Company: BHM
Filing Date: 2025-03-20
Form Type: 424B3
Source: 0001104659-25-026164
Chunk: 214

Company: Bluerock Homes Trust, Inc.
Filing Date: 2025-03-20
Form: 424B3
Chunk 214
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 projected receipts
on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.
The fair value of interest rate swaps is 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 inputs used
in the valuation of interest rate caps and swaps fall within Level 2 of the fair value hierarchy.

#### Note 12 –
Derivative Financial Instruments

Risk Management Objective
of Using Derivatives

The
Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages
its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages
economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets
and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments
to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts,
the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences
in the amount, timing, and duration of the Company’s known or expected cash payments principally related to the Company’s
borrowings.

The
Company’s objectives in using interest rate derivative financial instruments are to add stability to interest expense and to manage
the Company’s exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate caps
and swaps as part of its interest rate risk management strategy. 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. Interest rate swaps involve
the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements
without exchange of the underlying notional amount.

The
Company has not designated any of the interest rate derivatives as hedges. Although these derivative financial instruments were not designated
or did not qualify for hedge accounting, the Company believes these derivative financial instruments mitigate increases in interest rates.
The Company does not use derivative financial instruments for trading or speculative purposes.

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