the Board, or a committee thereof, may grant RSUs or 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). The 2018 LTIP provides for the Share Reserve and the Share Maximum for issuance of RSUs or PI Units. 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 ratably 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.

RSU Grants Under the 2018 LTIP

On December 10, 2019, a total of 73,700 RSUs were granted to certain employees of the Adviser and officers of the Company. On May 11, 2020, a total of 179,858 RSUs were granted to certain employees of the Adviser, officers of the Company and independent Board members. On February 15, 2021, a total of 191,506 RSUs were granted to certain employees of the Adviser, officers of the Company and independent Board members. On February 17, 2022, a total of 185,111 RSUs were granted to certain employees of the Adviser, officers of the Company and independent Board members. The RSUs granted to certain employees of the Adviser and officers of the Company on December 10, 2019 and May 11, 2020 vest over a four-year period. The RSUs granted to certain employees of the Adviser and officers of the Company on February 17, 2022, February 15, 2021 and May 11, 2020 vest 50% ratably over four years and 50% at the successful completion of an initial public offering. The RSUs granted to independent Board members fully vest on the first anniversary of the grant date. Any unvested RSU is forfeited, except in limited circumstances, as determined by the compensation committee of the Board, when the recipient is no longer employed by the Adviser. RSUs are valued at fair value (which is the NAV per share in effect) on the date of grant, with compensation expense recorded in accordance with the applicable vesting schedule that approximates a straight-line basis. Beginning on the date of grant, RSUs accrue dividends that are payable in cash on the vesting date. Once vested, the RSUs convert on a one-for-one basis into Shares.

As of June 30, 2022, the number of RSUs granted that are outstanding was as follows (dollars in thousands):

Dates	*Number of RSUs*				*Value (1)*
Outstanding December 31, 2021		377,704			$	12,405
Granted		185,111				10,022
Vested		(53,821	)	(2)		(1,845	)
Forfeited		—				—
Outstanding June 30, 2022		508,994			$	20,582

(1)

Value is based on the number of RSUs granted multiplied by the most recent NAV per share on the date of grant, which was $54.14 for the February 17, 2022 grant, $36.56 for the February 15, 2021 grant, $30.82 for the May 11, 2020 grant, and $29.85 for the December 10, 2019 grant.

(2)

Certain grantees elected to net the taxes owed upon vesting against the Shares issued resulting in 49,516 Shares being issued as shown on the consolidated statements of stockholders' equity.

The vesting schedule for the RSUs is as follows:

Vest Date	*RSUs Vesting*
December 10, 2022		18,425
February 15, 2023		22,717
February 17, 2023		30,412
May 11, 2023		21,335
December 10, 2023		18,426
February 15, 2024		22,717
February 17, 2024		22,100
May 11, 2024		21,335
February 14, 2025		22,717
February 17, 2025		22,100
February 17, 2026		22,100
Upon successful completion of IPO		264,610
		508,994

For the three months ended June 30, 2022 and 2021, the Company recognized approximately $0.9 million and $0.6 million, respectively, of non-cash compensation expense related to the RSUs, which is included in corporate general and administrative expenses on the consolidated statements of operations and comprehensive income (loss). For the six months ended June 30, 2022 and 2021, the Company recognized approximately $1.7 million and $1.1 million, respectively, of non-cash compensation expense related to the RSUs, which is included in corporate general and administrative expenses on the consolidated statements of operations and comprehensive income (loss).

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10. Redeemable Noncontrolling Interests

Redeemable Noncontrolling Interests in the OP

Other than PI Units and 6.50% Series A Cumulative Redeemable Preferred Units of the OP (“OP Preferred Units”), partnership interests in the OP are represented by OP Units. Net income (loss) is allocated pro rata to holders of OP Units and PI Units based upon net income (loss) attributable to the OP and the respective members’ OP Units and PI Units held during the period. Capital contributions, distributions, and profits and losses are allocated to PI Units and OP Units not held by the Company (the “noncontrolling interests”).

The following table presents the redeemable noncontrolling interests in the OP (in thousands):

	*Balances*
Redeemable noncontrolling interests in the OP, December 31, 2021	$	196,362
Net loss attributable to redeemable noncontrolling interests in the OP		(2,194	)
Contributions by redeemable noncontrolling interests in the OP		5,942
Distributions to redeemable noncontrolling interests in the OP		(4,548	)
Redemptions by redeemable noncontrolling interests in the OP		—
Equity-based compensation		1,397
Other comprehensive income attributable to redeemable noncontrolling interests in the OP		3,946
Adjustment to reflect redemption value of redeemable noncontrolling interests in the OP		33,808
Redeemable noncontrolling interests in the OP, June 30, 2022	$	234,713

The following table provides detail on distributions to noncontrolling interests in the OP for the six months ended June 30, 2022, including under the OP’s DRIP (dollars in thousands):

Quarter Ended	*DRIP OP Units Issued*		*OP DRIP Distribution*		*OP Cash Distribution*		*OP Distribution on PI Units*		*Total OP Distribution*
March 31, 2022		8,896	$	467	$	1,477	$	313	$	2,257
June 30, 2022		8,639		501		1,477		313		2,291
Total		17,535	$	968	$	2,954	$	626	$	4,548

As of June 30, 2022, the Company held 21,250,366 Class A OP Units, NREO held 2,691,330 Class B OP Units, NRESF held 88,268 Class C OP Units, GAF REIT held 139,296 Class C OP Units and the VineBrook Contributors and other Company insiders held 821,547 Class C OP Units.

On September 7, 2021, the general partner of the OP executed the OP LPA for the purposes of creating a board of directors of the OP (the “Partnership Board”) and subdividing and reclassifying the outstanding common partnership units of the OP into Class A, Class B and Class C OP Units. The OP LPA generally provides that the newly created 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 and removal of directors from the Partnership Board, and that the Class C OP Units have no voting power. The reclassification of the OP Units did not have a material effect on the economic interests of the holders of OP Units. In connection with the OP LPA, the OP Units held by the Company were reclassified into Class A OP Units, the OP Units held by NREO were reclassified into Class B OP Units and the remaining OP Units were reclassified into Class C OP Units. In addition, the OP LPA provides that holders of PI Units will receive Class C OP Units upon conversion of vested PI Units into OP Units.

The Partnership Board of the OP has exclusive authority to select, remove and replace the general partner of the OP and no other authority. The Partnership Board may replace the general partner of the OP at any time. Pursuant to the terms of the OP LPA, the Company appointed Brian Mitts as the sole initial director of the Partnership Board. The number of directors on the Partnership Board is initially one but may be increased by following the affirmative vote or consent of the majority of the voting power of the OP Units (the “Requisite Approval”). The election of directors to and removal of directors from the Partnership Board also requires the Requisite Approval.

Upon execution of the OP LPA, the Company reconsidered whether it was still the primary beneficiary of the OP. Upon reconsideration, the Company determined that it is the member of the related party group most closely associated with the OP and has the power to direct the activities that are most significant to the OP as any actions taken by the OP GP are subject to the authority and approval of the Company’s Board. Accordingly, the Company determined that it should continue to consolidate the OP.

PI Unit Grants Under the 2018 LTIP

In connection with the 2018 LTIP, PI Units have been issued to key personnel, senior management and executives of the Manager. On April 19, 2019, a total of 40,000 PI Units were granted; on November 21, 2019, a total of 80,399 PI Units were granted; on May 11, 2020, a total of 219,826 PI Units were granted; on November 30, 2020, a total of 11,764 PI Units were granted; and on May 31, 2021, a total of 246,169 PI Units were granted. The PI Units are a special class of partnership interests in the OP with certain restrictions, which are convertible into Class C OP Units, subject to satisfying vesting and other conditions. PI Unit holders are entitled to receive the same distributions as holders of our OP Units (only if we declare and pay such distributions). The PI Units granted in 2019 generally fully vest over a period of two to four years. The PI Units granted on May 11, 2020 and May 31, 2021 vest 50% ratably over four years and 50% at the successful completion of an initial public offering and the PI Units granted on November 30, 2020 vest 100% ratably over four years or alternatively 100% on the successful completion of an initial public offering. Once vested and converted into Class C OP Units in accordance with the OP LPA, the PI Units will then be fully recognized as Class C OP Units, which are subject to a one year lock up period before they can be converted to Shares. Any unvested PI Unit granted to an employee of the Manager is forfeited, except in limited circumstances, as determined by the compensation committee of the Board, when the recipient is no longer employed by the Manager. PI Units are valued at fair value on the date of grant, with compensation expense recorded in accordance with the applicable vesting schedule over the periods in which the restrictions lapse, that approximates a straight-line basis. We valued the PI Units at a per-unit value equivalent to the per-share offering price of our OP Units less a discount for lack of marketability and other discounts estimated by a third-party consultant. Beginning on the date of grant, PI Units accrue dividends that are payable in cash quarterly (if we declare and pay distributions to holders of our OP Units).

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As of June 30, 2022, the number of PI Units granted that are outstanding and unvested was as follows (dollars in thousands):

Dates	*Number of PI Units*			*Value (1)*
Outstanding December 31, 2021	498,590		$	16,965
Granted	—			—
Vested	(57,309	)		(1,964	)
Forfeited	(11,933	)		(434	)
Outstanding June 30, 2022	429,348		$	14,567

(1)

Value is based on the number of PI Units granted multiplied by the estimated per unit fair value on the date of grant, which was $27.88 for the April 19, 2019 grant, $29.12 for the November 21, 2019 grant, $30.16 for the May 11, 2020 grant, $33.45 for the November 30, 2020 grant and $38.29 for the May 31, 2021 grant.

The vesting schedule for the PI Units is as follows:

Vest Date	*PI Units Vesting*
November 1, 2022		7,200
November 21, 2022		18,425
November 30, 2022		1,470
March 30, 2023		29,831
May 11, 2023		27,478
November 1, 2023		7,200
November 21, 2023		18,425
November 30, 2023		1,470
March 30, 2024		29,831
May 11, 2024		27,478
November 30, 2024		1,470
March 30, 2025		29,831
Upon successful completion of IPO*		229,239
		429,348

*Upon successful completion of an IPO, an additional 11,764 PI Units will vest immediately instead of vesting ratably according to the schedule above on each of November 30, 2022, November 30, 2023 and November 30, 2024.

For the three months ended June 30, 2022 and 2021, the OP recognized approximately $0.7 million and $0.5 million, respectively, of non-cash compensation expense related to the PI Units, which is included in corporate general and administrative expenses on the Company’s consolidated statements of operations and comprehensive income (loss). For the six months ended June 30, 2022 and 2021, the OP recognized approximately $1.4 million and $0.9 million, respectively, of non-cash compensation expense related to the PI Units, which is included in corporate general and administrative expenses on the Company’s consolidated statements of operations and comprehensive income (loss).

The table below presents the consolidated Shares and OP Units outstanding held by the noncontrolling interests (“NCI”), as the OP Units held by the Company are eliminated in consolidation:

Period End	*Shares Outstanding*		*OP Units Held by NCI*		*Consolidated Shares and NCI OP Units Outstanding*
March 31, 2022		24,696,441		3,725,832		28,422,273
June 30, 2022		24,960,485		3,740,441		28,700,926

Redeemable Noncontrolling Interests in Consolidated VIEs

Partnership interests in the SFR OP are represented by SFR OP Units. Net income (loss) is allocated pro rata to holders of SFR OP Units and is based upon net income (loss) attributable to the SFR OP and the respective members’ SFR OP Units held during the period. Capital contributions, distributions, and profits and losses are allocated to SFR OP Units not held by the Company (the “noncontrolling interests in consolidated VIEs”). During the six months ended June 30, 2022, noncontrolling interests in consolidated VIEs contributed approximately $95.9 million and had a net loss attributable to noncontrolling interests in consolidated VIEs of approximately $1.2 million. As of June 30, 2022, an adjustment to reflect the redemption value of the noncontrolling interests in consolidated VIEs of approximately $1.2 million was recognized. As of June 30, 2022, the redeemable noncontrolling interests in consolidated VIEs was approximately $95.9 million on the consolidated balance sheets.

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11. Redeemable Series A Preferred Stock

The Company has issued 5,000,000 Preferred Shares as of June 30, 2022. The Preferred Shares have a redemption value of $25.00 per share and are mandatorily redeemable on October 7, 2027, subject to certain extensions. On March 8, 2022, the Company declared a dividend of $0.40625 per share to the holders of record of Preferred Shares as of March 25, 2022, which was paid on April 11, 2022. On June 14, 2022, the Company declared a dividend of $0.40625 per share to the holders of record of Preferred Shares as of June 24, 2022, which was paid on July 11, 2022.

The following table presents the redeemable Series A preferred stock (dollars in thousands):

	*Preferred Shares*		*Balances*
Redeemable Series A preferred stock, December 31, 2021		5,000,000	$	120,896
Issuance of Redeemable Series A preferred stock		—		—
Issuance costs related to Redeemable Series A preferred stock		—		—
Net income attributable to Redeemable Series A preferred stockholders		—		4,063
Dividends declared to Redeemable Series A preferred stockholders		—		(4,063	)
Accretion to redemption value		—		365
Redeemable Series A preferred stock, June 30, 2022		5,000,000	$	121,261

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12. Income Taxes

The Company has made the election and intends to be taxed as a REIT under Sections 856 through 860 of 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 in order for its distributed earnings to not be subject to corporate income tax. Additionally, the Company will be subject to a 4% nondeductible excise tax on the amount, if any, 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 six months ended June 30, 2022 or 2021.

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 regular 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 June 30, 2022, the Company believes it is in compliance with all applicable REIT requirements. The Company is still subject to state and local income taxes and to federal income and excise tax on its undistributed income, however those taxes are not material to the financial statements.

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 tax years subject to examination are 2021, 2020 and 2019.

The Company had no material unrecognized federal or state tax benefit or expense, accrued interest or penalties as of June 30, 2022. When applicable, the Company recognizes interest and/or penalties related to uncertain tax positions on its consolidated statements of operations and comprehensive income (loss).

13. Related Party Transactions

Advisory Fee

Pursuant to the Advisory Agreement, the Company will pay the Adviser, on a monthly basis in arrears, an advisory fee at an annualized rate of 0.75% of the gross asset value of the Company on a consolidated basis (excluding the value of the OP’s assets but inclusive of the Company’s pro rata share of the debt held at the OP and its SPEs). The Adviser will manage the Company’s business including, among other duties, advising the Board to issue distributions, preparing our quarterly and annual consolidated financial statements prepared under GAAP, development and maintenance of internal accounting controls, management and conduct of maintaining our REIT status, calculation of our NAV and recommending the appropriate NAV to be set by the Board, processing of sales of Shares through the Private Offering, reporting to holders of Shares, our tax filings, and other responsibilities customary for an external advisor to a business similar to ours. With certain specified exceptions, the advisory fee together with reimbursement of operating and offering expenses may not exceed 1.5% of average total assets of the Company and the OP, as determined in accordance with GAAP on a consolidated basis, at the end of each month (or partial month) (i) for which any advisory fee is calculated or (ii) during the year for which any expense reimbursement is calculated.

For the three months ended June 30, 2022 and 2021, the Company incurred advisory fees of approximately $3.8 million and $2.0 million, respectively, which is included in advisory fees on the consolidated statements of operations and comprehensive income (loss). For the six months ended June 30, 2022 and 2021, the Company incurred advisory fees of approximately $6.9 million and $3.3 million, respectively, which is included in advisory fees on the consolidated statements of operations and comprehensive income (loss).

Management Fee

The equity holders of the Manager are holders of noncontrolling interests in the OP and comprise a portion of the VineBrook Contributors. Through this noncontrolling ownership, the Manager is deemed to be a related party. Pursuant to the Management Agreements, the OP will pay the Manager (i) an acquisition fee equal to 1.0% of the purchase price paid for any new property acquired during the month, (ii) a construction fee monthly in arrears that shall not exceed the greater of 10% of construction costs or $1,000, whichever is higher, in connection with the repair, renovation, improvement or development of any newly acquired property, and (iii) a property management fee monthly in arrears equal to a percentage of collected rental revenues for all properties during the month as follows:

●

8.0% of collected rental revenue up to and including $45 million on an annualized basis;

●

7.0% of the incremental collected rental revenue above $45 million but below and including $65 million on an annualized basis;

●

6.0% of the incremental collected rental revenue above $65 million but below and including $85 million on an annualized basis; and

●

5.0% of the incremental collected rental revenue above $85 million on an annualized basis.

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Under the Management Agreements and the Side Letter, the aggregate fees that the Manager can earn in any fiscal year are capped such that the Manager’s EBITDA (as defined in the Management Agreements) derived from these fees may not exceed the greater of $1.0 million or 0.5% of the combined equity value of the Company and the OP on a consolidated basis, calculated on the first day of each fiscal year based on the aggregate NAV of the outstanding Shares and OP Units held other than by the Company on the last business day of the prior fiscal year (the “Manager Cap”). The aggregate fees up to the Manager Cap are payable (1) in cash in an amount equal to the tax obligations of the Manager’s equity holders resulting from the aggregate management fees earned in such fiscal year up to a maximum rate of 25% (the “Manager Cash Cap”) and (2) with respect to the remaining portion of the aggregate fees, in OP Units, at a price per OP Unit equal to the Cash Amount (as defined in the OP LPA). The aggregate fees paid in cash that exceed the Manager Cash Cap are rebated back to the OP. No Manager Cash Cap rebate was recorded for the three and six months ended June 30, 2022 and 2021.

The Manager is responsible for the day-to-day management of the properties, acquisition of new properties, disposition of existing properties (with acquisition and disposition decisions made under the approval of the investment committee and the Board), leasing the properties, managing tenant issues and requests, collecting rents, paying operating expenses, managing maintenance issues, accounting for each property using GAAP, and other responsibilities customary for the management of SFR properties.

Property management fees are included in property management fees on the consolidated statements of operations and comprehensive income (loss) and acquisition and construction fees are capitalized into each home and are included in buildings and improvements on the consolidated balance sheet and are depreciated over the useful life of each property.

The following table is a summary of fees that the OP incurred to the Manager and its affiliates, as well as reimbursements paid to the Manager and its affiliates for various operating expenses the Manager paid on the OP’s behalf, of which approximately $4.3 million and $2.7 million is due to the Manager and included in accounts payable and other accrued liabilities on the consolidated balance sheets as of June 30, 2022 and 2021, respectively, under the terms of Management Agreements and Side Letter, for the three and six months ended June 30, 2022 and 2021 (dollars in thousands):

		*For the Three Months Ended June 30,*				*For the Six Months Ended June 30,*
	*Location on Financial Statements*	*2022*		*2021*		*2022*		*2021*
Fees Incurred
Property management fees	Statement of Operations	$	3,331	$	2,249	$	6,442	$	4,054
Acquisition fees	Balance Sheet		1,015		972		6,055		6,946
Construction supervision fees	Balance Sheet		4,446		1,692		7,620		3,014

Reimbursements
Payroll and benefits	Balance Sheet and Statement of Operations		6,573		3,709		12,468		6,788
Other reimbursements	Balance Sheet and Statement of Operations		457		182		767		337
*Totals*		$	15,822	$	8,804	$	33,352	$	21,139

Internalization of the Adviser or the Manager

The Company may acquire all of the outstanding equity interests of the Adviser, the Manager or both (an “Internalization”) under certain provisions (a “Purchase Provision”) of the Advisory Agreement or the Side Letter to effect an Internalization upon the payment of a certain fee (an “Internalization Fee”). If the Company determines to acquire the equity interests of the Adviser, the applicable Purchase Provision of the Advisory Agreement provides that the Adviser must first agree to such acquisition and that the Company will pay the Adviser an Internalization Fee equal to three times the total of the prior 12 months’ advisory fee, payable only in capital stock of the Company. If the Company determines to acquire the equity interests of Manager, the applicable Purchase Provision of the Side Letter provides the Company has a right to do so and that the Company will pay the Manager an Internalization Fee equal to $6.5 million plus 50% of the subtraction of $6.5 million from three times the total of the prior 12 months’ property management fee, payable in cash, Shares or OP Units. The OP may also acquire the equity interests of the Manager on the same terms under the applicable Purchase Provision. In accordance with the Side Letter, on June 28, 2022, the OP notified the Manager that it elected to exercise its Purchase Provision of the Manager. As of June 30, 2022, the Internalization of the Manager has not closed. Certain additional conditions and limitations apply to the Internalizations, including but not limited to caps on the Internalization Fees. The Company expects any equity issued in satisfaction of an Internalization Fee to be valued at the NAV per share in effect on the date the Internalization is consummated.

Termination Fees Payable to the Adviser or Manager

If the Advisory Agreement or any one of the Management Agreements is terminated without cause by the Company or the SPE, as applicable, or is otherwise terminated under certain conditions, the Adviser or the Manager, as applicable, will be entitled to a termination fee (a “Termination Fee”) in the amount of three times the prior 12 months’ advisory fee, in the case of a termination of the Advisory Agreement, or three times the prior 12 months’ property management fee, in the case of the applicable Management Agreement. In addition to termination by the Company without cause, the Adviser will be entitled to the Termination Fee if the Adviser terminates the Advisory Agreement without cause or terminates the agreement due to the occurrence of certain specified breaches of the Advisory Agreement by the Company. The Advisory Agreement may be terminated without cause by the Company or the Adviser with 180 days’ notice prior to the expiration of the then-current term. In addition to termination by the SPE without cause, the Manager will be entitled to the Termination Fee if the SPE sells or otherwise disposes of all or substantially all of the properties subject to the applicable Management Agreement. The Management Agreements may be terminated by the SPE with 90 days’ notice without cause. Termination Fees are payable in cash.

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Advance Acquisition and Construction Fee Advances Paid to the Manager

Pursuant to the Side Letter, the Manager may request from the OP from time-to-time an advance on acquisition and construction fees (the “Fee Advances”) to fund the performance of its obligations under the Management Agreements. Each Fee Advance is repaid from future acquisition and construction fees earned by and owed to the Manager. Fee Advances are included in the line item due from Manager on the consolidated balance sheets. As of June 30, 2022 and December 31, 2021, the Company recorded no receivable for Fee Advances.

Backstop Loans to the Manager

Pursuant to the Side Letter, in the event the Manager does not have sufficient cash flow from operations to meet its budgeted obligations under the Management Agreements, the Manager may from time to time request from the Company a temporary loan (the “Backstop Loan”) to satisfy the shortfall. Backstop Loans are interest free, may be prepaid at any time and may not exceed a principal amount that is in the aggregate equal to the lesser of the Internalization Fee or Termination Fee under the applicable Management Agreement. Unless otherwise repaid, each Backstop Loan is payable upon termination of the applicable Management Agreement. Backstop Loans are included in the line item due from Manager on the consolidated balance sheets. As of June 30, 2022 and December 31, 2021, the Company recorded a receivable for Backstop Loans made to the manager of approximately $0.7 million and approximately $0.7 million, respectively.

Dealer Manager Fees

Investors may be charged a dealer manager fee of between 0.50% and 3.00% of gross investor equity by the Dealer Manager for sales of Shares pursuant to the Private Offering, subject to certain breakpoints and various terms of the Dealer Manager Agreements. At the sole discretion of the Dealer Manager, the dealer manager fee may be partially or fully waived. The dealer manager fee is paid to an affiliate of the Adviser.

Organization and Private Offering Expenses

Offering and organizational expenses (“O&O Expenses”) may be incurred in connection with sales in the Private Offering at the discretion of the Company and are borne by investors through a fee of up to 0.50% of gross investor equity for sales through Raymond James and up to 1.00% of gross investor equity for other sales. O&O Expenses are intended to reimburse the Company, Adviser and Placement Agents for the costs of maintaining the Private Offering and selling costs incurred in raising equity under the Private Offering. Payments for bona fide expenses and reimbursements are O&O Expenses which are recorded as a reduction to equity.

See below for detail related to the O&O Expenses as of June 30, 2022 (dollars in thousands):

	*Amount*
Gross investor equity raised subject to O&O	$	990,671

O&O collected and available for reimbursements	$	6,866
O&O Expenses reimbursed		(6,864	)
O&O available for future reimbursements	$	2

NexBank

The Company and the OP maintain bank accounts with an affiliate of the Adviser, NexBank N.A. (“NexBank”). NexBank charges no recurring maintenance fees on the accounts.

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NexPoint Homes Transactions

In connection with the Company’s consolidated investment in NexPoint Homes, the Company consolidated non-controlling interests in NexPoint Homes that were contributed by affiliates of the Adviser. As of June 30, 2022, these affiliates had contributed approximately $100.8 million. Additionally, the Company consolidated five SFR OP convertible notes that are loans from affiliates of the Adviser to the SFR OP that bear interest at 7.50% and mature on June 30, 2027 (the “SFR OP Convertible Notes”). As of June 30, 2022, the total principal outstanding on the SFR OP Convertible Notes was approximately $100.1 million which is included in notes payable on the consolidated balance sheets.

The Company consolidates an approximately $4.8 million loan from the SFR OP to HomeSource Operations, LLC (the “HomeSource Note”). The HomeSource Note bears interest at daily SOFR plus 2.00% and matures on February 1, 2027. In connection with the HomeSource Note, the SFR OP received a 9.99% non-voting interest in the HomeSource Operations LLC (the “HomeSource Investment”). The HomeSource Note and the HomeSource Investment are included in prepaid and other assets on the consolidated balance sheet.

On June 8, 2022, NexPoint Homes entered into an advisory agreement (the “NexPoint Homes Advisory Agreement”) with NexPoint Real Estate Advisors XI, LP (the “NexPoint Homes Adviser”), an affiliate of the Adviser. Under the terms of the NexPoint Homes Advisory Agreement, the NexPoint Homes Adviser manages the day-to-day affairs of NexPoint Homes for a fee equal to 0.75% of the consolidated enterprise value of NexPoint Homes. No fees were earned by the NexPoint Homes Adviser in connection with the NexPoint Homes Advisory Agreement during the six months ended June 30, 2022.

The NexPoint Homes portfolio is generally managed by HomeSource Operations, LLC, a Delaware limited liability company (the “NexPoint Homes Manager”), pursuant to the terms of a management agreement, dated June 8, 2022 (the “NexPoint Homes Management Agreement”), among the NexPoint Homes Manager and the SFR OP. The NexPoint Homes Manager is responsible for the day-to-day management of the NexPoint Homes portfolio, paying operating expenses, managing maintenance issues, accounting for each property using GAAP, overseeing third-party property managers and other responsibilities customary for the management of SFR properties. The NexPoint Homes Manager is entitled to an acquisition fee, a construction fee and an asset management fee. The acquisition fee is paid at closing of homes and the construction fee and asset management fee are paid monthly in arrears. No fees were earned by the NexPoint Homes Manager in connection with the NexPoint Homes Management Agreement during the six months ended June 30, 2022.

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14. Commitments and Contingencies

Commitments

In the normal course of business, the Company enters into various construction related purchase commitments with parties that provide these goods and services. In the event the Company were to terminate construction services prior to the completion of projects, the Company could potentially be committed to satisfy outstanding or uncompleted purchase orders with such parties. As of June 30, 2022, management does not anticipate any material deviations from schedule or budget related to rehabilitation projects currently in process.

Contingencies

In the normal course of business, the Company is subject to claims, lawsuits, and legal proceedings. While it is not possible to ascertain the ultimate outcome of all such matters, management believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the consolidated balance sheets or consolidated statements of operations and comprehensive income (loss) of the Company. The Company is not involved in any material litigation nor, to management’s knowledge, is any material litigation currently threatened against the Company or its properties or subsidiaries.

The Company is not aware of any environmental liability with respect to the properties it owns that could have a material adverse effect on the Company’s business, assets, or results of operations. However, there can be no assurance that such a material environmental liability does not exist. The existence of any such material environmental liability could have an adverse effect on the Company’s results of operations and cash flows.

An entity purchased by the OP as a part of the Formation Transaction, the Huber Transaction Sub, LLC (“Huber”), had potential liability exposure to a legacy environmental issue related to a 1988 petroleum release from an underground storage tank located on a property subsequently not purchased by Huber. The owner of the property prior to Huber has assumed the defense of alleged environmental violations and is proceeding with the required regulatory investigation and remediation of the underground storage tank release clean up. Huber received an indemnification, and the Company and the OP in turn received an indemnification, which was evidenced by approximately $2.6 million of proceeds in an escrow account (the “Indemnification Escrow”) that is for the benefit of the Company and the OP in the event the prior owner fails to perform their obligations in regard to any required remediation of the issue. On January 27, 2021, the Indemnification Escrow was released.

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15. Segment Information

Reportable Segments

Following the formation of NexPoint Homes, the Company has two reportable segments. For the three and six months ended June 30, 2022, the majority of the Company’s operations are included within the Company’s primary reportable segment, VineBrook, as the NexPoint Homes reportable segment was recently formed on June 8, 2022. For the three and six months ended June 30, 2021, the Company had one reportable segment, VineBrook. All corporate related costs are included in the VineBrook segment to align with how financial information is presented to the chief operating decision maker. The following presents select operational results for the reportable segments (in thousands):

	*For the Three Months Ended June 30,*
	*2022*							*2021*
	*Revenues*		*Expenses*		*Net loss*			*Revenues*		*Expenses*		*Net loss*
VineBrook	$	61,058	$	69,749	$	(8,644	)	$	39,821	$	41,612	$	(2,007	)
NexPoint Homes		1,246		4,240		(2,994	)		—		—		—
Total Company	$	62,304	$	73,989	$	(11,638	)	$	39,821	$	41,612	$	(2,007	)

	*For the Six Months Ended June 30,*
	*2022*							*2021*
	*Revenues*		*Expenses*		*Net loss*			*Revenues*		*Expenses*		*Net loss*
VineBrook	$	113,375	$	124,786	$	(11,357	)	$	70,449	$	72,297	$	(2,148	)
NexPoint Homes		1,246		4,240		(2,994	)		—		—		—
Total Company	$	114,621	$	129,026	$	(14,351	)	$	70,449	$	72,297	$	(2,148	)

The following presents select balance sheet data for the reportable segments (in thousands):

	*As of June 30, 2022*									*As of December 31, 2021*
	*VineBrook*			*NexPoint Homes*			*Total Company*			*VineBrook*			*NexPoint Homes*		*Total Company*
Assets
Gross operating real estate investments	$	2,439,510		$	482,277		$	2,921,787		$	1,726,948		$	—	$	1,726,948
Accumulated depreciation and amortization		(115,208	)		(794	)		(116,002	)		(76,789	)		—		(76,789	)
Net operating real estate investments		2,324,302			481,483			2,805,785			1,650,159			—		1,650,159
Real estate held for sale, net		2,166			—			2,166			81			—		81
Net real estate investments		2,326,468			481,483			2,807,951			1,650,240			—		1,650,240
Other assets		154,435			56,764			211,199			108,085			—		108,085
Total assets	$	2,480,903		$	538,247		$	3,019,150		$	1,758,325		$	—	$	1,758,325

Liabilities
Debt payable, net	$	1,445,007		$	321,158		$	1,766,165		$	768,545		$	—	$	768,545
Other liabilities		101,331			8,237			109,568			89,574			—		89,574
Total liabilities	$	1,546,338		$	329,395		$	1,875,733		$	858,119		$	—	$	858,119

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16. Subsequent Events

The Company evaluated subsequent events through the date the consolidated financial statements were issued, to determine if any significant events occurred subsequent to the balance sheet date that would have a material impact on these consolidated financial statements and determined the following events were material:

CoreVest Note Payoff

On July 11, 2022, the OP repaid the full balance of the CoreVest Note, which was approximately $2.3 million as of that date. This extinguished the CoreVest Note.

Acquisitions

Subsequent to June 30, 2022, the Company acquired 555 homes for a purchase price of approximately $71.2 million.

Entry into Purchase Agreements

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”) for approximately $466.5 million. 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”) for approximately $353.5 million. The Company expects to close the acquisition of the Tusk Portfolio and Siete Portfolio in the fourth quarter of 2022. The Company intends to use cash on hand, together with debt financing and assumption of certain of the sellers’ debt, to fund the purchase price of the Tusk Portfolio and the Siete Portfolio.

Third Quarter 2022 Dividends

On July 11, 2022, the Company approved a common stock dividend of $0.1767 per Share for shareholders of record as of July 15, 2022 that will be paid on September 30, 2022. On August 2, 2022, the Company approved a common stock dividend of $0.1767 per share for shareholders of record as of August 15, 2022 that will be paid on September 30, 2022.

NAV Determination

In accordance with the Valuation Methodology, on July 26, 2022, the Company determined that its NAV per share calculated on a fully diluted basis was $62.75 as of June 30, 2022. In accordance with provisions in the OP LPA, the value of the OP Units per OP Unit was also increased to $62.75. Shares and OP Units issued under the respective DRIPs will be issued a 3% discount to the NAV per share in effect.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion and analysis of our financial condition and our historical results of operations. The following should be read in conjunction with our financial statements and accompanying notes included herein and with our annual report on Form 10-K (our “Annual Report”), filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2022. 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 Form 10-Q. See “Cautionary Note Regarding Forward-Looking Statements” in this report and the information under the heading “Risk Factors” in Part I, Item IA, “Risk Factors” of our 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

The Company is an owner and operator of SFR homes for lease. The Company has two reportable segments, VineBrook and NexPoint Homes. VineBrook represents the Company’s primary reportable segment and represents a significant majority of the Company’s consolidated portfolio (the “VineBrook Portfolio”). The NexPoint Homes reportable segment represents a minority of the Company’s consolidated portfolio (the “NexPoint Homes Portfolio”) and operations.

As of June 30, 2022, our VineBrook Portfolio consisted of 21,943 SFR homes primarily located in the midwestern, heartland and southeastern United States. As of June 30, 2022, the VineBrook Portfolio had occupancy of approximately 82.5% with a weighted average monthly effective rent of $1,102 per occupied home. As of June 30, 2022, the VineBrook Portfolio had a stabilized occupancy of approximately 95.1% with a weighted average monthly stabilized effective rent of $1,128 per occupied home and 52.1% of homes in our VineBrook Portfolio were excluded from being stabilized either because the homes were in rehabilitation or were purchased with tenants in place. Substantially all of the Company’s business is conducted through the OP, as the Company owns its homes indirectly through the OP. VineBrook Homes OP GP, LLC, is the OP GP. As of June 30, 2022, there were 24,990,807 OP Units outstanding, of which 21,250,366 Class A OP Units, or 85.0% of the OP Units outstanding, were owned by the Company. Please see the notes to the financial statements for the breakdown of the non-controlling ownership of our OP.

As of December 31, 2021, our VineBrook Portfolio consisted of 16,891 SFR homes primarily located in the midwestern, heartland and southeastern United States. As of December 31, 2021, the VineBrook Portfolio had occupancy of approximately 81.9% with a weighted average monthly effective rent of $1,067 per occupied home. As of December 31, 2021, the VineBrook Portfolio had a stabilized occupancy of approximately 95.2% with a weighted average monthly effective rent of $1,074 per occupied stabilized home and 49.7% of homes in our VineBrook Portfolio were excluded from being stabilized either because the homes were in rehabilitation or were purchased with tenants in place. As of December 31, 2021, there were 22,300,100 OP Units outstanding, of which 18,673,164, or 83.7%, were owned by the Company.

We are primarily focused on acquiring, renovating, leasing, maintaining and otherwise managing SFR home investments primarily located in large to medium size cities and suburbs located in the midwestern, heartland and southeastern United States. We intend to employ targeted management and a value-add program at a majority of our homes in an attempt to improve rental rates and the net operating income (“NOI”) at our homes, maximize cash flow, provide quarterly cash distributions and achieve long-term capital appreciation for our stockholders. We are externally managed by the Adviser through the Advisory Agreement, which was renewed on November 1, 2021 and will automatically renew on the anniversary of the renewal date for one-year terms thereafter, unless otherwise terminated.

We 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 the Initial Portfolio of approximately 4,129 SFR assets located in Ohio, Kentucky and Indiana for a total purchase price of approximately $330.2 million, including closing and financing costs of approximately $6.0 million. On November 1, 2018, the Company accepted subscriptions for 1,097,367 Shares for gross proceeds of approximately $27.4 million in connection with the Formation Transaction. The proceeds from the issuance of such 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 the Initial Mortgage.

On August 28, 2018, the Company commenced the offering of 40,000,000 Shares through the Private Offering under Regulation D of the Securities Act (and various state securities law provisions) for a maximum of $1.0 billion of its Shares. The Private Offering expires on November 1, 2023 and will close upon the completion of certain share issuances expected to be completed by September 30, 2022. The initial offering price for Shares sold through the Private Offering was $25.00 per share. The Company sold Shares in periodic closings at a purchase price generally equal to the NAV per share as determined using the Valuation Methodology and as recommended by the Adviser and approved by the Pricing Committee, plus applicable fees and commissions. The NAV per share is calculated on a fully diluted basis. For sales through Raymond James, the purchaser subscribed for a gross amount based on NAV per share and separately paid the applicable fees upfront from the purchaser’s account with Raymond James. For sales through a broker-dealer other than Raymond James, the purchaser subscribed for a gross amount based on a public offering price (“POP”), which includes the applicable upfront fees and commissions. NAV may differ from the values of our real estate assets as calculated in accordance with GAAP.

On October 15, 2021, a lawsuit (the “Bankruptcy Trust Lawsuit”) was filed by a trust formed in connection with the Highland bankruptcy (the “Highland Bankruptcy”) in the United States Bankruptcy Court for the Northern District of Texas (the “Bankruptcy Court”). The Bankruptcy Trust Lawsuit makes claims against a number of entities, including NexPoint Advisors, L.P. (“NexPoint”), the parent of our Adviser, and James Dondero, a director and former officer of the Company. The Bankruptcy Trust Lawsuit does not include claims related to our business or our assets or operations. NexPoint and Mr. Dondero have informed us that they believe the Bankruptcy Trust Lawsuit has no merit and they intend to vigorously defend against the claims. We do not expect that the Bankruptcy Trust Lawsuit will have a material effect on our business, results of operations or financial condition.

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Our VineBrook Portfolio

Since our formation, we have significantly grown our VineBrook Portfolio, which only includes homes in the VineBrook reportable segment. When the Company began operations on November 1, 2018, the Initial Portfolio consisted of 4,129 homes located in Ohio, Kentucky and Indiana. As of June 30, 2022 and 2021, the VineBrook Portfolio consisted of 21,943 and 14,697 homes, respectively, in 18 and 16 states, respectively. As of June 30, 2022 and 2021, the VineBrook Portfolio had an occupancy of 82.5% and 85.6%, respectively, and a weighted average monthly effective rent of $1,102 and $1,044, respectively, per occupied home. As of June 30, 2022 and 2021, the occupancy of stabilized homes in our VineBrook Portfolio was 95.1% and 96.6%, respectively, and the weighted average monthly effective rent of occupied stabilized homes was $1,128 and $1,020, respectively. As of June 30, 2022 and 2021, 52.1% and 52.3%, respectively, of homes in our VineBrook Portfolio were excluded from being stabilized either because the homes were in rehabilitation or were purchased with tenants in place. The table below provides summary information regarding our VineBrook Portfolio as of June 30, 2022.

Market	State	# of Homes		Portfolio Occupancy			Average Effective Rent		# of Stabilized Homes		Stabilized Occupancy			Stabilized Average Monthly Rent
Cincinnati	OH, KY		3,164		91.2	%	$	1,167		2,254		96.5	%	$	1,187
Dayton	OH		2,839		89.0	%		1,066		2,345		96.5	%		1,058
Columbus	OH		1,553		91.6	%		1,145		1,314		95.4	%		1,147
St. Louis	MO		2,199		76.1	%		1,032		728		91.2	%		1,041
Indianapolis	IN		1,382		87.6	%		1,117		724		91.2	%		1,153
Birmingham	AL		927		85.1	%		1,140		234		89.3	%		1,174
Columbia	SC		843		84.7	%		1,204		216		94.0	%		1,271
Kansas City	MO, KS		1,004		89.3	%		1,112		504		96.6	%		1,112
Jackson	MS		1,073		58.6	%		1,068		333		96.7	%		1,167
Memphis	TN, MS		1,691		75.3	%		953		510		95.1	%		978
Augusta	GA, SC		751		73.9	%		1,003		168		97.6	%		1,190
Milwaukee	WI		931		72.7	%		1,100		280		90.7	%		1,228
Atlanta	GA		748		89.4	%		1,241		8		100.0	%		1,657
Pittsburgh	PA		457		57.8	%		1,007		132		96.2	%		1,109
Pensacola	FL		300		95.3	%		1,292		32		84.4	%		1,392
Greenville	SC		340		87.6	%		1,188		110		98.2	%		1,356
Little Rock	AR		374		45.5	%		943		141		89.4	%		982
Huntsville	AL		228		74.6	%		1,172		71		94.4	%		1,271
Raeford	NC		250		97.6	%		1,001		27		100.0	%		1,102
Portales	NM		150		97.3	%		1,001		18		100.0	%		1,087
Omaha	NE, IA		271		77.5	%		1,168		149		95.3	%		1,184
Triad	NC		210		82.9	%		1,129		94		94.7	%		1,213
Montgomery	AL		230		79.6	%		1,068		125		96.8	%		1,134
Sub-Total/Average			21,915		82.5	%	$	1,102		10,517		95.1	%	$	1,128
Held for Sale			28		n/a			n/a		n/a		n/a			n/a
Total/Average			21,943		82.5	%	$	1,102		10,517		95.1	%	$	1,128

As of December 31, 2021, the Company, through the OP’s SPEs, indirectly owned an interest in 16,891 homes in 16 states. As of December 31, 2021, the Portfolio had occupancy of 81.9%, and a weighted average monthly effective rent of $1,067 per occupied home. As of December 31, 2021, the occupancy of stabilized homes in our Portfolio was 95.2%, and the weighted average monthly effective rent of stabilized occupied homes was $1,074. As of December 31, 2021, 49.7% of homes in our Portfolio were excluded from being stabilized either because the homes were in rehabilitation or were purchased with tenants in place. The table below provides summary information regarding our Portfolio as of December 31, 2021:

Market	State	# of Homes		Portfolio Occupancy			Average Effective Rent		# of Stabilized Homes		Stabilized Occupancy			Stabilized Average Monthly Rent
Cincinnati	OH, KY		3,031		90.7	%	$	1,117		2,083		96.8	%	$	1,127
Dayton	OH		2,742		90.1	%		1,019		2,244		97.3	%		1,007
Columbus	OH		1,499		93.1	%		1,108		1,203		97.4	%		1,115
St. Louis	MO		1,696		79.9	%		1,010		596		92.1	%		991
Indianapolis	IN		1,308		83.0	%		1,081		571		88.6	%		1,104
Birmingham	AL		814		79.0	%		1,128		92		85.9	%		1,244
Columbia	SC		784		82.7	%		1,195		107		89.7	%		1,259
Kansas City	MO, KS		742		77.4	%		1,071		345		91.0	%		1,030
Jackson	MS		789		57.8	%		1,046		185		93.0	%		1,160
Memphis	TN, MS		626		84.0	%		911		385		93.0	%		927
Augusta	GA, SC		555		73.5	%		973		69		94.2	%		1,130
Milwaukee	WI		655		72.1	%		1,073		212		90.6	%		1,195
Pittsburgh	PA		401		59.1	%		951		86		97.7	%		1,071
Greenville	SC		253		77.5	%		1,177		39		92.3	%		1,346
Little Rock	AR		286		44.4	%		900		85		97.6	%		930
Huntsville	AL		180		75.0	%		1,146		34		79.4	%		1,261
Omaha	NE, IA		206		60.2	%		1,167		74		100.0	%		1,169
Triad	NC		161		83.2	%		1,083		46		97.8	%		1,152
Montgomery	AL		161		56.5	%		1,033		35		94.3	%		1,146
Sub-Total/Average			16,889		81.9	%	$	1,067		8,491		95.2	%	$	1,074
Held for Sale			2		n/a			n/a		n/a		n/a			n/a
Total/Average			16,891		81.9	%	$	1,067		8,491		95.2	%	$	1,074

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NexPoint Homes Portfolio

NexPoint Homes is an owner and operator of SFR homes for lease. As of June 30, 2022, the NexPoint Homes portfolio consisted of 1,731 SFR homes primarily located in the midwestern and southeastern United States. As of June 30, 2022, NexPoint Homes had occupancy of approximately 80.1% with a weighted average monthly effective rent of $1,448 per occupied home. As of June 30, 2022, the stabilized NexPoint Homes Portfolio was 90.0% occupied. NexPoint Homes’ activities include acquiring, renovating, developing, leasing and operating SFR homes as rental properties. See Note 5, NexPoint Homes Investment, for additional details on the formation of NexPoint Homes.

The table below provides summary information regarding the NexPoint Homes portfolio as of June 30, 2022.

Market	State	# of Homes		Portfolio Occupancy			Average Effective Rent
Austin	TX		20		95.0	%	$	1,964
Birmingham	AL		82		67.1	%		1,317
Charlotte	NC		20		80.0	%		1,671
Fayetteville/Bentonville	AR		436		82.3	%		1,451
Atlanta	GA		164		63.4	%		1,852
Greensboro/Winston	NC		50		56.0	%		1,650
Houston	TX		20		50.0	%		2,045
Huntsville	AL		18		61.1	%		1,596
Jacksonville	FL		12		41.7	%		1,797
Little Rock	AR		329		97.9	%		1,273
Oklahoma City	OK		444		80.4	%		1,458
Orlando	FL		1		100.0	%		1,975
San Antonio	TX		10		60.0	%		1,877
Tampa	FL		14		14.3	%		1,960
Tulsa	OK		95		78.9	%		1,232
Tuscaloosa	AL		16		100.0	%		1,445
Sub-Total/Average			1,731		80.1	%	$	1,448
Held for Sale			—		n/a			n/a
Total/Average			1,731		80.1	%	$	1,448

The following table sets forth a summary of operating results for the NexPoint Homes reportable segment for the three and six months ended June 30, 2022 (in thousands):

	For the Three Months Ended June 30, 2022			For the Six Months Ended June 30, 2022
Total revenues	$	1,246		$	1,246
Total expenses		4,240			4,240
Net loss	$	(2,994	)	$	(2,994	)

The NexPoint Homes reportable segment began operations on June 8, 2022 and currently does not contribute significantly to the Company’s consolidated operations. The Company anticipates revenues from the NexPoint Homes reportable segment to increase as more homes become stabilized and the reportable segment’s operations begin to scale. As NexPoint Homes continues to raise additional capital, the Company’s direct ownership interest in NexPoint Homes will decrease which may eventually result in deconsolidation of NexPoint Homes. 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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Components of Revenues and Expenses

The following is a description of the components of our revenues and expenses.

Revenues

Rental Income. Our revenues are derived primarily from rental revenue, net of any concessions and uncollectible amounts, collected from residents of our SFR homes under lease agreements which typically have a term of one year. 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, move-out fees, and other miscellaneous fees charged to tenants.

Expenses

Property operating expenses. Property operating expenses include property maintenance costs, turn costs (costs incurred in making a home ready for the next resident after the prior resident vacates the home), leasing costs and the associated salary and employee benefit costs, utilities, vehicle leases and HOA fees. Certain property operating costs are capitalized in accordance with our capitalization policy. Certain turn costs are capitalized to buildings and improvements if they improve the condition of the home or return it to its original condition and exceed $1,500 in cost. Upon being occupied, expenditures up to $1,500 for ordinary repairs and maintenance thereafter are expensed as incurred, and we capitalize expenditures that improve the condition of the home in excess of $1,500.

Real estate taxes and insurance. Real estate taxes include the property taxes assessed by local and state authorities depending on the location of each home. Insurance includes the cost of property, general liability, and other needed insurance for each property. Certain real estate taxes and insurance costs are capitalized in accordance with our capitalization policy.

Property management fees. Property management fees include fees paid to the Manager for managing each property, presented net of fee rebates related to the Manager Cap (see Note 13 to our consolidated financial statements).

Advisory fees. Advisory fees include the fees paid to our Adviser pursuant to the Advisory Agreement (see Note 13 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, tax preparation fees, Board fees, equity-based compensation expense and corporate payroll.

Property general and administrative expenses. Property general and administrative expenses include the costs of marketing, professional fees, legal fees, general office supplies, and other administrative related costs incurred in operating the properties.

Depreciation and amortization. Depreciation and amortization costs primarily include depreciation of our homes and amortization of acquired in-place leases, recognized over their respective useful lives.

Interest expense. Interest expense primarily includes the cost of interest expense on debt, payments and receipts related to our interest rate swap agreements and the amortization of deferred financing costs. Certain interest costs are capitalized in accordance with our capitalization policy.

Loss on extinguishment of debt. Loss on extinguishment of debt 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 and other costs incurred in a debt extinguishment.

Gain/(loss) on sales of real estate. Gain/(loss) on sales of real estate includes the gain/(loss) recognized upon sales of homes. Gain/(loss) 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 homes.

Casualty gain/(loss). Casualty gain/(loss) includes the gain or loss incurred on homes, net of insurance proceeds received, that experience an unexpected and unusual event such as a natural disaster or fire.

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Consolidated Results of Operations for the Three Months Ended June 30, 2022 and 2021

The three months ended June 30, 2022 compared to the three months ended June 30, 2021

The following table sets forth a summary of our consolidated operating results for the three months ended June 30, 2022 and 2021 (in thousands):

	For the Three Months Ended June 30,
	2022			2021			$ Change
Total revenues	$	62,304		$	39,821		$	22,483
Total expenses		(73,989	)		(41,612	)		(32,377	)
Gain/(loss) on sales of real estate		100			(123	)		223
Casualty loss, net of insurance proceeds		(53	)		(93	)		40
Net loss		(11,638	)		(2,007	)		(9,631	)
Dividends on and accretion to redemption value of Redeemable Series A preferred stock		2,219			2,207			12
Net loss attributable to redeemable noncontrolling interests in the OP		(1,771	)		(466	)		(1,305	)
Net loss attributable to redeemable noncontrolling interests in consolidated VIEs		(1,191	)		—			(1,191	)
Net loss attributable to common stockholders	$	(10,895	)	$	(3,748	)	$	(7,147	)

The change in our net loss between the periods primarily relates to increases in property operating expenses, real estate taxes and insurance costs, advisory fees, property general and administrative expenses, depreciation and amortization and interest expense, partially offset by an increase in rental income.

Revenues

Rental income. Rental income was $59.4 million for the three months ended June 30, 2022 compared to $39.1 million for the three months ended June 30, 2021, which was an increase of $20.3 million. The increase between the periods was primarily due to our acquisition activity and increases in rental rates over the past year.

Other income. Other income was $2.9 million for the three months ended June 30, 2022 compared to $0.7 million for the three months ended June 30, 2021, which was an increase of $2.2 million. The increase between the periods was primarily due to an increase in interest income from promissory notes with Ensign Peak Realty, LLC and our acquisition activity over the past year.

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Expenses

Property operating expenses. Property operating expenses were $12.4 million for the three months ended June 30, 2022 compared to $6.0 million for the three months ended June 30, 2021, which was an increase of $6.4 million. The increase between the periods was primarily due to our acquisition activity in 2022. For the three months ended June 30, 2022 and 2021, turn costs represented approximately 12% and 14%, respectively, of our property operating expenses.

Real estate taxes and insurance. Real estate taxes and insurance were $10.9 million for the three months ended June 30, 2022 compared to $7.6 million for the three months ended June 30, 2021, which was an increase of $3.3 million. The increase between the periods was primarily due to our acquisition activity in 2022 as well as increases in our real estate taxes as a result of increases in property valuations.

Property management fees. Property management fees were $3.4 million for the three months ended June 30, 2022 compared to $2.6 million for the three months ended June 30, 2021, which was an increase of $0.8 million. The increase between the periods was primarily due to our acquisition activity and increases in rental rates over the past year.

Advisory fees. Advisory fees were $3.8 million for the three months ended June 30, 2022 compared to $2.0 million for the three months ended June 30, 2021, which was an increase of $1.8 million. The increase between the periods was primarily due to our equity raising activity in 2022 and increases in total debt principal outstanding.

Corporate general and administrative expenses. Corporate general and administrative expenses were $2.5 million for the three months ended June 30, 2022 compared to $1.8 million for the three months ended June 30, 2021, which was an increase of $0.7 million. The increase between the periods was primarily due to increases in equity-based compensation expense and other corporate expenses as our operations continued to gain scale.

Property general and administrative expenses. Property general and administrative expenses were $4.6 million for the three months ended June 30, 2022 compared to $1.3 million for the three months ended June 30, 2021, which was an increase of $3.3 million. The increase between the periods was primarily due to our acquisition activity in 2022.

Depreciation and amortization. Depreciation and amortization costs were $24.2 million for the three months ended June 30, 2022 compared to $12.5 million for the three months ended June 30, 2021, which was an increase of $11.7 million. The increase between the periods was primarily due to our acquisition activity in 2022.

Interest expense. Interest expense was $11.2 million for the three months ended June 30, 2022 compared to $7.7 million for the three months ended June 30, 2021, which was an increase of $3.5 million. The increase between the periods was primarily due to an increase in interest on debt and amortization of deferred financing costs, as we increased our total debt principal outstanding during 2022. The following table details the various costs included in interest expense for the three months ended June 30, 2022 and 2021 (in thousands):

	For the Three Months Ended June 30,
	2022			2021			$ Change
Gross interest cost	$	14,022		$	8,560		$	5,462
Capitalized interest		(2,867	)		(872	)		(1,995	)
Total	$	11,155		$	7,688		$	3,467

Loss on extinguishment of debt. Loss on extinguishment of debt was $1.0 million for the three months ended June 30, 2022 compared to no loss on extinguishment of debt for the three months ended June 30, 2021, which was an increase of $1.0 million. The increase between the periods was due to the extinguishment of the Bridge Facility which occurred during the three months ended June 30, 2022.

Gain/(loss) on sales of real estate. Gain on sales of real estate was $0.1 million for the three months ended June 30, 2022, and loss on sales of real estate was $0.1 million for the three months ended June 30, 2021, which was an increase of $0.2 million. The majority of the homes sold during the three months ended June 30, 2022 related to a bulk disposition wherein the sales price exceeded the carrying value of the real estate and costs incurred to sell the properties.

Casualty gain/(loss), net of insurance proceeds. Casualty loss, net of insurance proceeds, was $0.1 million for the three months ended June 30, 2022 and 2021.

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Consolidated Results of Operations for the Six Months Ended June 30, 2022 and 2021

The six months ended June 30, 2022 compared to the six months ended June 30, 2021

The following table sets forth a summary of our consolidated operating results for the six months ended June 30, 2022 and 2021 (in thousands):

	For the Six Months Ended June 30,
	2022			2021			$ Change
Total revenues	$	114,621		$	70,449		$	44,172
Total expenses		(129,026	)		(72,297	)		(56,729	)
Gain/(loss) on sales of real estate		216			(198	)		414
Casualty loss, net of insurance proceeds		(162	)		(102	)		(60	)
Net loss		(14,351	)		(2,148	)		(12,203	)
Dividends on and accretion to redemption value of Redeemable Series A preferred stock		4,428			4,413			15
Net loss attributable to redeemable noncontrolling interests in the OP		(2,194	)		(501	)		(1,693	)
Net loss attributable to redeemable noncontrolling interests in consolidated VIEs		(1,191	)		—			(1,191	)
Net loss attributable to common stockholders	$	(15,394	)	$	(6,060	)	$	(9,334	)

Revenues

Rental income. Rental income was $110.4 million for the six months ended June 30, 2022 compared to $69.2 million for the six months ended June 30, 2021, which was an increase of $41.2 million. The increase between the periods was primarily due to our acquisition activity and increases in rental rates over the past year.

Other income. Other income was $4.2 million for the six months ended June 30, 2022 compared to $1.2 million for the six months ended June 30, 2021, which was an increase of $3.0 million. The increase between the periods was primarily due to an increase in interest income from promissory notes with Ensign Peak Realty, LLC and our acquisition activity over the past year.

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Expenses

Property operating expenses. Property operating expenses were $21.0 million for the six months ended June 30, 2022 compared to $11.2 million for the six months ended June 30, 2021, which was an increase of $9.8 million. The increase between the periods was primarily due to our acquisition activity in 2022. For the six months ended June 30, 2022 and 2021, turn costs represented approximately 13% and 14%, respectively, of our property operating expenses.

Real estate taxes and insurance. Real estate taxes and insurance were $20.5 million for the six months ended June 30, 2022 compared to $13.9 million for the six months ended June 30, 2021, which was an increase of $6.6 million. The increase between the periods was primarily due to our acquisition activity in 2022 as well as increases in our real estate taxes as a result of increases in property valuations.

Property management fees. Property management fees were $6.5 million for the six months ended June 30, 2022 compared to $4.6 million for the six months ended June 30, 2021, which was an increase of $1.9 million. The increase between the periods was primarily due to our acquisition activity and increases in rental rates over the past year.

Advisory fees. Advisory fees were $6.9 million for the six months ended June 30, 2022 compared to $3.3 million for the six months ended June 30, 2021, which was an increase of $3.6 million. The increase between the periods was primarily due to our equity raising activity in 2022 and increases in total debt principal outstanding.

Corporate general and administrative expenses. Corporate general and administrative expenses were $4.6 million for the six months ended June 30, 2022 compared to $3.3 million for the six months ended June 30, 2021, which was an increase of $1.3 million. The increase between the periods was primarily due to increases in equity-based compensation expense and other corporate expenses as our operations continued to gain scale.

Property general and administrative expenses. Property general and administrative expenses were $7.5 million for the six months ended June 30, 2022 compared to $2.7 million for the six months ended June 30, 2021, which was an increase of $4.8 million. The increase between the periods was primarily due to our acquisition activity in 2022.

Depreciation and amortization. Depreciation and amortization costs were $40.2 million for the six months ended June 30, 2022 compared to $20.6 million for the six months ended June 30, 2021, which was an increase of $19.6 million. The increase between the periods was primarily due to our acquisition activity in 2022.

Interest expense. Interest expense was $20.8 million for the six months ended June 30, 2022 compared to $12.8 million for the six months ended June 30, 2021, which was an increase of $8.0 million. The increase between the periods was primarily due to an increase in interest on debt and amortization of deferred financing costs, as we increased our total debt principal outstanding during 2022. The following table details the various costs included in interest expense for the six months ended June 30, 2022 and 2021 (in thousands):

	For the Six Months Ended June 30,
	2022			2021			$ Change
Gross interest cost	$	25,649		$	14,332		$	11,317
Capitalized interest		(4,874	)		(1,518	)		(3,356	)
Total	$	20,775		$	12,814		$	7,961

Loss on extinguishment of debt. Loss on extinguishment of debt was $1.0 million for the six months ended June 30, 2022 compared to no loss on extinguishment of debt for the six months ended June 30, 2021, which was an increase of $1.0 million. The increase between the periods was due to the extinguishment of the Bridge Facility which occurred during the six months ended June 30, 2022.

Gain/(loss) on sales of real estate. Gain on sales of real estate was $0.2 million for the six months ended June 30, 2022, and loss on sales of real estate was $0.2 million for the six months ended June 30, 2021, which was an increase of $0.4 million. The majority of the homes sold during the six months ended June 30, 2022 related to bulk dispositions wherein the sales price exceeded the carrying value of the real estate and costs incurred to sell the properties.

Casualty gain/(loss), net of insurance proceeds. Casualty loss, net of insurance proceeds, was $0.2 million for the six months ended June 30, 2022, and casualty loss, net of insurance proceeds, was $0.1 million for the six months ended June 30, 2021, which was an increase of approximately $0.1 million. The increase between the periods is due to a slight increase in casualty events in 2022.

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Non-GAAP Measurements

Net Operating Income

NOI is a non-GAAP financial measure of performance. NOI is used by 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 not affected by (1) interest expense, (2) advisory fees, (3) the impact of depreciation and amortization expenses, (4) gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP, (5) corporate general and administrative expenses, (6) property general and administrative expenses, (7) casualty gains or losses and (8) other gains and losses that are specific to us, including loss on extinguishment of debt.

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, or in the case of assumed debt, decisions made by others, which may have changed or may change in the future. Advisory fees 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 homes 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. Corporate general and administrative expenses are eliminated because they do not reflect the ongoing operating activity performed at the properties. Property general and administrative expenses are eliminated because they represent expenses such as legal, professional, centralized leasing, technology support, and accounting functions. Casualty gains or losses are excluded because of the infrequent and unusual nature of the sustained damages, they do not reflect continuing operating costs of the property owner and typically the economic impact, aside from deductible or risk retention, is covered by insurance. Losses on extinguished debt are excluded because they 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 or sustained damage at similar times. 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, property general and administrative expense, interest expense, casualty gains or losses, advisory fees, depreciation and amortization expense, gains or losses from the sale of properties, and other gains and losses as determined under GAAP, and 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 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.

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The following table, which has not been adjusted for the effects of noncontrolling interests (“NCI”), reconciles our NOI for the three and six months ended June 30, 2022 and 2021 to net loss, the most directly comparable GAAP financial measure on a consolidated basis (in thousands):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2022			2021			2022			2021
Net loss	$	(11,638	)	$	(2,007	)	$	(14,351	)	$	(2,148	)
Adjustments to reconcile net loss to NOI:
Advisory fees		3,844			2,010			6,930			3,301
Corporate general and administrative expenses		2,478			1,837			4,640			3,318
Property general and administrative expenses		4,625			1,332			7,498			2,655
Depreciation and amortization		24,207			12,507			40,163			20,551
Interest expense		11,155			7,688			20,775			12,814
Loss on extinguishment of debt		1,001			—			1,001			—
(Gain)/loss on sales of real estate		(100	)		123			(216	)		198
Casualty loss, net of insurance proceeds		53			93			162			102
NOI	$	35,625		$	23,583		$	66,602		$	40,791

The following table, which has not been adjusted for the effects of NCI, reconciles our NOI for the three and six months ended June 30, 2022 to net loss, the most directly comparable GAAP financial measure by reportable segment (in thousands):

	For the Three Months Ended June 30, 2022									For the Six Months Ended June 30, 2022
	VineBrook			NexPoint Homes			Total			VineBrook			NexPoint Homes			Total
Net loss	$	(8,644	)	$	(2,994	)	$	(11,638	)	$	(11,357	)	$	(2,994	)	$	(14,351	)
Adjustments to reconcile net loss to NOI:
Advisory fees		3,844			—			3,844			6,930			—			6,930
Corporate general and administrative expenses		2,474			4			2,478			4,636			4			4,640
Property general and administrative expenses		3,537			1,088			4,625			6,410			1,088			7,498
Depreciation and amortization		23,413			794			24,207			39,369			794			40,163
Interest expense		10,157			998			11,155			19,777			998			20,775
Loss on extinguishment of debt		1,001			—			1,001			1,001			—			1,001
Gain on sales of real estate		(100	)		—			(100	)		(216	)		—			(216	)
Casualty loss, net of insurance proceeds		53			—			53			162			—			162
NOI	$	35,735		$	(110	)	$	35,625		$	66,712		$	(110	)	$	66,602

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Net Operating Income for Our Same Home and Non-Same Home Properties for the Three Months Ended June 30, 2022 and 2021

There are 5,444 homes in our 2022 same home pool (our “Same Home” properties). To be included as a “Same Home,” homes must be in the VineBrook reportable segment and must have been stabilized for at least 90 days in advance of the first day of the previous fiscal year and be held through the current reporting period-end. Same Home properties for the period ended June 30, 2022 and June 30, 2021 were stabilized by October 1, 2020 and held through June 30, 2022. Same Home properties do not include homes held for sale. Homes that are stabilized are included as Same Home properties, whether occupied or vacant. See Item 1. “Business—Our Portfolio” in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 23, 2022 for a discussion of the definition of stabilized. We view Same Home NOI as an important measure of the operating performance of our homes because it allows us to compare operating results of homes owned for the entirety of the current and comparable periods and therefore eliminate variations caused by acquisitions or dispositions during the periods.

The following table reflects the revenues, property operating expenses and NOI for the three months ended June 30, 2022 and 2021 for our Same Home and Non-Same Home properties (dollars in thousands):

	For the Three Months Ended June 30,
	2022		2021		$ Change			% Change
Revenues
Same Home
Rental income ⁽¹⁾	$	17,126	$	16,407	$	719			4.4	%
Other income ⁽¹⁾		37		32		5			15.6	%
Same Home revenues		17,163		16,439		724			4.4	%
Non-Same Home
Rental income ⁽¹⁾		42,347		22,765		19,582			86.0	%
Other income ⁽¹⁾		1,479		80		1,399			1748.8	%
Non-Same Home revenues		43,826		22,845		20,981			91.8	%
Total revenues		60,989		39,284		21,705			55.3	%

Operating expenses
Same Home
Property operating expenses ⁽¹⁾		2,749		2,059		690			33.5	%
Real estate taxes and insurance		2,777		2,924		(147	)		-5.0	%
Property management fees ⁽²⁾		968		994		(26	)		-2.6	%
Same Home operating expenses		6,494		5,977		517			8.6	%
Non-Same Home
Property operating expenses ⁽¹⁾		8,293		3,411		4,882			143.1	%
Real estate taxes and insurance		8,137		4,720		3,417			72.4	%
Property management fees ⁽²⁾		2,440		1,593		847			53.2	%
Non-Same Home operating expenses		18,870		9,724		9,146			94.1	%
Total operating expenses		25,364		15,701		9,663			61.5	%

NOI
Same Home		10,669		10,462		207			2.0	%
Non-Same Home		24,956		13,121		11,835			90.2	%
Total NOI	$	35,625	$	23,583	$	12,042			51.1	%

	(1)	Presented net of tenant chargebacks.
	(2)	Fees incurred to the Manager.

See reconciliation of net income (loss) to NOI above under “—Net Operating Income.”

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Same Home Results of Operations for the Three Months Ended June 30, 2022 and 2021

As of June 30, 2022, our Same Home properties were approximately 95.3% occupied with a weighted average monthly effective rent per occupied home of $1,083. As of June 30, 2021, our Same Home properties were approximately 96.8% occupied with a weighted average monthly effective rent per occupied home of $1,010. For our Same Home properties, we recorded the following operating results for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021:

Revenues

Rental income. Rental income was $17.1 million for the three months ended June 30, 2022 compared to $16.4 million for the three months ended June 30, 2021, which was an increase of approximately $0.7 million, or 4.4%. The increase is related to a 7.2% increase in the weighted average monthly effective rent per occupied home, partially offset by a 1.5% decrease in occupancy.

Other income. Other income remained flat at less than $0.1 million for the three months ended June 30, 2022 and 2021.

Expenses

Property operating expenses. Property operating expenses were $2.7 million for the three months ended June 30, 2022 compared to $2.1 million for the three months ended June 30, 2021, which was an increase of approximately $0.6 million, or 33.5%. The majority of the increase is related to an increase in general turnover costs of approximately $0.3 million, an increase in water and sewer costs of approximately $0.2 million and an increase in third party maintenance costs of approximately $0.1 million.

Real estate taxes and insurance. Real estate taxes and insurance costs were $2.8 million for the three months ended June 30, 2022 compared to $2.9 million for the three months ended June 30, 2021, which was a decrease of approximately $0.1 million, or 5.0%. The majority of the decrease is related to a decrease in property and liability insurance costs of approximately $0.1 million.

Property management fees. Property management fees remained flat at approximately $1.0 million for the three months ended June 30, 2022 and 2021.

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Net Operating Income for Our Same Home and Non-Same Home Properties for the Six Months Ended June 30, 2022 and 2021

The following table reflects the revenues, property operating expenses and NOI for the six months ended June 30, 2022 and 2021 for our Same Home and Non-Same Home properties (dollars in thousands):

	For the Six Months Ended June 30,
	2022		2021		$ Change			% Change
Revenues
Same Home
Rental income ⁽¹⁾	$	33,880	$	32,510	$	1,370			4.2	%
Other income ⁽¹⁾		75		64		11			17.2	%
Same Home revenues		33,955		32,574		1,381			4.2	%
Non-Same Home
Rental income ⁽¹⁾		76,780		36,825		39,955			108.5	%
Other income ⁽¹⁾		1,594		137		1,457			1063.5	%
Non-Same Home revenues		78,374		36,962		41,412			112.0	%
Total revenues		112,329		69,536		42,793			61.5	%

Operating expenses
Same Home
Property operating expenses ⁽¹⁾		5,062		3,988		1,074			26.9	%
Real estate taxes and insurance		5,674		6,009		(335	)		-5.6	%
Property management fees ⁽²⁾		1,971		2,024		(53	)		-2.6	%
Same Home operating expenses		12,707		12,021		686			5.7	%
Non-Same Home
Property operating expenses ⁽¹⁾		13,690		6,259		7,431			118.7	%
Real estate taxes and insurance		14,782		7,929		6,853			86.4	%
Property management fees ⁽²⁾		4,548		2,536		2,012			79.3	%
Non-Same Home operating expenses		33,020		16,724		16,296			97.4	%
Total operating expenses		45,727		28,745		16,982			59.1	%

NOI
Same Home		21,248		20,553		695			3.4	%
Non-Same Home		45,354		20,238		25,116			124.1	%
Total NOI	$	66,602	$	40,791	$	25,811			63.3	%

	(1)	Presented net of tenant chargebacks.
	(2)	Fees incurred to the Manager.

See reconciliation of net income (loss) to NOI above under “—Net Operating Income.”

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Same Home Results of Operations for the Six Months Ended June 30, 2022 and 2021

As of June 30, 2022, our Same Home properties were approximately 95.3% occupied with a weighted average monthly effective rent per occupied home of $1,083. As of June 30, 2021, our Same Home properties were approximately 96.8% occupied with a weighted average monthly effective rent per occupied home of $1,010. For our Same Home properties, we recorded the following operating results for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021:

Revenues

Rental income. Rental income was $33.9 million for the six months ended June 30, 2022 compared to $32.5 million for the six months ended June 30, 2021, which was an increase of approximately $1.4 million, or 4.2%. The increase is related to a 7.2% increase in the weighted average monthly effective rent per occupied home, partially offset by a 1.5% decrease in occupancy.

Other income. Other income remained flat at $0.1 million for the six months ended June 30, 2022 and 2021.

Expenses

Property operating expenses. Property operating expenses were $5.1 million for the six months ended June 30, 2022 compared to $4.0 million for the six months ended June 30, 2021, which was an increase of approximately $1.1 million, or 26.9%. The majority of the increase is related to an increase in general turnover costs of approximately $0.5 million, an increase in water and sewer costs of approximately $0.4 million and an increase in third party maintenance costs of approximately $0.1 million.

Real estate taxes and insurance. Real estate taxes and insurance costs were $5.7 million for the six months ended June 30, 2022 compared to $6.0 million for the six months ended June 30, 2021, which was a decrease of approximately $0.3 million, or 5.6%. The majority of the decrease is related to a decrease in property taxes of approximately $0.2 million.

Property management fees. Property management fees remained flat at approximately $2.0 million for the six months ended June 30, 2022 and 2021.

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FFO, Core FFO and AFFO

We believe that net income (loss), as defined by GAAP, is the most appropriate earnings measure. We also believe that funds from operations (“FFO”) as defined by the National Association of Real Estate Investments Trusts (“NAREIT”), core funds from operations (“Core FFO”) and adjusted funds from operations (“AFFO”) are important non-GAAP supplemental measures of operating performance for a REIT.

Since the historical cost accounting convention used for real estate assets requires depreciation except on land, such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income (loss), as defined by GAAP. FFO is defined by NAREIT as net income (loss) computed in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization. We compute FFO for the VineBrook reportable segment in accordance with NAREIT’s definition. We excluded the NexPoint Homes reportable segment operations from the FFO calculation due to the timing of the acquisition of the portfolio as it was not deemed meaningful to the calculation. Our presentation differs slightly in that we begin with net income (loss) attributable to common stockholders and add net income (loss) attributable to NCI in the OP and then make the adjustments to arrive at FFO.

Core FFO for the VineBrook reportable segment makes certain adjustments to FFO for the VineBrook reportable segment, which relate to items that 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 gains or losses on extinguishment of debt, casualty gains or losses, the amortization of deferred financing costs and equity-based compensation expense. We believe Core FFO is useful as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other REITs.

AFFO for the VineBrook reportable segment makes certain adjustments to Core FFO for the VineBrook reportable segment 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 the method of calculating AFFO is divergent across the industry. AFFO adjusts Core FFO to remove recurring capital expenditures, which are costs necessary to help preserve the value and maintain functionality of our homes. We believe AFFO is useful as a supplemental gauge of our operating performance and is useful in comparing our operating performance with other REITs.

Basic and diluted weighted average shares in our FFO table includes both our Shares and OP Units. NexPoint Homes Shares and SFR OP Units are not part of this count as the metrics in the FFO table only pertain to the VineBrook reportable segment.

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 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.

The FFO, Core FFO and AFFO results discussed further below are for the VineBrook reportable segment, and reconcile to net loss for the VineBrook reportable segment. See below for a reconciliation of VineBrook net loss to consolidated net loss:

	For the Three Months Ended June 30, 2022									For the Six Months Ended June 30, 2022
	VineBrook			NexPoint Homes			Total			VineBrook			NexPoint Homes			Total
Net loss attributable to common stockholders	$	(9,580	)	$	(1,315	)	$	(10,895	)	$	(14,079	)	$	(1,315	)	$	(15,394	)
Net loss attributable to NCI in the OP		(1,283	)		(488	)		(1,771	)		(1,706	)		(488	)		(2,194	)
Net loss attributable to NCI in consolidated VIEs		—			(1,191	)		(1,191	)		—			(1,191	)		(1,191	)

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The three months ended June 30, 2022 as compared to the three months ended June 30, 2021

The following table reconciles our calculations of VineBrook FFO, Core FFO and AFFO to VineBrook net loss, which is reconciled to consolidated net loss above, the most directly comparable GAAP financial measure, for the three months ended June 30, 2022 and 2021 (in thousands, except per share amounts):

	For the Three Months Ended June 30,
	2022			2021			$ Change			% Change
Net loss attributable to common stockholders	$	(9,580	)	$	(3,748	)	$	(5,832	)		155.6	%
Net loss attributable to NCI in the OP		(1,283	)		(466	)		(817	)		175.3	%
Depreciation and amortization		23,412			12,507			10,905			87.2	%
(Loss)/gain on sales of real estate		(100	)		123			(223	)		-181.3	%
FFO		12,449			8,416			4,033			47.9	%

FFO per share - basic	$	0.43		$	0.51		$	(0.08	)		-15.7	%
FFO per share - diluted	$	0.42		$	0.50		$	(0.08	)		-16.0	%

Casualty loss, net of insurance proceeds		53			93			(40	)		-43.0	%
Amortization of deferred financing costs		1,793			1,083			710			65.6	%
Loss on extinguishment of debt		1,001			—			1,001			100.0	%
Equity-based compensation expense		1,617			1,144			473			41.3	%
Core FFO		16,913			10,736			6,177			57.5	%

Core FFO per share - basic	$	0.58		$	0.65		$	(0.07	)		-10.8	%
Core FFO per share - diluted	$	0.57		$	0.64		$	(0.07	)		-10.9	%

Recurring capital expenditures		(2,777	)		(1,456	)		(1,321	)		90.7	%
AFFO		14,136			9,280			4,856			52.3	%

AFFO per share - basic	$	0.49		$	0.57		$	(0.08	)		-14.0	%
AFFO per share - diluted	$	0.48		$	0.55		$	(0.07	)		-12.7	%

Weighted average shares outstanding - basic		29,092			16,401
Weighted average shares outstanding - diluted ⁽¹⁾		29,578			16,861

Dividends declared per share	$	0.5301		$	0.5301

FFO Coverage - diluted ⁽²⁾	0.79x			0.94x
Core FFO Coverage - diluted ⁽²⁾	1.08x			1.20x
AFFO Coverage - diluted ⁽²⁾	0.91x			1.04x

(1)

For the three months ended June 30, 2022 and 2021, includes approximately 1,095,000 shares and 994,000 shares, respectively, related to the assumed vesting of RSUs and PI Units.

(2)

Indicates coverage ratio of FFO/Core FFO/AFFO per common share (diluted) over dividends declared per common share during the period.

FFO was $12.4 million for the three months ended June 30, 2022 compared to $8.4 million for the three months ended June 30, 2021, which was an increase of approximately $4.0 million. The change in our FFO between the periods primarily relates to an increase in VineBrook rental income of $19.1 million, partially offset by increases in VineBrook total property operating expenses of $11.3 million and VineBrook interest expense of $2.5 million. The changes in diluted FFO per share, AFFO per share and Core FFO per share were primarily related to an 75.4% increase in the diluted weighted average shares outstanding as of June 30, 2022 compared to June 30, 2021 as a result of significant equity raise activity. The entirety of the proceeds from these equity issuances have not been deployed immediately into the acquisition of cash flow yielding homes as a portion of the homes purchased during the period are currently in rehabilitation. This significant increase in the weighted average shares outstanding in the current period without a significant and immediate corresponding increase in FFO results in the period over period decline. Also, the increased weighted average interest rate of our debt has contributed to this decline in our FFO per share results. On a longer time horizon, these irregularities are expected to diminish and we expect our results to normalize and comparatively improve on a per share basis as a larger amount of the acquired homes become stabilized, resulting in increases in diluted FFO per share, Core FFO per share and AFFO per share.

Core FFO was $16.9 million for the three months ended June 30, 2022 compared to $10.7 million for the three months ended June 30, 2021, which was an increase of approximately $6.2 million. The change in our Core FFO between the periods primarily relates to an increase in FFO and increases in VineBrook amortization of deferred financing costs of $0.7 million, VineBrook loss on extinguishment of debt of $1.0 million and VineBrook equity-based compensation expense of $0.5 million.

AFFO was $14.1 million for the three months ended June 30, 2022 compared to $9.3 million for the three months ended June 30, 2021, which was an increase of approximately $4.8 million. The change in our AFFO between the periods primarily relates to an increase in Core FFO and an increase in VineBrook recurring capital expenditures of $1.3 million.

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The six months ended June 30, 2022 as compared to the six months ended June 30, 2021

The following table reconciles our calculations of VineBrook FFO, Core FFO and AFFO to VineBrook net loss, which is reconciled to consolidated net loss above, the most directly comparable GAAP financial measure, for the six months ended June 30, 2022 and 2021 (in thousands, except per share amounts):

	For the Six Months Ended June 30,
	2022			2021			$ Change			% Change
Net loss attributable to common stockholders	$	(14,079	)	$	(6,060	)	$	(8,019	)		132.3	%
Net loss attributable to NCI in the OP		(1,706	)		(501	)		(1,205	)		240.5	%
Depreciation and amortization		39,368			20,551			18,817			91.6	%
(Gain)/loss on sales of real estate		(216	)		198			(414	)		-209.1	%
FFO		23,367			14,188			9,179			64.7	%

FFO per share - basic	$	0.83		$	0.94		$	(0.11	)		-11.7	%
FFO per share - diluted	$	0.82		$	0.91		$	(0.09	)		-9.9	%

Casualty loss, net of insurance proceeds		162			102			60			58.8	%
Amortization of deferred financing costs		3,319			1,614			1,705			105.6	%
Loss on extinguishment of debt		1,001			—			1,001			100.0	%
Equity-based compensation expense		3,072			2,074			998			48.1	%
Core FFO		30,921			17,978			12,943			72.0	%

Core FFO per share - basic	$	1.10		$	1.19		$	(0.09	)		-7.6	%
Core FFO per share - diluted	$	1.08		$	1.15		$	(0.07	)		-6.1	%

Recurring capital expenditures		(5,183	)		(2,253	)		(2,930	)		130.0	%
AFFO		25,738			15,725			10,013			63.7	%

AFFO per share - basic	$	0.92		$	1.04		$	(0.12	)		-11.5	%
AFFO per share - diluted	$	0.90		$	1.01		$	(0.11	)		-10.9	%

Weighted average shares outstanding - basic		28,047			15,160
Weighted average shares outstanding - diluted ⁽¹⁾		28,537			15,591

Dividends declared per share	$	1.0602		$	1.0602

FFO Coverage - diluted ⁽²⁾	0.77x			0.86x
Core FFO Coverage - diluted ⁽²⁾	1.02x			1.09x
AFFO Coverage - diluted ⁽²⁾	0.85x			0.95x

(1)

For the six months ended June 30, 2022 and 2021, includes approximately 1,095,000 shares and 994,000 shares, respectively, related to the assumed vesting of RSUs and PI Units.

(2)

Indicates coverage ratio of FFO/Core FFO/AFFO per common share (diluted) over dividends declared per common share during the period.

FFO was $23.4 million for the six months ended June 30, 2022 compared to $14.2 million for the six months ended June 30, 2021, which was an increase of approximately $9.2 million. The change in our FFO between the periods primarily relates to an increase in VineBrook rental income of $39.9 million, partially offset by increases in VineBrook total property operating expenses of $20.8 million, VineBrook interest expense of $7.0 million and VineBrook advisory fees of $3.6 million. The changes in diluted FFO per share, AFFO per share and Core FFO per share were primarily related to an 83.0% increase in weighted average shares outstanding as of June 30, 2022 compared to June 30, 2021 as a result of significant equity raise activity. The entirety of the proceeds from these equity issuances have not been deployed immediately into the acquisition of cash flow yielding homes as a portion of the homes purchased during the period are currently in rehabilitation. This significant increase in the weighted average shares outstanding in the current period without a significant and immediate corresponding increase in FFO results in the period over period decline. Also, the increased weighted average interest rate of our debt has contributed to this decline in our FFO per share results. On a longer time horizon, these irregularities are expected to diminish and we expect our results to normalize and comparatively improve on a per share basis as a larger amount of the acquired homes become stabilized, resulting in increases in diluted FFO per share, Core FFO per share and AFFO per share.

Core FFO was $30.9 million for the six months ended June 30, 2022 compared to $18.0 million for the six months ended June 30, 2021, which was an increase of approximately $12.9 million. The change in our Core FFO between the periods primarily relates to an increase in FFO and increases in VineBrook amortization of deferred financing costs of $1.7 million, VineBrook loss on extinguishment of debt of $1.0 million and VineBrook equity-based compensation expense of $1.0 million.

AFFO was $25.7 million for the six months ended June 30, 2022 compared to $15.7 million for the six months ended June 30, 2021, which was an increase of approximately $10.0 million. The change in our AFFO between the periods primarily relates to an increase in Core FFO and an increase in VineBrook recurring capital expenditures of $2.9 million.

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Net Asset Value

The sale price of the Shares sold in the Private Offering as well as the sale price of OP Units was equal to the most recent NAV per share in effect at the time a subscription agreement or funds are received, plus applicable fees and commissions. The purchase price at which Shares may be repurchased in accordance with the terms of the Share Repurchase Plan (defined below) is generally based on the most recent NAV per share in effect at the time of repurchase, and Shares or OP Units issued under the applicable DRIP generally reflect a 3% discount to the then-current NAV per share.

Effective for valuations beginning on July 31, 2021, the Company implemented an amended and restated Valuation Methodology as approved by our Board. Under the Valuation Methodology, Green Street calculates a preliminary NAV by valuing the portfolio in accordance with the Valuation Methodology. Green Street then recommends the preliminary NAV to the Adviser. Based on this recommendation, the Adviser then calculates transaction costs and makes any other adjustments, including costs of internalization, determined necessary to finalize NAV.

On and before March 31, 2020, NAV was determined as of the end of each quarter. Beginning April 30, 2020, NAV was determined as of the end of each month. Effective for NAV determined on and after December 31, 2021, NAV has been determined as of the end of each quarter. NAV per share is calculated on a fully diluted basis. The table below illustrates the changes in NAV since inception:

Date	NAV per share
November 1, 2018	$	25.00
December 31, 2018		28.27
March 31, 2019		28.75
June 30, 2019		28.88
September 30, 2019		29.85
December 31, 2019		30.58
March 31, 2020		30.59
April 30, 2020		30.82
May 31, 2020		31.08
June 30, 2020		31.24
July 31, 2020		31.47
August 31, 2020		32.91
September 30, 2020		34.00
October 31, 2020		34.18
November 30, 2020		34.38
December 31, 2020		36.56
January 31, 2021		36.56
February 28, 2021		36.68
March 31, 2021		36.82
April 30, 2021		37.85
May 31, 2021		38.68
June 30, 2021		40.82
July 31, 2021		43.76
August 31, 2021		46.19
September 30, 2021		47.90
October 31, 2021		49.09
November 30, 2021		51.38
December 31, 2021		54.14
March 31, 2022		59.85
June 30, 2022		62.75

Fees and Commissions paid to Placement Agents and Dealer Manager

Subject to certain exceptions, investors that purchase Shares through the Private Offering generally paid the Placement Agents in the Private Offering placement fees or commissions, in addition to the NAV sales price. For sales through Placement Agents other than Raymond James, the placement fees or commissions generally equal between 1% to 5.5% of gross investor equity, subject to certain breakpoints and various terms of each specific Selling Agreement. A placement fee equal to 3% and an advisory fee equal to 2% of gross proceeds invested, which is also in addition to the NAV sales price, was paid to Raymond James for all Shares sold by Raymond James on behalf of the Company in the Private Offering. With the consent of the applicable Placement Agent, some or all of the applicable fees and commissions may be waived. Other Selling Agreements may have specific fees that differ from the Raymond James fees related to selling Shares to their clients. In addition, the Dealer Manager generally received a fee of 0.5% on sales in the Private Offering through Raymond James and 3% on sales through other Placement Agents, a portion of which may be reallowed to those Placement Agents. Placement Agent compensation was subject to a reasonable carve-out for sales of Shares directly by the Company or for sales to employees of our Adviser, Manager and affiliates thereof. For sales through registered investment advisors (“RIAs”), the Dealer Manager received a fee of up to 2% of gross investor equity. With respect to sales through RIAs or Placement Agents other than Raymond James who in each case were first introduced to the Company by Raymond James, Raymond James could receive a participating placement fee equal to 1% of gross investor equity.

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Liquidity and Capital Resources

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

•

recurring maintenance necessary to maintain our homes;

•

interest expense and scheduled principal payments on outstanding indebtedness;

•

distributions necessary to qualify for taxation as a REIT;

•

advisory fees payable to our Adviser;

•

general and administrative expenses;

•

offering expenses related to raising equity from our Private Offering; and

•

property management fees payable to the Manager.

We expect to meet our short-term liquidity requirements generally through net cash provided by operations and existing cash balances. Additionally, as of June 30, 2022, we had significant access to credit through our credit facilities. The JPM Facility has an additional $185.0 million of capacity and the Warehouse Facility has an additional $450.0 million of capacity.

Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional homes, renovations and other capital expenditures to improve our homes and scheduled debt payments and distributions. We expect to meet our long-term liquidity requirements through various sources of capital, which may include equity issuances through the Private Offering, other public or private issuances of common equity, preferred equity or debt, draws on our revolving credit facilities, existing working capital, net cash provided by operations, long-term mortgage indebtedness and may include other secured and unsecured borrowings. 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. Additionally, the Company continues to monitor the impact of 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.

As disclosed in Note 16 to our consolidated financial statements, so far in the third quarter of 2022 we have acquired 555 homes for an aggregate purchase price of approximately $71.2 million. For the remainder of 2022, excluding the purchases disclosed previously, we expect to purchase approximately 3,000 – 6,000 total homes for consideration of approximately $820 million – $1.3 billion. However, there can be no assurance that we will be able to complete these acquisitions during the remainder of the year on terms that are acceptable to us, or at all.

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Our homes will require periodic capital expenditures and renovation to remain competitive. Also, acquisitions of new homes 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 and acquisitions 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.

We believe that our available cash, expected operating cash flows, and potential debt or equity financings will provide sufficient funds for our operations, acquisitions, anticipated scheduled debt service payments and dividend requirements for the twelve-month period following June 30, 2022. We believe that the various sources of long-term capital, which may include equity issuances through the Private Offering, other public or private issuances of common equity, preferred equity or debt, draws on our revolving credit facilities, existing working capital, net cash provided by operations, long-term mortgage indebtedness and other secured and unsecured borrowings will provide sufficient funds for our operations, acquisitions, anticipated scheduled debt service payments and dividend requirements in the long-term.

Cash Flows

The six months ended June 30, 2022 as compared to the six months ended June 30, 2021

The following table presents selected data from our consolidated statements of cash flows for the six months ended June 30, 2022 and 2021 (in thousands):

	For the Six Months Ended June 30,
	2022			2021			$ Change
Net cash provided by operating activities	$	45,252		$	24,607		$	20,645
Net cash used in investing activities		(892,924	)		(676,303	)		(216,621	)
Net cash provided by financing activities		876,028			679,016			197,012
Change in cash and restricted cash		28,356			27,320			1,036
Cash and restricted cash, beginning of period		74,997			37,096			37,901
Cash and restricted cash, end of period	$	103,353		$	64,416		$	38,937

Cash flows from operating activities. During the six months ended June 30, 2022, net cash provided by operating activities was $45.3 million compared to net cash provided by operating activities of $24.6 million for the six months ended June 30, 2021. The change in cash flows from operating activities was mainly due to an increase in net operating income during the period.

Cash flows from investing activities. During the six months ended June 30, 2022, net cash used in investing activities was $892.9 million compared to net cash used in investing activities of $676.3 million for the six months ended June 30, 2021. The change in cash flows from investing activities was mainly due to the acquisition of NexPoint Homes through VIE consolidation, net of cash received, during the period, as well as an increase in acquisitions of real estate investments and additions to real estate investments during the period.

Cash flows from financing activities. During the six months ended June 30, 2022, net cash provided by financing activities was $876.0 million compared to net cash provided by financing activities of $679.0 million for the six months ended June 30, 2021. The change in cash flows from financing activities was mainly due to an increase in proceeds received from credit facilities and an increase in contributions from redeemable noncontrolling interests in consolidated VIEs, which was partially offset by a decrease in proceeds received from notes payable and a decrease in proceeds received from issuance of redeemable Series A preferred stock during the period.

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Debt, Derivatives and Hedging Activity

Debt

As of June 30, 2022, the VineBrook reportable segment had aggregate debt outstanding to third parties of approximately $1.5 billion at a weighted average interest rate of 3.6611% and an adjusted weighted average interest rate of 3.9097%. For purposes of calculating the adjusted weighted average interest rate of our debt outstanding, we have included the weighted average fixed rate of 2.0217%, representing a weighted average fixed rate for one-month LIBOR and daily SOFR, on our combined $870.0 million notional amount of interest rate swap agreements, which effectively fixes the interest rate on $870.0 million of our floating rate debt. See Notes 7 and 8 to our consolidated financial statements for additional information.

The following table sets forth a summary of our mortgage loan indebtedness for the VineBrook reportable segment as of June 30, 2022:

		Outstanding Principal as of
	Type	June 30, 2022		Interest Rate (1)			Maturity
Initial Mortgage	Floating	$	241,222		3.34	%	12/1/2025
Warehouse Facility	Floating		750,000		3.49	%	11/3/2024	(2)
JPM Facility	Floating		315,000		4.35	%	3/1/2023
MetLife Note	Fixed		124,554		3.25	%	1/31/2026
TrueLane Mortgage	Fixed		10,312		5.35	%	2/1/2028
CoreVest Note	Fixed		2,319		6.12	%	1/9/2023
Crestcore II Note	Fixed		4,691		5.12	%	7/9/2029
Crestcore IV Note	Fixed		4,170		5.12	%	7/9/2029
Hatchway Broadmoor Mortgage	Fixed		4,609		5.35	%	2/1/2029
Total Outstanding Principal		$	1,456,877

(1)

Represents the interest rate as of June 30, 2022. Except for fixed rate debt, the interest rate is one-month LIBOR, daily SOFR or one-month term SOFR, plus an applicable margin. One-month LIBOR as of June 30, 2022 was 1.7867%, daily SOFR as of June 30, 2022 was 1.5000% and one-month term SOFR as of June 30, 2022 was 1.6860%.

(2)

This is the stated maturity for the Warehouse Facility, but it is subject to a 12-month extension option.

In addition to the mortgage loan indebtedness for the VineBrook reportable segment presented above and described below, the NexPoint Homes reportable segment had $321.6 million of debt outstanding at June 30, 2022. See Notes 5 and 13 to the unaudited consolidated financial statements.

On November 1, 2018, the OP, as guarantor, and some of the SPEs, as borrowers, entered into the $241.4 million Initial Mortgage with KeyBank. The Initial Mortgage is secured by certain properties in the Initial Portfolio and equity pledges of the related SPEs that own those properties and bears interest at a variable rate equal to one-month LIBOR plus 1.55%. The Initial Mortgage is interest-only for the first 48 months of the term and principal amortizes at a rate of 30 years over the last 36 months of the term. The Initial Mortgage matures and is due in full on December 1, 2025.

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On September 20, 2019, the OP, as guarantor, and VB One, LLC, as borrower, entered into a credit facility (the “Warehouse Facility”) with KeyBank. The Warehouse Facility is secured by an equity pledge in certain assets of VB One, LLC and an equity pledge in the equity of VB One, LLC. On November 3, 2021, the Company, as guarantor, the OP, as parent borrower, and each of (i) VB OP Holdings, LLC and (ii) VB One, LLC and certain of its subsidiaries, as subsidiary borrowers, entered into an amended and restated credit agreement to recast the Warehouse Facility, which was subsequently amended on December 9, 2021, April 8, 2022 and May 20, 2022. The amended recast Warehouse Facility is a full-term, interest-only facility with an initial 36-month term ending November 3, 2024, has one 12-month extension option, and bears interest at a variable rate equal to the forward-looking term rate based on SOFR for the applicable interest period (one-month term SOFR) plus a margin of 0.1% plus an applicable rate ranging from 1.6% to 2.45% depending on the Company’s consolidated total leverage ratio. Under the amended recast Warehouse Facility, the OP has the right to increase the total commitments available for borrowing, which may take the form of an increase in revolving commitments or one or more tranches of term loan commitments, up to $1.2 billion. As of June 30, 2022, $750.0 million was drawn on the Warehouse Facility. The balance of the Warehouse Facility, net of unamortized deferred financing costs, is included in credit facilities on the consolidated balance sheets.

On September 30, 2019, in connection with the TrueLane Portfolio acquisition, the OP, as guarantor, assumed the approximately $10.8 million TrueLane Mortgage with Berkadia Commercial Mortgage LLC as a result of the OP’s acquisition of True FM 2017-1, LLC. The TrueLane Mortgage is secured by certain of our properties and equity pledges in the entity that owns those properties and bears interest at a fixed rate equal to 5.35%. The TrueLane Mortgage matures and is due in full on February 1, 2028 and requires monthly principal and interest payments.

On December 28, 2020, in connection with the acquisition of a 45-home portfolio, the OP provided a non-recourse carveout guaranty related to the approximately $2.4 million CoreVest Note assumed by a subsidiary of the OP as a result of the OP’s acquisition of SMP Homes 5B, LLC. The CoreVest Note is secured by the properties in SMP Homes 5B, LLC and an equity pledge in SMP Homes 5B, LLC and bears interest at a fixed rate equal to 6.12%. The CoreVest Note matures and is due in full on January 9, 2023 and requires monthly principal and interest payments. On July 11, 2022, the OP repaid the full balance of the CoreVest Note, which extinguished the CoreVest Note.

On January 6, 2021, the Company, as guarantor, and VB Two, LLC, as borrower, entered into a $125.0 million note with Metropolitan Life Insurance (the “MetLife Note”). The MetLife Note is secured by equity pledges in VB Two, LLC and its wholly owned subsidiaries and bears interest at a fixed rate of 3.25%. The MetLife Note is interest-only and matures and is due in full on January 31, 2026. The net proceeds received were used to fund a portion of the purchase price of the Conrex I Portfolio.

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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 matures and is 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 a daily SOFR plus 2.85%. As of June 30, 2022, the outstanding balance of the JPM Facility was $315.0 million and had $185.0 million of available capacity.

On January 13, 2022, in connection with the acquisition of a 98-home portfolio, the OP (as guarantor) assumed an approximately $4.6 million Freddie Mac mortgage loan (the “Hatchway Broadmoor Mortgage”) with Arbor Agency Lending, LLC as a result of the OP’s acquisition of Hatchway Broadmoor, LLC. The Hatchway Broadmoor Mortgage is secured by properties in Hatchway Broadmoor, LLC and an equity pledge in Hatchway Broadmoor, LLC and bears interest at a fixed rate equal to 5.35%. The Hatchway Broadmoor Mortgage matures and is due in full on February 1, 2029 and requires monthly principal and interest payments. The balance of the Hatchway Broadmoor Mortgage, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets.

On February 8, 2022, in connection with the acquisition of the Prager Portfolio, the Company entered into a bridge credit agreement through the OP with KeyBank National Association, and borrowed $150.0 million (the “Bridge Facility”). On April 8, 2022, the Company repaid the outstanding principal balance on the Bridge Facility, which extinguished the Bridge Facility. In connection with the extinguishment of the Bridge Facility, the Company incurred a loss on extinguishment of debt of approximately $1.0 million, which is presented on the consolidated statements of operations and comprehensive income (loss).

On March 18, 2022, in connection with the acquisition of an 88-home portfolio, the OP provided a non-recourse carveout guaranty related to an approximately $4.7 million mortgage loan assumed by a subsidiary of the OP (the “Crestcore II Note”) with CoreVest American Finance Lender LLC as a result of the OP’s acquisition of Crestcore II, LLC. The Crestcore II Note is secured by the properties in Crestcore II, LLC and an equity pledge in Crestcore II, LLC and bears interest at a fixed rate equal to 5.12%. The Crestcore II Note matures and is due in full on July 9, 2029 and requires monthly principal and interest payments. The balance of the Crestcore II Note, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets.

On March 18, 2022, in connection with the acquisition of an 82-home portfolio, the OP provided a non-recourse carveout guaranty related to an approximately $4.2 million mortgage loan assumed by a subsidiary of the OP (the “Crestcore IV Note”) with CoreVest American Finance Lender LLC as a result of the OP’s acquisition of Crestcore IV, LLC. The Crestcore IV Note is secured by the properties in Crestcore IV, LLC and an equity pledge in Crestcore IV, LLC and bears interest at a fixed rate equal to 5.12%. The Crestcore IV Note matures and is due in full on July 9, 2029 and requires monthly principal and interest payments. The balance of the Crestcore IV Note, net of unamortized deferred financing costs, is included in notes payable on the consolidated balance sheets.

As of June 30, 2022, the Company was in compliance with the debt covenants in each of its debt agreements.

We intend to invest in additional homes 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 Shares, Preferred Shares 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 Shares, Preferred Shares or other debt or equity securities, on terms that are acceptable to us or at all.

Furthermore, following the completion of our renovations 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.

Interest Rate Derivative Agreements

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 approximately three to six years and effectively establish a fixed interest rate on debt on the underlying notional amounts. 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 11 interest rate swap transactions with KeyBank and Mizuho with a combined notional amount of $870.0 million. As of June 30, 2022, the interest rate swaps we have entered into effectively replace the floating interest rate (one-month LIBOR or daily SOFR) with respect to $870.0 million of our floating rate mortgage debt outstanding with a weighted average fixed rate of 2.0217%. As of June 30, 2022, interest rate swap agreements effectively covered $870.0 million, or 66.6%, of our $1.3 billion of floating rate debt outstanding. During the term of these interest rate swap agreements, we are required to make monthly fixed rate payments of 2.0217%, on a weighted average basis, on the notional amounts, while KeyBank and Mizuho are obligated to make monthly floating rate payments based on one-month LIBOR or daily SOFR to us referencing the same notional amounts. For purposes of hedge accounting under ASC 815, Derivatives and Hedging, we have designated these interest rate swaps as cash flow hedges of interest rate risk. See Notes 7 and 8 to our consolidated financial statements for additional information.

On April 13, 2022, we paid of a premium of approximately $12.7 million and entered into an interest rate cap transaction with Goldman Sachs Bank USA with a notional amount of $300.0 million. The interest rate cap effectively caps one-month term SOFR on $300.0 million of our floating rate debt at 1.50%. The interest rate cap expires on November 1, 2025.

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Reference Rate Reform

On March 5, 2021, the Financial Conduct Authority of the U.K. (the “FCA”) announced that one-month LIBOR will either cease to be provided by any administrator or no longer be representative immediately after June 30, 2023. This announcement has several implications, including setting the spread that may be used to convert the index rates in our debt and hedging contracts from LIBOR to an alternative rate, such as the Secured Overnight Financing Rate.

The Company anticipates that one-month LIBOR will continue to be available at least until June 30, 2023. Any changes adopted by the FCA or other governing bodies in the method used for determining one-month LIBOR may result in a sudden or prolonged increase or decrease in reported one-month LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if one-month LIBOR were to remain available in its current form.

The Company has contracts that are indexed to one-month LIBOR and it is monitoring and evaluating the related risks, which include interest on loans and amounts received/paid on derivative instruments. These risks arise in connection with transitioning contracts to an alternative rate, including any resulting value transfer that may occur. Transitions and alternative rates are likely to vary by contract. The value of loans, securities, or derivative instruments tied to one-month LIBOR, as well as interest rates on our current or future indebtedness, may also be impacted if one-month LIBOR is unrepresentative or discontinued. For some instruments the method of transitioning to an alternative reference rate may be challenging, especially if we cannot agree with the respective counterparty about how to make the transition or upon which alternative rate is appropriate.

While we expect one-month LIBOR to be available in substantially its current form until at least June 30, 2023, it is possible that one-month LIBOR will become unavailable prior to that point. This could result, for example, if a sufficient number of banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate will be accelerated and magnified.

Alternative rates and other market changes related to the replacement of one-month LIBOR, including the introduction of financial products and changes in market practices, may lead to risk modeling and valuation challenges, such as adjusting interest rate accrual calculations and building a term structure for an alternative rate.

The introduction of an alternative rate also may create additional basis risk and increased volatility as alternative rates are phased in and utilized in parallel with one-month LIBOR.

Adjustments to systems and mathematical models to properly process and account for alternative rates will be required, which may strain the model risk management and information technology functions and result in substantial incremental costs for the Company.

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REIT Tax Election and Income Taxes

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 U.S. federal, state, and local income and margin taxes. We had no significant taxes associated with our TRS for the three and six months ended June 30, 2022 and 2021. 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. NexPoint Homes has elected to be taxed as a REIT under Sections 856 through 860 of the Code and expects to continue to qualify as a REIT.

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.

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 regular 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 June 30, 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 Shares. 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 Shares 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 dividends per share may be substantially different than our taxable earnings and GAAP earnings per share.

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Inflation

The real estate market has not been affected significantly 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. The Federal Reserve, in response to or in anticipation of continued inflation concerns, could continue to raise interest rates. 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.

Seasonality

We believe that our business and related operating results will be impacted by seasonal factors throughout the year. We experience higher levels of tenant move-outs and move-ins during the late spring and summer months, which impacts both our rental revenues and related turnover costs. Furthermore, our property operating costs are seasonally impacted in certain markets for expenses such as repairs to heating, ventilation and air conditioning systems, turn costs and landscaping expenses during the summer season. Additionally, our SFR properties are at greater risk in certain markets for adverse weather conditions such as extreme cold weather in winter months and hurricanes in late summer months.

Off-Balance Sheet Arrangements

As of June 30, 2022 and December 31, 2021, 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 recently issued 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 report.

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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 (the “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 to our consolidated financial statements), 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.

The allocation of Total Consideration to the various components of properties acquired during the year can have an effect on our net loss due to the useful depreciable and amortizable lives applicable to each component and the recognition of the related depreciation and amortization expense. For example, if a greater portion of the Total Consideration is allocated to land, which does not depreciate, our net income would be higher. Typically, we allocate between 10% to 30% of the Total Consideration to land.

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 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 costs as a cost 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 interest 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.

Impairment

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. No significant impairments on operating properties were recorded during the years ended December 31, 2021 and 2020 or the three and six months ended June 30, 2022 and 2021.

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Implications of being an Emerging Growth Company and Smaller Reporting Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”) and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to take advantage of this extended transition period. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates for such new or revised standards. We may elect to comply with public company effective dates at any time, and such election would be irrevocable pursuant to Section 107(b) of the JOBS Act.

We could remain an “emerging growth company” until the earliest of (1) the end of the fiscal year following the fifth anniversary of the date of the first sale of shares of our common stock pursuant to an effective registration statement, (2) the last day of the fiscal year in which our annual gross revenues exceed $1.07 billion, (3) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (4) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

We are also a “smaller reporting company” as defined in the Exchange Act, and may elect to take advantage of certain of the scaled disclosures available to smaller reporting companies. We may be a smaller reporting company even after we are no longer an “emerging growth company.”

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

Item 4. 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 Interim President and Chief Financial Officer, evaluated, as of June 30, 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 Interim President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 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 Interim 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.

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 15-d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed under Item 1A, “Risk Factors,” of our Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Sales of Shares

The following table presents information regarding the sale of Shares in the Continuous Offering and the DRIP that have not been previously disclosed in Current Reports on Form 8-K.

	Common Stock Private Offering						Common Stock DRIP
Date	Shares Sold		Sale Price (1)		Gross Proceeds		Shares Reinvested		Sale Price (2)		Gross Proceeds (3)		Total Gross Proceeds
May 13, 2022		2,615	$	58.81	$	154		—	$	—	$	—	$	154
June 30, 2022		—		—		—		120,496		58.05		7,046		7,046
July 26, 2022		185,298		58.32		10,807		—		—		—		10,807
		187,913			$	10,961		120,496			$	7,046	$	18,007

(1)

Sale price is the per share weighted average for the sale date which includes upfront selling costs.

(2)

Shares issued under DRIP are generally issued at a 3% discount to the Company’s then-current NAV.

(3)

For Shares issued under the DRIP, we do not receive any cash proceeds from the transaction as the shareholder receives shares in lieu of the cash dividend. Refer to Note 7 for further discussion.

An aggregate of approximately $0.8 million in selling commissions and fees were paid in connection with sales of Shares in the Continuous Offering in the above transactions. No underwriting discount or commission is applicable to sales pursuant to the DRIP.

The Company issued the Shares noted above to accredited investors in reliance upon the exemptions from registration under the Securities Act Securities Act provided by Rule 506(b) under Regulation D promulgated under the Securities Act and Section 4(a)(2) of the Securities Act.

Repurchase of Shares

The Company has adopted a share repurchase plan (the “Share Repurchase Plan”) pursuant to which investors may request on a quarterly basis that the Company repurchase all or a portion of their Shares, subject to certain terms and conditions. Under the Share Repurchase Plan, shares will be repurchased at the most recent NAV per share in effect, which will generally be equal to our prior quarter’s or month’s NAV per share. The Share Repurchase Plan began on November 1, 2019. The total amount of aggregate repurchases of Shares is limited to no more than 5% of the Company’s aggregate NAV per calendar quarter. For additional discussion and information, see “Exhibit 4.1. Description of Registrant’s Securities to be Registered—Share Repurchase Plan” in our Annual Report. The table below contains information regarding the repurchases of Shares by the Company pursuant to the Share Repurchase Plan during the three months ended June 30, 2022.

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that may yet be Purchased under the Plans or Programs (in thousands)
April 1 - April 30		—	$	—		—	$	—
May 1 - May 31		—		—		—		—
June 1 - June 30		437,357		59.85		437,357		72,064
Total		437,357	$	59.85		437,357	$	72,064

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

EXHIBIT INDEX

Exhibit Number	Description

10.1	Increase Agreement, Joinder, and Second Amendment to Credit Agreement, dated as of April 8, 2022, among VineBrook Homes Operating Partnership, L.P., as parent borrower, certain of its subsidiaries, as subsidiary borrowers, the lenders party thereto, KeyBank National Association, as administrative agent, Citizens Bank, N.A., as documentation agent, BMO Capital Markets Corp., Raymond James Bank, Truist Securities, Inc., Wells Fargo Bank, National Association and Citizens Bank, N.A. as co-syndication agents, and KeyBanc Capital Markets Inc., BMO Capital Markets Corp., Raymond James Bank, Truist Securities, Inc., Wells Fargo Bank, National Association and Citizens Bank, N.A. as joint lead arrangers and joint bookrunners (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on April 13, 2022).

10.2*	Increase Agreement, Joinder and Third Amendment to Credit Agreement, dated as of May 20, 2022, among VineBrook Homes Operating Partnership, L.P., as parent borrower, certain of its subsidiaries, as subsidiary borrowers, KeyBank National Association, as administrative agent, and Bank of America, N.A., as a new lender.

10.3	Contribution Agreement, dated as of June 8, 2022, between VineBrook Homes Operating Partnership, L.P. and NexPoint Homes Trust, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on June 14, 2022).

10.4	Contribution Agreement, dated as of June 8, 2022, between NexPoint Homes Trust, Inc., NexPoint SFR Operating Partnership, L.P., NexPoint Diversified Real Estate Trust, NRESF REIT Sub, LLC, NFRO REIT Sub, LLC, GAF REIT Sub, LLC, Randy Hagedorn, Adam Levinson and Richard Scola (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the Company on June 14, 2022).

10.5	Form of 7.50% Convertible Notes of NexPoint Homes, Inc., due June 30, 2027 (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by the Company on June 14, 2022).

10.6	Form of 7.50% Convertible Notes of NexPoint SFR Operating Partnership, L.P., due June 30, 2027 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed by the Company on June 14, 2022).

10.7	Amended and Restated Limited Partnership of NexPoint SFR Operating partnership, L.P., dated as of June 8, 2022 (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed by the Company on June 14, 2022).

10.8*	Advisory Agreement, dated as of June 8, 2022, by and between NexPoint Homes Trust, Inc. and NexPoint Real Estate Advisors XI, L.P.

10.9*	Management Agreement, dated as of June 8, 2022, by and among NexPoint SFR Operating Partnership, L.P. and HomeSource Operations LLC.

31.1*	Certification of Interim President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1+	Certification of Interim President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*	Inline XBRL Instance Document

101.SCH*	Inline XBRL Taxonomy Extension Schema Document

101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

+ Furnished herewith.

Table of Contents

SIGNATURES

Pursuant to the requirements 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.

VineBrook Homes Trust, Inc.

Signature	Title	Date

/s/ Brian Mitts		August 15, 2022
Brian Mitts	Interim President, Chief Financial Officer, Treasurer and Assistant Secretary
	(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

ex_409560.htm

Exhibit 10.2

Execution Version

INCREASE AGREEMENT, JOINDER, AND THIRD AMENDMENT TO CREDIT AGREEMENT

THIS INCREASE AGREEMENT, JOINDER, AND THIRD AMENDMENT TO CREDIT AGREEMENT (this “Agreement”) is dated as of May 20, 2022 by and among VINEBROOK HOMES OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (“Parent Borrower”), and certain of its subsidiaries, as “Subsidiary Borrowers”, KEYBANK NATIONAL ASSOCIATION, a national banking association (in its individual capacity, “KeyBank”), as administrative agent (together with any successor appointed pursuant to Article VIII of the Credit Agreement (defined below), the “Administrative Agent”) and Bank of America, N.A., as a “New Lender” (“New Lender”).

A. The Borrowers, the Administrative Agent and the Lenders are party to that certain Amended and Restated Revolving Credit Agreement, dated as of November 3, 2021, as amended by that certain Increase Agreement, Joinder and First Amendment to Credit Agreement dated as of December 9, 2021 (as further amended and in effect as of the date hereof, the “Credit Agreement”, and as further amended by this Agreement, the “Amended Credit Agreement”);

B. The Borrowers have requested, pursuant to Section 2.22 of the Credit Agreement, an increase in the Maximum Revolving Commitment to NINE HUNDRED THIRTY-FIVE MILLION AND 00/100 DOLLARS ($935,000,000.00);

C. New Lender desires to join into the Credit Agreement as a “Lender” as provided herein; and

D. The Borrowers and the Administrative Agent have agreed to make certain modifications to the Credit Agreement to correct certain scrivener’s errors therein;

NOW, THEREFORE, in consideration of the mutual promises herein contained and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows:

1. CREDIT AGREEMENT DEFINITIONS. Unless otherwise expressly defined herein, capitalized terms used but not defined herein shall have the meaning given to such terms in the Amended Credit Agreement.

2. INCREASE IN COMMITMENTS. Subject to satisfaction of the conditions set forth in Section 6 of this Agreement:

2.01. The parties hereto agree and acknowledge that, effective as of the Second Amendment Effective Date (as defined below), the Maximum Revolving Commitment is $835,000,000.00.

2.02. Each Lender party hereto (including New Lender) hereby acknowledges, agrees and confirms, by its execution of this Agreement, that on the Third Amendment Effective Date, the amount of its Revolving Commitment under the Credit Agreement is set forth in Schedule 2.01 of the Credit Agreement (as amended hereby).

2.03. The Administrative Agent shall calculate the net amount to be paid or received by each Lender in connection with the increase effected hereunder on the Third Amendment Effective Date. New Lender shall make the net amount of its required payment available to the Administrative Agent, in same day funds, at the office of the Administrative Agent not later than 12:00 P.M. (New York time) on the Third Amendment Effective Date. The Administrative Agent shall distribute on the Third Amendment Effective Date the proceeds of such amounts to the Lenders entitled to receive payments pursuant to this Section.

3. JOINDER OF NEW LENDER.

3.01. By its signature below, New Lender joins in the execution of, and becomes a party to, the Credit Agreement and the other Loan Documents as a Revolving Lender and a Lender with the Revolving Commitment set forth in Schedule 2.01 of the Credit Agreement (as amended hereby) and irrevocably assumes all rights and obligations in its capacity as a Revolving Lender and a Lender under the Credit Agreement and the other Loan Documents to the extent of such Revolving Commitment.

3.02. New Lender (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Agreement and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement; (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement); (iii) from and after the date hereof, it shall be bound by the provisions of the Amended Credit Agreement as a Lender thereunder and, to the extent of its Revolving Commitment set forth in Schedule 2.01 of the Credit Agreement (as amended hereby), shall have the obligations of a Lender thereunder; (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Agreement and to acquire its Revolving Commitment on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender; and (v) it has delivered any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by it; (b) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers as are reasonably incidental thereto pursuant to the terms of the Loan Documents; and (c) agrees that: (i) it will, independently and without reliance on the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents; and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

3.03. By its signature below, each of the Parent Borrower and the Administrative Agent consents to the addition of New Lender as a Lender under the Credit Agreement.

4. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the Third Amendment Effective Date (as defined below):

4.01. BofA Securities, Inc. is hereby designated as a joint lead arranger and joint bookrunner and a co-syndication agent under the Credit Agreement. From and after the date of this Agreement, the term “Arranger” as used in the Credit Agreement shall include BofA Securities, Inc., in its capacity as a joint lead arranger and bookrunner.

4.02. Schedule 2.01 of the Credit Agreement is hereby amended and restated in its entirety as set forth on Exhibit A to this Agreement.

5. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby represents and warrants to the Administrative Agent and the Lenders that, as of the date hereof:

The representations and warranties of each Borrower and each other Credit Party contained in Article III of the Credit Agreement or in any other Loan Document are true and correct on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes hereof, the representations and warranties contained in Section 3.04 of the Credit Agreement shall be deemed to refer to the most recent financial statements furnished pursuant to clauses (a) and (b), respectively, of Section 5.01 of the Credit Agreement.

To such Borrower’s knowledge, no Default or Event of Default has occurred and is continuing or would result from the increase in the Maximum Total Commitment.

This Agreement has been duly authorized, executed and delivered by each Borrower so as to constitute the legal and binding obligation of such Borrower, enforceable against it in accordance with its terms, subject to Debtor Relief Laws and equitable principles.

6. CONDITIONS PRECEDENT. The effectiveness of this Agreement is subject to the conditions precedent that Administrative Agent shall have received the following (the date when such conditions shall have been satisfied or waived, the “Third Amendment Effective Date”):

6.01. Agreement. This Agreement duly executed and delivered by each Borrower, New Lender, and each other Lender party hereto;

6.02. Notes. If requested by New Lender, a Note, payable to New Lender in the amount of its respective Commitment (after giving effect hereto), duly executed and delivered by the Borrowers;

6.03. Evidence of Authority. Evidence satisfactory to the Administrative Agent that all corporate action necessary to authorize the execution, delivery and performance by the Borrowers of this Agreement shall have been duly and effectively taken;

6.04. Constituent Documents. A certificate from a responsible officer (not individually, but in his or her capacity as such officer) of each Borrower that its authority documents and certificates that were previously delivered to the Administrative Agent in connection with the Credit Agreement have not been amended or modified since such date; and

6.05. Fees and Expenses. In connection with this Agreement, the Administrative Agent, New Lender, and the Arranger shall have received all fees, expenses, and other amounts due and payable under the Loan Documents in connection with this Agreement, including, without limitation, the applicable Facility Increase Fee and, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrowers hereunder.

7. NO OTHER AMENDMENTS; RATIFICATION OF LOAN DOCUMENTS. Except for the amendments set forth in Sections 2 and 4 of this Agreement, (a) the Credit Agreement and the other Loan Documents shall remain unchanged and in full force and effect and (b) nothing in this Agreement is intended, or shall be construed, to constitute a novation or an accord and satisfaction of any Borrower’s or Guarantor’s Obligations under or in connection with the Credit Agreement or any other Loan Document. Each Credit Party hereby ratifies, confirms and reaffirms all of the terms and conditions of the Credit Agreement and each of the other Loan Documents, and further acknowledges and agrees that all of the terms and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect, in each case, except as expressly provided in this Agreement. This Agreement shall constitute a Loan Document for all purposes.

8. MISCELLANEOUS.

8.01. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

8.02. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted by the Amended Credit Agreement.

8.03. Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement, unless such continued effectiveness of this Agreement, as modified, would be contrary to the basic understandings and intentions of the parties as expressed herein.

8.04. Headings. Section headings are for convenience of reference only and shall in no way affect the interpretation of this Agreement.

8.05. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 6 of this Agreement, this Agreement shall become effective when it shall have been executed by Administrative Agent and when Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.

Remainder of Page Intentionally Left Blank
Signature Pages Follow.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

PARENT BORROWER:

VINEBROOK HOMES OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership

By: /s/ Brian Mitts______________________________

Name: Brian Mitts

Title: Authorized Representative

SUBSIDIARY BORROWERS:

VB OP HOLDINGS LLC,
a Delaware limited liability company

By: /s/ Brian Mitts______________________________

Name: Brian Mitts

Title: Authorized Representative

VB ONE, LLC,
a Delaware limited liability company

By: /s/ Brian Mitts______________________________

Name: Brian Mitts

Title: Authorized Representative

TRUE PIT2017-1, LLC,
a Delaware limited liability company

By: /s/ Brian Mitts______________________________

Name: Brian Mitts

Title: Authorized Representative

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement

TRUE PIT2017-2, LLC,
a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

TRUE JACK2017-1, LLC,
a Delaware limited liability company

By: /s/ Brian Mitts______________________________

Name: Brian Mitts

Title: Authorized Representative

TRUE JACK2017-2, LLC,
a Delaware limited liability company

By: /s/ Brian Mitts______________________________

Name: Brian Mitts

Title: Authorized Representative

TRUE OM2016-1, LLC,
a Delaware limited liability company

By: /s/ Brian Mitts______________________________

Name: Brian Mitts

Title: Authorized Representative

TI KC BRAVO, LLC,
a Delaware limited liability company

By: /s/ Brian Mitts______________________________

Name: Brian Mitts

Title: Authorized Representative

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement

TRUE KC2016-1, LLC,
a Delaware limited liability company

By: /s/ Brian Mitts______________________________

Name: Brian Mitts

Title: Authorized Representative

TRUE MEM2016-1, LLC,
a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

P FIN VI HOLDINGS, LLC,
a Delaware limited liability company

By: /s/ Brian Mitts______________________________

Name: Brian Mitts

Title: Authorized Representative

P FIN VII MEM HOLDINGS, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts______________________________

Name: Brian Mitts

Title: Authorized Representative

P FIN VII STL HOLDINGS, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement

P FIN VII KC HOLDINGS, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

P FIN V FL HOLDINGS, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

P FIN V NC HOLDINGS, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

P FIN V NM HOLDINGS, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

P FIN II F HOLDINGS, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement

P FIN VI, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

P FIN VII MEM, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

P FIN VII STL, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

P FIN VII KC, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

P FIN V FL, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement

P FIN V NC, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

P FIN V NM, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

P FIN II F, LLC,

a Delaware limited liability company

By: /s/ Brian Mitts_____________________________

Name: Brian Mitts

Title: Authorized Representative

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement

The Guarantor joins in the execution of this Agreement to evidence its agreement to the provisions of Section 7 of this Agreement.

	VINEBROOK HOMES TRUST, INC., a Maryland corporation


	By:	/s/ Brian Mitts
	Name:	Brian Mitts
	Title:	Authorized Representative

Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement

	ADMINISTRATIVE AGENT: KEYBANK NATIONAL ASSOCIATION, as Administrative Agent


	By:	/s/ Christopher T. Neil
	Name:	Christopher T. Neil
	Title:	Senior Banker

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement

	NEW LENDER: BANK OF AMERICA, N.A., as a New Lender


	By:	/s/ Stephanie Mejia
	Name:	Stephanie Mejia
	Title:	Vice President

Signature Page to
Increase Agreement, Joinder, and Third Amendment to A&R Credit Agreement

EXHIBIT A

Schedule 2.01

LENDER COMMITMENTS

LENDER	REVOLVING COMMITMENT	APPLICABLE PERCENTAGE
KeyBank National Association	$125,000,000	13.368983957219%
Truist Bank	$125,000,000	13.368983957219%
BMO Harris Bank N.A.	$100,000,000	10.695187165775%
Raymond James Bank	$100,000,000	10.695187165775%
Mizuho Bank, Ltd.	$100,000,000	10.695187165775%
Wells Fargo Bank, National Association	$100,000,000	10.695187165775%
Bank of America, N.A.	$100,000,000	10.695187165775%
Citizens Bank, N.A.	$75,000,000	8.021390374332%
First Financial Bank	$30,000,000	3.208556149733%
Comerica Bank	$25,000,000	2.673796791444%
Synovus Bank	$25,000,000	2.673796791444%
S&T Bank	$20,000,000	2.139037433155%
Arvest Bank	$10,000,000	1.069518716578%
TOTAL:	$935,000,000	100%

Exhibit B

ex_412497.htm

Exhibit 10.8

ADVISORY AGREEMENT

BY AND BETWEEN

NEXPOINT HOMES TRUST, INC.

AND

NEXPOINT REAL ESTATE ADVISORS XI, L.P.

TABLE OF CONTENTS

		Page

1.	Definitions	1
2.	Appointment	4
3.	Duties of the Adviser	4
4.	Authority of Adviser	7
5.	No Partnership or Joint Venture	7
6.	Bank Accounts	7
7.	Records; Access; Confidentiality	7
8.	Limitations on Activities	8
9.	Compensation	8
10.	Expenses	9
11.	Other Services	9
12.	Other Activities of the Adviser	9
13.	Term and Termination	10
14.	Payments and Duties Upon Termination	10
15.	Board Designees	11
16.	Internalization	11
17.	Limitation on Liability, Limitation of Liability, Exculpation and Indemnification by the Company and its Subsidiaries	11
18.	Indemnification by the Adviser	12
19.	Notices	13
20.	Modification	14
21.	Severability	14
22.	Governing Law; Arbitration	14
23.	Entire Agreement	14
24.	No Waiver	14
25.	Pronouns and Plurals	14
26.	Headings	14
27.	Execution in Counterparts	14

ADVISORY AGREEMENT

THIS ADVISORY AGREEMENT (this “Agreement”), dated as of June 8, 2022, is entered into by and between NexPoint Homes Trust, Inc., a Maryland corporation (the “Company”) and NexPoint Real Estate Advisors XI, L.P., a Delaware limited partnership (the “Adviser”).

RECITALS

A. The Company is a Maryland corporation created in accordance with the Maryland General Corporation Law and intends to elect to qualify as a REIT for U.S. federal income tax purposes beginning with the taxable year ending December 31, 2022.

B. The Company is a limited partner of NexPoint SFR Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”) and, as of the effective date of this Agreement, owns 54.9% of the outstanding partnership units of the Operating Partnership.

C. The Company desires to avail itself of the experience, sources of information, advice, assistance and certain facilities of the Adviser and its Affiliates and to have the Adviser undertake the duties and responsibilities set forth in this Agreement, on behalf of and subject to, the supervision of the Board of Directors, all as provided in this Agreement.

D. The Adviser is willing to render such services, subject to the supervision of the Board of Directors, on the terms and conditions set forth in this Agreement.

E. The Board of Directors have approved this Agreement.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Definitions. The following terms shall have the meanings set forth in this Section 1 for purposes of this Agreement. Other terms are defined in the text of this Agreement.

“1940 Act” means the Investment Company Act of 1940, as amended.

“Advisory Fee” means an annual fee, payable monthly, in an amount equal to 0.75% of Consolidated Enterprise Value; provided, however, that when calculating Net Asset Value for Consolidated Enterprise Value for the Advisory Fee, Net Asset Value will exclude (i) the capital contributed by NexPoint and its Affiliates or the Manager to the Company and the Operating Partnership and (ii) the capital contributed by the management team of Manager as required by Section 10 of the Side Letter in connection with the sale of the Existing Portfolio (as defined in the Side Letter) to the Company or Operating Partnership. For the avoidance of doubt, contributions in connection with the sale of the Existing Portfolio to the Company or Operating Partnership by investors that are not the management team of the Manager or the Manager will be included in Net Asset Value for Consolidated Enterprise Value for the Advisory Fee.

“Affiliate” or “Affiliated” means with respect to any Person, (a) any Person directly or indirectly controlling, controlled by or under common control with such other Person, (b) any executive officer, director, trustee or general partner of such other Person, and (c) any legal entity for which such Person acts as an executive officer, director, trustee or general partner. For purposes of this definition, the terms “controls,” “is controlled by,” or “is under common control with” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity, whether through ownership or voting rights, by contract or otherwise.

“Articles of Incorporation” means the Articles of Amendment and Restatement of the Company, as hereafter amended and/or restated from time to time.

“Average Consolidated Enterprise Value” means the average of the Consolidated Enterprise Value at the end of each month (or partial month) (i) for which any fee under this Agreement is calculated or (ii) during the year for which any Expense reimbursement under this Agreement is calculated.

“Board of Directors” or “Board” means the Board of Directors of the Company.

“Bylaws” means the bylaws of the Company, as hereafter amended and/or restated from time to time.

“Capitalization Fee” means, for each Capitalization Transaction, a fee in an amount equal to 0.25% of such Capitalization Transaction, payable at the end of the month in which such Capitalization Transaction is completed.

“Capitalization Transaction” means a transaction in which the Company, the Operating Partnership or any of their respective subsidiaries receives equity or debt capital.

“Cause Event” means (a) a final judgment by any court or governmental body of competent jurisdiction not stayed or vacated within 30 days that the Adviser, any of its agents or any of its assignees has committed a felony or a material violation of applicable securities laws that has a material adverse effect on the business of the Company or the ability of the Adviser to perform its duties under the terms of this Agreement, (b) an order for relief in an involuntary bankruptcy case relating solely to the Adviser or the Adviser authorizing or filing a voluntary bankruptcy petition on its own behalf, (c) the dissolution of the Adviser, or (d) a determination that the Adviser has (i) committed fraud against the Company, (ii) misappropriated or embezzled funds of the Company, (iii) acted in a manner constituting bad faith, willful misconduct, gross negligence or reckless disregard in the performance of its duties under this Agreement, (iv) failed to act, where such failure to act constituted bad faith, willful misconduct, gross negligence or reckless disregard in the performance of its duties under this Agreement, or (v) defaulted in the performance or observance of any material term, condition or covenant contained in this Agreement and such default shall have continued for a period of 30 days after the Company had given written notice to the Adviser of such default; provided, however, that if any of the actions or omissions described in this clause (d) are caused by an employee and/or officer of the Adviser or one of its Affiliates and the Adviser takes all necessary action against such person and cures the damage caused by such actions or omissions within 30 days of such determination, then such event shall not constitute a Cause Event.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

“Consolidated Enterprise Value” means (x) the aggregate number of outstanding Shares and OP Units (excluding OP Units owned by the Company) multiplied by the then-current Net Asset Value plus (y) the then-current outstanding debt of the Company and the Operating Partnership and their subsidiaries plus the then-current redemption value of any outstanding preferred equity of the Company and the Operating Partnership (excluding preferred equity of the Operating Partnership owned by the Company).

“Director” means a member of the Board of Directors.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“GAAP” means the U.S. generally accepted accounting principles.

“Independent Director” means a Director who qualifies as an “independent director” under the NYSE listing rules.

“Internalization Fee” means an internalization fee equal to four times the sum of the annualized Advisory Fee earned by the Advisor for the fiscal quarter ending immediately preceding the date the Company and the Adviser agree to the Internalization; provided, however, if this Agreement is terminated prior to the end of the first fiscal quarter ending after of the date of this Agreement, the Advisory Fee will be annualized based on the Advisory Fee earned by the Adviser during the period the Agreement was in effect; provided, further, the Internalization Fee shall be capped at 5.0% of the Consolidated Enterprise Value.

“Investment Committee” means the investment committee of the Operating Partnership.

“Investments” means any investments by the Company or its subsidiaries in Real Estate Assets or any other asset.

“Joint Ventures” means any joint venture or partnership arrangements (other than between the Company and the Operating Partnership) in which the Company or any of its subsidiaries is a co-venturer, member or partner, which are established to own Investments.

“Loans” means any indebtedness or obligations in respect of borrowed money or evidenced by bonds, notes, debentures, deeds of trust, letters of credit or similar instruments, including mortgages and mezzanine loans.

“Management Agreement” means that certain Management Agreement, dated June 8, 2022, by and among the Operating Partnership and the Manager as may be amended, restated, modified, supplemented or replaced from time to time.

"Manager" means HomeSource Operations LLC, a Delaware limited liability company.

“Net Asset Value” means the net asset value of the Company and the Operating Partnership to be calculated by Green Street Advisors (“GSA”) or another reputable third party on a quarterly or monthly basis, but no less frequently than quarterly, using a methodology developed in conjunction with GSA (or other firm) and the Company management team to be approved by the Board of Directors and the Investment Committee of the Operating Partnership.

“NexPoint” means NexPoint Advisors, L.P., a Delaware limited partnership.

“NYSE” means the New York Stock Exchange.

“Offering” means any public or private offering of equity or debt securities of the Company that is consummated as of or at a time following the date of this Agreement, excluding Shares (or securities convertible or exchangeable for Shares) offered under any employee benefit plan of the Company or its Affiliates.

“Offering Expenses” means any and all expenses (other than underwriters’ discounts) paid or to be paid by the Company in connection with an Offering, including, without limitation, the Company’s legal, accounting, printing, mailing and filing fees and other documented offering expenses.

“Operating Expenses” means all out-of-pocket expenses of the Adviser in performing services for the Company, including the expenses incurred by the Adviser in connection with any provision by the Adviser of legal, accounting, financial and due diligence services performed by the Adviser that outside professionals or outside consultants would otherwise perform. Operating Expenses also include compensation expenses under any Company long term incentive plan and the Company’s pro rata share of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Adviser required for the Company’s operations. Operating Expenses do not include expenses for the administrative services described on Exhibit A to this Agreement.

“OP Units” means any class of common units of limited partnership interests in the Operating Partnership.

“Person” means an individual, corporation, partnership, joint venture, association, company (whether of limited liability or otherwise), trust, bank or other entity, or government or any agency or political subdivision of a government.“

Real Estate Assets” means any investment by the Company or its subsidiaries (including, without limitation, reserves for capital expenditures) in unimproved and improved Real Property (including, without limitation, fee or leasehold interests, options and leases) either directly, through a direct or indirect subsidiary of the Company or through a Joint Venture.

“Real Property” means real property owned from time to time by the Company, either directly, through a direct or indirect subsidiary of the Company or through a Joint Venture, which consists of (a) land only, (b) land, including the single-family and multi-family residences located thereon, (c) single-family and multi-family residences only, (d) real estate-related securities (including preferred stock), mortgage, bridge or mezzanine loans, or (e) such Investments the Board or the Adviser designate as Real Property to the extent such Investments could be classified as Real Property.

“REIT” means a “real estate investment trust” within the meaning of Sections 856 through 860 of the Code.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Shares” means the shares of the Company’s common stock, par value $0.01 per share.

“Side Letter” means that certain side letter, dated June 8, 2022, by and among the Company, the Operating Partnership, the Manager and other parties thereto, as amended restated and/or supplemented from time to time.

“Stockholders” means the registered holders of the Shares.

“Termination Fee” means a termination fee equal to four times the sum of the annualized Advisory Fee earned by the Adviser for the fiscal quarter ending immediately preceding the termination date of the Agreement; provided, however, if this Agreement is terminated prior to the end of the first fiscal quarter ending after the date of this Agreement, the Advisory Fee will be annualized based on the Advisory Fee earned by the Adviser during the period the Agreement was in effect.

“Value Per Share and OP Unit” means the most recent price paid for a Share in connection with an Offering or, if there is no current Offering, the then-current Net Asset Value per Share and OP Unit.

2. Appointment. The Company hereby appoints the Adviser to serve as its adviser to perform the services set forth herein on the terms and conditions set forth in this Agreement, and the Adviser hereby accepts such appointment. Except as otherwise provided in this Agreement, the Adviser hereby agrees to use its commercially reasonable efforts to perform each of the duties set forth herein. The appointment of the Adviser shall be exclusive to the Adviser, except to the extent that the Adviser elects, in its sole and absolute discretion, subject to the terms of this Agreement, to cause the duties of the Adviser as set forth herein to be provided by third parties and/or its Affiliates.

3. Duties of the Adviser. The Adviser, in its capacity as manager of the assets and the day-to-day operations of the Company, at all times will be subject to the supervision of the Company’s Board of Directors and will have only such functions and authority as the Company may delegate to it including, without limitation, the functions and authority identified herein and delegated to the Adviser hereby. The Adviser will be responsible for the day-to-day operations of the Company and will perform (or cause to be performed) such services and activities relating to the assets and operations of the Company as may be appropriate, including, without limitation:

(a) serve as the Company’s investment and financial advisor;

(b) vote on behalf of the Company all equity securities of the Operating Partnership and any other equity securities owned, directly or indirectly, by the Company;

(c) provide the daily management for the Company and perform and supervise the various administrative functions necessary for the day-to-day management of the operations of the Company, including the administrative services described on Exhibit A to this Agreement;

(d) investigate, select, and, on behalf of the Company, engage and conduct business with such Persons as the Adviser deems necessary to the proper performance of its obligations hereunder, including, but not limited to, consultants, accountants, correspondents, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, banks, builders, developers, property owners, real estate management companies, real estate operating companies, securities investment advisors, mortgagors, the registrar and the transfer agent and any and all agents for any of the foregoing, including Affiliates of the Adviser, and Persons acting in any other capacity deemed by the Adviser necessary or desirable for the performance of any of the foregoing services, including, but not limited to, entering into contracts in the name of the Company with any of the foregoing;

(e) consult with the officers and Directors of the Company and assist the Directors in the formulation and implementation of the Company’s (including, as it relates to any of its subsidiaries) financial policies, and, as necessary, furnish the Board with advice and recommendations with respect to the making of investments consistent with the investment objectives and policies of the Company (including, as it relates to any of its subsidiaries) and in connection with any borrowings proposed to be undertaken by the Company and its subsidiaries;

(f) subject to the provisions of Section 4 hereof, (i) participate in formulating an investment strategy and asset allocation framework, (ii) locate, analyze and select potential Investments, (iii) structure and negotiate the terms and conditions of transactions pursuant to which acquisitions and dispositions of Investments will be made, (iv) research, identify, review and recommend acquisitions and dispositions of Investments to the Board and make Investments on behalf of the Company in compliance with the investment objectives and policies of the Company, (v) negotiate the terms of and arrange for financing and refinancing and make other changes in the asset or capital structure of, and dispose of, reinvest the proceeds from the sale of, or otherwise deal with, Investments, (vi) negotiate and enter into leases and service contracts for Real Estate Assets and, to the extent necessary, perform all other operational functions for the maintenance and administration of such Real Estate Assets, (vii) actively oversee and manage Investments for purposes of meeting the Company’s investment objectives and reviewing and analyzing financial information for each of the Investments and the overall portfolio, (viii) select Joint Venture partners, structure and negotiate corresponding agreements and oversee and monitor these relationships, (ix) engage, oversee, supervise and evaluate property managers who perform services for the Company, (x) engage, oversee, supervise and evaluate Persons with whom the Adviser contracts to perform certain of the services required to be performed under this Agreement, (xi) manage accounting and other record keeping functions for the Company, including reviewing and analyzing the capital and operating budgets for the Real Estate Assets and generating an annual budget for the Company, and if requested, its subsidiaries, and (xii) recommend various liquidity events to the Board when appropriate;

(g) upon request, provide the Board with periodic reports regarding prospective Investments that are actively being considered by the Investment Committee of the Operating Partnership or by the Adviser;

(h) negotiate the terms of and make investments in, and dispositions of, Investments within the discretionary limits and authority as granted by the Board;

(i) within the discretionary limits and authority as granted by the Board, negotiate on behalf of the Company with banks or other lenders for Loans to be made to or guaranteed by the Company, and negotiate on behalf of the Company with investment banking firms and broker-dealers or negotiate private sales of Shares or obtain Loans for the Company, but in no event in such a manner so that the Adviser shall be acting as broker-dealer or underwriter; provided, further, that any fees and costs payable to third parties incurred by the Adviser in connection with the foregoing shall be the responsibility of the Company or, in the case of any guarantee of any obligations of the Operating Partnership, the Operating Partnership;

(j) at least quarterly, and at any other time reasonably requested by the Board, obtain reports (which may, but are not required to, be prepared by the Adviser or its Affiliates), where appropriate, concerning the value of Investments or contemplated Investments of the Company or the Investment Committee of the Operating Partnership;

(k) at least quarterly, and at any other time reasonably requested by the Board, make reports to the Board of its performance of services to the Company under this Agreement (including reports with respect to potential conflicts of interest involving the Adviser or any of its Affiliates), the composition and characteristics of the Company’s portfolio, and compliance with the Company’s investment guidelines and other policies approved from time to time by the Board;

(l) provide the Company with all necessary cash management services;

(m) deliver to, or maintain on behalf of, the Company copies of all appraisals obtained in connection with the Investments in any Real Estate Assets as may be required to be obtained by the Board or the Investment Committee of the Operating Partnership;

(n) notify the Board of all proposed transactions outside of the Adviser’s delegated authority before they are completed and obtain Board approval of same;

(o) negotiate and effect any interests in Investments as may be approved by the Board;

(p) perform investor-relations and Stockholder communications functions for the Company;

(q) render such services as may be reasonably determined by the Board of Directors consistent with the terms and conditions herein;

(r) maintain the Company’s accounting and other records and assist the Company in filing all reports required to be filed by it with the SEC, the Internal Revenue Service and other regulatory agencies, to the extent applicable;

(s) advise the Company regarding the maintenance of the Company’s qualification as a REIT and monitor the Company’s compliance with the various REIT qualification requirements and other rules set forth in the Code and any applicable treasury regulations promulgated under the Code, as amended from time to time, and use its commercially reasonable efforts to cause the Company to qualify as a REIT and maintain its qualification as a REIT for U.S. federal income tax purposes;

(t) advise the Company regarding the maintenance of its exemptions from the status of an investment company required to register under the 1940 Act, and monitor compliance with the requirements for maintaining such exemptions and using commercially reasonable efforts to cause it to maintain such exemptions from such status;

(u) assist the Company in qualifying to do business in all applicable jurisdictions in which the Company or its subsidiaries do business, and ensure that the Company and its subsidiaries obtain and maintain all applicable licenses;

(v) assist the Company in complying with all regulatory requirements applicable to them with respect to their business activities, including preparing or causing to be prepared all financial statements required under applicable regulations and contractual undertakings and all reports and documents, if any, required under the Exchange Act or the Securities Act;

(w) if requested by the Company, provide, or cause another qualified third party to provide, such internal audit, compliance and control services as may be required for the Company and its subsidiaries to comply with applicable law (including the Securities Act and the Exchange Act), regulation (including SEC regulations), and as otherwise requested by the Board;

(x) handle and resolve on behalf of the Company and, if requested, its subsidiaries all routine claims, disputes or controversies, including all routine litigation, arbitration, settlement or other proceedings or negotiations, in which the Company or its subsidiaries may be involved or to which they may become subject, subject to such limitations or parameters as may be imposed from time to time by the Board;

(y) perform and do all things necessary on behalf of the Company in its role as the tax matter partner of the Operating Partnership;

(z) elect to and exercise any call or similar rights that are in favor of the Company or its subsidiaries, including the call rights set forth in the Side Letter;

(aa) designate the two members of the Investment Committee of the Operating Partnership that the Company is entitled to appoint pursuant to the terms of the Agreement of Limited Partnership of the Operating Partnership, as the same is in effect from time to time;

(bb) do all things necessary to assure its ability to render the services described in this Agreement; and

(cc) use commercially reasonable efforts to cause the Company and its subsidiaries to comply with all applicable laws.

Notwithstanding the foregoing, the Adviser may delegate any of the foregoing duties to any Person so long as the Adviser remains responsible for the performance of the duties set forth in this Section 3; provided, however, that the delegation by the Adviser of any of the foregoing duties to another Person shall not result in an increased Advisory Fee or additional expenses payable by the Company hereunder.

4. Authority of Adviser.

(a) Pursuant to the terms of this Agreement (including the restrictions included in this Section 4 and in Section 8), and subject to the continuing and exclusive authority of the Board over the management of the Company, the Company, acting on the authority of the Board of Directors, hereby delegates to the Adviser the authority to perform the services described in Section 3.

(b) For the period and on the terms and conditions set forth in this Agreement, the Company and its subsidiaries hereby constitute, appoint and authorize the Adviser as its true and lawful agent and attorney-in-fact, in its name, place and stead, to negotiate, execute, deliver and enter into agreements, instruments and authorizations on their behalf, on such terms and conditions as the Adviser, acting in its sole and absolute discretion, deems necessary or appropriate (subject to any limitations imposed by the Board). This power of attorney is deemed to be coupled with an interest.

5. No Partnership or Joint Venture. The parties to this Agreement are not partners or joint venturers with each other and nothing herein shall be construed to make them partners or joint venturers or impose any liability as such on either of them.

6. Bank Accounts. The Adviser may establish and maintain one or more bank accounts in its own name for the account of the Company and any of its subsidiaries or in the name of the Company and its subsidiaries and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company or its subsidiaries, consistent with the authority granted under Section 4 and in such other circumstances as the Board may approve, provided that no funds shall be commingled with the funds of the Adviser; and the Adviser shall upon request by the Board render appropriate accountings of such collections and payments to the Board and to the auditors of the Company.

7. Records; Access; Confidentiality. The Adviser shall maintain appropriate books of accounts and records of all its activities hereunder and make such records available for inspection by the Directors and by counsel, auditors and authorized agents of the Company, at any time and from time to time. The Adviser shall at all reasonable times have access to the books and records of the Company and its subsidiaries. The Adviser shall keep confidential any and all information obtained in connection with the services rendered under this Agreement and shall not disclose any such information (or use the same except in furtherance of its duties under this Agreement) to unaffiliated third parties except (a) with the prior written consent of the Board, (b) to legal counsel, accountants or other professional advisors or consultants engaged by the Company, (c) to appraisers, financing sources and others in the ordinary course of the Company’s business, (d) to governmental officials having jurisdiction over the Company and its subsidiaries), (e) in connection with any governmental or regulatory filings of the Company or its subsidiaries, or disclosure or presentations to Company investors, (f) as required by law or legal process to which the Adviser or any Person to whom disclosure is permitted hereunder is a party, (g) to the Manager or members of the Operating Partnership’s Investment Committee, or (h) to the extent such information is otherwise publicly available through the actions of a Person other than the Adviser not resulting from the Adviser’s violation of this Section 7. The confidentiality provisions of this Section 7 shall survive for a period of one year after the expiration or earlier termination of this Agreement.

8. Limitations on Activities. Notwithstanding anything herein to the contrary, the Adviser shall not intentionally or with gross negligence, reckless disregard or bad faith take any action that, would (a) adversely affect the maintenance of the Company’s qualification as a REIT under the Code, unless the Board has determined that the maintenance of the Company’s REIT qualification is not in the best interests of the Company and its Stockholders, (b) subject the Company to regulation under the 1940 Act, or (c) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company or its Shares, or otherwise not be permitted by the Articles of Incorporation or Bylaws, except if such action shall be ordered by the Board, in which case the Adviser shall notify promptly the Board of the Adviser’s judgment of the potential impact of such action and shall refrain from taking such action until it receives further clarification or instructions from the Board. In such event, the Adviser shall have no liability for acting in accordance with the specific instructions of the Board so given. The Adviser shall comply in all material respects with all applicable law and regulations.

9. Compensation.

(a) During the term hereof, as the same may be extended from time to time, the Company shall pay the Adviser the Advisory Fee. The Adviser shall compute each installment of the Advisory Fee as promptly as possible after the end of the month with respect to which such installment is payable. The accrued fees will be payable monthly as promptly as possible after the end of each month during which this Agreement is in effect. If requested by the Board, a copy of the computations made by the Adviser to calculate such installment shall thereafter, for informational purposes only, promptly be delivered to the Board. The Advisory Fee shall be paid in cash unless the Adviser elects, in its sole discretion, to receive all or a portion of the Advisory Fee in Shares or OP Units; provided, that such election to receive all or a portion of the fee in Shares or OP Units shall be made by notice to the Board (the “Election Notice”) at the time the Adviser delivers to the Board the computation of the Advisory Fee for such month. To the extent that the Adviser elects to receive Shares or OP Units in payment of all or a portion of the Advisory Fee for any particular month, the number of Shares or OP Units payable to the Adviser for such month shall equal (i) the dollar amount of the portion of the monthly installment of the Advisory Fee payable in Shares or OP Units (as set forth in the Election Notice) divided by (ii) the Value Per Share and OP Unit. The Advisory Fee shall be payable independent of the performance of the Company or the Investments. The Adviser’s ability to receive Shares or OP Units in payment of all or a portion of the Advisory Fee due to the Adviser under this Agreement shall be subject to complying with all U.S. federal and state securities laws.

(b) During the term hereof, as the same may be extended from time to time, the Company shall pay the Adviser the Capitalization Fee for each Capitalization Transaction. The Adviser shall compute each Capitalization Fee as promptly as possible after the closing of the Capitalization Transaction with respect to which such Capitalization Fee is payable. If requested by the Board, a copy of the computations made by the Adviser to calculate such Capitalization Fee shall thereafter, for informational purposes only, promptly be delivered to the Board. The Capitalization Fee shall be paid in cash unless the Adviser elects, in its sole discretion, to receive all or a portion of the Capitalization Fee in Shares or OP Units; provided, that such election to receive all or a portion of the Capitalization Fee in Shares or OP Units shall be made by an Election Notice to the Board at the time the Adviser delivers to the Board the computation of the Capitalization Fee for such transaction. To the extent that the Adviser elects to receive Shares or OP Units in payment of all or a portion of the Capitalization Fee for any particular Capitalization Transaction, the number of Shares or OP Units payable to the Adviser for such Capitalization Transaction shall equal (i) the dollar amount of the Capitalization Fee payable in Shares or OP Units (as set forth in the Election Notice) divided by (ii) the Value Per Share and OP Unit. The Adviser’s ability to receive Shares or OP Units in payment of all or a portion of the Capitalization Fee due to the Adviser under this Agreement shall be subject to complying with all U.S. federal and state securities laws.

(c) The Adviser may waive a portion of its fees. If this Agreement becomes effective subsequent to the first day of a month or shall terminate before the last day of a month, compensation for such month shall be computed in a manner consistent with the calculation of the fees payable on a monthly basis.

(d) In addition to the fees described herein, the Company will adopt a long term incentive plan, which will provide for awards to certain employees of the Adviser and other participants.

10. Expenses.

(a) In addition to the compensation paid to the Adviser pursuant to Section 9, the Company shall pay directly or reimburse the Adviser for all of the documented Operating Expenses and Offering Expenses (together, “Expenses”) paid or incurred by the Adviser or its Affiliates in connection with the services it provides to the Company and its subsidiaries pursuant to this Agreement. Any Expenses payable by the Company or reimbursable to the Adviser pursuant to this Agreement shall not be in amounts greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s length basis. Reimbursement of Operating Expenses under this Section 10, plus Advisory Fees under Section 9, may not exceed 1.5% of the Average Consolidated Enterprise Value for any calendar year or portion thereof; provided, however, that this limitation will not apply to legal, accounting, financial, due diligence and other service fees incurred in connection with extraordinary litigation, an initial public offering of equity securities of the Company, an Internalization, mergers and acquisitions and other events outside the Company’s 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.

(b) The Adviser shall prepare a statement documenting all Expenses incurred during each month, and shall deliver such statement to the Company within 15 business days after the end of each month. Expenses incurred by the Adviser on behalf of the Company and its subsidiaries and payable pursuant to this Section 10 shall be reimbursed no later than the 15th business day immediately following the date of delivery of such statement of Expenses to the Company.

11. Other Services. Should the Board request that the Adviser or any director, officer or employee thereof render services for the Company and its subsidiaries other than set forth in Section 3, such services shall be separately compensated at such customary rates and in such customary amounts as are agreed upon by the Adviser and the Board, including a majority of the Independent Directors, subject to the limitations contained in the Articles of Incorporation, and shall not be deemed to be services pursuant to the terms of this Agreement.

12. Other Activities of the Adviser. Except as set forth in this Section 12, nothing herein contained shall prevent the Adviser or any of its Affiliates from engaging in or earning fees from other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by NexPoint or its Affiliates; nor shall this Agreement limit or restrict the right of any director, officer, member, partner, employee, or stockholder of the Adviser or its Affiliates to engage in or earn fees from any other business or to render services of any kind to any other partnership, corporation, firm, individual, trust or association and earn fees for rendering such services; provided, however, that the Adviser must devote sufficient resources to the Company’s business to discharge its obligations to the Company under this Agreement. The Adviser may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein, and earn fees for rendering such advice and service. Specifically, it is contemplated that the Company may enter into Joint Ventures or other similar co-investment arrangements with certain Persons, and pursuant to the agreements governing such Joint Ventures or arrangements, the Adviser may be engaged to provide advice and service to such Persons, in which case the Adviser will earn fees for rendering such advice and service.

The Board acknowledges that the Adviser and its Affiliates are subject to various conflicts of interest. The Adviser shall report to the Board the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, which creates or is reasonably likely to create a conflict of interest between the Adviser’s obligations to the Company and its obligations to or its interest in any other partnership, corporation, firm, individual, trust or association.

13. Term and Termination.

(a) Duration. This Agreement shall become effective on the date first set forth above. Unless terminated as herein provided, this Agreement shall remain in full force and effect until the date that is three years after the effective date of this Agreement (the “Initial Term”). Subsequent to the Initial Term, this Agreement shall be deemed to be automatically renewed for successive additional one-year periods (an “Automatic Renewal Term”), unless the Company or the Adviser elects not to renew this Agreement in accordance with Section 13(c) below.

(b) Amendment. No provision of this Agreement may be amended, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the amendment, waiver, discharge or termination is sought. Any amendment of this Agreement shall be approved by either (i) the Company’s Board of Directors or (ii) a vote of the Company’s Stockholders.

(c) Termination. Notwithstanding any other provision of this Agreement to the contrary, (i) upon written notice given 180 days’ prior to the expiration of the Initial Term or any Automatic Renewal Term to the Adviser, the Company may, without cause, in connection with the expiration of the Initial Term or the then-current Automatic Renewal Term, decline to renew this Agreement, whereupon this Agreement shall not be renewed and extended and this Agreement shall terminate effective on the anniversary date of this Agreement next following the delivery of such notice, (ii) no later than 180 days prior to the expiration of the Initial Term or the then-current Automatic Renewal Term, the Adviser may deliver written notice to the Company informing it of the Adviser’s intention to decline to renew this Agreement, whereupon this Agreement shall not be renewed and extended and this Agreement shall terminate effective on the anniversary date of this Agreement next following the delivery of such notice, (iii) the Company may terminate this Agreement upon the occurrence of a Cause Event by giving written notice to the Adviser of the occurrence of a Cause Event, whereupon this Agreement shall terminate 30 days after delivery of such written notice, (iv) the Adviser may terminate this Agreement by giving written notice to the Company in the event that the Company shall default in the performance or observance of any material term, condition or covenant contained in this Agreement and such default shall have continued for a period of 30 days before the Adviser had given written notice to the Company of such default, whereupon this Agreement shall terminate 30 days after delivery of such written notice, (v) the Adviser may terminate this Agreement by giving written notice to the Company in the event that any of the Adviser Designees are not elected or appointed to the Board as set forth in Section 15, whereupon this Agreement shall terminate 30 days after delivery of such written notice and (vi) this Agreement will automatically terminate on the Internalization Closing.

14. Payments and Duties Upon Termination.

(a) Amounts Owed. The Company shall pay the Adviser the Termination Fee before or on the last day of the Initial Term, the Automatic Renewal Term or the end of the 30-day period, as the case may be, provided, that the Company is not required to pay the Adviser the Termination Fee if this Agreement is terminated by the Company as a result of a Cause Event.

(b) Adviser’s Duties. The Adviser shall promptly upon termination of this Agreement:

(i) pay over to the Company all money collected and held for the account of the Company and its subsidiaries pursuant to this Agreement, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled;

(ii) deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;

(iii) deliver to the Board all assets, including all Investments, and documents of the Company and its subsidiaries then in the custody of the Adviser; and

(iv) reasonably cooperate with the Company and its subsidiaries, at the Company’s expense, to provide an orderly management transition.

15. Board Designees. So long as this Agreement is in effect, (a) the Adviser will have the right to designate two individuals (the “Adviser Designees”) that (i) on the date hereof, the Board will appoint to fill a vacancy on the Board and (ii) at each applicable annual meeting of stockholders or special meeting of stockholders at which directors are to be elected, is nominated for election (or re-election) to the Board such that, if elected, there shall be two Adviser Designees serving on the Board, and the Company will take all reasonably necessary action to nominate and include the Adviser Designees in the slate of nominees recommended by the Board for election as directors at each applicable annual meeting of stockholders or special meeting of stockholders at which directors are to be elected, including, without limitation, at every adjournment or postponement thereof, or in a written consent of stockholders relating to the election of directors, and the Company will recommend such individual be elected as a director and will solicit proxies or consents in favor thereof. In the event that a vacancy on the Board is created at any time by the death, disability, retirement, resignation or removal of an Adviser Designee, the Company will take all reasonably necessary action (whether by Board or stockholder action) to cause the vacancy created thereby to be filled as soon as reasonably practicable by a new designee of the Adviser.

16. Internalization. At any time at which the Company and the Adviser mutually agree to internalize the Adviser (the “Internalization”), pursuant to which the Company will purchase all, but not less than all, of the outstanding and issued partnership interests of the Adviser (the "Adviser Equity") from the Adviser’s general partner, NexPoint Real Estate Advisors GP, LLC (the “Adviser GP”), and its limited partners (together with the Adviser GP, the “Equity Holders”), the purchase price for the Adviser Equity shall be equal to the Internalization Fee. At the closing of the Internalization (the "Internalization Closing"), the Company shall pay the Internalization Fee to the Equity Holders in Shares. Each of the Equity Holders’ ability to receive Shares in payment of the Internalization Fee shall be subject to the following: (i) the ownership by the Equity Holder of Shares shall not violate the ownership limits set forth in the Articles of Incorporation or otherwise raise a material risk to the status of the Company as a REIT, after giving effect to any exception from such limit that the Board may grant to the Equity Holder; and (ii) the Company’s issuance of Shares to the Equity Holder shall comply with all applicable restrictions under the U.S. federal securities laws. If the Equity Holder is unable to receive all or a portion of the Internalization Fee in Shares due to the limitations set forth in the preceding sentence, the Company shall pay the Internalization Fee or such portion of the Internalization Fee to such Equity Holder in cash. At the Internalization Closing, the Equity Holders shall transfer the Adviser Equity, free and clear of any lien or encumbrance, and shall deliver to the Company certificates evidencing the Adviser Equity, duly endorsed in blank and accompanied by a duly executed instrument of assignment separate from the certificate, together with any other documentation reasonably requested by the Company to evidence the transfer. For the avoidance of doubt, if the Internalization occurs pursuant to this Section 16, the Adviser shall not be entitled to the Termination Fee provided under Section 14.

17. Limitation of Liability, Exculpation and Indemnification by the Company and its Subsidiaries.

(a) Whether or not expressly provided in this Agreement, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Adviser or any of its respective Affiliates and their respective partners, members, officers, directors, employees and agents (including parties acting as agents for the execution of transactions) (each, a “Covered Person” and collectively, “Covered Persons”) shall be subject to the provisions of this Section 17.

(b) To the fullest extent permitted by law, no Covered Person shall be liable to the Company and its subsidiaries for any act or omission (including but not limited to (i) any act or omission by any Covered Person in connection with the conduct of the business of the Company or its subsidiaries, that is determined by such Covered Person in good faith to be in or not opposed to the best interests of the Company or its subsidiaries, (ii) any act or omission by any Covered Person based on the suggestions of any professional advisor of the Company or its subsidiaries whom such Covered Person believes is authorized to make such suggestions on behalf of the Company or its subsidiaries, (iii) any act or omission by the Company or its subsidiaries, or (iv) any mistake, negligence, misconduct or bad faith of any broker or other agent of the Company or its subsidiaries selected by the Covered Person with reasonable care), unless any such act or omission by such Covered Person constitutes bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of its duties (as determined by a non-appealable judgment of a court or arbitration proceeding of competent jurisdiction).

(c) A Covered Person may consult with legal counsel or accountants selected by such Covered Person and any act or omission by such Covered Person on behalf of the Company or its subsidiaries or in furtherance of the business of the Company or its subsidiaries in good faith in reliance on and in accordance with the advice of such counsel or accountants shall be full justification for the act or omission, and such Covered Person shall be fully protected in so acting or omitting to act if the counsel or accountants were selected with reasonable care.

(d) To the fullest extent permitted by law, the Company or its applicable subsidiaries shall indemnify and held harmless Covered Persons, from and against any and all claims, liabilities, damages, losses, costs and expenses, including amounts paid in satisfaction of judgments, in compromises and settlements, as fines and penalties and legal or other costs and expenses of investigating or defending against any claim or alleged claim, of any nature whatsoever, known or unknown, liquidated or unliquidated, that are incurred by any Covered Person and arise out of or in connection with the business or investments of the Company or its subsidiaries, or the performance by the Covered Person of its responsibilities hereunder, provided that the Covered Person shall not be entitled to indemnification hereunder to the extent the Covered Person’s conduct constitutes bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of its duties (as determined by a non-appealable judgment of a court or arbitration proceeding of competent jurisdiction). The termination of any proceeding by settlement, judgment, order or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the Covered Person’s conduct constituted bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of its duties.

(e) Expenses incurred by a Covered Person in defense or settlement of any claim that shall be subject to a right of indemnification hereunder, shall be advanced by the Company or its applicable subsidiaries prior to the final disposition thereof upon receipt of an undertaking by or on behalf of the Covered Person to repay the amount advanced to the extent that it shall be determined ultimately that the Covered Person is not entitled to be indemnified hereunder.

(f) The right of any Covered Person to the indemnification provided herein shall be cumulative of, and in addition to, any and all rights to which the Covered Person may otherwise be entitled by contract or as a matter of law or equity and shall be extended to the Covered Person’s successors, assigns and legal representatives.

(g) The provisions of this Section 17 are expressly intended to confer benefits upon Covered Persons and such provisions shall remain operative and in full force and effect regardless of the expiration or any termination of this Agreement.

(h) No Covered Person shall be liable hereunder for any settlement of any action or claim effected without its written consent thereto.

18. Indemnification by the Adviser.

(a) The Adviser shall indemnify and hold harmless the Company from all claims, liabilities, damages, losses, costs and expenses, including amounts paid in satisfaction of judgments, in compromises and settlements, as fines and penalties and legal or other costs and expenses of investigating or defending against any claim or alleged claim, of any nature whatsoever, known or unknown, liquidated or unliquidated, that are incurred by reason of the Adviser’s bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of its duties; provided, however, that the Adviser shall not be held responsible for any action of the Board in following or declining to follow any written advice or written recommendation given by the Adviser.

(b) Notwithstanding anything in this Agreement to the contrary, the aggregate maximum amount that the Adviser may be liable to the Company pursuant to this Agreement shall, to the extent not prohibited by law, never exceed the amount of the Advisory Fees received by the Adviser under this Agreement prior to the date that the acts or omissions giving rise to a claim for indemnification or liability shall have occurred. In no event shall the Adviser be liable for special, exemplary, punitive, indirect, or consequential loss, or damage of any kind whatsoever, including without limitation lost profits. The foregoing limitations shall not apply to the extent such damages are determined in a final binding non-appealable court or arbitration proceeding to result from the bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of its duties of the Adviser.

(c) The provisions of this Section 18 are expressly intended to confer benefits upon the Company and such provisions shall remain operative and in full force and effect regardless of the expiration or any termination of this Agreement.

19. Notices. All notices or other communications required or permitted by this Agreement shall be in writing and shall be deemed to have been duly received (a) if given by electronic mail transmitted delivery receipt requested, upon receipt of a delivery receipt, (b) if given by certified or registered mail, return receipt requested, postage prepaid, three business days after being deposited in the U.S. mails and (c) if given by courier or other means, when received or personally delivered, and, in any such case, addressed as follows:

To the Company:	NexPoint Homes Trust, Inc. 300 Crescent Court Suite 700 Dallas, Texas 75201 Attention: Brian Mitts Email: BMitts@nexpoint.com with a copy to: Winston & Strawn LLP 2121 North Pearl Street 9^th Floor Dallas, Texas 75201 Attention: Charles T. Haag; Justin S. Reinus Email: chaag@winston.com; jreinus@winston.com


To the Adviser:	NexPoint Real Estate Advisors XI, L.P. 300 Crescent Court Suite 700 Dallas, Texas 75201 Attention: Brian Mitts Email: BMitts@nexpoint.com with a copy to: Winston & Strawn LLP 2121 North Pearl Street 9^th Floor Dallas, Texas 75201 Attention: Charles T. Haag; Justin S. Reinus Email: chaag@winston.com; jreinus@winston.com

Any party may at any time give notice in writing to the other parties of a change in its address for the purposes of this Section 19.

20. Modification. This Agreement shall not be amended, supplemented, modified, terminated, or discharged, in whole or in part, except by an instrument in writing signed by the parties hereto, or their respective successors or assignees.

21. Severability. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

22. Governing Law; Exclusive Jurisdiction; Waiver of Jury Trial. THE PROVISIONS OF THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AS AT THE TIME IN EFFECT, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. THE PARTIES TO THIS AGREEMENT HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF DELAWARE, INCLUDING ANY APPELLATE COURTS THEREOF. THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

23. Entire Agreement. This Agreement, including the Exhibits attached hereto, contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof.

24. No Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

25. Pronouns and Plurals. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

26. Headings. The titles of Sections and Subsections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.

27. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.

	NEXPOINT HOMES TRUST, INC.



	By:	/s/ Brian Mitts
		Name: Brian Mitts Title: President, Chief Executive Officer, Chief Financial Officer, Treasurer and Assistant Secretary

	NEXPOINT REAL ESTATE ADVISORS XI, L.P. By: NexPoint Real Estate Advisors GP, LLC



	By:	/s/ Brian Mitts
		Name: Brian Mitts Title: Chief Financial Officer, Executive Vice President – Finance, Secretary and Treasurer

[Signature Page to Advisory Agreement]

EXHIBIT A

Description of Advisory Services.

Adviser will perform the following services:

(i)	Prepare monthly transaction listings;

(ii)	Supply various normal and customary portfolio and Company statistical data as requested on an ongoing basis;

(iii)

Prepare for execution and file the Company’s Federal and state tax returns: prepare a fiscal tax provision in coordination with the annual audit; prepare an excise tax provision; and prepare all relevant 1099 calculations;

(iv)	Coordinate contractual relationships and communications between the Company and its contractual service providers;

(v)	Oversee the relationships with any property or asset manager, including pursuant to the Management Agreement or any other asset and/or property management agreement that may be entered into from time to time, if applicable;

(vi)	Prepare income and capital gain distributions;

(vii)

Prepare the quarterly and annual financial statements;

(viii)

Monitor the Company’s compliance with the Internal Revenue Code of 1986, as amended, and particularly compliance with EBIT rules and if applicable, SEC reporting requirements;

(ix)	Assist in the preparation of notices of meetings of shareholders, coordinate preparation of proxy statements, including obtaining information required to be disclosed by applicable regulations and the engagement of proxy solicitors on behalf of the Company;

(x)	Assist in obtaining directors’ and officers’/errors and omissions insurance policies for the Company, including evaluation of insurance carriers, recommending appropriate coverage levels and evaluating the costs thereof, as such policies are approved by the Company’s Board of Directors;

(xi)	Draft agendas and resolutions for quarterly and special board meetings;

(xii)

Coordinate the preparation, assembly and posting of board materials;

(xiii)

Attend board meetings and draft minutes thereof;

(xiv)

Prepare REIT level and consolidated accounting;

(xv)	Arrange and manage audit;

(xvi)

Raise additional equity and manage the process relating thereto, including updating and revising as necessary any Confidential Private Placement Memorandum and working with any broker dealers to negotiate and secure debt financing;

(xvii)

Maintain the Company’s calendar to assure compliance with various filing and board approval deadlines;

A-1

(xviii)

Prepare and coordinate the Company’s state notice filings;

(xix)

Furnish the Company office space in the offices of Adviser, or in such other place or places as may be agreed from time to time, and all necessary office facilities, simple business equipment, supplies, utilities and telephone service for managing the affairs of the Company;

(xx)	Perform clerical, bookkeeping and other administrative services not provided by the Company’s other service providers;

(xxi)

Oversee the maintenance by the Company’s transfer agent and dividend disbursing agent of certain books and records of the Company and maintain (or oversee maintenance by such other persons as approved by the Board of Directors) such other books and records required by law or for the proper operation of the Company;

(xxii)

Determine the amounts available for distribution as dividends and distributions to be paid by the Company to its shareholders; calculate, analyze and prepare a detailed income analysis and forecast future earnings for presentation to the Board of Directors; prepare and arrange for dividend notices to shareholders, as applicable, and provide the Company’s dividend disbursing agent and custodian with such information as is required for such parties to effect the payment of dividends and distributions and to implement the Company’s dividend reinvestment plan, if any;

(xxiii)

Serve as liaison between the Company and each of its service providers;

(xxiv)

Assist in monitoring and tracking the daily cash flows of the individual assets of the Company;

(xxv)

Monitor compliance with leverage tests under the Company’s credit facility and other debt facilities, if any, and communicate with leverage providers and rating agencies;

(xxvi)

Coordinate negotiation and renewal of credit agreements for presentation to the Board of Directors;

(xxvii)

Coordinate negotiations of agreements with counterparties for derivatives and similar transactions, as applicable;

(xxviii)

Provide assistance with the closing of Real Estate Asset purchases and dispositions;

(xxix)

Coordinate and oversee the provision of legal services to the Company;

(xxx)

Cooperate with the Company’s independent registered public accounting firm in connection with audits and reviews of the Company’s financial statements, including interviews and other meetings, as necessary;

(xxxi)

Provide Secretary and any Assistant Secretaries, Treasurer and any Assistant Treasurers and other officers for the Company as requested;

(xxxii)

Develop or assist in developing guidelines and procedures to improve overall compliance by the Company;

(xxxiii)

Determine and monitor expense accruals for the Company;

(xxxiv)

Authorize expenditures and approve bills for payment on behalf of the Company;

(xxxv)

Monitor the number of shares of the Company registered and assist in the registration of additional shares, as necessary;

A-2

(xxxvi)

Exercise or procure the exercise of any rights of the Company with respect to any class action proceedings or other legal action concerning investments of the Company;

(xxxvii)

Prepare such reports as the Board of Directors may request from time to time;

(xxxviii)

Perform such additional administrative duties relating to the administration of the Company as may subsequently be agreed upon in writing between the Company and Adviser;

(xxxix)

Process sales and redemptions of shares of the Company;

(xl)	Determine, on behalf of the Company, whether a proposed transfer of shares of common stock or preferred stock should be permitted under the Company’s Articles of Incorporation and provide the necessary documentation required under the Articles of Incorporation to allow such a transfer;

(xli)

Prepare Net Asset Value calculations;

(xlii)

If applicable, prepare, coordinate with the Company’s counsel and coordinate the filing with the SEC: quarterly reports on Form 10-Q; annual reports on Form 10-K, in each case based upon information provided by the Company; assist in the preparation of Forms 3, 4 and 5 pursuant to Section 16 of the 1934 Act for the officers and directors of the Company, such filings to be based on information provided by those persons;

(xliii)

Assist the Company, if applicable, in the handling of SEC examinations and responses thereto;

(xliv)

Determine or oversee the determination of the Company’s Net Asset Value in accordance with the Company’s policies as adopted from time to time by the Board of Directors;

(xlv)

Design, implement, maintain and update internal accounting controls;

(xlvi)

Manage any long-term incentive plan that is in place at the Company-level or the Operating Partnership-level; and

(xlvii)

Manage any distribution reinvestment plan that is in place from time to time.

A-3

ex_412667.htm

Exhibit 10.9

MANAGEMENT AGREEMENT

This MANAGEMENT AGREEMENT (this “Agreement”), dated June 8, 2022, is made and entered into by and among NexPoint SFR Operating Partnership, L.P., a Delaware limited partnership (the “OP”) and HomeSource Operations LLC, a Delaware limited liability company agreement (“Manager”).

RECITALS

WHEREAS, the OP is the operating subsidiary of NexPoint Homes Trust, Inc., a Delaware corporation (the “REIT”);

WHEREAS, the OP owns or otherwise has, or intends to own or otherwise have, the right to collect rents from, and contract for services for, the single-family rental properties identified and described in Schedule A attached hereto, plus any additional properties acquired by the OP or subsidiaries of the OP (together with the OP, “Owner”), in accordance with this Agreement, minus any properties sold by Owner from time to time in accordance with this Agreement (collectively, such properties owned by Owner from time to time during the term of this Agreement, the “Properties” and each, a “Property”); and

WHEREAS, the parties desire for Manager to provide certain management, construction, acquisition, disposition and oversight functions with respect to the Properties.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I
APPOINTMENT OF MANAGER

SECTION 1.01 Appointment of Manager. Owner hereby appoints Manager the sole and exclusive manager for the assets of Owner, including the Properties upon the terms and conditions set forth herein. Manager hereby accepts such appointment on the terms and conditions set forth herein and shall furnish the services of its organization for the management of the assets of Owner, including the Properties.

SECTION 1.02 INDEPENDENT CONTRACTOR STATUS. Manager is hereby engaged to manage the assets of Owner, including the Properties, as an independent contractor.

ARTICLE II
TERM OF AGREEMENT

SECTION 2.01 Term of Agreement. This Agreement shall commence as of the date hereof (the “Effective Date”) and shall continue until June 8, 2025 (the “Term”). Upon expiration of the Term, this Agreement will automatically renew for additional one-year periods until terminated as provided in Article VIII.

ARTICLE III
MANAGER’S DUTIES AND RESPONSIBILITIES

SECTION 3.01 General Scope. Manager shall devote such efforts as are consistent with the Standard of Care (as defined below) in managing, coordinating and supervising the ordinary and usual business and affairs pertaining to the identification, acquisition, operation, maintenance, leasing, licensing, rehabilitation, construction, disposition and management of the Properties and in compliance with the directives of Owner or the Investment Committee (as defined below), all pursuant to the terms, conditions and limitations of this Agreement. Manager shall have such responsibilities, and shall perform and take, or cause to be performed or taken, all such services and actions customarily taken by managing agents of assets of similar nature, location, and character to that of Owner, including the Properties, consistent with the duties set forth in this Article III. Unless otherwise specifically provided in this Agreement, the written directives of Owner or the Investment Committee, the Approved Guidelines (as defined below), or the Approved Operating Budget (as defined below) (collectively, the “Guiding Documents”), all services and actions that Manager is required or permitted to perform or take, or cause to be performed or taken in connection with the management of assets of Owner, including the Properties, shall be performed or taken, as the case may be, on behalf of Owner and at Owner’s sole cost, expense, and risk. Manager’s authority is limited to performing the services set forth herein and the other Guiding Documents. Except as provided in the Guiding Documents, Manager shall have no authority (a) to execute any contract or agreement for or on behalf of Owner, (b) to provide additional services or modify existing services to tenants, or (c) to assume or create any obligation or liability or to make any representation, covenant, agreement or warranty for or on behalf of Owner.

SECTION 3.02 Standard of Care. Manager shall perform its duties and obligations hereunder (including, without, limitation, those set forth on Schedule D attached hereto) in a commercially reasonable manner, consistent with the degree of care, skill, prudence, diligence and good faith that a manager would use in managing other assets or performing similar services in the same geographic location (the “Standard of Care”). Without limiting the generality of the foregoing, Manager shall employ such efforts as are consistent with the Standard of Care to comply with all applicable requirements of federal, state and local laws, ordinances, rules, regulations and orders governing the leasing, promotion, management, use, operation, repair and maintenance of the Properties and the terms of any leases, mortgages or other agreements to which Properties are subject (collectively, the “Requirements” or individually a “Requirement”). Manager shall have in its employ at all times a sufficient number of capable employees to properly, adequately, safely and economically perform the duties hereunder. Further, Manager shall carry out its duties set forth herein in a manner that is consistent with Owner’s written instructions concerning its election to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended.

SECTION 3.03 Proposed Management Plans. Manager shall prepare and submit to Owner a proposed “Management Plan” and “Operating Budget,” which shall include an annual business plan and budget of proposed Operating Expenditures and capital expenditures with respect to the leasing, management, identification, acquisition, promotion, operation, disposition, and repair and maintenance of the Properties for each calendar year (the “Fiscal Year”); provided, that if the effective date of this Agreement occurs on a date other than the first day of a calendar year, or if the day on which the term of this Agreement expires or is terminated occurs on a day other than the last day of a calendar year, then the first and last Fiscal Years, as applicable, shall be prorated according to the number of days in the applicable Fiscal Year. Proposed Management Plans and Operating Budgets shall be submitted to Owner sixty (60) days prior to the beginning of each Fiscal Year. All proposed Management Plans and Operating Budgets shall include, without limitation, leasing objectives for the next annual budget period, a marketing plan for the next annual budget period including the estimated costs of the marketing and promotional plans, a market analysis of the leasing market in which the Properties are located, and if requested by Owner, a review of the real estate taxes and assessed valuation and a recommendation concerning the merits of a tax appeal for the Properties. Owner will review the proposed Management Plan and Operating Budget and will consult with Manager prior to the commencement of the forthcoming fiscal year in order to agree on an approved Management Plan and an approved Operating Budget (collectively, the “Approved Operating Budget”). Until such time as the Management Plan and Operating Budget shall be approved by Owner as aforesaid, Manager shall, unless otherwise directed in writing by Owner and subject to the terms of this Agreement, make only those expenditures necessary to (1) maintain the physical integrity of the Properties, preserve the security of the Properties (including without limitation taxes, insurance and utilities borne by Owner), or prevent any lien or other encumbrances on the Properties, (2) comply with the Requirements, (3) comply with Owner’s obligations hereunder, as landlord under the terms of any Leases, and under any Loan Documents (as defined in Schedule G), and (4) remedy an emergency situation. Manager agrees to use such efforts as are consistent with the Standard of Care to ensure the actual costs of all Operating Expenditures and capital expenditures for the Properties shall not exceed the Approved Operating Budget, both in the aggregate and in respect of the specific budget category pertaining thereto (taking into account any variance allowances permitted in the Guiding Documents).

SECTION 3.04 Approved Operating Budget. The Approved Operating Budget shall constitute an authorization for Manager to establish rental rates and implement marketing strategies in accordance therewith. Manager shall supervise the preparation of all advertising layouts, brochures, and campaigns. Advertising and promotional materials shall be prepared in accordance with the Approved Operating Budget and full compliance with federal, state, and municipal fair housing laws, and Manager shall not use Owner’s name (or any Affiliate of Owner) without Owner’s express written approval.

SECTION 3.05 Acquisition and Disposition. Manager shall provide management, supervisory, administrative and logistical services and support to Owner consistent with the Standard of Care and the Guiding Documents in connection with (i) the identification and evaluation of Properties that might be suitable for purchase or other acquisition, (ii) the purchase or other acquisition of Properties, and (iii) the sale or other disposition of Properties (including, without limitation, the structuring and negotiation of such transactions and the management of Owner’s dealings with brokers, appraisers, and other professionals engaged by Owner in connection with such transactions). Manager shall be responsible for the preparation of all diligence reports and the initial underwriting proposal for any new acquisition or disposition. Upon the request of Owner or any member of the Investment Committee, Manager shall deliver such reports to the Investment Committee prior to any meeting of the Investment Committee. Further, Manager will be responsible for all other reports, analysis or studies as requested by Owner or the Investment Committee, and Manager is hereby authorized to contact NexPoint Real Estate Advisors XI, L.P. (the “Adviser”) and any Lender to obtain additional information reasonably necessary for the preparation of such reports, analyses, or studies. The approved guidelines for the acquisition, disposition and leasing of existing and future Properties are attached hereto as Schedule F (the “Approved Guidelines”). The Approved Guidelines shall be applicable to the markets within which the Properties are located, and before acquiring Properties in new markets, Manager shall propose updated guidelines for properties in that market for the approval of the Investment Committee. Provided that Manager has obtained the Investment Committee’s prior written approval, Manager shall be authorized to cause Owner or an Affiliate thereof to acquire, dispose of, and lease Properties consistent with this Agreement, the Approved Guidelines and the other Guiding Documents. For purposes of clarification, Properties acquired by Owner or any subsidiaries of the OP which are not covered by any Additional Management Agreement will be deemed Properties under this Agreement, and Properties sold by Owner or any subsidiaries of the OP which are not covered by any Additional Management Agreement shall no longer be deemed Properties under this Agreement, in either case regardless of whether this Agreement or any exhibit or schedule is formally amended to reflect the new or former Properties.

SECTION 3.06 Construction Management. Manager shall provide management, supervisory, administrative and logistical services and support to Owner consistent with the Standard of Care and the Guiding Documents in connection with (i) the identification and evaluation of rehabilitation needed for the Properties. The approved guidelines for the identification and performance of existing and future rehabilitation on the Properties are attached hereto as the Approved Guidelines.

SECTION 3.07 Leasing. Manager shall exercise such efforts as are consistent with the Standard of Care to obtain and keep residents and will cooperate with any broker in any reasonable manner likely to aid in filling any vacancy. Manager is authorized, subject to the Approved Operating Budget and consistent with the Standard of Care and Guiding Documents, to oversee and direct the negotiation, preparation, and execution of all leases on Owner’s approved lease form, including all renewals and extensions of leases and to cancel and modify existing leases, provided such actions are taken in accordance with all Requirements.

SECTION 3.08 Financing. Owner shall provide administrative and logistical services related to the financing and refinancing of Properties. In connection with such financing and/or refinancing, Manager shall support and cooperate with Owner, including providing information requested by any potential financing source.

SECTION 3.09 Security Deposits. Manager is authorized to oversee and direct any third-party property manager to (a) establish accounts on behalf of Owner for holding security deposits in accordance with the Approved Operating Budget and all Requirements, and (b) collect and refund security deposits in accordance with the terms of each resident’s lease and as may be required by applicable law.

SECTION 3.10 Collection of Rents and Enforcement of Leases. Manager shall exercise such efforts as are consistent with the Standard of Care to promptly collect all rents and other charges for services provided in connection with the use of the Properties. All monies collected shall be promptly deposited into the Operating Account unless otherwise directed by Owner. When necessary and permissible by applicable Requirements, Manager is authorized to oversee and direct any third party property manager to institute the following actions: (a) terminate tenancies; (b) sign and serve such notices as are deemed reasonably necessary or expedient; (c) institute and prosecute actions and evict residents; (d) recover rents and other sums due by legal proceedings; and (e) settle, compromise, and release such actions or suits, or reinstitute such tenancies.

SECTION 3.11 Approved Operating Expenditures.

(a) The term “Operating Expenditures” shall mean the aggregate of all actual, reasonable expenses incurred by Manager in accordance with this Agreement in connection with or arising from the identification, acquisition, financing, ownership, operation, asset management, construction, repair, disposition, replacement, maintenance, and use or occupancy of the Properties including, without limitation, expenditures for: (i) license and permit fees, landowner association fees and assessments, and all other charges of any kind and nature by any governmental or public authority; (ii) management fees and any other reasonable expenses incurred by Manager consistent with the Guiding Documents; (iii) advertising and marketing expenses, and third-party leasing fees and commissions; (iv) legal, accounting, engineering, and other professional and consulting fees and disbursements; (v) accounts payable to independent contractors providing labor, material, services and equipment to the Properties; (vi) premiums for insurance paid with respect to the Properties or the operations thereof; (vii) resident improvements and replacement and segregated reserves therefor; (viii) maintenance and repair of the Properties and all property and equipment used in connection with the operation thereof; (ix) renovation, improvement and development of the Properties and all property and equipment used in connection with the operation thereof; (x) funds reserved for contingent or contested liabilities, real estate taxes, insurance premiums, or other amounts not payable on a monthly basis; (xi) service contracts and public utility charges and assessments; (xii) personnel administration charges and pre-employment screening and testing costs; (xiii) cost of third party revenue management programs; and (xiv) costs of credit reports, bank charges, and like matters. Operating Expenditures may include (A) payroll, benefits and overhead expenses approved by Owner pursuant to the Approved Operating Budget, and (B) other costs and expenses of Manager’s or its Affiliates’ personnel engaged in any Additional Services (as defined below); provided, however, that Manager shall be responsible for paying, and shall not be reimbursed for, its general administrative overhead costs and expenses, including without limitation the costs and expenses of renting its offices, employing its general administrative staff, purchasing or renting its office equipment and supplies, and maintaining phone and internet connections.

(b) For purposes of clarification, Manager may perform (or cause its Affiliates to perform) certain services (including without limitation services related to leasing, onboarding, fit-up, inspecting, renovation, improvement, development, construction, maintenance, repair, cleaning, painting or decorating any of the Properties) that could be contracted or subcontracted out to third parties hereunder, and, for performing such services, Manager (or its Affiliates) shall be entitled to reimbursement for the costs and expenses incurred performing such services (in addition to the Management Fees contemplated under Article VI) at rates commensurate with rates that would be payable to unrelated third parties if the Manager engaged such unrelated third parties to perform such services (collectively, the “Additional Services”).

(c) The Approved Operating Budget shall constitute an authorization for Manager to expend the amounts approved as long as the expenses are incurred in connection with the operation and management of the Properties. Manager shall employ such efforts as are consistent with the Standard of Care to ensure that the actual costs of maintaining and operating the Properties shall not exceed the Approved Operating Budget and significant year-to-date budget variances will be explained to Owner each month. In cases of emergency, Manager may make expenditures which exceed the aforementioned spending limit without prior approval, if such expenditures are necessary in the reasonable judgment of Manager to effectively protect the Properties or to prevent personal injury and is not in excess of $50,000.00 with respect to any individual Property or $1,000,000.000 collectively among all Properties during any calendar year. Manager will promptly notify Owner of any such emergency.

SECTION 3.12 Approved Capital Expenditures. Any capital expenditures set forth in the Approved Operating Budget shall constitute an authorization for Manager to expend the amounts approved; however, any capital expenditure (excluding expenditures related to acquisition activities and rehabilitation of newly acquired Properties) over $30,000.00 per Property shall be awarded on the basis of competitive bidding, solicited in the following manner: (a) a minimum of two (2) written bids shall be obtained for each purchase where possible and practical to obtain such bids; (b) each bid will be solicited in a form so that uniformity will exist in the bid quotes; (c) Manager shall provide the Investment Committee with all bid responses accompanied by Manager’s recommendations as to the most acceptable bid; and (d) the Investment Committee shall be free to accept or reject any and all bids, provided that if the Investment Committee fails to do so within three (3) Business Days, Manager shall provide written notice to the Investment Committee that a failure to respond within one (1) Business Day shall constitute a deemed approval, and the Investment Committee fails to do so within such one (1) business day, such failure shall be deemed acceptance]. Owner shall be responsible for capital expenditures set forth in the Approved Operating Budget, and may pay some from its own resources or may authorize payment by Manager out of available funds in the Operating Account.

SECTION 3.13 Public Utility and Service Contracts. To the extent applicable, Manager shall negotiate and execute, in its capacity as Owner’s agent, contracts for water, electricity, gas, vermin or pest extermination, and any other services which are necessary to properly maintain the Properties. All required utility deposits will be the responsibility of Owner and each contract shall: (a) be in the name of, and expense of, Owner; and (b) include a provision for cancellation thereof by Owner or Manager upon not more than thirty (30) days written notice or longer period if reasonable.

SECTION 3.14 Debt Service and Tax Payments. If requested by Owner, and sufficient funds are available in the Operating Account to satisfy all outstanding Operating Expenditures of the Properties, Manager will apply any surplus operating funds to pay (to the extent of such surplus funds) the debt service and taxes due pursuant to any federal, state, county, or municipal authority, or other similar body having jurisdiction thereover. If Owner notifies Manager to make such payments after the beginning of the Term of this Agreement, Manager shall have the authority to name a new contingency reserve amount pursuant to Section 5.01 of this Agreement, and Owner authorizes Manager to maintain this new contingency reserve amount at all times in the Operating Account. Manager shall not take any action under this Section 3.14 so long as Owner is contesting, or has notified Manager of its intention to contest, any such order or requirement. Owner will supply all information necessary for Manager to comply promptly with these requirements.

SECTION 3.15 Oversight of Subcontractors. To the extent Manager has subcontracted or delegated any of its responsibilities hereunder to any subcontractor in accordance with Article X, Manager shall oversee such subcontractor to ensure compliance with the responsibilities of Manager hereunder. In addition, Manager shall provide oversight of any third-party property manager hired by Owner with respect to the Properties and shall cooperate with Owner, to the extent commercially reasonable, to take any actions, including the execution of documents, in order to evidence Manager’s oversight obligations or such third-party property manager.

SECTION 3.16 Compliance with Regulations. Manager shall employ such efforts as are consistent with the Standard of Care to cause the Properties to be in compliance with all Requirements. Manager shall promptly give written notice to Owner of Manager’s receipt of any oral or written notice of the actual existence (or material violation that is reasonably likely to occur) of a material violation of any material Requirement or as otherwise required by the Standard of Care (a “Violation”), and Manager shall promptly cure at Owner’s expense any such Violation applicable to any Property, other than a Violation that is required to be cured by the respective tenants under the leases in effect at the Property. Expenses incurred in curing any Violation applicable to any Property may be paid from the Operating Account to the extent such expenses have been budgeted for in the Approved Operating Budget, and provided such expenses do not exceed $25,000.00 in any one instance. If (1) such expenses have not been so budgeted, (2) more than $25,000.00 is required to remedy a Violation, or (3) a Violation is one for which Owner may be subject to penalty, Manager shall immediately notify Owner of such Violation and advise Owner regarding a course of action for curing such Violation.

SECTION 3.17 Environmental Risk Management. Owner acknowledges and understands that Manager, except with respect to the obligations set forth in Section 3.05 and Schedule D, is not responsible for (1) evaluating the presence or absence of hazardous or toxic substances, mold, waste, materials, electromagnetic field, radon, or radioactive materials upon, within, above, or beneath the Properties; (2) maintaining or evaluating compliance with environmental, hazardous or solid materials or waste laws, rules and regulations (except for any operating and maintenance plan applicable to the Properties or in connection with Manager’s construction management duties); or (3) conducting or ensuring clean-up or remediation of existing or identified Hazardous Material spills or contamination unless the parties otherwise agree in writing or as expressly provided herein.

(a) Accordingly, Manager’s obligations to Owner with respect to the presence of Hazardous Materials, and/or with the compliance and enforcement of Hazardous Materials Laws shall be subject to, conditioned upon, and limited by the following:

(i) Owner may from time to time, at Owner’s sole discretion and expense, obtain from an independent environmental consultant retained by Owner, an environmental assessment report on the Properties (or any of them) and may have such assessment report periodically updated.

(ii) Except as provided by Section 3.17(a)(iii), Section 3.05, Schedule D, or as otherwise expressly agreed in writing by the parties, Manager shall not be obligated to make an independent determination as to the presence or absence of Hazardous Materials, or whether the Properties are in violation or compliance with any Hazardous Materials Laws. Manager may seek, on Owner’s behalf and at Owner’s expense, to enforce a resident’s compliance with any Hazardous Materials Laws in accordance with an environmental consultant’s recommendations contained in any environmental assessment report. Manager shall not have any obligation to determine whether or not Owner, any residents, the Properties, or any portion thereof is in compliance with Hazardous Materials Laws; provided, Manager shall promptly notify Owner of any violations or potential violations of Hazardous Materials Laws observed on the Properties.

(iii) Manager shall be responsible for any Hazardous Materials which it uses or introduces to the Properties, including storage, containment, removal, or remediation as required by applicable law. To the extent Hazardous Materials (such as cleaning supplies or fuel) are required by Manager in the discharge of its duties under this Agreement, Manager shall only use and store quantities of such Hazardous Materials as are permitted under applicable law and Schedule D, and shall store, use and dispose of such Hazardous Materials in accordance with applicable laws. In connection with the foregoing, Manager hereby agrees to and shall indemnify, protect, defend, save, and hold harmless Owner, its principals and employees, and their respective successors and assigns from any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost, or expense (including attorney’s fees and expenses) arising out of or relating in any way to Manager’s violation of this Section 3.17(a)(iii).

(iv) Manager shall not be responsible for the abatement, clean-up or remediation of any spill of or contamination from any Hazardous Materials upon, beneath, or within all, or any portion, of the Properties (other than Hazardous Materials introduced, used or stored by Manager in violation of Section 3.17(a)(iii)), and the entire responsibility for such clean-up, abatement, or remediation shall lie with Owner and Owner’s environmental consultation. However, Manager shall cooperate with Owner in coordinating and supervising any abatement, clean-up, monitoring or remedial action on a Property site. Owner agrees that, with respect to any abatement, clean-up, or remedial action, Owner shall employ a qualified and licensed environmental clean-up company to undertake such clean-up and remediation, and Owner’s environmental consultant shall oversee the entire abatement, clean-up and remediation process and the obtaining of any required governmental approvals. If the clean-up or remediation is the responsibility of any resident of the Properties and/or the Owner’s environmental consultant, Manager shall, on Owner’s behalf, require the resident to utilize qualified and licensed environmental clean-up companies and ensure that the clean-up and remediation is conducted to Owner’s satisfaction and in accordance with all Hazardous Materials Laws, governmental laws and approvals of which Manager is aware.

(v) In connection with the foregoing, Owner hereby agrees to and shall indemnify, protect, defend, save, and hold harmless Manager, its principals and employees, and their respective successors and assigns from any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost or expense (including attorney’s fees and expenses) arising out of or relating in any way to (1) the actions, or failure to act, by Manager in following Owner’s and Owner’s environmental consultant’s directions, (2) Owner’s failure or refusal to employ an environmental consultant with respect to the Properties, (3) the acts, omissions, or negligence of Owner, Owner’s environmental consultant, or the failure of such environmental consultant, to fulfill its obligations with respect to the Properties, (4) any violation of Hazardous Materials Laws applicable to the Properties (except as set forth in Section 3.17(a)(iii) above), (5) the designation of Manager as an “operator” or the Properties as a “regulated facility” under Hazardous Materials Laws, or otherwise liable as a party under Hazardous Materials Laws, or as a party in any claim for contribution, cost recovery or indemnity against Manager, or its insurer arising out of the foregoing (except as set forth in Section 3.17(a)(iii) above), and (6) any condition or circumstance arising initially prior to the date of the Original Management Agreement (regardless of whether such condition or circumstance continues). The foregoing indemnity shall not apply to any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost, or expense (including attorney’s fees and expenses) resulting from an indemnified party’s sole or gross negligence or willful misconduct.

(b) The indemnities herein shall be immediately vested and shall survive the expiration or termination of this Agreement.

SECTION 3.18 Disclaimer of Certain Liabilities. Manager assumes no liability for any acts or omissions of Owner. Manager assumes no liability for any failure of, or default by, any tenant in the payment of any rent or other charges due Owner or in the performance of any obligations owed by any tenant to Owner pursuant to any lease or otherwise.

SECTION 3.19 No Requirement to Advance Funds. In no event shall Manager advance any monies on behalf of Owner, lend its credit to the Properties, or incur any liability in Manager’s own name.

SECTION 3.20 Representations. Manager represents and warrants to Owner as follows:

(a) Manager (i) is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware, (ii) has qualified or will qualify to do business as a foreign corporation and will remain so qualified, and is and will remain in good standing, in each jurisdiction where the character of its property or the nature of its activities makes such qualification necessary and in which failure to so qualify would have a material adverse effect upon Manager or its ability to perform its obligations hereunder, (iii) has and will have limited liability company power to own its property, carry on its business as presently conducted, and to enter into and perform it obligations under this Agreement and (iv) has and will have all licenses or other governmental approvals necessary to perform it obligations hereunder.

(b) The execution and delivery by Manager of this Agreement has been duly authorized by all necessary limited liability company action on the part of Manager. Neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof, will conflict with or result in a breach of, or constitute a default under, any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on Manager or its property or the certificate of formation of Manager, or any of the provisions of any indenture, mortgage, contract or other instrument to which Manager is a party or by which it is bound or result in the creation or imposition of any lien, charge or encumbrance upon any of its property pursuant to the terms of any such indenture, mortgage, contract or other instrument.

(c) The execution and delivery by Manager of this Agreement does not require the consent or approval of, the giving of notice to, the registration or filing with, or the taking of any other action in respect of any state, federal or other governmental authority or agency. Any and all prior exclusive agreements with any third-party, including AV HomeSource, LP and its Affiliates, has been terminated and Manager is not restricted from entering into this Agreement. As of the Effective Date, the Manager is not providing any similar services for any property that is not owned by Owner and does not receive any income from any third-party other than reimbursements from services provided by Manager’s Affiliates that have been disclosed to Owner. Further, as of the Effective Date, the Manager does not expect to receive any income other than as a result of payments by Owner to Manager pursuant to this Agreement or reimbursements from services provided by Manager’s Affiliates that have been disclosed to Owner.

(d) This Agreement has been duly executed and delivered by Manager and, assuming due authorization, execution and delivery by Owner, constitutes a valid and binding obligation of Manager enforceable against it in accordance with its terms (subject to applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally and general principles of equity).

(e) There are no actions, suits, or proceedings pending, or, to the knowledge of Manager, threatened or likely to be asserted against or affecting Manager before or by any court, administrative agency, arbitrator, or governmental body (i) with respect to any of the transactions contemplated by this Agreement or (ii) with respect to any other matter which in the judgment of Manager will be determined adversely to Manager or if determined adversely to Manager, will materially and adversely affect it or its business, assets, operations or condition, financial or otherwise, or adversely affect Manager’s ability to perform its obligations under this Agreement. Manager is not in default with respect to any order of any court, administrative agency, arbitrator or governmental body so as to materially and adversely affect the transactions contemplated by the above mentioned documents.

(f) No consents, approvals, waivers or notifications of members, creditors, lessors or other nongovernmental persons are required to be obtained by Manager in connection with the execution and delivery of this Agreement and the consummation of all the transactions herein contemplated.

(g) Manager is not (and no person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Manager shall be) subject to sanctions of the United States government or in violation of any federal, state, municipal or local laws, statutes, codes, ordinances, orders, decrees, rules or regulations (“Laws”) relating to terrorism or money laundering, including, without limitation, Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”) and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56, the “Patriot Act”). Neither Manager nor any person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Manager is a “Prohibited Person,” which term is defined as: (i) a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (ii) a person or entity owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (iii) a person or entity with whom Manager is prohibited from dealing or otherwise engaging in any transaction by any terrorism or anti-money laundering Law, including the Executive Order and the Patriot Act; (iv) a person or entity who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or (v) a person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website, http://www.treas.gov/ofac/tllusdn.pdf or any replacement website or other replacement official publication of such list.

(h) As of the Effective Date, Manager has no actual knowledge of any illegal activities relating to controlled substances on any Property.

(i) As of the Effective Date, to Manager’s actual knowledge, (i) each Property is being used exclusively as a residential rental property and (ii) no illegal activity is taking place at any Property.

SECTION 3.21 Investment Committee. Notwithstanding anything to the contrary herein, the duties and responsibilities of Manager set forth herein are subject in all respects to the authority of the investment committee of the OP (the “Investment Committee”) pursuant to the terms set forth in the Limited Partnership Agreement of the OP (as may be amended and/or restated from time to time, the “LPA”). Owner shall at all times provide Manager with a true and correct copy of the LPA, and notify Manager of any changes (or contemplated changes) by the Investment Committee that would impact Manager’s duties or responsibilities hereunder.

SECTION 3.22 Additional Covenants. Manager shall exercise such efforts as are consistent with the Standard of Care to comply with the terms and conditions of Schedule D attached hereto and agrees not to knowingly or intentionally take any action in material contravention thereof.

ARTICLE IV
BANKING AND FINANCIAL RECORDS

SECTION 4.01 Account Agency Agreement & Bank Accounts. Owner (or a Subsidiary) and Manager entered, or intend to enter, into the Account Agency Agreement, attached as Schedule B. Manager is responsible for providing effective internal controls and efficiencies. Owner (or a Subsidiary) will maintain a separate operating account at Owner’s (or a Subsidiary’s) platform bank or other bank acceptable to Owner (the “Operating Account”) and a separate acquisition account at Owner’s (or a Subsidiary’s) platform bank or other bank acceptable to Owner (the “Acquisition Account”), and each have been named in the Account Agency Agreement. Owner shall retain the ability to change the platform banks at its discretion with reasonable notice to Manager. It is understood that the bank account contemplated and authorized by the Account Agency Agreement shall be a non-interest bearing checking account.

SECTION 4.02 Financial Recordkeeping. Financial records include, but are not limited to, general ledgers for each account, journal entries, all supporting documentation and calculations used to create journal entries, trial balances, financial statements, bank statements, bank reconciliations, tax reports, accounts payable and receivable records, rent rolls, tenant information, portfolio analysis routinely created or created at the request of Owner, ad hoc reports requested by Owner from time to time and any other financial records and reports listed on Schedule C. At Owner’s cost, Manager shall maintain, at Manager’s premises and electronically in a centralized location designated and accessible by Owner, and maintain in a manner customary and consistent with generally accepted accounting principles, financial records based on Owner’s fiscal year-end. Further, at Owner’s cost, Manager shall provide Owner with connectivity to any systems utilized by Manager. Manager shall not delete, destroy, relocate or otherwise make any historical record inaccessible to Owner without Owner’s prior written consent. Manager shall use its own chart of accounts and monthly financial statements may be cut-off approximately five (5) days prior to month-end. Owner shall bear the expense of maintaining financial records electronically and the expense of storing historical financial records that are more than 36 months old.

SECTION 4.03 Internal Controls Environment. Manager shall continuously maintain an internal control environment that is customary and consistent with the size and complexity of Owner’s business and the Standard of Care. At Owner’s expense, Owner may hire consultants and other advisors to further develop and refine Manager’s internal controls. Manager agrees, at Owner’s expense, to implement all reasonable suggestions Owner makes to modify internal controls and agrees to periodic testing and remediation of any identified deficiencies. Manager also agrees to assist in an audit of the internal controls if requested by Owner, to be completed at Owner’s expense and in accordance with Section 4.05 herein.

SECTION 4.04 Required Financial Reports. Manager shall furnish as listed on Schedule C monthly reports of collections, disbursements, and other accounting matters. These reports will be received by Owner not later than the 10^th of each month. To support the monthly financial reports, Manager shall maintain at Manager’s premises copies of the following: (a) bank statements, bank deposit slips, and cancelled checks; (b) comprehensive bank reconciliations; (c) detailed cash receipt records; (d) summaries of adjusting journal entries, and (e) supporting documentation for payroll, payroll taxes, and employee benefits.

SECTION 4.05 Owner’s Right to Audit and Test. Manager, in the conduct of its responsibilities and obligations to Owner hereunder, shall maintain complete, accurate, and separate books and records for the Properties, the entries to which shall be supported by sufficient documentation to ascertain that said entries are properly and accurately recorded with regard to each Property. Such books and records shall be maintained in accordance with Owner's financial information requirements and shall at all times be the property of Owner. Manager shall maintain such books and records for a period of not less than twelve (12) months after the date of expiration or earlier termination of this Agreement, except that upon any termination of this Agreement by Owner, Manager shall immediately deliver to Owner all such books and records. Owner reserves the right to conduct an examination of the books and records maintained by Manager for Owner or that relate to the calculation of the fees, expenses, or other compensation paid or payable pursuant to this Agreement, and to perform any and all audit tests (whether conducted by the external auditors or Owner’s internal audit team) relating to Manager’s activities, either at the Properties, or at the office of Manager; provided such examination and tests are related to those activities performed by Manager for Owner or the calculation of the fees, expenses, or other compensation paid or payable pursuant to this Agreement. Owner may also conduct periodic testing of Manager’s internal controls. For purposes of clarity and not limitation, Owner shall have the right to examine and audit Manager’s books and records in order to verify the accuracy of the Cash Cap (as defined below). Owner shall give Manager not less than forty-eight (48) hours written notice of any such audit, examination or testing. Any and all such audits conducted either by Owner’s employees or appointees will be at the sole expense of Owner.

SECTION 4.06 Disbursement of Deposits. If requested by Owner, Manager shall remit to Owner with the monthly financial report all unexpended operating funds, except for a reserve of contingencies, as provided in Section 5.01 below, which shall remain in the Operating Account.

ARTICLE V
OWNER’S DUTIES AND RESPONSIBILITIES

SECTION 5.01 Contingency Reserves. Owner authorizes Manager to maintain a contingency reserve of $500.00 per Property at all times in each of the Operating Account, to enable Manager to pay obligations of Owner under this Agreement as they become due, and the Acquisition Account, to enable Manager to acquire new Properties in accordance with this Agreement and the Approved Operating Budget.

SECTION 5.02 Insufficient Operating Funds. If a cash flow deficit can be anticipated in the next budgeted month of operations, Owner agrees to, prior to the commencement of the next budgeted month, remit to Manager sufficient funds to cover the anticipated deficiency and fully fund the Operating Expenditures and approved contingency reserves. In the event that funds in the Operating Account become insufficient to cover all Operating Expenditures and approved contingency reserves, Owner agrees to, within three (3) days of notice, remit to Manager sufficient funds to cover the deficiency and replenish the contingency reserves. Notwithstanding any provision hereof to the contrary, Manager’s performance under this Agreement shall be excused and shall in no event be in default in the event there are insufficient funds in the Operating Account to perform its services described hereunder unless due to the gross negligence or willful misconduct of Manager.

SECTION 5.03 Manager’s Compensation. Owner agrees to pay Manager, as compensation for services in accordance with the terms of this Agreement, the compensation as specified in Article VI below. To the extent due in cash, Manager’s compensation may be paid to itself by Manager, on behalf of Owner, when due hereunder from the Operating Account.

SECTION 5.04 Manager’s Costs to be Reimbursed. Owner agrees to reimburse Manager for all direct costs incurred in managing, leasing, rehabilitating and maintaining the Properties in accordance with the terms of this Agreement and the Approved Operating Budget. Manager’s reimbursement may be paid to itself by Manager, on behalf of Owner, from the Operating Account as incurred by Manager.

SECTION 5.05 Representations. As of the Effective Date, Owner represents and warrants to Manager as follows:

(a) The OP (i) is a corporation or limited partnership, respectively, duly formed, validly existing and in good standing under the laws of the State of Delaware, (ii) has qualified or will qualify to do business as a foreign corporation and will remain so qualified, and is and will remain in good standing, in each jurisdiction where the character of its Properties or the nature of its activities makes such qualification necessary and in which failure to so qualify would have a material adverse effect upon the OP or its ability to perform its obligations hereunder, (iii) has and will have full limited partnership power to own the Properties, carry on its business as presently conducted, and to enter into and perform it obligations under this Agreement and (iv) has and will have all licenses or other governmental approvals necessary to perform it obligations hereunder.

(b) The execution and delivery by the OP of this Agreement has been duly authorized by all necessary limited partnership action on the part of the OP. Neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof, will conflict with or result in a breach of, or constitute a default under, any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on the OP or their Properties or the certificate of formation of the OP or any of the provisions of any indenture, mortgage, contract or other instrument to which the OP is a party or by which it is bound or result in the creation or imposition of any lien, charge or encumbrance upon any of the Properties pursuant to the terms of any such indenture, mortgage, contract or other instrument.

(c) The execution and delivery by the OP of this Agreement does not require the consent or approval of, the giving of notice to, the registration or filing with, or the taking of any other action in respect of any state, federal or other governmental authority or agency.

(d) This Agreement has been duly executed and delivered by the OP and, assuming due authorization, execution and delivery by Manager, constitutes a valid and binding obligation of the OP enforceable against it in accordance with its terms (subject to applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally and general principles of equity).

(e) There are no actions, suits, or proceedings pending, or, to the knowledge of the OP, threatened or likely to be asserted against or affecting the OP before or by any court, administrative agency, arbitrator, or governmental body (i) with respect to any of the transactions contemplated by this Agreement or (ii) with respect to any other matter which in the judgment of Owner will be determined adversely to the OP or if determined adversely to the OP, will materially and adversely affect it or its business, assets, operations or condition, financial or otherwise, or adversely affect the OP’s ability to perform its obligations under this Agreement. The OP is not in default with respect to any order of any court, administrative agency, arbitrator or governmental body so as to materially and adversely affect the transactions contemplated by the above mentioned documents.

(f) No consents, approvals, waivers or notifications of members, creditors, lessors or other nongovernmental persons are required to be obtained by the OP in connection with the execution and delivery of this Agreement and the consummation of all the transactions herein contemplated.

(g) The OP is not (and no person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in the OP shall be) subject to sanctions of the United States government or in violation of any Laws relating to terrorism or money laundering, including, without limitation, the Executive Order and the Patriot Act. Neither the OP nor any person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in the OP is a Prohibited Person.

ARTICLE VI
COMPENSATION OF THE MANAGER

SECTION 6.01 Acquisition Fees. Owner shall pay to Manager a fee in the amount of 2.0% of (i) the construction costs of “build-to-rent” homes (including land purchase and construction costs but excluding loan and other closing costs) paid by Owner, or (ii) the purchase price with respect to the acquisition of any Property that is not “build-to-rent” (including the purchase price of purchased homes, but excluding budgeted rehabilitation, loan and other closing costs ) (the “Acquisition Fee”). Notwithstanding the foregoing, in no event shall Manager be entitled to any compensation in connection with debt placement.

SECTION 6.02 Construction Fees. Owner shall pay to Manager (or subsidiaries of the Manager subcontracted to complete such construction pursuant to Section 10.02) a fee in the amount of 10.0% of rehabilitation costs (excluding “build-to-rent” projects and repairs and maintenance expenses incurred in the normal course of operations) (the “Construction Fee”). For avoidance of doubt, Manager is not entitled to a Construction Fee on “build-to-rent” projects.

SECTION 6.03 Asset Management Fee. For each Property, Owner shall pay to Manager on a monthly basis in arrears, fees for services provided by Manager to manage the portfolio equal to 1.0% of the Effective Gross Income (the “Asset Management Fee”), and together with the Acquisition Fee and the Construction Fee, the “Management Fees”).

SECTION 6.04 Profit Cap. Manager’s EBITDA payable in cash shall be capped at the greater of $3 million or 0.5% of the Consolidated Enterprise Value of the REIT (the “Cash Cap”) per calendar year, and OP hereby agrees that the portion of Manager’s EBITDA equal to or greater than the Cash Cap for a given calendar year shall be paid in the form of OP Units issued to Manager at a price per OP Unit equal to the then-current Net Asset Value. In lieu of payment to the Manager in accordance with this Section 6.04, the Manager and the Owner agree that, upon delivery of written request by the Manager to the Owner, the payment of OP Units in excess of the Cash Cap may be directed instead to the Manager Equityholders (or their designees) in accordance with their respective ownership percentages in the Manager, such designees and percentages to be included in the notice delivered by the Manager. The calculation of the Cash Cap will be performed quarterly and payment of the Management Fees subject to the limitations provided in this section will be paid within 30 days of the end of each quarter, subject to Manager’s or the Manager Equityholders’ (or their designees’) compliance with all U.S. federal and state securities laws.

SECTION 6.05 Definitions.

“Consolidated Enterprise Value” shall mean (x) the aggregate number of outstanding shares of the REIT’s common stock, par value $0.01 per share, and OP Units (excluding OP Units owned by the REIT) multiplied by the then-current Net Asset Value, plus (y) the then-current outstanding debt of the REIT, the OP and their subsidiaries plus the then-current redemption value of any outstanding preferred equity of the REIT and the OP (excluding preferred equity owned by the REIT).

“Effective Gross Income” shall mean the amount of Gross Potential Rental Income for each Property plus other income items, fees or revenue collected by Manager (including, for example, application fees, forced place insurance, late fees, security deposits (except to the extent applied to rent per the terms of the lease pertaining to any Property), and bad check fees) less vacancy and collection losses.

“EBITDA” means Manager’s profit, based upon Manager’s earnings before deductions for interest expenses, taxes, depreciation, and amortization as calculated according to generally accepted account principles as codified by the Financial Accounting Standards Board (“GAAP”).

“Gross Potential Rental Income” shall mean the total rental income for each Property as if all units were fully leased and rented at market rents with a zero vacancy rate.

“Net Asset Value” means the net asset value of the REIT and the OP to be calculated by Green Street Advisors (“GSA”) or another reputable third party on a quarterly or monthly basis, but no less frequently than quarterly, using a methodology developed in conjunction with GSA (or other firm) and the REIT management team to be approved by the Board of Directors of the REIT and the Investment Committee.

“OP Units” means common units of limited partnership interest in the OP.

SECTION 6.06 Additional Services; No Other Compensation. The Management Fees are in addition to the reimbursements otherwise due to Manager under this Agreement, including for the Additional Services as described in Section 3.11. Manager expressly agrees that Manager shall not be entitled to receive any other compensation or other payments from Owner for services provided in respect of the Property (including, without limitation, for construction management, legal, tenant coordination, design, engineering, consulting or any other services performed by Manager or its Affiliates) unless expressly provided for in this Agreement or pursuant to a separate written agreement between Owner and Manager.

ARTICLE VII
INSURANCE AND INDEMNIFICATION

SECTION 7.01 Property and Liability Insurance. Manager shall, at Owner’s sole cost and expense, promptly obtain and keep in force at all times adequate insurance against physical damage (e.g., fire with extended coverage endorsement) and against liability for loss, damage, or injury to property or persons which might arise out of the occupancy, management, operation, or maintenance of the Properties and in accordance with Schedule D. If flood insurance coverage is required by any applicable law or Lender, separate policies shall be procured at Owner’s sole cost and expense. Liability insurance must include a Commercial General Liability Policy and shall have bodily injury and property damage combined single limits of $1,000,000 each occurrence/$1,000,000 aggregate; provided, however, that such limits will be increased, if necessary, to meet requirements of any Lenders in any Loan Document. Such liability insurance shall be deemed to be primary coverage over Manager’s general liability insurance and must cover claims asserted by reason of alleged wrongful actions, fault, or negligence on the part of third-parties and independent contractors, including persons employed by or acting on behalf of the Properties and Owner. Such insurance shall include Manager as an “Additional Insured” and provide for the payment of all costs of defense of any claims. Any deductible required under such insurance policies shall be Owner’s expense. Liability insurance shall be written by a nationally recognized and reputable carrier licensed to do business in the state in which such Property is located. Manager shall furnish Owner with certificates evidencing such insurance and duplicate copies of such policies. The certificates evidencing insurance shall have attached thereto an endorsement from the actual policy that Manager, Owner, and any Lender shall be given at least thirty (30) days prior written notice (by certified mail) of cancellation, non-renewal, or any material change in the subject policy. Without limiting the generality of the foregoing, the parties acknowledge that as of the date of this Agreement, Manager has procured the foregoing policies of insurance on behalf of Owner.

SECTION 7.02 Workers’ Compensation Insurance. Manager shall, at Owner’s expense, maintain workers’ compensation insurance covering all employees of Manager employed in, on, or about the Properties so as to provide statutory benefits required by state and federal laws. Manager shall be reimbursed by Owner for the cost of providing workers’ compensation insurance according to the Approved Operating Budget.

SECTION 7.03 Fidelity Bond. Manager will maintain, at Manager’s expense, a comprehensive fidelity bond covering all employees of Manager who handle or are responsible for the safekeeping of any monies of Owner.

SECTION 7.04 Indemnification. Owner shall indemnify, defend, and hold harmless Manager and its agents and employees from and against all claims, liabilities, losses, damages, and/or expenses arising out of (i) Manager’s performance under this Agreement, or (ii) facts occurrences, or matters first arising prior to the date of this Agreement. Owner, at its own cost and expense, shall defend any action or proceeding against Manager arising therefrom. Notwithstanding the foregoing, Owner shall not be required to indemnify Manager against damages or expenses suffered as a result of the gross negligence, willful misconduct, or fraud on the part of Manager, its agents or employees. Manager shall indemnify, defend and hold harmless Owner and its agents from and against all claims, liabilities, losses, damages and/or expenses arising out of the gross negligence, willful misconduct, or fraud on the part of Manager, its agents, or employees, and shall at its own cost and expense defend any action or proceeding against Owner arising therefrom.

ARTICLE VIII
TERMINATION

SECTION 8.01 Termination. Notwithstanding the provisions of Article II above, this Agreement may also be terminated as follows:

(a) Automatically, in the event (i) Owner sells or otherwise disposes of all or substantially all of the Properties or (ii) a Bankruptcy Event occurs with respect to Manager provided that Manager shall have sixty (60) days to obtain a dismissal of a Bankruptcy Event occurring pursuant to subsection (e) of the definition of “Bankruptcy Event” as set forth in Schedule G;

(b) by Manager, in the event Owner materially defaults in the performance of any of its obligations under this Agreement and fails to cure such default within thirty (30) days after its receipt from Manager of a notice of default (specifying in reasonable detail the nature of the default complained of); provided, however, that if such default cannot be cured within thirty (30) days, then such additional period as shall be reasonable, provided that Owner has commenced to cure such default within such thirty (30) day period, has proceeded to prosecute such cure with due diligence and such cure is completed within ninety (90) days after Owner’s receipt of the notice of default;

(c) by Owner, in the event Manager materially defaults in the performance of any of its obligations under this Agreement and fails to cure such default within thirty (30) days after its receipt from Owner of a notice of default (specifying in reasonable detail the nature of the default complained of); provided, however, that if such default cannot be cured within thirty (30) days, then such additional period as shall be reasonable, provided that Manager has commenced to cure such default within such thirty (30) day period, has proceeded to prosecute such cure with due diligence and such cure is completed within ninety (90) days after Manager’s receipt of the notice of default;

(d) by Manager, if a Bankruptcy Event occurs with respect to Owner, provided that Owner shall have sixty (60) days to obtain a dismissal of a Bankruptcy Event occurring pursuant to subsection (e) of the definition of “Bankruptcy Event” as set forth in Schedule G, in any such event, termination to become effective upon written notice to Owner;

(e) by Owner, without cause upon not less than one hundred twenty (120) days prior written notice to Manager; or

(f) by Owner, in the event that two of the Manager Equityholders ceases to be an equityholder (directly or indirectly) or ceases to lead the activities of Manager (each, a “Key-Man Event”), unless within thirty (30) days thereafter Manager presents one or more substitute key persons in the place of such Manager Equityholder, as necessary, who are reasonably acceptable to Owner. Owner shall have the right to terminate this Agreement immediately and for cause after the expiration of the foregoing cure period following the occurrence of a Key-Man Event if Manager does not present a replacement reasonably acceptable to Owner.

Any amounts accruing to Manager prior to such termination, shall be due and payable upon termination of this Agreement; provided, however, that in the event this Agreement is terminated pursuant to Section 8.01(c), no further fees or expenses shall be payable to Manager thereafter, other than reimbursement of expenses properly documented and supported by invoices or receipts.

SECTION 8.02 Termination Fee. If Owner terminates this Agreement pursuant to Section 8.01(a)(i) or Section 8.01(e) before the end of the Term or any subsequent term year, then Owner shall be obligated to pay Manager an amount equal to 4.0 times the annual Management Fees. For the purposes of this Section 8.02, the amount of the annual Management Fees will be determined by taking the aggregate Management Fees for the last full fiscal quarter immediately preceding termination and multiplying such amount by 4.0. In addition, any amounts accruing to Manager prior to such termination, shall be due and payable upon termination of this Agreement. To the extent funds are available, such sums shall be payable from the Operating Account. Any amount due in excess of the funds available from the Operating Account shall be paid by Owner to Manager upon demand. For the avoidance of doubt, fees attributable to Additional Services are not considered in the calculation of the termination fee.

SECTION 8.03 Owner Responsible for Payments. Owner will be responsible for the direct handling and payment of invoices received after notice of termination. Upon notice of termination, Manager will submit to Owner written notice of all obligations payable with respect to the Properties through the termination date.

SECTION 8.04 Final Accounting. Within sixty (60) days after termination, Manager shall deliver to Owner: (a) a final accounting, reflecting the balance of income and expenses on the Properties as of the date of termination; (b) all records, contracts, leases, receipts, deposits, unpaid bills, and other papers or documents which pertain to the Properties; and (c) all remaining funds held by Manager with respect to the Properties. In consideration of performing the services contemplated under the preceding sentence during such post-termination period, provided this Agreement is not terminated pursuant to Section 8.01(c). During the Final Accounting period, Owner shall pay Manager an accounting fee equal to $50,000.00 per month.

SECTION 8.05 Manager’s Retention of Copies. Manager shall be entitled to retain copies of all documents referred to in Section 8.04.

SECTION 8.06 Survival of Obligations. All obligations of the parties hereunder, as to which performance is contemplated to occur after termination, shall survive termination of this Agreement. Without limiting the generality of the foregoing, all representations and warranties of the parties contained herein and all provisions of this Agreement that require Owner to have insured or to defend, reimburse, or indemnify Manager shall survive the termination of this Agreement; and if Manager is or becomes involved in any proceeding or litigation by reason of having been Owner’s agent, such provisions shall apply as if this Agreement were still in effect.

ARTICLE IX
COVENANTS

SECTION 9.01 Non-Competition; Non-Solicitation.

(a) So long as this Agreement remains in effect, and for a period of eighteen (18) months commencing on the Call Right Closing or a termination of this Agreement pursuant to Subsections (a)(ii), (c), (e) or (f) of Section 8.01 of this Agreement (the “Restricted Period”), each Manager Equityholder shall not, and shall not permit any of its Affiliates under a Manager Equityholder’s control to, directly or indirectly, (i) engage in or assist others engaging in the Business in the States in North America in which the REIT or the OP then owns Properties (the “Territory”), (ii) be or become an officer, director, stockholder, investor, beneficiary, promoter owner, co-owner, Affiliate, partner, joint venturer, member, employee, agent, representative, consultant, advisor, manager of or otherwise render any material services to or have an material interest in any Person that engages directly or indirectly in the Business in the Territory in any material capacity, or (iii) intentionally interfere in any material respect with the business relationships (whether formed prior to or after the date of this Agreement, but only if such Manager Equityholder has actual knowledge of such relationship) between Owner and customers or suppliers of Owner. Notwithstanding the foregoing, such Manager Equityholder may (A) directly or indirectly engage in or assist others engaging in the Business in the Territory pursuant to any management agreements in effect as of the date of this Agreement; (B) own, directly or indirectly, solely as an investment, securities of any Person if such Manager Equityholder is not a controlling Person of, or a member of a group which controls, such Manager Equityholder and does not, directly or indirectly, own five percent (5%) or more of any class of securities of such Person and/or (B) own equity interests in the REIT, the OP or its Affiliates or continue to be involved in the management of or be an employee of the REIT or the OP.

(b) During the Restricted Period, each Manager Equityholder shall not, and shall not permit any of its Affiliates to, directly or indirectly, hire or solicit any employee of Owner or encourage any such employee to leave such employment or hire any such employee who has left such employment, except pursuant to a general solicitation which is not directed specifically to any such employees.

(c) During the Restricted Period, each Manager Equityholder shall not, and shall not permit any of its Affiliates to, directly or indirectly, solicit or entice, or attempt to solicit or entice, any clients or customers of Owner for purposes of diverting their business or services from Owner.

(d) Each Manager Equityholder acknowledges and agrees that a breach or threatened breach of this Section 9.05 may give rise to irreparable harm to Owner, for which monetary damages may not be an adequate remedy, and hereby agrees that in the event of a breach or threatened breach by any Manager Equityholder of any such obligations, Owner shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to seek equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).

(e) Each Manager Equityholder acknowledges that the restrictions contained in this Section 9.05 are reasonable and necessary to protect the legitimate interest of Owner and constitute a material inducement to Owner to enter into this Agreement and consummate the transactions contemplated by this Agreement. In the event that any covenant contained in this Section 9.05 should ever be adjudicated to exceed the time, geographic, product or service, or other limitations permitted by applicable Law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service, or other limitations permitted by applicable Law. The covenants contained in this Section 9.05 and each provision hereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction. Each Manager Equityholder agrees to enter into an agreement containing similar restrictive covenants in the event this Agreement is terminated.

SECTION 9.02 Exclusivity. So long as this Agreement remains in effect, the Manager shall not provide any similar services for any property not owned by Owner or receive any income other than the payments by Owner to Manager pursuant to this Agreement without the prior written consent of the OP, which may be withheld in its reasonable discretion.

SECTION 9.03 Financial Statements. So long as this Agreement remains in effect, the Manager shall (and, to the extent required, shall direct the General Partner to) cooperate with the Adviser, the REIT and the OP to facilitate the timely preparation of any required financial statements, including any required to be publicly filed by an affiliate of the REIT or a company managed by the Adviser.

ARTICLE X
SUBCONTRACTING

SECTION 10.01 Construction. Manager is authorized to subcontract or delegate any of its responsibilities relating to construction and rehabilitation of the Properties hereunder, other than inspection and oversight, to any third-party; provided, that such third-party is approved by the Investment Committee if such construction or rehabilitation work is reasonably likely to cost in excess of $30,000.00 per Property and that such third-party executes a an agreement which includes an express obligation to comply with the terms of this Agreement applicable to the Properties it will manage, in form and substance satisfactory to Owner and further provided that the Manager adequately oversees the third party in accordance with the Standard of Care.

SECTION 10.02 Other Services. Other than as described in Section 10.01, Manager is not authorized to subcontract or delegate any of its responsibilities hereunder to any other person or entity without the prior written consent of the Board of Directors of the REIT and the Investment Committee. For the avoidance of doubt, in the event Manager subcontracts or delegates its responsibilities pursuant to Section 10.01, Manager shall retain its responsibility of oversight of such subcontracted third-parties in accordance with the Standard of Care.

ARTICLE XI

MISCELLANEOUS

SECTION 11.01 NOTICES. All notices or other communications required or permitted by this Agreement shall be in writing and shall be deemed to have been duly received (i) if given by electronic mail, on the date of delivery, (ii) if given by certified or registered mail, return receipt requested, postage prepaid, three (3) Business Days after being deposited in the U.S. mails and (iii) if given by courier or other means, when received or personally delivered, and, in any such case, addressed as follows:

If to Owner:

NexPoint Homes Trust, Inc.

300 Crescent Court

Suite 700

Dallas, Texas 75201

Attention: Brian Mitts

Email: BMitts@nexpoint.com

with a copy to:

NexPoint Advisors, L.P.

300 Crescent Court

Suite 700

Dallas, Texas 75201

Attention: D.C. Sauter

Email: DSauter@nexpoint.com

and

Winston & Strawn LLP

2121 North Pearl Street

Suite 900

Dallas, Texas 75201

Attention: Charles T. Haag

Email: chaag@winston.com

If to Manager:

HomeSource Operations LLC

11818 Westbranch Parkway

Davidson, North Carolina 28036

Attn: Randy Hagedorn

Email: randy.hagedorn@renthomesource.com

and

Vaisey Nicholson & Nearpass, PLLC

155 Clinton Square

Rochester, New York 14604

Attn: Jeffrey A. Vaisey

Email: jvaisey@vnnlaw.com

or to such other addresses as may be specified by any such person to the other person pursuant to notice given by such person in accordance with the provisions of this Section 11.01.

SECTION 11.02 GOVERNING LAW; WAIVER OF JURY TRIAL. THE PROVISIONS OF THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AS AT THE TIME IN EFFECT, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. THE PARTIES TO THIS AGREEMENT HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF DELAWARE, INCLUDING ANY APPELLATE COURTS THEREOF. THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

SECTION 11.03 ENTIRE AGREEMENT. This Agreement sets forth the final, entire agreement among the parties hereto with respect to the subject matter hereof and supersedes any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof.

SECTION 11.04 Amendment; MODIFICATION. This Agreement shall not be amended, supplemented, modified, terminated, or discharged, in whole or in part, except by an instrument in writing signed by the parties hereto, or their respective successors or assignees; provided, that upon the acquisition or disposition of any Property, Schedule A shall be automatically and without any further action by the parties hereto amended to reflect such acquisition or disposition of Property; provided further, that Owner shall deliver a revised Schedule A to Manager as soon as reasonably practicable and in accordance with Section 11.01 above that reflects such acquisition or disposition of Property.

SECTION 11.05 SEVERABILITY. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

SECTION 11.06 CONSTRUCTION. EACH OF THE PARTIES HERETO HAS HAD THE BENEFIT OF LEGAL COUNSEL OF ITS OWN CHOICE AND HAS BEEN AFFORDED AN OPPORTUNITY TO REVIEW THIS AGREEMENT WITH ITS LEGAL COUNSEL. THIS AGREEMENT SHALL BE CONSTRUED AS IF JOINTLY DRAFTED BY OWNER AND MANAGER. HEADINGS FOR SECTIONS, SUBSECTIONS, AND OTHER PARTS OF THIS AGREEMENT ARE FOR CONVENIENCE OF REFERENCE ONLY AND SHALL NOT CONSTITUTE A PART OF THIS AGREEMENT FOR ANY OTHER PURPOSE OR BE GIVEN ANY SUBSTANTIVE EFFECT.

SECTION 11.07 COUNTERPARTS. This Agreement and any amendments, waivers, consents, or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile, scanned pages or electronic signature shall be effective as delivery of a manually executed counterpart to this Agreement.

SECTION 11.08 Transferability; Successors and Assigns; Third-Party Beneficiary. This Agreement is not transferable by Manager. The rights of Owner hereunder are transferable to any of its respective Affiliates upon no less than ten (10) days’ prior written notice to Manager. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. The parties hereto acknowledge that the REIT is an express third-party beneficiary for purposes of, and may enforce any provisions of, Article IX.

SECTION 11.09 CONFIDENTIALITY. No party to this Agreement will disclose the terms of this Agreement to any third party without the consent of the other parties hereto, except as required by securities or other applicable laws. Notwithstanding the above provisions, each party may disclose the terms of this Agreement (i) in connection with the requirements of a public offering or securities filing, (ii) to accountants, banks, and financing sources (both debt and equity) and their advisors, (iii) in connection with the enforcement of this Agreement or rights under this Agreement, or (iv) in connection with a merger or acquisition (whether by an equity or asset transfer), or the like.

[Signature page follows]

IN WITNESS WHEREOF, the parties have executed and delivered this MANAGEMENT AGREEMENT as of the date first written above.

	NEXPOINT SFR OPERATING
	PARTNERSHIP, L.P.,
	a Delaware limited partnership


	By:	/s/ Brian Mitts
	Name:	Brian Mitts
	Title:	Chief Financial Officer,
	Treasurer and Assistant Secretary


	HOMESOURCE OPERATIONS, LLC,
	a Delaware limited liability company


	By:	/s/ Randy Hagedorn
	Name:	Randy Hagedorn
	Title:	President and CEO

[Signature Page to Management Agreement]

Schedule A

The Properties

[Omitted]

Schedule B

Account Agency Agreement

[Omitted]

Schedule C

Financial Records and Reports

[Omitted]

Schedule D

Additional Covenants

[Omitted]

Schedule E

Approved Operating Budget

[Omitted]

Schedule F

Approved Guidelines

[Omitted]

Schedule G

Defined Terms

Capitalized terms used in this Agreement but not otherwise defined herein have the following definitions:

“Affiliate” of any Person means (i) any other individual or entity that is, directly or indirectly, (A) in Control of the applicable Person, (B) under the Control of the applicable Person or (C) under common Control with the applicable Person; (ii) any individual that is a director or officer of the applicable Person or (iii) any individual that is a director or officer of any entity described in clause (i) of this definition.

“AML Laws” means applicable federal anti-money laundering laws and regulations including 18 U.S.C. 1956 and 1957, as amended.

“Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq., as amended from time to time.

“Bankruptcy Event” with respect to any Person, means the occurrence of any of the following:

(a) Such Person voluntarily files for bankruptcy protection under the Bankruptcy Code.

(b) Such Person voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights.

(c) Any Property becomes an asset in a voluntary bankruptcy or becomes subject to any voluntary reorganization, receivership, insolvency proceeding, or other similar voluntary proceeding pursuant to any other federal or state law affecting debtor and creditor rights.

(d) An order of relief is entered against such Person pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a Related Party. If such Person, any general partner of such person if such Person is a general partnership, or any Related Party has solicited creditors to initiate or participate in such a proceeding, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding will be considered as having been initiated by a Related Party.

(e) An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against such Person but only if such Person has failed to use commercially reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts” will not require any direct or indirect interest holders in such Person to contribute or cause the contribution of additional capital to such Person.

If such Person is a general partnership, any of the following occur:

(a) Any general partner of such Person voluntarily files for bankruptcy protection under the Bankruptcy Code.

(b) Any general partner of such Person voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights.

(c) An order of relief is entered against any general partner of such Person pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a Related Party.

(d) An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against any general partner of such Person but only if such Person or such general partner of such Person has failed to use commercially reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts” will not require any direct or indirect interest holders in such Person or such general partner of such Person to contribute or cause the contribution of additional capital to such Person.

“Business” means the business of acquiring, developing, renovating, leasing and operating single family rental properties.

“Business Day” means any day other than a Saturday, a Sunday, or any other day on which Owner or the national banking associations are not open for business.

"Call Right Closing” has the meaning set forth in the Side Letter.

“Control” means to possess, directly or indirectly through one or more intermediate entities, the power to direct or cause the direction of the management, operation, or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, including the power to elect a majority of the directors or trustees of a corporation or trust, as the case may be.

For example, a trustee of a trust is a Person that Controls that trust; a general partner in a limited partnership is a Person that Controls that limited partnership; a managing member or a non- member manager of a limited liability company is a Person that Controls that limited liability company; members of a limited liability company with a voting interest that permits them (individually or collectively) to direct or control the decisions of the limited liability company are Persons that Control that limited liability company; every general partner in a general partnership or member in a joint venture is a Person that Controls that entity; a shareholder of a corporation that holds 50% or more of the shares in the corporation (whether individually or in the aggregate with its Affiliates) is a Person that Controls that corporation.

“Economic Sanctions Laws” means the foreign assets control regulations, 31 C.F.R. Chapter V, as amended, and any amending federal legislation or executive order relating thereto, as administered by OFAC.

“Eligible Lease” means, unless otherwise approved by Owner, a written Lease that satisfies all of the following characteristics:

(a)

It is on a form approved by Owner.

(b)

It is executed by an Eligible Tenant and Owner, or Manager on behalf of Owner (or, in the case of a Lease existing on the Effective Date, such Lease has been assigned to Owner).

(c)

It has a rental rate and terms consistent with existing local market rates and terms.

(d)

As of the date the Lease was executed, the Lease had an initial term of at least 6 months and not more than 2 years.

(e)

It complies with all applicable law in all material respects and includes all disclosures required by applicable law.

(f)

It covers 100% of the square footage of the applicable Property or Unit.

(g)

It does not include any purchase option, right of refusal, right of first offer or other similar interest in any Property in favor of any tenant or other Person.

(h)

In the case of leases on Properties where a Lender has a loan secured directly or indirectly by a Property, lease terms must meet all Lender requirements.

“Eligible Tenant” means a bona fide third-party lessee of a Property who satisfies each of the following criteria:

(i)

Manager has verified, based on bona fide written documentation, that the tenant has sufficient financial resources to satisfy its obligations under the Lease for the Property.

(j)

The tenant is not subject to an ongoing Bankruptcy Event as such date of initial screening (or if not so initially screened, as of the Effective Date).

(k)

The tenant is not an Affiliate of Manager or any Immediate Family Member of any of the foregoing.

“Event of Default” means an event of default under the Loan Documents of which Manager has received written notice or has actual knowledge.

“Fixtures” means all property owned by Owner which is attached to the Land or the Improvements so as to constitute a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators and installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, awnings, storm windows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment.

“FHFA” means the Federal Housing Finance Authority.

“FHFA SCP List” means the Suspended Counterparty List maintained by the FHFA which is currently published at https://www.fhfa.gov/SupervisionRegulation/LegalDocuments/Pages/SuspendedCounterpartyProgram.aspx.

"General Partner” means NexPoint SFR OP GP, LLC, a Delaware limited liability company.

“Governmental Authority” means any board, commission, department, agency or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, which has or acquires jurisdiction over any Property, or the use, operation or improvement of any Property, or over Manager.

“Hazardous Materials” means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls (PCBs) and compounds containing them; lead and lead- based paint; asbestos or asbestos containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on any Property is prohibited by any Governmental Authority; any substance that requires special handling and any other material or substance now or in the future that (i) is defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” by or within the meaning of any Hazardous Materials Law, or (ii) is regulated in any way by or within the meaning of any Hazardous Materials Law.

“Hazardous Materials Law” and “Hazardous Materials Laws” means any and all federal, state and local laws, ordinances, regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future, including all amendments, that relate to Hazardous Materials or the protection of human health or the environment and apply to Manager or to any Property. Hazardous Materials Laws include the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101 et seq., and their state analogs.

“Immediate Family Members” means a Person’s spouse, parent (including step-parent), child (including stepchild), grandchild (including step-grandchild) or sibling (including step-siblings).

“Improvements” means the buildings, structures and improvements now constructed or at any time in the future constructed or placed upon the Land, including any future alterations, replacements and additions.

“Indebtedness” means (i) the principal of, (ii) interest at the fixed or variable rate set forth in a Note on the principal of, and (iii) all other amounts due at any time under a Note or any other Loan Document.

“Insurance” means Property Insurance, liability insurance and all other insurance that Owner requires Manager to maintain pursuant to this Agreement.

“Land” means the land described in any Exhibit A to the Security Instrument(s).

“Leases” means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Property, or any portion of the Property, and all modifications, extensions or renewals.

“Lender” means any lender providing a loan to Owner which is secured by a mortgage or deed of trust on any Property.

“Lien” means any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance on any Property or any direct or indirect ownership interest in Owner.

“Loan” means any loan provided by any Lender to Owner.

“Loan Documents” means all documents now or in the future executed by Owner in connection with any Loan.

“Manager Equityholder” means Randy Hagedorn, Adam Levinson and Rich Scola.

“Manager Principal” means any of the following: (i) any general partner of Manager (if Manager is a partnership), (ii) any manager or managing member of Manager (if Manager is a limited liability company), (iii) any Person (limited partner, member or shareholder) with a collective direct or indirect equity interest in Manager equal to or greater than 25% (if Manager is an entity), or (iv) any trustee of Manager (if Manager is a trust).

“Material Adverse Effect” means a material adverse effect on: (i) the Properties taken as a whole, (ii) the business, prospects, profits, operations or condition (financial or otherwise) of Manager, (iii) the enforceability, validity, perfection or priority of the Lien of any Loan Document, or (iv) the ability of Manager to perform any obligations under this Agreement.

“Mold” means mold, fungus, microbial contamination or pathogenic organisms.

“Non-U.S. Equity Holder” means any Person with a collective equity interest (whether direct or indirect) of 10% or more in Manager, and which is either (a) an individual who is not a citizen of the United States, or (b) an entity formed outside the United States.

“Note” means any Note(including any Amended and Restated Note, Consolidated, Amended and Restated Note, or Extended and Restated Note) evidencing the Indebtedness executed by Owner in favor of Lender, including all schedules, riders, allonges and addenda.

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.

“OFAC Lists” means either one of the following:

(l)

The OFAC Specially Designated Nationals and Blocked Persons List.

(m)

The OFAC Consolidated Sanctions List.

“Person” means any natural person, sole proprietorship, corporation, general partnership, limited partnership, limited liability company, limited liability partnership, limited liability limited partnership, joint venture, association, joint stock company, bank, trust, estate, unincorporated organization, any federal, state, county or municipal government (or any agency or political subdivision thereof), endowment fund or any other form of entity.

“Personalty” means all of the following:

(a)

accounts (including deposit accounts) of Owner related to any Property.

(b)

equipment and inventory owned by Owner, which are used now or in the future in connection with the ownership, management or operation of the Land or Improvements or are located on the Land or Improvements, including furniture, furnishings, machinery, building materials, goods, supplies, tools, books, records (whether in written or electronic form) and computer equipment (hardware and software).

(c)

other tangible personal property owned by Owner which is used now or in the future in connection with the ownership, management or operation of the Land or Improvements or is located on the Land or in the Improvements, including ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances (other than Fixtures).

(d)

any service contracts relating to the Land or the Improvements.

(e)

any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements.

(f)

all other intangible property, general intangibles and rights relating to the operation of, or used in connection with, the Land or the Improvements, including all governmental permits relating to any activities on the Land and including subsidy or similar payments received from any sources, including a Governmental Authority.

(g)

any rights of Owner in or under letters of credit.

“Priority Repairs” means those repairs required to be performed under any Loan of which Manager has been given written notice by Owner.

“Prohibited Activity or Condition” means each of the following:

(a)

The presence, use, generation, release, treatment, processing, storage (including storage in above-ground and underground storage tanks), handling or disposal of any Hazardous Materials on or under a Property.

(b)

The transportation of any Hazardous Materials to, from or across a Property.

(c)

Any occurrence or condition on a Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws.

The term “Prohibited Activity or Condition” excludes the safe and lawful use and storage of each of the following materials, so long as the materials are used, stored, handled, transported, and disposed of in compliance with Hazardous Materials Laws:

(a)

Prepackaged supplies, cleaning materials, and petroleum products customarily used in the operation and maintenance of comparable properties.

(b)

Cleaning materials, personal grooming items, and other items sold in pre- packaged containers for consumer use and used by tenants and occupants of residential units in the Properties.

(c)

Petroleum products used in the operation and maintenance of motor vehicles from time to time located on the Property’s parking areas.

“Prohibited Parties List” means any one or more of the following:

(a)

The OFAC Lists.

(b)

The FHFA SCP List.

“Property” means, individually, and “Properties” means, collectively, the residential real properties encumbered by the Security Instruments.

“Property Document” means each agreement relating to a Property and each other instrument binding on any Property, including any reciprocal easement agreement, declaration of covenants, conditions and restrictions and any condominium or homeowner’s association governing documents, rules and regulations.

“Property Jurisdiction” means the jurisdiction in which the Land is located for any particular Property.

“Regulatory Agreement” means any recorded or unrecorded agreement with a Regulatory Agreement Agency that encumbers any Property and which imposes use, occupancy and/or rent restrictions on any Property and/or its operation.

“Regulatory Agreement Agency” means a Governmental Authority, acting through any authorized representative, or any quasi-governmental authority, that is entitled to enforce the provisions of a Regulatory Agreement that encumbers any Property.

“Related Party” means all the following:

(a)

Manager.

(b)

Any general partner of Manager if Manager is a general partnership.

(c)

Any Person that holds, directly or indirectly, any ownership interest (including any shareholder, member or partner) in Manager, any general partner of Manager if Manager is a general partnership, or any Person that has a right to manage Manager or any general partner of Manager if Manager is a general partnership.

(d)

Any Person in which Manager or any general partner of Manager if Manager is a general partnership.

(e)

Any Person in which any partner, shareholder, or member of Manager or any general partner of Manager if Manager is a general partnership.

(f)

Any Person in which any Person holding an interest in Manager or any general partner of Manager if Manager is a general partnership.

(g)

Any creditor of Manager that is related by blood, marriage or adoption to Manager.

(h)

Any creditor of Manager or any general partner of Manager if Manager is a general partnership that is related to any partner, shareholder or member of, or any other Person holding an interest in, Manager or any general partner of Manager if Manager is a general partnership.

“Rent(s)” means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Property, whether now due, past due or to become due, and deposits forfeited by tenants.

“Rent Schedule” means a written schedule for the Properties showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Owner. The Rent Schedule should be prepared using the template available from Owner, which may be revised from time to time, or in a format otherwise acceptable to Owner.

“Repairs” means all repairs made to the Properties, including all Priority Repairs.

“Restoration” is defined in Section 1.09(i) of Schedule D.

“Security Instrument” means the mortgage(s), deed(s) of trust, deed(s) to secure debt or other similar security instrument(s) encumbering one or more Properties and securing Owner’s performance of its Loan obligations.

"Side Letter” means that certain agreement, dated as of the date hereof, between the REIT, the OP, the Adviser, the Manager, the General Partner and the Manager Equityholders.

“Transfer” means any of the following: (i) a sale, assignment, transfer or other disposition or divestment of any direct or indirect interest in Manager, a Person that Controls Manager, or a Property (whether voluntary, involuntary or by operation of law), (ii) the granting, creating or attachment of a Lien, encumbrance or security interest (whether voluntary, involuntary or by operation of law), (iii) the issuance or other creation of an ownership interest in a legal entity, including a partnership interest, interest in a limited liability company or corporate stock, (iv) the withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or Manager in a limited liability company, (v) the merger, dissolution, liquidation, or consolidation of a legal entity or the reconstitution of one type of legal entity into another type of legal entity.

For purposes of defining the term “Transfer,” the term “partnership” means a general partnership, a limited partnership, a joint venture, a limited liability partnership, or a limited liability limited partnership and the term “partner” means a general partner, a limited partner, or a joint venturer.

“Transfer” does not include any of the following: (i) a conveyance of a Property at a judicial or non-judicial foreclosure sale under the Security Instrument, (ii) a Property becoming part of a bankruptcy estate by operation of law under the Bankruptcy Code, (iii) the filing or recording of a Lien against a Property for local taxes and/or assessments not then due and payable, or (iv) a sale, assignment, transfer or other disposition or divestment of any direct or indirect interest in Manager or any owner of direct or indirect ownership interests in Manager.

“Unit” means each separate legal address comprising all or part of a Property.

ex_381499.htm

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND

PRINCIPAL FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian Mitts, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of VineBrook Homes Trust, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 15, 2022

/s/ Brian Mitts

Brian Mitts

Interim President and Chief Financial Officer

(Principal Executive Officer and Principal Financial Officer)

ex_381500.htm

Exhibit 32.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Brian Mitts, certify that:

1. I have reviewed this Annual Report on Form 10-Q of VineBrook Homes Trust, Inc.; and

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.

Date: August 15, 2022

/s/ Brian Mitts

Brian Mitts

Interim President and Chief Financial Officer

(Principal Executive Officer and Principal Financial Officer)

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