Company: BHM
Filing Date: 2025-07-08
Form Type: DRS
Source: 0001104659-25-066400
Chunk: 158

Company: Bluerock Homes Trust, Inc.
Filing Date: 2025-07-08
Form: DRS
Chunk 158
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the underlying collateral when determining if a loan investment is fully recoverable, we evaluate estimated future cash flows to be generated
from the collateral underlying the investment. The inputs and assumptions utilized to estimate the future cash flows of the underlying
collateral are based upon our evaluation of the operating results, economy, market trends, and other factors, including judgments regarding
costs to complete any construction activities, lease-up and occupancy rates, rental rates, and capitalization rates utilized to estimate
the projected cash flows at the disposition. We may also obtain a third-party valuation which may value the collateral through an “as-is”
or “stabilized value” methodology. If upon completion of the valuation the fair value of the underlying collateral securing
the investment is less than the net carrying value, we record a provision for credit loss on that loan investment. As the investment no
longer displays the characteristics that are similar to those of the pool of loan investments, the investment is removed from the CECL
collective (pool) analysis described above.

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Preferred Equity Investments

We perform an individual
assessment of expected credit losses for our preferred equity investments, which are accounted for as AFS debt securities, that have an
unrealized loss recorded at the reporting date. If it is determined that the borrower is experiencing financial difficulty, or a foreclosure
is probable, or we expect repayment through the sale of the collateral, we calculate expected credit losses based on the value of the
underlying collateral as of the reporting date. During this review process, if we determine that it is probable that we will not be able
to collect all amounts due for both principal and interest according to the contractual terms of an investment, that preferred equity
investment is not considered fully recoverable and a provision for credit loss is recorded.

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OUR INDUSTRY AND MARKET OPPORTUNITY</div>

Market and Investment Opportunity

The residential rental industry
has historically been more resilient to economic downturns than other commercial real estate sectors and is currently benefiting from
significant industry tailwinds that began during the COVID-19 pandemic. Rental market fundamentals are strong and demographic trends support
further strengthening, particularly from rental-biased and debt-burdened millennials now reaching peak household-formation and homeownership
age. We believe that a continued upswing in the propensity to rent, coupled with the limited and depleting supply for the middle-income
range, signals significant opportunity. Specifically:

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