Bluerock Homes Trust, Inc. Fair Value Disclosure
Note 12 – Fair Value
Fair Value Measurements
For financial assets and liabilities recorded at fair value on a recurring or non-recurring basis, fair value is the price the Company would expect to receive to sell an asset, or pay to transfer a liability, in an orderly transaction with a market participant at the measurement date under current market conditions. In the absence of such data, fair value is estimated using internal information consistent with what market participants would use in a hypothetical transaction.
In determining fair value, observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions; preference is given to observable inputs. In accordance with GAAP and as defined in ASC Topic 820: Fair Value Measurement, these two types of inputs create the following fair value hierarchy:
| ● | Level 1:Quoted prices for identical instruments in active markets |
| ● | Level 2:Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable |
| ● | Level 3:Significant inputs to the valuation model are unobservable |
If the inputs used to measure the fair value fall within different levels of the hierarchy, the fair value is determined based upon the lowest level input that is significant to the fair value measurement. Whenever possible, the Company uses quoted market prices to determine fair value. In the absence of quoted market prices, the Company uses independent sources and data to determine fair value.
Fair Value of Financial Instruments
At December 31, 2025 and 2024, the carrying values of cash and cash equivalents, restricted cash, accounts receivable, due from and due to affiliates, revolving credit facilities, accounts payable, other accrued liabilities, and distributions payable approximate fair value based on their highly liquid nature and/or short-term maturities and are classified in Level 1 of the fair value hierarchy. The carrying values of notes receivable approximate fair value because stated interest rate terms are consistent with interest rate terms on new deals with similar leverage and risk profiles. The fair values of notes receivable are classified in Level 3 of the fair value hierarchy due to the significant unobservable inputs that are utilized in their respective valuations.
At December 31, 2025, the fair value of the Marble Fund is based upon the net asset value reported within the Marble Fund’s financial information. This financial information represents market prices within an inactive market as the Marble Fund prices units based on the net asset value of the fund. Entrants to the fund are priced based upon the current net asset value of the fund at the time of investment. As such, the carrying value of the Marble Fund approximates fair value, and the financial information used to determine the fair value of the Company’s investment in the Marble Fund represents market-corroborated inputs of the asset, which is considered a Level 2 input within the fair value hierarchy. The Company held no investments in unconsolidated real estate funds at December 31, 2024. Refer to Note 7 for further information on the Marble Fund.
As of December 31, 2025 and 2024, based on the discounted amount of future cash flows using rates currently available to the Company for similar liabilities, the fair value of the Company’s mortgages payable is estimated at $436.4 million and $250.2 million, respectively, compared to the carrying amounts, before adjustments for deferred financing costs, net, of $438.7 million and $258.2 million, respectively. The fair value of mortgages payable is estimated based on interest rates obtained from a third party for similar types of borrowing arrangements and accordingly, the fair value of mortgages payable is classified in Level 2 of the fair value hierarchy.
The carrying values and fair values of the Company’s financial instruments recorded at fair value on a recurring basis at December 31, 2025 and 2024 are summarized in the table below (amounts in thousands):
December 31, 2025 | December 31, 2024 | |||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||
Assets | | | | | | | | | | | ||||
Preferred equity investments (1) |
| Level 3 | $ | 35,738 | $ | 35,738 | $ | 81,668 | $ | 81,668 | ||||
Derivative financial instruments (2) | Level 2 | 679 | 679 | 1,220 | 1,220 | |||||||||
| (1) | Represents the Company’s preferred equity investments which are classified as available-for-sale (“AFS”) debt securities (refer to Note 8 for further information). The Company measures the fair value of its AFS preferred equity investments utilizing observable and unobservable market inputs. The observable market inputs include recent transactions and broker quotes (“market data”). However, given the implied price dispersion amongst the market data, the fair value determination for the AFS preferred equity investments has also utilized significant unobservable inputs in discounted cash flow models based on recent performance of the collateral, the underlying collateral characteristics, industry trends as well as expectations of macroeconomic events. At each measurement date, the Company considers both the observable and unobservable valuation inputs in the determination of fair value. However, given the significance of the unobservable inputs, the fair values of AFS preferred equity investments are classified in Level 3 of the fair value hierarchy. |
| (2) | The estimated fair values of derivative financial instruments are valued 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 volatility. The fair value of interest rate caps is determined using the market-standard methodology of discounting the future expected cash receipts which would occur if floating interest rates rise above the strike rate of the caps. The floating 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. 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. |
The Company’s operating units classified as held for sale for which it has recorded impairments, measured at fair value on a non-recurring basis, for the years ended December 31, 2025 and 2024 are summarized in the table below (amounts in thousands). The units classified as held for sale are all reported in the Company’s scattered single-family homes segment.
Investment in operating units classified as held for sale (Level 3) | | 2025 | | 2024 | ||
Pre-impairment amount | $ | 14,117 | $ | 13,631 | ||
Total impairments (1) |
| (1,921) |
| (2,541) | ||
Fair value (2) | $ | 12,196 | $ | 11,090 | ||
| (1) | Impairment amounts are included in (impairment) and gain on sale of real estate investments, net on the Company’s consolidated statements of operations and comprehensive income (loss). |
| (2) | Real estate assets classified as held for sale are reported at the lower of their carrying value or estimated fair value less costs to sell and are presented separately within operating real estate held for sale, net on the Company’s consolidated balance sheets. The estimated fair value is based on historical sales experience, discussions with third-party brokers, and current market conditions. |
Fair Value Measurements on a Nonrecurring Basis
The Company continually monitors events and changes in circumstances that could indicate that the carrying amounts of its operating real estate and related intangible assets may not be recoverable. If the Company does not believe that it will be able to recover the carrying value of operating real estate and related intangible assets, the Company will record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the operating real estate and related intangible assets. Fair value is determined by using valuation techniques appropriate to the specific operating asset, which may include discounted cash flow analysis or a broker’s opinion of value. These valuation methods utilize inputs that fall within Level 3 of the fair value hierarchy. During the year ended December 31, 2025, the Company recognized an impairment loss of approximately $3.8 million related to its Peak JV 2 portfolio, which is included in the Company’s scattered single-family homes segment. Of the total impairment loss, approximately $3.5 million was attributable to a revised hold period assessment for 75 units within the portfolio that are now expected to be sold in the near term. The remaining $0.3 million impairment was driven by deterioration in submarket conditions. During 2024, the Lubbock, Texas submarket experienced deterioration, and as a result, we recorded a $1.4 million impairment loss on the Peak JV 2 portfolio as of December 31, 2024. The impairment losses for 2025 and 2024 are recorded within (impairment) and gain on sale of real estate investments, net on the Company’s consolidated statements of operations and comprehensive income (loss).
The Company’s operating units for which it has recorded impairments, measured at fair value on a non-recurring basis, for the years ended December 31, 2025 and 2024 are summarized in the table below (amounts in thousands). The operating units for which the Company has recorded impairment losses are all reported in the Company’s scattered single-family homes segment.
| 2025 | | 2024 | |||
Investment in operating units (Level 3) |
| |
| | ||
Pre-impairment amount | $ | 12,875 | $ | 3,507 | ||
Total impairments (1) |
| (3,792) |
| (1,375) | ||
Fair value (2) | $ | 9,083 | $ | 2,132 | ||
| (1) | Impairment amounts are included in (impairment) and gain on sale of real estate investments, net on the Company’s consolidated statements of operations and comprehensive income (loss). |
| (2) | Operating real estate assets for which the Company has recorded impairment losses are reported at the lower of their carrying value or estimated fair value and are included within total net operating real estate investments on the Company’s consolidated balance sheets. The estimated fair value is based on estimates obtained from third-party brokers and current market conditions. |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 20, 2025 | |
| 2023 | Mar 12, 2024 | |
| 2022 | Mar 22, 2023 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.