Company: BHM
Filing Date: 2025-07-08
Form Type: DRS
Source: 0001104659-25-066400
Chunk: 68

Company: Bluerock Homes Trust, Inc.
Filing Date: 2025-07-08
Form: DRS
Chunk 68
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 a derivative contract is positive, the counterparty owes us, which creates credit risk for us. Basis risk occurs when the
index upon which the contract is based is more or less variable than the index upon which the hedged asset or liability is based, thereby
making the hedge less effective. Finally, legal enforceability risks encompass general contractual risks, including the risk that the
counterparty will breach the terms of, or fail to perform its obligations under, the derivative contract. If we are unable to manage
these risks effectively, our results of operations, financial condition and ability to make distributions to you will be adversely affected.

Complying with REIT requirements may limit our ability to hedge risk effectively.

We must satisfy two gross
income tests annually to maintain our qualification as a REIT. First, at least 75% of our gross income for each taxable year must consist
of defined types of income that we derive, directly or indirectly, from investments relating to real property or mortgages on real property
or qualified temporary investment income (the “75% Gross Income Test”). Second, at least 95% of our gross income for each
taxable year must consist of income that is qualifying income for purposes of the 75% Gross Income Test, other types of interest and
dividends, gain from the sale or disposition of shares or securities, or any combination of these (the “95% Gross Income Test”).

These and other REIT provisions
of the Code may limit our ability to hedge the risks inherent to our operations. From time to time, we may enter into hedging transactions
with respect to one or more of our assets or liabilities. Our hedging transactions may include entering into interest rate swaps, caps
and floors, options to purchase these items, and futures and forward contracts. Any income or gain derived by us from transactions that
hedge certain risks, such as the risk of changes in interest rates, will not be treated as gross income for purposes of either the 75%
Gross Income Test or the 95% Gross Income Test if specific requirements are met. Such requirements include that the hedging transaction
be properly identified within prescribed time periods and that the transaction either (1) hedge risks associated with indebtedness
issued by us that is incurred to acquire or carry real estate assets, (2) manage the risks of currency fluctuations with respect
to income or gain that qualifies under the 75% Gross Income Test or 95% Gross Income Test (or assets that generate such income), or