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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2025

☐ 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: 000-54295

Sterling Real Estate Trust

d/b/a Sterling Multifamily Trust

(Exact name of registrant as specified in its charter)

North Dakota	90-0115411
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4340 18th Ave S., Suite 200, Fargo, North Dakota	58103
(Address of principal executive offices)	(Zip Code)

(701) 353-2720

(Registrant’s telephone number, including area code)

(Former name, former address and formal fiscal year, if changed since last report)

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


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Shares, par value $0.01 per share	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 (Section 232.405 of this chapter) during the preceding 12 months (or 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, 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 ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.


Class		Outstanding at November 5, 2025
Common Shares of Beneficial Interest, $0.01 par value per share		13,143,765

Table of Contents

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

INDEX

	Page
	No.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited):	3
Consolidated Balance Sheets – September 30, 2025 (unaudited) and December 31, 2024 (audited)	3
Consolidated Statements of Operations and Other Comprehensive Income – Three and nine months ended September 30, 2025 and 2024	4
Consolidated Statements of Shareholders’ Equity – Three and nine months ended September 30, 2025 and 2024	5
Consolidated Statements of Cash Flows – Nine months ended September 30, 2025 and 2024	7
Notes to Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3. Quantitative and Qualitative Disclosures About Market Risk	47
Item 4. Controls and Procedures	47

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	48
Item 1A. Risk Factors	48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3. Defaults Upon Senior Securities	49
Item 4. Mine Safety Disclosures	49
Item 5. Other Information	49
Item 6. Exhibits	50
Signatures	51

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2025 (UNAUDITED) and December 31, 2024 (AUDITED)


	September 30,		December 31,
	2025		2024

	(in thousands)
ASSETS
Real estate investments
Land and land improvements	$	145,373	$	139,491
Buildings and improvements		923,837		905,504
Furniture, fixtures and equipment		35,878		35,721
Construction in progress		21,543		14,699
Real estate investments		1,126,631		1,095,415
Less accumulated depreciation		(253,527)		(237,416)
Real estate investments, net		873,104		857,999
Cash and cash equivalents		7,391		4,798
Restricted deposits		9,930		10,127
Investment in unconsolidated affiliates		29,210		28,407
Notes receivable		1,500		1,539
Notes receivable, affiliates		4,420		7,945
Assets held for sale		7,130		—
Lease intangible assets, less accumulated amortization		1,862		2,541
Other assets, net		21,328		24,416

Total Assets	$	955,875	$	937,772

LIABILITIES
Mortgage notes payable, net	$	508,796	$	506,735
Mortgage notes payable, net, affiliates		56,275		57,983
Notes payable, affiliate		10,000		—
Lines of credit		9,430		4,992
Dividends payable		9,572		9,039
Tenant security deposits payable		8,698		8,291
Lease intangible liabilities, less accumulated amortization		213		324
Liabilities related to assets held for sale		2,498		—
Accrued expenses and other liabilities		27,972		21,470
Total Liabilities		633,454		608,834

COMMITMENTS and CONTINGENCIES - Note 13

SHAREHOLDERS' EQUITY
Beneficial interest		152,634		153,834
Noncontrolling interest
Operating partnership		153,230		154,353
Partially owned properties		9,982		9,290
Accumulated other comprehensive income		6,575		11,461
Total Shareholders' Equity		322,421		328,938

	$	955,875	$	937,772

See Notes to Consolidated Financial Statements

Table of Contents

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME THREE AND NINE MONTHS ENDED September 30, 2025 and 2024 (UNAUDITED)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024

	(in thousands, except per share data)				(in thousands, except per share data)
Income from rental operations
Real estate rental income	$	43,730	$	41,477	$	128,910	$	118,035
Expenses
Expenses from rental operations
Operating expenses		19,228		17,667		53,695		49,960
Real estate taxes		4,682		4,120		12,764		13,047
Depreciation and amortization		7,592		7,604		21,313		20,528
Interest		6,828		6,701		19,469		17,642
		38,330		36,092		107,241		101,177
Loss on impairment of property		735		—		735		—
Administration of REIT		1,391		1,194		4,335		4,079
Total expenses		40,456		37,286		112,311		105,256
Income from operations		3,274		4,191		16,599		12,779

Other (loss) income
Equity in losses of unconsolidated affiliates		(870)		(826)		(2,767)		(2,239)
Other income		273		276		666		1,057
Gain on sale or conversion of real estate investments		—		241		—		3,069
Gain on involuntary conversion		—		96		—		95
Total other income		(597)		(213)		(2,101)		1,982
Net income	$	2,677	$	3,978	$	14,498	$	14,761
Net income (loss) attributable to noncontrolling interest:
Operating partnership		1,622		2,641		8,735		9,300
Partially owned properties		(52)		(357)		(309)		(274)
Net income attributable to Sterling Real Estate Trust	$	1,107	$	1,694	$	6,072	$	5,735

Net income attributable to Sterling Real Estate Trust per common share, basic and diluted	$	0.08	$	0.15	$	0.47	$	0.50

Comprehensive income
Net income	$	2,677	$	3,978	$	14,498	$	14,761
Other comprehensive (loss) income:
Gain (loss) on cash flow hedges		139		(2,951)		(2,528)		(375)
Cash flow hedge losses reclassified to earnings		(787)		(1,798)		(2,358)		(3,284)
Total other comprehensive loss		(648)		(4,749)		(4,886)		(3,659)
Total comprehensive income (loss)		2,029		(771)		9,612		11,102
Comprehensive income (loss) attributable to noncontrolling interest		1,186		(654)		5,544		6,753
Comprehensive income (loss) attributable to Sterling Real Estate Trust	$	843	$	(117)	$	4,068	$	4,349

Weighted average common shares outstanding, basic and diluted		13,032		11,512		12,970		11,403

See Notes to Consolidated Financial Statements

Table of Contents

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

THREE AND NINE MONTHS ENDED September 30, 2025 (UNAUDITED)


				Accumulated				Noncontrolling
				Distributions		Total		Interest				Accumulated
	Common	Paid-in		in Excess of		Beneficial		Operating		Partially Owned		Comprehensive
	Shares	Capital		Earnings		Interest		Partnership		Properties		Income (Loss)		Total

	(in thousands)
BALANCE AT DECEMBER 31, 2024	12,829	$	205,020	$	(51,186)	$	153,834	$	154,353	$	9,290	$	11,461	$	328,938
Shares/units redeemed	(50)		(1,146)		-		(1,146)		(1,434)		-		-		(2,580)
Dividends and distributions declared ($0.3000 per share/unit)	-		-		(3,867)		(3,867)		(5,565)		-		-		(9,432)
Dividends reinvested - stock dividend	91		2,066		-		2,066		-		-		-		2,066
Issuance of shares under optional purchase plan	22		529		-		529		-		-		-		529
Owner Contribution	-		-		-		-		-		1,000		-		1,000
Total other comprehensive loss	-		-		-		-		-		-		(2,782)		(2,782)
Net income (loss)	-		-		2,106		2,106		3,031		(230)		-		4,907
BALANCE AT MARCH 31, 2025	12,892	$	206,469	$	(52,947)	$	153,522	$	150,385	$	10,060	$	8,679	$	322,646
Shares/units redeemed	(89)		(2,040)		-		(2,040)		(1,155)		-		-		(3,195)
Dividends and distributions declared ($0.3000 per share/unit)	-		-		(3,878)		(3,878)		(5,550)		-		-		(9,428)
Dividends reinvested - stock dividend	93		2,131		-		2,131		-		-		-		2,131
Issuance of shares under optional purchase plan	28		663		-		663		-		-		-		663
Total other comprehensive loss	-		-		-		-		-		-		(1,456)		(1,456)
Net income (loss)	-		-		2,858		2,858		4,083		(26)		-		6,915
BALANCE AT JUNE 30, 2025	12,924	$	207,223	$	(53,967)	$	153,256	$	147,763	$	10,034	$	7,223	$	318,276
Contribution of assets in exchange for UPREIT partnership units	-		-		-		-		10,518		-		-		10,518
Shares issued under trustee compensation plan	3		61		-		61		-		-		-		61
Shares/units redeemed	(39)		(896)		-		(896)		(1,005)		-		-		(1,901)
Dividends and distributions declared ($0.3000 per share/unit)	-		-		(3,905)		(3,905)		(5,668)		-		-		(9,573)
Dividends reinvested - stock dividend	93		2,130		-		2,130		-		-		-		2,130
Issuance of shares under optional purchase plan	37		881		-		881		-		-		-		881
Total other comprehensive loss	-		-		-		-		-		-		(648)		(648)
Net income (loss)	-		-		1,107		1,107		1,622		(52)		-		2,677
BALANCE AT SEPTEMBER 30, 2025	13,018	$	209,399	$	(56,765)	$	152,634	$	153,230	$	9,982	$	6,575	$	322,421

See Notes to Consolidated Financial Statements

Table of Contents

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 (UNAUDITED)


				Accumulated				Noncontrolling
				Distributions		Total		Interest				Accumulated
	Common	Paid-in		in Excess of		Beneficial		Operating		Partially Owned		Comprehensive
	Shares	Capital		Earnings		Interest		Partnership		Properties		Income (Loss)		Total

	(in thousands)
BALANCE AT DECEMBER 31, 2023	11,257	$	168,975	$	(44,880)	$	124,095	$	163,308	$	2,555	$	11,362	$	301,320
Shares/units redeemed	(51)		(1,108)		-		(1,108)		(410)		-		-		(1,518)
Dividends and distributions declared ($0.2875 per share/unit)	—		—		(3,257)		(3,257)		(5,338)		-		-		(8,595)
Dividends reinvested - stock dividend	87		1,899		-		1,899		-		-		-		1,899
Issuance of shares under optional purchase plan	37		843		-		843		-		-		-		843
Total other comprehensive (loss) income	—		—		-		-		-		-		1,517		1,517
Net income	—		—		1,739		1,739		2,850		51		-		4,640
BALANCE AT MARCH 31, 2024	11,330	$	170,609	$	(46,398)	$	124,211	$	160,410	$	2,606	$	12,879	$	300,106
Contribution of assets in exchange for the issuance of noncontrolling interest shares	-		-		-		-		7,396		-		-		7,396
Shares/units redeemed	(132)		(2,885)		-		(2,885)		(2,910)		-		-		(5,795)
Dividends and distributions declared ($0.2875 per share/unit)	-		-		(3,251)		(3,251)		(5,392)		-		-		(8,643)
Dividends reinvested - stock dividend	84		1,838		-		1,838		-		-		-		1,838
Issuance of shares under optional purchase plan	27		629		-		629		-		-		-		629
Contributions from consolidated real estate entity noncontrolling interest	-		-		-		-		-		7,041		-		7,041
Total other comprehensive (loss) income	-		-		-		-		-		-		(427)		(427)
Net income	-		-		2,303		2,303		3,809		31		-		6,143
BALANCE AT JUNE 30, 2024	11,309	$	170,191	$	(47,346)	$	122,845	$	163,313	$	9,678	$	12,452	$	308,288
Shares issued under trustee compensation plan	3		72		-		72		-		-		-		72
Shares/units redeemed	(29)		(623)		-		(623)		(1,831)		-		-		(2,454)
Dividends and distributions declared ($0.2875 per share/unit)	-		-		(3,364)		(3,364)		(5,368)		-		-		(8,732)
Dividends reinvested - stock dividend	84		1,843		-		1,843		-		-		-		1,843
Issuance of shares under optional purchase plan	29		676		-		676		-		-		-		676
Contributions from consolidated real estate entity noncontrolling interest	-		-		-		-		-		177		-		177
Issuance of common shares	302		6,943		-		6,943		-		-		-		6,943
Total other comprehensive (loss) income	-		-		-		-		-		-		(4,749)		(4,749)
Net income	-		-		1,694		1,694		2,641		(357)		-		3,978
BALANCE AT SEPTEMBER 30, 2024	11,698	$	179,102	$	(49,016)	$	130,086	$	158,755	$	9,498	$	7,703	$	306,042

See Notes to Consolidated Financial Statements

Table of Contents

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED September 30, 2025 and 2024 (UNAUDITED)


	Nine Months Ended
	September 30,
	2025		2024

	(in thousands)
OPERATING ACTIVITIES
Net income	$	14,498	$	14,761
Adjustments to reconcile net income to net cash provided by operating activities
Gain on sale of real estate investments		—		(3,069)
Loss on impairment of property		735		—
Gain on involuntary conversion		—		(95)
Equity in loss of unconsolidated affiliates		2,767		2,239
Allowance for uncollectible accounts receivable		—		226
Depreciation		19,740		18,260
Amortization		1,573		2,268
Amortization of debt issuance costs		—		38
Effects on operating cash flows due to changes in
Other assets		(2,218)		(428)
Tenant security deposits payable		329		1,014
Accrued expenses and other liabilities		404		(1,143)
NET CASH PROVIDED BY OPERATING ACTIVITIES		37,828		34,071
INVESTING ACTIVITIES
Purchase of real estate investment properties		(10,855)		(28,287)
Capital expenditures and tenant improvements		(16,352)		(12,817)
Proceeds from sale of real estate investments and non-real estate investments		83		9,863
Proceeds from insurance claims		797		—
Investment in unconsolidated affiliates		(4,540)		(6,119)
Distributions in excess of earnings received from unconsolidated affiliates		970		1,706
Notes receivable issued net of payments received		3,564		(510)
NET CASH USED IN INVESTING ACTIVITIES		(26,333)		(36,164)
FINANCING ACTIVITIES
Principal payments on special assessments payable		(203)		(42)
Proceeds from issuance of mortgage notes payable, net of financing costs		30,354		(152)
Principal payments on mortgage notes payable		(27,513)		(14,522)
Draws on lines of credit		4,438		5,849
Proceeds from contributions received from noncontrolling interest - partially owned properties		1,001		7,219
Draws (payments) on notes payable		—		8,518
Proceeds on notes payable, affiliate		10,000		—
Proceeds from issuance of common shares		—		6,943
Proceeds from issuance of shares under optional purchase plan		2,073		2,148
Shares/units redeemed		(7,677)		(9,768)
Dividends/distributions paid		(21,572)		(20,235)
NET CASH USED IN FINANCING ACTIVITIES		(9,099)		(14,042)
NET CHANGE IN CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS		2,396		(16,135)
CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT BEGINNING OF PERIOD		14,925		37,061
CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT END OF PERIOD	$	17,321	$	20,926

CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT END OF PERIOD
Cash and cash equivalents	$	7,391	$	11,145
Restricted deposits		9,930		9,781
TOTAL CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS, END OF PERIOD	$	17,321	$	20,926

See Notes to Consolidated Financial Statements

Table of Contents

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE NINE MONTHS ENDED September 30, 2025 and 2024 (UNAUDITED)


	Nine Months Ended
	September 30,
	2025		2024

	(in thousands)
SCHEDULE OF CASH FLOW INFORMATION
Cash paid during the period for interest	$	18,874	$	16,650

SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Dividends reinvested	$	6,327	$	5,579
Dividends declared and not paid		3,904		3,364
UPREIT distributions declared and not paid		5,668		5,368
Acquisition of assets in exchange for the issuance of noncontrolling interest units in UPREIT		10,518		72
Assumed loans		—		7,396
Increase in land improvements due to increase in special assessments payable		4,510		80,774
Accrued capital expenditures		3,424		1,013
Total other comprehensive (loss) income		(4,886)		(3,659)
Acquisition of assets through assumption of debt and liabilities		772		653
Capitalized interest and real estate taxes related to construction in progress		226		133

See Notes to Consolidated Financial Statements

Table of Contents

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

Note 1 - Organization

Sterling Real Estate Trust d/b/a Sterling Multifamily Trust (“Sterling”, “the Trust” or “the Company”) is a registered, but unincorporated business trust organized in North Dakota in December 2002. Sterling has elected to be taxed as a Real Estate Investment Trust (“REIT”) under Sections 856-860 of the Internal Revenue Code.

Sterling previously established an Operating Partnership (“Sterling Properties, LLLP” or the “Operating Partnership”) and transferred all of its assets and liabilities to the Operating Partnership in exchange for general partnership units. As the general partner, Sterling has management responsibility for all activities of the Operating Partnership. As of September 30, 2025 and December 31, 2024, Sterling owned approximately 40.79% and 40.80%, respectively, of the Operating Partnership.

NOTE 2 – PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2024, which have previously been filed with the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted from this report on Form 10-Q pursuant to the rules and regulations of the SEC.

The results for the interim periods shown in this report are not necessarily indicative of future financial results. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary to present fairly our consolidated financial statements as of and for the three and nine months ended September 30, 2025. These adjustments are of a normal recurring nature.

Principles of Consolidation

The consolidated financial statements include the accounts of Sterling, Sterling Properties, LLLP, and wholly-owned limited liability companies. All significant intercompany transactions and balances have been eliminated in consolidation.

As of September 30, 2025 the Trust owned approximately 40.79% of the partnership interests (“OP Units”) of the Operating Partnership. The remaining OP Units, consisting exclusively of limited partner interests, are held by persons who contributed their interests in properties to the Operating Partnership in exchange for OP Units. Under the LLLP Agreement and the individual’s respective redemption plan, these persons have the right to request the Operating Partnership redeem their OP Units following a specified restricted period. All redemptions are at the sole discretion of the Trust, acting for itself or in its capacity as General Partner of the Operating Partnership, and further subject to the conditions and limitations of the LLLP Agreement and redemption plans, as the same may be amended or modified from time to time. If the Trust accepts a redemption request, the redemption of OP Units shall be made in cash in an amount equal to the fair value of an equivalent number of common shares of the Trust. In lieu of delivering cash, however, the Trust, as the Operating Partnership’s general partner, may, at its option and in its sole and absolute discretion, choose to acquire any OP Units so tendered by issuing common shares in exchange for the tendered OP Units. If the Trust so chooses, its common shares will be exchanged for OP Units on a one-for-one basis. This one-for-one exchange ratio is subject to adjustment to prevent dilution. With each such exchange or redemption, the Trust’s percentage ownership in the Operating Partnership will increase. In addition, whenever the Trust issues common or other classes of its shares, it contributes the net proceeds it receives from the issuance to the Operating Partnership and the Operating Partnership issues to the Trust an equal number of OP Units or other partnership

Table of Contents

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

interests having preferences and rights that mirror the preferences and rights of the shares issued. This structure is commonly referred to as an umbrella partnership REIT or “UPREIT.”

Additionally, we evaluate the need to consolidate affiliates based on standards set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation (“ASC 810”). In determining whether we have a requirement to consolidate the accounts of an entity, management considers factors such as our ownership interest, our authority to make decisions and contractual and substantive participating rights of the limited partners and shareholders, as well as whether the entity is a variable interest entity (“VIE”) for which we have both: a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and b) the obligation to absorb losses or the right to receive benefits from the VIE that could be potentially significant to the VIE. The Trust will consolidate the operations of a joint venture if the Trust determines that it is the primary beneficiary of a variable interest entity (VIE) and has substantial influence and control of the entity.

In instances where the Trust determines that it is not the primary beneficiary of a VIE and the Trust does not control the joint venture but can exercise influence over the entity with respect to its operations and major decisions, the Trust will use the equity method of accounting. Under the equity method, the operations of a joint venture will not be consolidated with the Trust’s operations but instead its share of operations will be reflected as equity in earnings (losses) of unconsolidated affiliates on its consolidated statements of operations and comprehensive income. Additionally, the Trust’s net investment in the joint venture will be reflected as investment in unconsolidated entity on the consolidated balance sheets. See Note 5 for additional details regarding variable interest entities where the Trust uses the equity method of accounting.

The Operating Partnership meets the criteria as a variable interest entity (“VIE”). The Trust’s sole significant asset is its investment in the Operating Partnership. As a result, substantially all of the Trust’s assets and liabilities represent those assets and liabilities of the Operating Partnership. All of the Trust’s debt is an obligation of the Operating Partnership, and the Trust guarantees the unsecured debt obligations of the Operating Partnership.

Concentration of Credit Risk

Our cash balances are maintained in various bank deposit accounts. The bank deposit amounts in these accounts may exceed federally insured limits at various times throughout the year.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Real Estate Investments

Real estate investments are recorded at cost less accumulated depreciation. Ordinary repairs and maintenance are expensed as incurred.

The Trust allocates the purchase price of each acquired investment property accounted for as an asset acquisition based upon the relative fair value at acquisition date of the individual assets acquired and liabilities assumed, which generally include (i) land, (ii) building and other improvements, (iii) in-place lease intangibles, (iv) acquired above and below market

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

lease intangibles, and (v) assumed financing that is determined to be above or below market, if any. Transaction costs related to acquisitions accounted for as asset acquisitions are capitalized as a cost of the property.

For tangible assets acquired, including land, building and other improvements, the Trust considers available comparable market and industry information in estimating acquisition date fair value. Key factors considered in the calculation of fair value of both real property and intangible assets include the current market rent values, “dark” periods (building in vacant status), direct costs estimated with obtaining a new tenant, discount rates, escalation factors, standard lease terms, and tenant improvement costs.

Furniture and fixtures are stated at cost less accumulated depreciation. Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for routine maintenance and repairs, which do not add to the value or extend useful lives, are expensed as incurred.

Depreciation is provided for over the estimated useful lives of the individual assets using the straight-line method over the following estimated useful lives:


Buildings and improvements		40 years
Land Improvements		20 years
Furniture, fixtures and equipment		5-9 years

The Trust’s investment properties are reviewed for potential impairment at the end of each reporting period or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. At the end of each reporting period, the Trust separately determines whether impairment indicators exist for each property.

Based on our evaluation, there was one impairment loss of $735 during the three and nine months ended September 30, 2025 and no impairment losses during the three and nine months ended September 30, 2024.

Equity

The Amended and Restated Share Redemption Plan, effective June 20, 2024, permits us to repurchase common shares held by our shareholders and limited partnership units held by partners of our Operating Partnership, up to an aggregate amount of $75,000 worth of shares and units, upon request by the holders after they have held them for at least one year and subject to other conditions and limitations described in the plan. The amount remaining to be redeemed as of September 30, 2025, was $10,096. The redemption price for such shares and units redeemed under the plan was fixed at $22.80 per share or unit, which became effective January 1, 2025. The redemption plan will terminate in the event the shares become listed on any national securities exchange, the subject of bona fide quotes on any inter-dealer quotation system or electronic communications network or are the subject of bona fide quotes in the pink sheets. Additionally, the Board, in its sole discretion, may terminate, amend or suspend the redemption plan at any time if it determines to do so is in our best interest.

Any and all units redeemed by the Limited Partnership shall be canceled, and will have the status of authorized but unissued Units. Units acquired by the Limited Partnership through the Redemption Plan will not be reissued unless they are first registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and other appropriate state securities laws or otherwise issued pursuant to exemptions from applicable registration requirements of such laws.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

Federal Income Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code, as amended. A REIT calculates taxable income similar to other domestic corporations, with the major difference being a REIT is entitled to a deduction for dividends paid. A REIT is generally required to distribute each year at least 90% of its taxable income. If it chooses to retain the remaining 10% of taxable income, it may do so, but it will be subject to a corporate tax on such income. REIT shareholders are generally taxed on REIT distributions of ordinary income in the same manner as they are taxed on other corporate distributions.

We intend to continue to qualify as a REIT and, provided we maintain such status, will not be taxed on the portion of the income that is distributed to shareholders. In addition, we intend to distribute all of our taxable income; therefore, no provisions or liabilities for income taxes have been recorded in the financial statements.

We follow FASB ASC Topic 740, Income Taxes, to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of September 30, 2025 and December 31, 2024 we did not have any liabilities for uncertain tax positions that we believe should be recognized in our consolidated financial statements. We are no longer subject to Federal and State tax examinations by tax authorities for years before 2021.

Revenue Recognition

The Trust is the lessor for its residential and commercial leases. Leases are analyzed on an individual basis to determine lease classification. As of September 30, 2025 all leases analyzed under the Trust’s lease classification process were determined to be operating leases.

Earnings per Common Share

Basic earnings per common share is computed by dividing net income available to common shareholders (the “numerator”) by the weighted average number of common shares outstanding (the “denominator”) during the period. Sterling had no dilutive potential common shares during the three and nine months ended September 30, 2025 and 2024 and, therefore, basic earnings per common share was equal to diluted earnings per common share for all periods presented.

For the nine months ended September 30, 2025 and 2024, Sterling’s denominators for the basic and diluted earnings per

common share were approximately 12,970,000 and 11,403,000, respectively.

Recent Accounting Pronouncements

In August 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-05, “Business Combinations - Joint Venture Formations” (“ASU 2023-05”), which addresses the accounting for contributions made to a joint venture. ASU 2023-05 requires joint ventures to measure all assets and liabilities upon formation at fair value. This guidance is to be applied prospectively for all joint venture formations with a formation date on or after January 1, 2025. During the previous reporting period, we adopted ASU 2023-05. Adoption of ASU 2023-05 did not have an impact on our Condensed Consolidated Financial Statements.

Segment Reporting. In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), to improve reportable segment disclosure requirements so that investors can better understand an entity’s overall performance and assess potential future cash flows. The amendments in ASU 2023-07

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

include, but are not limited to: (i) disclosure of, on an annual basis, significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss; (ii) disclosure of, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition (the other segment items category is the difference between segment revenue less the significant expenses disclosed and each reported measure of segment profit or loss); (iii) disclosure of, on an interim basis, all currently required annual disclosures about a reportable segment’s profit (loss) and assets; (iv) clarification that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, an entity may report one or more of those additional measures of segment profit; and (v) disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. During the year ended December 31, 2024, the amendments in ASU 2023-07 were adopted retrospectively and did not have a significant impact on the Company’s consolidated financial position, results of operations, or cash flows.

In November 2024, the FASB issued ASU 2024-03, Income Statement- Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires new tabular disclosures in the notes to consolidated financial statements, disaggregating certain cost and expense categories within relevant captions on the Consolidated Statements of Operations. The prescribed cost and expense categories requiring disaggregated disclosures include purchases of inventory, employee compensation, depreciation and intangible asset amortization, along with certain other expense disclosures already required by U.S. GAAP that would need to be integrated within the new tabular disaggregated expense disclosures. Additionally, the amendments also require the disclosure of total selling expenses and an entity's definition of those expenses. The amendments in ASU 2024-03 are effective for annual periods beginning after December 15, 2026, which for the Company would be applicable to fiscal year 2027, and for subsequent interim periods. Early adoption is permitted and the amendments should be applied on a prospective basis. Retrospective application is permitted. The Trust is currently evaluating the impact the new accounting standard will have on its expense disclosures in the notes to the consolidated financial statements.

NOTE 3 – segment reporting

We report our results in two reportable segments: residential and commercial properties. Our residential properties include multifamily properties. Our commercial properties include retail, office, industrial, restaurant and medical properties. We assess and measure operating results based on net operating income (“NOI”), which we define as total real estate segment revenues less real estate expenses (which consist of real estate taxes, property management fees, utilities, repairs and maintenance, insurance, and property administrative and management fees). We believe NOI is an important measure of operating performance even though it should not be considered an alternative to net income or cash flow from operating activities. NOI is unaffected by financing, depreciation, amortization, legal and professional fees, and certain general and administrative expenses. The accounting policies of each segment are consistent with those described in Note 2 of this report.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

Segment Revenues and Net Operating Income

The revenues and net operating income for the reportable segments (residential and commercial) are summarized as follows for the three and nine months ended September 30, 2025 and 2024, along with reconciliations to the consolidated financial statements. Segment assets are also reconciled to total assets as reported in the consolidated financial statements.


	Three months ended September 30, 2025						Three months ended September 30, 2024
	Residential		Commercial		Total		Residential		Commercial		Total

	(in thousands)						(in thousands)
Income from rental operations	$	38,764	$	4,966	$	43,730	$	36,519	$	4,958	$	41,477
Real Estate Expenses
Real Estate Taxes		4,233		449		4,682		3,616		504		4,120
Property Management		5,092		223		5,315		4,905		208		5,113
Utilities		2,836		310		3,146		2,639		302		2,941
Repairs and Maintenance		8,829		544		9,373		7,415		528		7,943
Insurance		1,359		35		1,394		1,640		30		1,670
Expenses from rental operations		22,349		1,561		23,910		20,215		1,572		21,787
Net operating income	$	16,415	$	3,405	$	19,820	$	16,304	$	3,386	$	19,690
Depreciation and amortization ¹						7,592						7,604
Interest ¹						6,828						6,701
Administration of REIT ¹						1,391						1,194
Loss on impairment of property						735						—
Other income (expense) ¹						597						213
Net income					$	2,677					$	3,978

¹The financial information provided to the CODM for these expense categories are not reflected by segment to evaluate performance of our reportable segments.


	Nine months ended September 30, 2025						Nine months ended September 30, 2024
	Residential		Commercial		Total		Residential		Commercial		Total

	(in thousands)						(in thousands)
Income from rental operations	$	114,102	$	14,808	$	128,910	$	102,921	$	15,114	$	118,035
Real Estate Expenses
Real Estate Taxes		11,375		1,389		12,764		11,555		1,492		13,047
Property Management		14,822		673		15,495		13,798		648		14,446
Utilities		9,531		810		10,341		8,346		778		9,124
Repairs and Maintenance		21,941		1,502		23,443		20,229		1,301		21,530
Insurance		4,309		107		4,416		4,752		108		4,860
Expenses from rental operations		61,978		4,481		66,459		58,680		4,327		63,007
Net operating income	$	52,124	$	10,327	$	62,451	$	44,241	$	10,787	$	55,028
Depreciation and amortization ¹						21,313						20,528
Interest ¹						19,469						17,642
Administration of REIT ¹						4,335						4,079
Loss on impairment of property ¹						735						—
Other income ¹						2,101						(1,982)
Net income					$	14,498					$	14,761

¹The financial information provided to the CODM for these expense categories are not reflected by segment to evaluate performance of our reportable segments.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

Segment Assets and Accumulated Depreciation


As of September 30, 2025	Residential		Commercial		Total

	(in thousands)
Real estate investments	$	948,056	$	178,575	$	1,126,631
Accumulated depreciation		(197,200)		(56,327)		(253,527)
Total real estate investments, net	$	750,856	$	122,248	$	873,104
Lease intangible assets, less accumulated amortization		—		1,862		1,862
Cash and cash equivalents						7,391
Restricted deposits						9,930
Investment in unconsolidated affiliates						29,210
Notes receivable						1,500
Notes receivable, affiliates						4,420
Assets held for sale						7,130
Other assets, net						21,328
Total Assets					$	955,875


As of December 31, 2024	Residential		Commercial		Total

	(in thousands)
Real estate investments	$	916,559	$	178,856	$	1,095,415
Accumulated depreciation		(183,753)		(53,663)		(237,416)
Total real estate investments, net	$	732,806	$	125,193	$	857,999
Lease intangible assets, less accumulated amortization		199		2,342		2,541
Cash and cash equivalents						4,798
Restricted deposits						10,127
Investment in unconsolidated affiliates						28,407
Notes receivable						1,539
Notes receivable, affiliates						7,945
Other assets, net						24,416
Total Assets					$	937,772

NOTE 4 – Restricted deposits and FUNDED reserves

The following table summarizes the Trust’s restricted deposits and funded reserves.


	As of September 30,		As of December 31,
	2025		2024

	(in thousands)
Tenant security deposits	$	8,304	$	7,838
Real estate tax and insurance escrows		1,308		1,041
Replacement reserves		318		127
Other funded reserves		—		1,121
	$	9,930	$	10,127

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

NOTE 5 – Investment in unconsolidated affiliates

The Company’s investments in unconsolidated real estate ventures, are summarized as follows (in thousands):


			Total Investment in Unconsolidated Affiliates at				Total Assets in Unconsolidated Affiliates at				Total Liabilities of Unconsolidated Affiliates at
Unconsolidated Affiliates	Date Acquired	Trust Ownership Interest	September 30, 2025		December 31, 2024		September 30, 2025			December 31, 2024	September 30, 2025		December 31, 2024
Banner Building	2007	66.67%	$	1,333	$	1,276	$	8,505	$	8,561	$	6,561	$	6,704
Grand Forks INREIT, LLC	2003	50%		5,441		5,684		19,713		20,839		8,832		9,472
SE Savage, LLC	2019	60%		(361)		136		29,371		30,375		29,973		30,298
SE Maple Grove, LLC	2019	60%		765		(62)		26,584		27,754		26,078		27,938
SE Rogers, LLC	2020	60%		291		855		28,270		29,314		27,422		27,975
ST Oak Cliff, LLC	2021	70%		6,031		6,821		45,839		47,577		37,189		37,806
SE Brooklyn Park, LLC	2021	60%		339		871		27,084		28,121		26,539		26,877
ST Fossil Creek, LLC	2022	70%		5,779		7,038		46,846		48,229		39,090		38,175
Emory North Liberty, LC	2024	50%		9,231		5,494		44,183		33,281		25,970		22,294
SHG Emory North Liberty, LLC	2024	99%		(176)		232		488		500		540		268
			$	28,673	$	28,345	$	276,883	$	274,551	$	228,194	$	227,807

Negative investments presented in accrued expenses and other liabilities				537		62

Total investment in unconsolidated affiliates			$	29,210	$	28,407

Banner Building - the Operating Partnership owns a 66.67% interest as tenant in common in an office building in Fargo, North Dakota. The property is encumbered by a first mortgage with the Trust acting as a guarantor on the outstanding indebtedness.

Grand Forks INREIT, LLC - the Operating Partnership owns 50% interest as tenant in common through 100% ownership in a limited liability company. The property is located in Grand Forks, North Dakota. The property is encumbered by a non-recourse first mortgage with the Trust acting as a guarantor on the outstanding indebtedness.

SE Savage, LLC - the Operating Partnership owns a 60% interest in a limited liability company that holds a multifamily property. The entity is located in Savage, Minnesota. The property is encumbered by a first mortgage, with the Trust acting as a guarantor on the indebtedness.

SE Maple Grove, LLC - the Operating Partnership owns a 60% interest in a limited liability company that holds a multifamily property. The entity is located in Maple Grove, Minnesota. The property is encumbered by a first mortgage, with the Trust acting as a guarantor on the outstanding indebtedness. During the third quarter of 2025, the second mortgage to Sterling Properties, LLLP was satisfied and had a balance of $3,428 at December 31, 2024. The note is included in Notes receivable, affiliates on the Consolidated Balance Sheet at December 31, 2024.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

SE Rogers, LLC - the Operating Partnership owns a 60% interest in a limited liability company that holds a multifamily property. The entity is located in Rogers, Minnesota. The property is encumbered by a first mortgage, with the Trust acting as a guarantor on the outstanding indebtedness. The property is also encumbered by a second mortgage to Sterling Properties, LLLP with a balance of $2,100 and $2,100 at September 30, 2025 and December 31, 2024, respectively. The note is included in Notes Receivable on the Consolidated Balance Sheet at September 30, 2025 and December 31, 2024.

ST Oak Cliff, LLC - the Operating Partnership owns a 70% interest in a limited liability company, with a related party a multifamily property. The entity is located in Dallas, Texas. The entity is encumbered by a first mortgage, with the Trust acting as a guarantor on the outstanding indebtedness.

SE Brooklyn Park, LLC - the Operating Partnership owns a 60% interest in a limited liability company that holds a multifamily property. The entity is located in Brooklyn Park, Minnesota. The property is encumbered by a first mortgage, with the Trust acting as a guarantor on the outstanding indebtedness. The property is also encumbered by a second mortgage to Sterling Properties, LLLP with a balance of $2,294 and $2,294 at September 30, 2025 and December 31, 2024, respectively. The note is included in Notes Receivable on the Consolidated Balance Sheet at September 30, 2025 and December 31, 2024.

ST Fossil Creek, LLC - the Operating Partnership owns a 70% interest in a limited liability company, with a related party. The entity is located in Fort Worth, Texas. The property is encumbered by a first mortgage, with the Trust acting as a guarantor on the outstanding indebtedness.

Emory North Liberty, LC – the Operating Partnership owns a 50% interest in a limited company. The entity is currently developing a multifamily property located in North Liberty, Iowa. The property is encumbered by a construction mortgage, with the Trust acting as a guarantor on the outstanding indebtedness. For the acquisition of Emory North Liberty, LC, Sterling determined that it does not control the key decision-making rights and is not the primary beneficiary related to Emory North Liberty, LC from the respective date it was acquired. The VIE that owned legal title to Emory North Liberty, LC was not included in Sterling’s consolidated financial statements, but rather as an unconsolidated affiliate, from the date it was acquired.

SHG Emory North Liberty, LLC – The Operating Partnership owns a 99% interest in a limited liability company. For the acquisition of SHG Emory North Liberty, LLC, Sterling determined that it does not control the key decision-making rights and is not the primary beneficiary related to SHG Emory North Liberty, LLC from the respective date it was acquired. The VIE that owned legal title to SHG Emory North Liberty, LLC was not included in Sterling’s consolidated financial statements, but rather as an unconsolidated affiliate, from the date it was acquired.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

The following is a summary of the financial position of the unconsolidated affiliates at September 30, 2025 and December 31, 2024.


	September 30, 2025		December 31, 2024

	(in thousands)
ASSETS
Real estate investments	$	316,016	$	305,398
Accumulated depreciation		(48,736)		(38,078)
Total Real Estate Investments, net		267,280		267,320
Cash and cash equivalents		5,998		4,147
Restricted deposits		1,650		1,263
Financing and lease costs, net		731		796
Other assets, net		1,224		1,025
Total Assets	$	276,883	$	274,551

LIABILITIES
Mortgage notes payable, net	$	220,087	$	221,819
Tenant security deposits payable		504		487
Accrued expenses and other liabilities		7,603		5,501
Total Liabilities	$	228,194	$	227,807
SHAREHOLDERS' EQUITY
Total Shareholders' Equity	$	48,689	$	46,744

Total liabilities and shareholders' equity	$	276,883	$	274,551

The following is a summary of results of operations of the unconsolidated affiliates for the three and nine months ended September 30, 2025


	Three months ended September 30,				Nine months ended September 30,
	2025		2024		2025		2024

	(in thousands)					(in thousands)
Income from rental operations	$	8,197	$	6,558	$	24,087	$	18,570
Expenses from rental operations		3,799		3,257		10,844		8,930
Net operating income	$	4,398	$	3,301	$	13,243	$	9,640
Depreciation and Amortization		3,572		2,890		10,800		8,072
Interest		2,270		1,681		6,697		4,919
Other expense		(136)		(12)		(2)		(12)
Net loss	$	(1,308)	$	(1,258)	$	(4,252)	$	(3,339)

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

NOTE 6 - Lease intangibles

The following table summarizes the net value of other intangible assets and liabilities and the accumulated amortization for each class of intangible:


	Lease		Accumulated		Lease
As of September 30, 2025	Intangibles		Amortization		Intangibles, net

Lease Intangible Assets	(in thousands)
In-place leases	$	16,914	$	(15,385)	$	1,529
Above-market leases		1,415		(1,082)		333
	$	18,329	$	(16,467)	$	1,862
Lease Intangible Liabilities
Below-market leases	$	(2,314)	$	2,101	$	(213)


	Lease		Accumulated		Lease
As of December 31, 2024	Intangibles		Amortization		Intangibles, net

Lease Intangible Assets	(in thousands)
In-place leases	$	16,188	$	(14,047)	$	2,141
Above-market leases		1,415		(1,015)		400
	$	17,603	$	(15,062)	$	2,541
Lease Intangible Liabilities
Below-market leases	$	(2,315)	$	1,991	$	(324)

The estimated aggregate amortization expense for each of the five succeeding fiscal years and thereafter is as follows:


	Intangible		Intangible
Years ending December 31,	Assets		Liabilities

	(in thousands)
2025 (October - December)	$	160	$	37
2026		490		77
2027		381		38
2028		311		19
2029		207		17
Thereafter		313		25
	$	1,862	$	213

NOTE 7 – LINES OF CREDIT

We have a $4,915 variable rate (floating SOFR plus 2.00%) line of credit agreement with Bremer Bank, which expires in December 2026; and a $3,500 variable rate (floating SOFR plus 2.00%) line of credit agreement with Bremer Bank, which also expires December 2026. We also have a $19,800 variable rate (Prime - 1.50%) line of credit agreement with Gate City Bank, with a maturity that was originally extended from September 2025 to October 2025 and has now been further extended to December 2025. The lines of credit are secured by specific properties. At September 30, 2025, the lines of credit have $28,215 available and an unused balance of $18,785 under the agreements. These operating lines are designed to enhance treasury management activities and more effectively manage cash balances. As of September 30, 2025 and December 31, 2024, there was an outstanding balance on the lines of credit of $9,430 and $4,992, respectively.

Certain lines of credit agreements include covenants that, in part, impose maintenance of certain debt service coverage and debt to net worth ratios.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

NOTE 8 - NOTES PAYABLE

The following table summarizes the Trust’s mortgage notes payable.


	Principal Balance At
	September 30,		December 31,
	2025		2024
	(in thousands)
Mortgage notes payable, net (a)	$	510,608	$	508,644
Mortgage notes payable, net, affiliates		56,275		57,983
Less unamortized debt issuance costs		1,812		1,909
	$	565,071	$	564,718

(a)	Includes $124,117 and $127,050 of variable rate mortgage debt that was swapped to a fixed rate at September 30, 2025 and December 31, 2024, respectively.

We are required to make the following principal payments on our outstanding mortgage notes payable for each of the five succeeding fiscal years and thereafter as follows:


Years ending December 31,	Amount
	(in thousands)
2025 (October - December)	$	36,329
2026		71,777
2027		79,440
2028		47,291
2029		91,648
Thereafter		242,635
Total payments	$	569,120

NOTE 9 – DERIVATIVES AND HEDGING ACTIVITIES

As part of our interest rate risk management strategy, we have used derivative instruments to manage our exposure to interest rate movements and add stability to interest expense. Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty. In exchange, the Trust makes fixed rate payments over the life of the agreement without exchange of the underlying notional amount.

As of September 30, 2025, the Trust used 15 interest rate swaps to hedge the variable cash flows associated with variable rate debt. Changes in fair value of the derivatives that are designated and qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss) and are reclassified into interest expense as interest payments are made on the Trust’s variable rate debt. During the next twelve months, the Trust estimates that an additional $2,114 will be reclassified as a decrease to interest expense.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (UNAUDITED)

(Dollar amounts in thousands, except share and per share data)

The following table summarizes the Trust’s interest rate swaps as of September 30, 2025, which effectively convert one month floating rate LIBOR or 30-day average SOFR to a fixed rate:

Sterling Real Estate Trust 10-Q