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Sterling Real Estate Trust_September 30, 2025

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

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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

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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

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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

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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 1 - Organization

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

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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)

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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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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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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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 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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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:


			Fixed
Effective Date		Notional	Interest Rate	Maturity Date
November 1, 2019	$	5,980	3.15%	November 1, 2029
November 1, 2019	$	4,162	3.28%	November 1, 2029
January 10, 2020	$	2,722	3.39%	January 10, 2030
December 2, 2020	$	11,344	2.91%	December 2, 2027
July 1, 2021	$	23,782	2.99%	July 1, 2031
November 10, 2021	$	26,419	3.54%	August 1, 2029
December 1, 2021	$	9,971	3.32%	December 1, 2031
August 15, 2022	$	1,359	3.07%	June 15, 2030
August 15, 2022	$	2,634	3.07%	June 15, 2030
August 15, 2022	$	1,470	2.94%	June 15, 2030
August 15, 2022	$	3,889	2.94%	June 15, 2030
May 10, 2023	$	4,429	2.79%	June 10, 2030
April 15, 2024	$	9,339	3.57%	May 15, 2032
April 15, 2024	$	3,646	3.57%	May 15, 2032
April 15, 2024	$	12,971	3.57%	May 15, 2032

The following table summarizes the Trust’s interest rate swaps that were designated as cash flow hedges of interest rate risk:


	Number of Instruments			Notional
Interest Rate Derivatives	September 30, 2025	December 31, 2024		September 30, 2025		December 31, 2024
Interest rate swaps	15	15	$	124,117	$	127,050

The table below presents the estimated fair value of the Trust’s derivative financial instruments as well as their classification in the accompanying consolidated balance sheets. The valuation techniques are described in Note 10 to the consolidated financial statements.


Derivatives designated as	September 30, 2025			December 31, 2024
cash flow hedges:	Balance Sheet Location		Fair Value	Balance Sheet Location		Fair Value
Interest rate swaps	Other assets, net	$	9,215	Other assets, net	$	14,449

The carrying amounts of the swaps have been adjusted to their fair value at the end of the quarter, which because of changes in forecasted levels and 30-day average SOFR, resulted in reporting an asset for the fair value of the future net payments forecasted under the swap. The interest rate swap is accounted for as an effective hedge in accordance with ASC 815-20 whereby it is recorded at fair value and changes in fair value are recorded to other comprehensive income.

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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 table presents the effect of the Trust’s derivative financial instruments on the accompanying consolidated statements of operations and other comprehensive income for the three months ended September 30, 2025 and 2024:


			Location of Gain
			Reclassified from
Derivatives in			Accumulated other		Amount of Gain (Loss)
Cash Flow Hedging		Total Comprehensive	Comprehensive Income		Reclassified from
Relationships		(Loss) Income	(AOCI) into Income		AOCI into Income
		2025			2025
Interest rate swaps	$	(648)	Interest expense	$	(787)
		2024			2024
Interest rate swaps	$	4,749	Interest expense	$	(1,131)



			Location of Gain
			Reclassified from
Derivatives in			Accumulated other		Amount of Gain (Loss)
Cash Flow Hedging		Total Comprehensive	Comprehensive Income		Reclassified from
Relationships		(Loss) Income	(AOCI) into Income		AOCI into Income
		2025			2025
Interest rate swaps	$	(4,886)	Interest expense	$	(2,358)
		2024			2024
Interest rate swaps	$	3,707	Interest expense	$	(3,284)

Credit-risk-related Contingent Features

The Trust’s agreements with each of its derivative counterparties also contain a provision whereby if the Trust consolidates with, merges with or into, or transfers all or substantially all of its assets to another entity and the creditworthiness of the resulting, surviving or transferee entity, is materially weaker than the Trust’s, the counterparty has the right to terminate the derivative obligations. As of September 30, 2025, the termination value of derivatives in a liability position was $0. The termination value of derivatives in an asset position was $9,215. As of September 30, 2025, the Trust has pledged the properties related to the loans which are hedged as collateral.

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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)

NOTE 10 - FAIR VALUE MEASUREMENT

The amounts included in the consolidated financial statements for cash and cash equivalents, short-term investments, leasing receivables from tenants and accounts payable and accrued liabilities approximates their fair values because of the short-term maturities of these instruments.

The following table presents the carrying value and estimated fair value of the Company’s financial instruments:


	September 30, 2025				December 31, 2024
	Carrying				Carrying
	Value		Fair Value		Value		Fair Value

	(in thousands)
Financial assets:
Notes receivable	$	1,500	$	1,509	$	1,539	$	1,534
Notes receivable, affiliates	$	4,420	$	4,252	$	7,945	$	7,559
Derivative assets	$	9,215	$	9,215	$	14,449	$	14,449

Financial liabilities:
Lines of Credit	$	9,430	$	9,430	$	4,992	$	4,992
Mortgage notes payable	$	510,609	$	482,166	$	508,644	$	483,630
Mortgage notes payable, affiliates	$	56,275	$	54,615	$	57,983	$	55,594

ASC 820-10 established a three-level valuation hierarchy for fair value measurement. Management uses these valuation techniques to establish the fair value of the assets at the measurement date. These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect management’s assumptions.

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 significant inputs are observable;

●

Level 3 – Instruments whose significant inputs are unobservable.

The guidance requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

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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)

Recurring Fair Value Measurements

The following table presents the Company’s financial instruments, which are measured at fair value on a recurring basis, by the level in the fair value hierarchy within which those measurements fall. Methods and assumptions used to estimate the fair value of these instruments are described after the table.


	Level 1		Level 2		Level 3		Total

	(in thousands)
September 30, 2025
Derivative assets	$	—	$	9,215	$	—	$	9,215

December 31, 2024
Derivative assets	$	—	$	14,449	$	—	$	14,449

Derivatives: The fair value of interest rate swaps is determined using a discounted cash flow analysis on the expected future cash flows of the derivative.

The Company has determined that its derivative valuations in their entirety are classified within Level 2 of the fair value hierarchy. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements.

Fair Value Disclosures

The following table presents the Trust’s financial assets and liabilities, which are measured at fair value for disclosure purposes, by the level in the fair value hierarchy within which they fall. Methods and assumptions used to estimate the fair value of these instruments are described after the table.


	Level 1		Level 2		Level 3		Total

	(in thousands)
September 30, 2025
Lines of Credit	$	—	$	—	$	9,430	$	9,430
Mortgage notes payable	$	—	$	—	$	482,166	$	482,166
Mortgage notes payable, affiliate	$	—	$	—	$	54,615	$	54,615
Notes receivable	$	—	$	—	$	1,509	$	1,509
Notes receivable, affiliate	$	—	$	—	$	4,252	$	4,252

December 31, 2024
Lines of Credit	$	—	$	—	$	4,992	$	4,992
Mortgage notes payable	$	—	$	—	$	483,630	$	483,630
Mortgage notes payable, affiliate	$	—	$	—	$	55,594	$	55,594
Notes receivable	$	—	$	—	$	1,534	$	1,534
Notes receivable, affiliate	$	—	$	—	$	7,559	$	7,559

Line of credit: The Trust estimates the fair value of its line of credit approximates the carrying value due to the relatively short maturity of the instruments and that they carry a variable rate of interest.

Mortgage notes payable: The Trust estimates the fair value of its mortgage notes payable by discounting the future cash flows of each instrument at rates currently offered to the Trust for similar debt instruments of comparable maturities by

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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 Trust’s lenders. The rates used range from 5.85% to 6.00% and from 5.87% to 5.87% at September 30, 2025 and December 31, 2024, respectively.

Note payable: The Trust estimates the fair value of its note payable approximates the carrying value due to the relatively short maturity of the instruments and that they carry a variable rate of interest.

Notes receivable: The Trust estimates the fair value of its notes receivable by discounting future cash flows of each instrument at rates currently offered to the Trust for similar note instruments of comparable maturities by the Trust’s lenders. The rate used was 12.00% at September 30, 2025 and December 31, 2024.

NOTE 11 – LEASES

As of September 30, 2025, we derived 83.1% of our revenues from residential leases that are generally for terms of one year or less. The residential leases may include lease income related items such as parking, storage and non-refundable deposits that we treat as a single lease component because the amenities cannot be leased on their own and the timing and pattern of revenue recognition are the same. The collection of lease payments at lease commencement is probable and therefore we subsequently recognize lease income over the lease term on a straight-line basis. Residential leases are renewable upon consent of both parties on an annual or monthly basis.

As of September 30, 2025, we derived 16.9% of our revenues from commercial leases primarily under long-term lease agreements. Substantially all commercial leases contain fixed escalations or, in some instances, changes based on the Consumer Price Index, which occur at specified times during the term of the lease. In certain commercial leases, variable lease income, such as percentage rent, is recognized when rents are earned. We recognize rental income and rental abatements from our commercial leases on a straight-line basis over the lease term. Recognition of rental income commences when control of the leased space has been transferred to the tenant.

We recognize variable income from pass-through expenses on an accrual basis over the periods in which the expenses were incurred. Pass-through expenses are comprised of real estate taxes, operating expenses and common area maintenance costs which are reimbursed by tenants in accordance with specific allowable costs per tenant lease agreements. When we pay pass-through expenses, subject to reimbursement by the tenant, they are included within operating expenses, excluding real estate taxes, and reimbursements are included within “real estate rental income” along with the associated base rent in the accompanying consolidated financial statements.

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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)

Lease income related to the Company’s operating leases is comprised of the following:


	Three months ended September 30, 2025
	Residential		Commercial		Total

	(in thousands)
Lease income related to fixed lease payments	$	36,665	$	3,945	$	40,610
Lease income related to variable lease payments		(1)		1,091		1,090
Other (a)		(721)		(123)		(844)
Lease Income (b)	$	35,943	$	4,913	$	40,856


	Three months ended September 30, 2024
	Residential		Commercial		Total

	(in thousands)
Lease income related to fixed lease payments	$	34,654	$	3,873	$	38,527
Lease income related to variable lease payments		(2)		1,095		1,093
Other (a)		(372)		(58)		(430)
Lease Income (b)	$	34,280	$	4,910	$	39,190

(a)

For the three months ended September 30, 2025 and 2024, “Other” is comprised of revenue adjustments related to changes in collectability and amortization of above and below market lease intangibles and lease inducements.

(b)

Excludes other rental income for the three months ended September 30, 2025 and 2024 of $2,870 and $2,287, respectively, which is accounted for under the revenue recognition standard.


	Nine months ended September 30, 2025
	Residential		Commercial		Total

	(in thousands)
Lease income related to fixed lease payments	$	107,263	$	11,822	$	119,085
Lease income related to variable lease payments		—		3,167		3,167
Other (a)		(986)		(304)		(1,290)
Lease Income (b)	$	106,277	$	14,685	$	120,962


	Nine months ended September 30, 2024
	Residential		Commercial		Total

	(in thousands)
Lease income related to fixed lease payments	$	98,205	$	11,654	$	109,859
Lease income related to variable lease payments		—		3,434		3,434
Other (a)		(855)		(99)		(954)
Lease Income (b)	$	97,350	$	14,989	$	112,339

(a)

For the nine months ended September 30, 2025 and 2024, “Other” is comprised of revenue adjustments related to changes in collectability and amortization of above and below market lease intangibles and lease inducements.

(b)

Excludes other rental income for the nine months ended September 30, 2025 and 2024 of $7,944 and $5,695. respectively, which is accounted for under the revenue recognition standard.

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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)

As of September 30, 2025, non-cancelable commercial operating leases provide for future minimum rental income as follows. Residential leases are not included, as the terms are generally for one year or less.


Years ending December 31,	Amount
	(in thousands)
2025 (October - December)	$	4,720
2026		15,258
2027		13,658
2028		12,644
2029		11,014
Thereafter		26,047
	$	83,341

NOTE 12 – RELATED PARTY TRANSACTIONS

Effective January 1, 2021, Trustmark Enterprises, Inc. was formed to act as the holding company for Sterling Management, LLC and GOLDMARK Property Management, Inc. In connection with this restructuring transaction, the owners of Trustmark Enterprises, Inc. indirectly own Sterling Management, LLC and GOLDMARK Property Management, Inc. Trustmark Enterprises, Inc. is owned in part by the Trust’s Chief Executive Officer and Trustee Mr. Kenneth P. Regan, by Trustee Mr. James S. Wieland, by President, Interim Chief Financial Officer and Treasurer Megan E. Schreiner, by General Counsel and Secretary Michael P. Carlson, by Chief Investment Officer Luke B. Swenson, and by Vice President David F. Perkins. In addition, Messrs. Regan, Wieland, Carlson, Swenson, Perkins, and Ms. Schreiner all serve on the Board of Governors of the Advisor and the Board of Directors of GOLDMARK Property Management, Inc.

Sterling Management, LLC (the “Advisor”), is a North Dakota limited liability company formed in November 2002. The Advisor is responsible for managing day-to-day affairs, overseeing capital projects, and identifying, acquiring, and disposing investments on behalf of the Trust.

GOLDMARK Property Management, Inc., is a North Dakota corporation formed in 1981. GOLDMARK Property Management, Inc. performs property management services for the Trust.

We have a historical and ongoing relationship with Bell Bank. Bell Bank has provided the Trust certain financial services throughout the relationship. Mr. Wieland, a Trustee, also serves as a Board Member of Bell Bank. Mr. Wieland could have an indirect material interest in any such engagement and related transactions.

The Trust has a historical and ongoing relationship with Trumont Group and Trumont Construction. Trumont Group provides development services for current joint venture projects in which the Operating Partnership is an investor. Trumont Construction has been engaged to construct the properties associated with these joint ventures. Mr. Regan, Chief Executive Officer and Trustee, is a partner in both Trumont Group and Trumont Construction and has a direct material interest in any engagement or related transaction, the Trust enters into, with these entities.

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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)

Property Management Fees

We paid fees to GOLDMARK Property Management, Inc. related to the management of properties, on-site staff costs and other miscellaneous fees required to run the property. Management fees paid approximated 5% of net collected rent. In addition, we paid repair and maintenance expenses, and payroll related expenses to GOLDMARK Property Management, Inc.


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

	(in thousands)				(in thousands)

Onsite staff costs, and other misc.	$	4,832	$	4,414	$	14,099	$	12,808
Goldmark Management fees	$	1,828	$	1,606		5,208		4,600
R&M related payroll and payroll related expenses	$	2,528	$	2,480		7,427		7,095
Sterling Management fees	$	25	$	27	$	76	$	86

Advisory Agreement

We are an externally managed trust and as such, although we have a Board of Trustees and Executive Officers responsible for our management, we have no paid employees. The following is a brief description of the current fees and compensation that may be and was received by the Advisor under the Advisory Agreement, which must be renewed on an annual basis and approved by a majority of the independent trustees. The Advisory Agreement was approved by the Board of Trustees (including all the independent Trustees) on March 20, 2025, and is effective until March 31, 2026.

The below table summarizes the fees incurred to our Advisor.


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

	(in thousands)				(in thousands)
Fee:
Advisory	$	1,160	$	1,042	$	3,417	$	2,983
Acquisition	$	375	$	375	$	375	$	1,125
Disposition	$	-	$	38	$	-	$	302
Financing	$	44	$	47	$	75	$	144
Development	$	-	$	-	$	-	$	350
Project Management	$	6	$	371	$	429	$	745

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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 below table summarizes the fees payable to our Advisor.


	Payable at
	September 30,		December 31,
	2025		2024

	(in thousands)
Fee:
Advisory	$	12	$	4
Project Management	$	50	$	-

Operating Partnership Units Issued in Connection with Acquisitions

During the three months ended September 30, 2025, there were 438,000 Operating Partnership units issued to an entity affiliated with Mr. Regan, one of our trustees, in connection to the Sterling Pointe acquisition. The aggregate value of these units was $10,518. During the three months ended September 30, 2024, no Operating Partnerships units were issued. During the nine months ended September 30, 2025, there were 438,000 Operating Partnerships units issued to an entity affiliated with Mr. Regan, one of our trustee, in connection to an acquisition. The aggregate value of these units was $10,518. During the nine months ended September 30, 2024, 276,000 Operating Partnerships units were issued to an entity affiliated with Messrs. Regan and Wieland, two of our trustees, in connection to an acquisition. The aggregate value of these units was $6,339.

Commissions

During the three months ended September 30, 2025, we incurred real estate commissions of $100 paid to GOLDMARK Commercial Real Estate, Inc., in which Mr. Regan owns an interest. During the three months ended September 30, 2024, there were no real estate commissions paid. During the nine months ended September 30, 2025, we incurred real estate commissions of $100 paid to GOLDMARK Commercial Real Estate, Inc., in which Mr. Regan owns an interest. During the nine months ended September 30, 2024, we incurred real estate commissions of $531 paid to GOLDMARK Commercial Real Estate, Inc., in which Messrs. Regan and Wieland jointly own an interest. As of September 30, 2025 and December 31, 2024, there were no unpaid commission to GOLDMARK Commercial Real Estate, Inc.

During the three months ended September 30, 2025, there were no commissions paid to GOLDMARK Property Management. During the three months ended September 30, 2024, there were no commissions paid to GOLDMARK Property Management. During the nine months ended September 30, 2025, there were no commissions paid to GOLDMARK Property Management. During the nine months ended September 30, 2024, we incurred real estate commissions of $39 paid to GOLDMARK Property Management. As of September 30, 2025 and December 31, 2024, there were no unpaid commissions to GOLDMARK Property Management.

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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)

Rental Income


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

	(in thousands)				(in thousands)
Rental Income:
Operating lease agreement with our Advisor	$	35	$	34	$	103	$	101
Goldmark Property Management, Inc.	$	72	$	70	$	212	$	208
Bell Bank	$	321	$	287	$	961	$	857

Due to Related Parties

As of September 30, 2025, and December 31, 2024, the Trust had $182 and $160, respectively, for other related party payables.

Debt Financing

At September 30, 2025 and December 31, 2024, the Trust had $56,275 and $57,983, respectively, of outstanding principal on loans entered into with Bell Bank. During the three months ended September 30, 2025 and 2024, the Trust incurred interest expense on debt held with Bell Bank of $596 and $598, respectively. During the nine months ended September 30, 2025 and 2024, the Trust incurred interest expense on debt held with Bell Bank of $1,756 and $1,750 , respectively. Accrued interest as of September 30, 2025 and December 31, 2024 related to this debt was $128 and $135, respectively.

At September 30, 2025 the Trust had an outstanding principal balance of $10,000 on a loan entered into with Sterling Office and Industrial Properties, LLLP. There was no outstanding principal balance as of December 31, 2024. During the three months ended September 30, 2025 and 2024, the Trust incurred interest expense on debt held with Sterling Office and Industrial Properties, LLLP of $66 and $0, respectively. During the nine months ended September 30, 2025 and 2024, the Trust incurred interest expense on debt held with Sterling Office and Industrial Properties, LLLP of $200 and $0, respectively. There was no accrued interest as of September 30, 2025 and December 31, 2024.

Mezzanine Financing

The Trust offers mezzanine financing to joint ventures. See Note 5 for investment in unconsolidated affiliates. At September 30, 2025 and December 31, 2024, Sterling issued $4,394 and $7,821 respectively, in second mortgage financing to related entities.

During the three months ended September 30, 2025 and 2024, the Trust earned interest income related to second mortgage financing of $121 and $149, respectively. During the nine months ended September 30, 2025 and 2024, the Trust earned interest income related to second mortgage financing of $407 and $438, respectively.

Insurance Services

The Trust retains insurance services from Bell Insurance. Policies provided by these services provide insurance coverage for the Trust’s Commercial and Residential Segment as well as Director and Officer general and liability coverage. For the three months ended September 30, 2025, there were no premiums incurred for this policy. For the three months ended September 30, 2024, there were no premiums incurred. For the nine months ended September 30, 2025 and 2024, total

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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)

premiums incurred for this policy were $65 and $76, respectively. At September 30, 2025 and December 31, 2024, there was no outstanding liabilities.

Development Arrangements

During the three months ended September 30, 2025 and 2024, the Trust had no development fees to Trumont Group. During the nine months ended September 30, 2025 and 2024, the Trust had no development fees to Trumont Group. At September 30, 2025 and December 31, 2024, the Trust had no costs owed for development fees to Trumont Group.

During the three months ended September 30, 2025 and 2024, the Trust incurred $0 and $18, respectively, in construction fees to Trumont Construction. During the nine months ended September 30, 2025 and 2024, the Trust incurred $0 and $91, respectively. At September 30, 2025 and December 31, 2024, the Trust had no costs owed for construction fees to Trumont Construction.

During the three months ended September 30, 2025 and 2024, the Trust incurred $0 and $169, respectively, in general construction costs to Trumont Construction. During the nine months ended September 30, 2025 and 2024, the Trust incurred $0 and $378, respectively. At September 30, 2025 and December 31, 2024, the Trust had no costs owed for any general construction costs.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

Environmental Matters

Federal law (and the laws of some states in which we own or may acquire properties) imposes liability on a landowner for the presence on the premises of hazardous substances or wastes (as defined by present and future federal and state laws and regulations). This liability is without regard to fault or knowledge of the presence of such substances and may be imposed jointly and severally upon all succeeding landowners. If such hazardous substance is discovered on a property acquired by us, we could incur liability for the removal of the substances and the cleanup of the property.

There can be no assurance that we would have effective remedies against prior owners of the property. In addition, we may be liable to tenants and may find it difficult or impossible to sell the property either prior to or following such a cleanup.

Risk of Uninsured Property Losses

We maintain property damage, fire loss, and liability insurance. However, there are certain types of losses (generally of a catastrophic nature) which may be either uninsurable or not economically insurable. Such excluded risks may include war, earthquakes, tornados, certain environmental hazards, and floods. Should such events occur, (i) we might suffer a loss of capital invested, (ii) tenants may suffer losses and may be unable to pay rent for the spaces, and (iii) we may suffer a loss of profits which might be anticipated from one or more properties.

Litigation

The Trust is subject, from time to time, to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of such matters cannot be predicted with certainty, management believes, based on currently available information, that the final outcome of such matters will not have a material effect on the financial statements of the Trust.

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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)

NOTE 14 – DISPOSITIONS

The Trust had no dispositions during the nine months ended September 30, 2025.

The Trust had nine dispositions during the nine months ended September 30, 2024.

Date

Property Name

Location

Property Type

Units/ Square Footage/ Acres (Unaudited)

Total Disposition Cost

Gain on Sale

1/25/24

Dairy Queen

Apple Valley, MN

Retail

5,348 square feet

1,607

(68)

3/1/24

Westwind

Fargo, ND

Apartment Complex

18 units

900

489

3/8/24

Westside

Hawley, MN

Apartment Complex

14 units

837

394

4/3/24

Columbia Park Village

Grand Forks, ND

Apartment Complex

12 units

675

5/1/24

Gate City Bank

Grand Forks, ND

Office

17,407 square feet

2,950

974

5/21/24

First International Bank & Trust

Moorhead, MN

Office

3,510 square feet

1,516

683

6/14/24

Jadestone

Fargo, ND

Apartment Complex

18 units

1,039

136

6/14/24

Essex

Fargo, ND

Apartment Complex

18 units

1,039

178

7/25/24

Cityside

Fargo, ND

Apartment Complex

36 units

1,500

241

12,063

3,069

NOTE 15 – ACQUISITIONS OF CONSOLIDATED PROPERTIES

The Trust had one acquisition during the nine months ended September 30, 2025.

Date

Property Name

Location

Property Type

Units/ Square Footage/ Acres

Total Net Assets Acquired

7/16/25

Sterling Pointe

Grand Forks, ND

Apartment Complex

196 units

21,373

The Trust had two acquisitions during the nine months ended September 30, 2024.

Date

Property Name

Location

Property Type

Units/ Square Footage/ Acres

Total Net Assets Acquired

4/15/24

Urban Plains

Fargo, ND

Apartment Complex

415 units

17,527

6/26/24

Lexington Lofts

Forest Lake, MN

Apartment Complex

355 units

18,379

35,906

For the acquisition of Lexington Lofts, Sterling determined that it controls the key decision-making rights related to Lexington Lofts from the respective date it was acquired that most impact the economic benefits and obligations of the venture. The VIE that owned legal title to Lexington Lofts was included in Sterling’s consolidated financial statements as a consolidated variable interest entity from the date it was acquired.

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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)

During the quarter ended December 31, 2024 the Trust determined that when allocating the purchase price for the Urban Plains acquisition, no value was assigned to an assumed interest rate derivative which resulted in an error in the purchase price allocation. The error was corrected during the quarter ended December 31, 2024 and properly reflected in the financial statements as of and for the year ended December 31, 2024. The impact of this error to the previously reported amounts for the three months ended September 30, 2024 is as follows:


		Quarter Ending		YTD
		September 30, 2024		September 30, 2024
Real estate investments, net	Increase/(Decrease)	$	18	$	(3,295)
Other assets, net - interest income receivable	Increase/(Decrease)	$	(3)	$	36
Other assets, net - fair value of interest rate swap	Increase/(Decrease)	$	27	$	(79)
Other comprehensive income	Decrease/(Increase)	$	(147)	$	3,188
Net income	Decrease/(Increase)	$	103	$	147

The table below represents a summary of the purchase accounting allocation and reconciliation to net cash consideration of the properties acquired.


	September 30,
	2025		2024
Real estate investment acquired	$	21,008	$	111,290
Assumed interest rate derivative		-		3,331
Acquired lease intangible assets		792		2,261
Assumed assets		345		451
Total Assets Acquired	$	22,145	$	117,333
Assumed loans		-		(80,774)
Other liabilities		(772)		(653)
Net assets acquired		21,373		35,906
Equity/limited partnership unit consideration		(10,518)		(7,396)
Net cash consideration	$	10,855	$	28,510

NOTE 16 - SUBSEQUENT EVENTS

On October 9, 2025, we entered into a joint venture agreement for Rosemount Townhomes with total estimated project costs of $64,200.

On October 15, 2025, we paid a dividend or distribution of $0.3000 per share on our common shares of beneficial interest or limited partnership units, respectively, to common shareholders and limited partnership unit holders of record on September 30, 2025.

On October 15, 2025, the Trust disposed of a residential property located in St. Louis Park, MN for $18,350.

On October 30, 2025, the Trust extended its line of credit with Gate City Bank through December 2025. See Note 7 for further details.

Pending acquisitions and dispositions are subject to numerous conditions and contingencies and there are no assurances that the transactions will be completed.

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All dollar amounts in this Form 10-Q in Part I Item 2. through Item 4 and Part II Item 2. are stated in thousands with the exception of share and per share amounts, unless otherwise indicated.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Certain statements included in this Quarterly Report on Form 10-Q and the documents incorporated into this document by reference contain certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include statements regarding our plans and objectives, including, among other things, our future financial condition, anticipated capital expenditures, anticipated dividends and other matters. Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology. These statements are only predictions and are not historical facts. Actual events or results may differ materially.

The forward-looking statements included herein are based on our current expectations, plans, estimates and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Any of the assumptions underlying the forward-looking statements contained herein could be inaccurate. Although we believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, we cannot assure readers that the forward-looking statements included in this filing will prove to be accurate. The accompanying information contained in this Quarterly Report on Form 10-Q, including, without limitation, the information set forth under the section entitled “Risk Factors” identifies important additional factors that could materially adversely affect actual results and performance. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of certain unanticipated events or changes to future operating results.

The following discussion of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on March 19, 2025 and our condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Overview

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, which requires that 75% of the assets of a REIT consist of real estate assets and that 75% of its gross income be derived from real estate. The net income of the REIT is allocated in accordance with the stock ownership in the same fashion as a regular corporation. Our real estate portfolio consisted of 178 properties containing 12,151 apartment units and approximately 1,187,000 square feet of leasable commercial space as of September 30, 2025. The portfolio has a net book value of real estate investments (cost less accumulated depreciation) of $873,104, which includes construction in progress. Sterling’s current acquisition strategy and focus is on multifamily apartment properties.

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Critical Accounting Estimates

Below are accounting policies and estimates that management believes are critical to the preparation of the unaudited consolidated financial statements included in this Report. Certain accounting policies used in the preparation of these consolidated financial statements are particularly important for an understanding of the financial position and results of operations presented in the historical consolidated financial statements included in this Report. A summary of significant accounting policies is also provided in the aforementioned notes to our consolidated financial statements (see Note 2 to the unaudited consolidated financial statements). These policies require the application of judgment and assumptions by management and, as a result, are subject to a degree of uncertainty. Due to this uncertainty, actual results could differ materially from estimates calculated and utilized by management.

Impairment of Real Estate Investments

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. To assess potential impairment of the real estate portfolio, the Trust initially performs a screen test and reviews the net book value (NBV) of each property, compares the trailing twelve months (T12) net operating income (NOI) against the prior year’s T12 NOI, and evaluates key assumptions, including the anticipated hold period and applicable capitalization rates, to determine whether any indicators of impairment exist.

Examples of situations considered to be impairment indicators include, but are not limited to:

●

A substantial decline or negative cash flows;

●

Continued low occupancy rates;

●

Continued difficulty in leasing space;

●

Significant financially troubled tenants;

●

A change in plan to sell a property prior to the end of its useful life or holding period;

●

A significant decrease in market price not in line with general market trends; and

●

Any other quantitative or qualitative events or factors deemed significant by the Trust’s management or Board of Trustees.

If the presence of one or more impairment indicators as described above is identified with respect to an investment property, the asset is tested for recoverability by comparing its carrying value to the estimated future undiscounted cash flows. An investment property is considered to be impaired when the estimated future undiscounted cash flows are less than its current carrying value. When performing a test for recoverability or estimating the fair value of an impaired investment property, the Trust makes complex or subjective assumptions which include, but are not limited to:

●

Projected operating cash flows considering factors such as vacancy rates, rental rates, lease terms, tenant financial strength, demographics, holding period and property location;

●

Projected capital expenditures;

●

Projected cash flows from the eventual disposition of an operating property using a property specific capitalization rate;

●

Comparable selling prices; and

●

Property specific discount rates for fair value estimates as necessary.

To the extent impairment has occurred, the Trust will record an impairment charge calculated as the excess of the carrying value of the asset over its fair value. 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.

There have been no material changes in our Critical Accounting Policies as disclosed in Note 2 to our financial statements for the nine months ended September 30, 2025 included elsewhere in this report.

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Acquisition of Real Estate Investments

The Company allocates the purchase price of properties that meet the definition of an asset acquisition to net tangible and identified intangible assets acquired based on their relative fair values. In making estimates of relative fair values for purposes of allocating purchase price, the Company utilizes a number of sources, included independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, our own analysis of recently acquired and existing comparable properties in our portfolio and other market data. The Company also considered information obtained about each property as a result of its pre-acquisition due diligence, marketing, and leasing activities in estimating the relative fair value of the tangible and intangible assets acquired.

REIT Status

We operate in a manner intended to enable us to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code. Under those sections, a REIT which distributes as least 90% of its REIT taxable income, excluding net capital gains, as a distribution to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. We intend to distribute to our shareholders 100% of our taxable income. Therefore, no provision for Federal income taxes is required. If we fail to distribute the required amount of income to our shareholders, we would fail to qualify as a REIT and substantial adverse tax consequences may result.

Principal Business Activity

Sterling currently owns 178 properties included in the consolidated financial statements. The Trust’s 141 residential properties are located in North Dakota, Minnesota, Missouri, Nebraska, and Texas and are principally multifamily apartment buildings. The Trust owns 37 commercial properties primarily located in North Dakota with others located in Arkansas, Colorado, Iowa, Louisiana, Michigan, Minnesota, Mississippi, Nebraska and Wisconsin. The commercial properties include retail, office, industrial, restaurant and medical properties. Presently, the Trust’s mix of properties is 83.1% residential and 16.9% commercial (based on cost) with a total carrying value of $873,104 at September 30, 2025. Currently our focus is limited to multifamily apartment properties. We will consider unsolicited offers for purchase of commercial properties on a case-by-case basis.


Residential Property	Location	No. of Properties	Units
	North Dakota	119	7,695
	Minnesota	16	3,383
	Missouri	1	164
	Nebraska	4	639
	Texas	1	270
		141	12,151

Commercial Property	Location	No. of Properties	Sq. Ft
	North Dakota	19	501,000
	Arkansas	2	28,000
	Colorado	1	17,000
	Iowa	1	36,000
	Louisiana	1	15,000
	Michigan	1	12,000
	Minnesota	5	481,000
	Mississippi	1	15,000
	Nebraska	1	19,000
	Wisconsin	5	63,000
		37	1,187,000

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Results of Operations

Management Highlights

●

Increased revenues from rental operations by $2,253 or 5.4% for the three months ended September 30, 2025, compared to the same three month period in 2024.

●

Increased revenues from rental operations by $10,875 or 9.2% for the nine months ended September 30, 2025, compared to same nine month period in 2024.

●

Declared dividends aggregating $0.9000 per common share for the nine months ended September 30, 2025

Results of Operations for the Three Months Ended September 30, 2025 and 2024


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

	(unaudited)						(unaudited)
	(in thousands)						(in thousands)
Real Estate Revenues	$	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
Total Real Estate Expenses		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
Interest						6,828						6,701
Depreciation and amortization						7,592						7,604
Administration of REIT						1,391						1,194
Loss on impairment of property						735						—
Other expense						597						213
Net Income					$	2,677					$	3,978

Net Income Attributed to:
Noncontrolling Interest					$	1,570					$	2,284
Sterling Real Estate Trust					$	1,107					$	1,694
Dividends per share⁽¹⁾					$	0.3000					$	0.2875
Earnings per share					$	0.08					$	0.15
Weighted average number of common shares						13,032						11,512

(1)	Does not take into consideration the amounts distributed by the Operating Partnership to limited partners.

Revenues

Property revenues of $43,730 for the three months ended September 30, 2025 increased $2,253 or 5.4% in comparison to the same period in 2024. Residential property revenues increased $2,245 and commercial property revenues increased $8 for the three months ended September 30, 2025 in comparison to the same period in 2024.

The following table illustrates occupancy percentages for the three month periods indicated:


	September 30,		September 30,
	2025		2024
Residential	93.0	%	92.6	%
Commercial	90.0	%	90.4	%

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Residential revenues for the three months ended September 30, 2025 increased $2,245 or 6.1% in comparison to the same period for 2024. Residential properties acquired since September 30, 2024 contributed approximately $742 of the increase in total residential revenues in the three months ended September 30, 2025. The remaining increase is due to increased rent charges at our stabilized properties. Residential revenues comprised 88.6% of total revenues for the three months ended September 30, 2025 compared to 88.0% of total revenues for the three months ended September 30, 2024.

For the three months ended September 30, 2025 total commercial revenues increased $8 or 0.1% in comparison to the same period for 2024. The increase is primarily attributed to increased rent charges at our stabilized properties during the three months ended September 30, 2025, compared to the three months ended September 30, 2024. Commercial revenues comprised 11.4% of the total revenues for the three months ended September 30, 2025 compared to 12.0% of total revenues for the three months ended September 30, 2024. As commercial properties are sold, commercial revenues are expected to continue declining as a percentage of total revenues.

Expenses

Residential expenses from operations of $22,349 during the three months ended September 30, 2025 increased $2,134 or 10.6% in comparison to the same period in 2024. The increase is primarily attributed to an increase of $1,414 or 19.1% and $617 or 17.1%, for repairs and maintenance and real estate taxes, respectively. The increase in repairs and maintenance was primarily due to the timing of several planned projects being completed during the quarter including painting, flooring and other maintenance work. The increase in property taxes was primarily due to general increases in stabilized properties as well as additional amounts paid as a result of acquisitions.

Commercial expenses from operations of $1,561 during the three months ended September 30, 2025 decreased $11 or 0.7% in comparison to the same period in 2024. The decrease is primarily attributed to a $55 or 10.9% decrease in real estate taxes. The decrease is partially offset by an increase of $16 or 3.0% and $15 or 7.2% for repairs and maintenance and property management, respectively, during the three months ended September 30, 2025.

Interest expense of $6,828 during the three months ended September 30, 2025 increased $127 or 1.9% in comparison to the same period in 2024. The increase in interest expense was primarily driven by increased use of lines of credit during the three months ended September 30, 2025 as compared to the same period in 2024. Interest expense as a percentage of total revenues for the three months ending September 30, 2025 and 2024 was 15.6% and 16.2%, respectively.

Depreciation and amortization expense of $7,592 during the three months ended September 30, 2025 decreased $ (12) or (0.2)% in comparison to the same period in 2024. Amortization expense will continue to decrease as lease intangibles become fully amortized but will increase upon acquisitions of intangible assets. Depreciation and amortization expense as a percentage of total revenues for the three months ended September 30, 2025 and 2024 was 17.4% and 18.4%, respectively.

REIT administration expenses of $1,391 during the three months ended September 30, 2025 increased $197 or 16.5% in comparison to the same period in 2024. The increase is primarily due to the acquisition of Sterling Pointe as compared to the same period in 2024.

Other expense of $598 during the three months ended September 30, 2025 increased $385 or 181.8% in comparison to the same period in 2024. The increase is primarily attributable to the absence of a gain on asset disposition in the current period as compared to the same period in 2024.

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Results of Operations for the Nine Months Ended September 30, 2025 and 2024


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

	(in thousands)						(in thousands)
Real Estate Revenues	$	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
Real Estate Expenses		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
Interest						19,469						17,642
Depreciation and amortization						21,313						20,528
Administration of REIT						4,335						4,079
Loss on impairment of property						735						—
Other expense (income)						2,101						(1,982)
Net Income					$	14,498					$	14,761

Net Income Attributed to:
Noncontrolling Interest					$	8,426					$	9,026
Sterling Real Estate Trust					$	6,072					$	5,735
Dividends per share⁽¹⁾					$	0.9000					$	0.8625
Earnings per share					$	0.4700					$	0.5000
Weighted average number of common shares						12,970						11,403

(1)	Does not take into consideration the amounts distributed by the Operating Partnership to limited partners.

Revenues

Property revenues of $128,910 for the nine months ended September 30, 2025 increased $10,875 or 9.2% in comparison to the same period in 2024. Residential property revenues increased $11,181 and commercial property revenues decreased $306 for the nine months ended September 30, 2025 from the prior year’s comparable period.

The following table illustrates occupancy percentages for the nine month periods indicated:


	September 30,		September 30,
	2025		2024
Residential	93.2	%	92.9	%
Commercial	90.0	%	90.4	%

Residential revenues for the nine months ended September 30, 2025 increased $11,181 or 10.9% in comparison to the same period for 2024. Residential properties acquired since September 30, 2024 contributed approximately $742 of the increase in total residential revenues. The remainder of the increase is due to continued growth in rent charges at our stabilized properties. Residential revenues comprised 88.5% of total revenues for the nine months ended September 30, 2025 compared to 87.2% of total revenues for the nine months ended September 30, 2024.

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For the nine months ended September 30, 2025, total commercial revenues decreased $306 or 2.0% in comparison to the same period for 2024. The decrease is attributed to the sale of three commercial buildings in 2024. Commercial revenues comprised 11.5% of the total revenues for the nine months ended September 30, 2025 compared to 12.8% of total revenues for the nine months ended September 30, 2024.

Expenses

Residential expenses from operations of $61,978 during the nine months ended September 30, 2025 increased $3,298 or 5.6% in comparison to the same period in 2024. The increase is primarily attributed to an increase of $1,712 or 8.5%, $1,185 or 14.2%, $1,024 or 7.4% for repairs and maintenance, utilities, and property management fees, respectively as a result of acquisitions of properties in the second quarter of 2024. The increase is offset by a decrease in insurance and real estate tax expense of $443 or 9.3% and $180 or 1.6%, respectively, during the nine months ended September 30, 2025.

Commercial expenses from operations of $4,481 during the nine months ended September 30, 2025 increased $154 or 3.6% in comparison to the same period in 2024. The increase is primarily attributed to an increase of $201 or 15.4% in repairs and maintenance during the nine months ended September 30, 2025.

Interest expense of $19,469 during the nine months ended September 30, 2025 increased $1,827 or 10.4% in comparison to the same period in 2024. Interest expense related to financing activities increased by $1,278 during the nine months ended September 30, 2025 as compared to the same period in 2024 is due to acquisition of two properties in 2024 and the debt associated with those acquisitions. Interest expense related to line of credit increased by $549 during the nine months ended September 30, 2025 as compared to the same period in 2024 for operating needs. During the nine months ended September 30, 2025 and 2024, interest expense was 15.1% and 14.9% of total revenues, respectively.

Depreciation and amortization expense of $21,313 for the nine months ended September 30, 2025 increased $785 or 3.8% in comparison to the same period in 2024. The primary reason for the increase is attributed to additional depreciation of acquired properties. Depreciation and amortization expense as a percentage of rental income for the nine months ended September 30, 2025 and 2024 at 16.5% and 17.4%, respectively.

REIT administration expenses of $4,335 for the nine months ended September 30, 2025 increased $256 or 6.3% in comparison to the same period in 2024. The increase is due to an increase in advisor fees and income tax advisory fees of $439 and $187, respectively. This is partially offset by a decrease in a one-time development fee of $350.

Other expense of $2,101 for the nine months ended September 30, 2025, increased $4,083 or 206.0% in comparison to the same period in 2024. This is primarily due to a decrease of $3,069 in realized gain on sale of real estate investments from properties disposed of in 2024 and an increase in losses of unconsolidated affiliates of $528.

Construction in Progress and Development Projects

The Trust capitalizes direct and certain indirect project costs incurred during the development period such as construction, insurance, architectural, legal, interest and other financing costs, and real estate taxes. At such time as the development is considered substantially complete, the capitalization of certain indirect costs such as real estate taxes, interest, and financing costs cease, and all project-related costs included in construction in process are reclassified to land and building and other improvements.

Construction in progress as of September 30, 2025, consists primarily of construction at residential properties located in North Dakota and Minnesota. Rosedale Estates located in Roseville, MN has two projects in process for a parking structure and a parking lot. The parking structure is budgeted for $2,591, of which $2,531 has been incurred. The parking lot has a budget of $6,031, of which $5,178 has been incurred. Remaining construction in progress projects are primarily related to parking lot replacements, rehabs, window and patio replacements, roof upgrades, new CCTV cameras, and various property upgrades on multiple residential properties.

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Funds From Operations (FFO)

Funds From Operations (FFO) applicable to common shares and limited partnership units means net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.

Historical cost accounting for real estate assets implicitly assumes the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. FFO was created to address this problem. It was intended to be a standard supplemental measure of REIT operating performance that excluded historical cost depreciation from — or “added back” to — GAAP net income.

Our management believes this non-GAAP measure is useful to investors because it provides supplemental information that facilitates comparisons to prior periods and for the evaluation of financial results. Management uses this non-GAAP measure to evaluate our financial results, develop budgets and manage expenditures. The method used to produce non-GAAP results is not computed according to GAAP, is likely to differ from the methods used by other companies and should not be regarded as a replacement for corresponding GAAP measures. Management encourages the review of the reconciliation of this non-GAAP financial measure to the comparable GAAP results.

Since the introduction of the definition of FFO, the term has come to be widely used by REITs. In the view of National Association of Real Estate Investment Trusts (“NAREIT”), the use of the definition of FFO (combined with the primary GAAP presentations required by the Securities and Exchange Commission) has been fundamentally beneficial, improving the understanding of operating results of REITs among the investing public and making it easier to compare the results of one REIT with another.

While FFO applicable to common shares and limited partnership units are widely used by REITs as performance metrics, all REITs do not use the same definition of FFO or calculate FFO in the same way. The FFO reconciliation presented here is not necessarily comparable to FFO presented by other real estate investment trusts. FFO should also not be considered as an alternative to net income as determined in accordance with GAAP as a measure of a real estate investment trust’s performance, but rather should be considered as an additional, supplemental measure, and should be viewed in conjunction with net income as presented in the consolidated financial statements included in this report. FFO applicable to common shares and limited partnership units does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of sufficient cash flow to fund a real estate investment trust’s needs or its ability to service indebtedness or to pay dividends to shareholders.

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The following tables include calculations of FFO, and the reconciliations to net income, for the three and nine months ended September 30, 2025 and 2024, respectively. We believe these calculations are the most comparable GAAP financial measure (in thousands):

Reconciliation of Net Income Attributable to Sterling to FFO Applicable to Common Shares and Limited Partnership Units


	Three months ended September 30, 2025			Three months ended September 30, 2024
			Weighted Avg			Weighted Avg
			Shares and			Shares and
	Amount		Units	Amount		Units

	(unaudited)
	(in thousands, except per share data)
Net Income attributable to Sterling Real Estate Trust	$	1,107	13,032	$	1,694	11,512

Adjustments:
Noncontrolling Interest - Operating Partnership Units		1,622	18,904		2,641	18,679
Depreciation & Amortization from continuing operations (1)		7,254			7,102
Pro rata share of unconsolidated affiliate depreciation and amortization		2,233			1,778
Loss on impairment of real estate investments		735			—
Subtract:
Gain on sales of land, depreciable real estate, investment in equity method investee, and change in control of real estate investments		—			(241)
Funds from operations applicable to common shares and limited partnership units (FFO)	$	12,951	31,936	$	12,974	30,191

(1)

Excludes the portion allocated to noncontrolling interest in the amount of $338 and $502 for the three months ended September 30, 2025 and 2024, respectively.


	Nine months ended September 30, 2025			Nine months ended September 30, 2024
			Weighted Avg			Weighted Avg
			Shares and			Shares and
	Amount		Units	Amount		Units

	(in thousands, except per share data)
Net Income attributable to Sterling Real Estate Trust	$	6,072	12,970	$	5,735	11,403

Adjustments:
Noncontrolling Interest - Operating Partnership Units		8,735	18,666		9,300	18,686
Depreciation & Amortization from continuing operations (1)		20,231			19,620
Pro rata share of unconsolidated affiliate depreciation and amortization		6,741			4,974
Loss on impairment of real estate investments		735			—
Subtract:
Gain on sale of depreciable real estate		—			(3,069)
Funds from operations applicable to common shares and limited partnership units (FFO)	$	42,514	31,636	$	36,560	30,089

(1)

Excludes the portion allocated to noncontrolling interest in the amount of 1,082 and $908 nine months ended September 30, 2025 and 2024, respectively.

Liquidity and Capital Resources

Evaluation of Liquidity

We continually evaluate our liquidity and ability to fund future operations, debt obligations, and any repurchase requests. As part of our analysis, we consider, among other items, the credit quality of tenants, current lease terms, and projected expiration dates.

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Our principal demands for funds are for:
(i) acquisition of real estate and real estate-related investments,
(ii) payment of acquisition-related expenses and operating expenses,
(iii) payment of dividends/distributions,
(iv) payment of principal and interest on current and any future outstanding indebtedness,
(v) redemptions of our securities under our redemption plans, and
(vi) capital improvements, development projects, and property-related expenditures.

Generally, we expect to meet cash needs for operating expenses and interest on outstanding indebtedness from cash flow from operations. We expect to pay dividends/distributions and any repurchase requests to our shareholders and the unit holders of our Operating Partnership from cash flow from operations.

As of September 30, 2025, our unrestricted cash resources consisted of cash and cash equivalents totaling $7,391. Our unrestricted cash reserves can be used for working capital needs and other commitments. In addition, we had unencumbered properties with a gross book value of $72,995, which could potentially be used as collateral to secure additional financing in future periods.

Credit Facilities

The Trust maintains a $4,915 variable rate (floating SOFR + 2.00%) line of credit agreement with Bremer Bank, expiring in December 2026, and a $3,500 variable rate (floating SOFR + 2.00%) line of credit agreement with Bremer Bank, also expiring in December 2026. The Trust also has a $19,800 variable rate (Prime - 1.50%) line of credit agreement with Gate City Bank. This Gate City Bank line was expanded from $14,800 to $19,800 in February 2025, and the maturity date was amended from July 2029 to July 2025 and subsequently extended to October 2025 and has now been further extended to December 2025. The Trust is currently negotiating and expects to execute a revised credit facility in December 2025 which is anticipated will increase borrowing capacity and extend the maturity to a multi-year term. If the Gate City Bank line of credit is not extended, the Trust has sufficient borrowing capacity and unencumbered assets to refinance or repay the outstanding balance. The Trust’s leverage ratio is low which provides flexibility to further encumber real estate assets if necessary.

At September 30, 2025, the lines of credit had $28,215 available and an unused balance of $18,785 under the agreements. The lines of credit are secured by specific properties. The Trust anticipates it will hold the lines of credit as cash resources to the Trust.

Strategic Use of Credit Facilities

In 2024 and 2025 the Trust increased utilization of lines of credit as a tactical response to favorable acquisition opportunities and the retirement of a $13 million mortgage on December 31, 2024. While lines of credit continue to serve as a treasury management tool, they are also used to provide flexibility for opportunistic investments and efficient cash management, consistent with our strategy and utilization of available credit.

Capital and Equity

The sale of our securities and issuance of limited partnership units of the Operating Partnership in exchange for property acquisitions and sale of additional common or preferred shares is also expected to be a source of long-term capital for the Trust.

During the nine months ended September 30, 2025, we did not sell any common shares in private placement. During the nine months ended September 30, 2025, we issued 277,000 and 87,000 common shares under the dividend reinvestment plan and optional share purchases, respectively, which raised gross proceeds of $8,400. During the nine months ended September 30, 2024, we sold 302,000 common shares in a private placement. During the nine months ended September 30, 2024, we issued 255,000 and 93,000 common shares under the dividend reinvestment plan and as optional share purchases, respectively, which raised gross proceeds of $7,728.

Additionally, to reduce our cash investment and liquidity needs, the Trust utilizes the UPREIT structure whereby we can acquire property in whole or in part by issuing partnership units in lieu of cash payments. During the nine months ended

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September 30, 2025, the Trust issued approximately 438,000 limited partnership units of the Operating Partnership value at $24.00 per unit of an aggregate consideration of approximately $10,518 for the purchase of real estate investments. During the nine months ended September 30, 2024, the Trust issued approximately 322,000 limited partnership units of the Operating Partnership value at $23.00 per unit of an aggregate consideration of approximately $7,396 for the purchase of real estate investments.

The Board of Trustees, acting as general partner for the Operating Partnership, determined an estimate of fair value for the limited partnership units exchanged through the UPREIT structure. In determining this value, the Board relied upon their experience with, and knowledge about, the Trust’s real estate portfolio and debt obligations. The Board typically determines the fair value on an annual basis. The Trustees determine the fair value, in their sole discretion and use data points to guide their determination which is typically based on a consensus of opinion. Thus, the Trust does not employ any specific valuation methodology or formula. Rather, the Board looks to available data and information, which is often adjusted and weighted to comport more closely with the assets held by the Trust at the time of valuation. The principal valuation methodology utilized is the NAV calculation/direct capitalization method. The information made available to the Board is assembled by the Trust’s Advisor. In addition, the Board considers how the price chosen will affect existing share and unit values, redemption prices, dividend coverage ratios, yield percentages, dividend reinvestment factors, and future UPREIT transactions, among other considerations and information. The fair value was not determined based on, nor intended to comply with, fair value standards under US GAAP and the value may not be indicative of the price we would get for selling our assets in their current condition. At this time, no shares are held in street name accounts and the Trust is not subject to FINRA’s specific pricing requirements set out in Rule 2340 or otherwise.

As with any valuation methodology, the methodologies utilized by the Board in reaching an estimate of the value of the shares and limited partnership units are based upon a number of estimates, assumptions, judgments, or opinions that may, or may not, prove to be correct. The use of different estimates, assumptions, judgments, or opinions would likely have resulted in significantly different estimates of the value of the shares and limited partnership units. In addition, the Board’s estimate of share and limited partnership unit value is not based on the book values of our real estate, as determined by GAAP, as our book value for most real estate is based on the amortized cost of the property, subject to certain adjustments.

Liquidity Outlook

Cash on hand, together with cash from operations and access to the lines of credit, is expected to provide sufficient capital to meet the Company’s needs for at least the next 12 months. As appropriate, we will use cash flows from operations, net proceeds from share offerings, debt proceeds, and proceeds from the disposition of real estate investments to meet long-term liquidity demands.

Credit Quality of Tenants

We are exposed to credit risk within our tenant portfolio, which can reduce our results of operations and cash flow from operations if our tenants are unable to pay their rent. Tenants experiencing financial difficulties may become delinquent on their rent or default on their leases and, if they file for bankruptcy protection, may reject our lease in bankruptcy court, resulting in reduced cash flow. This may negatively impact net asset values and require us to incur impairment charges. Even if a default has not occurred and a tenant is continuing to make the required lease payments, we may restructure or renew leases on less favorable terms, or the tenant’s credit profile may deteriorate, which could affect the value of the leased asset and could in turn require us to incur impairment charges.

To mitigate credit risk on commercial properties, we have historically looked to invest in assets that we believe are critically important to our tenants’ operations and have attempted to diversify our portfolio by tenant, tenant industry and geography. We also monitor all of our properties’ performance through review of rent delinquencies as a precursor to a potential default, meetings with tenant management and review of tenants’ financial statements and compliance with financial covenants. When necessary, our asset management process includes restructuring transactions to meet the evolving needs of tenants, refinancing debt and selling properties, as well as protecting our rights when tenants default or enter into bankruptcy.

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Lease Expirations and Occupancy

Our residential leases are for a term of one year or less. The Advisor, with the assistance of our property managers, actively manages our real estate portfolio and begins discussing options with tenants in advance of scheduled lease expirations. In certain cases, we may obtain lease renewals from our tenants; however, tenants may elect to move out at the end of their term. In the cases where tenants elect not to renew, we may seek replacement tenants or try to sell the property.

Cash Flow Analysis

Our objectives are to generate sufficient cash flow over time to provide shareholders with increasing dividends and to seek investments with potential for strong returns and capital appreciation throughout varying economic cycles. We have funded 100% of the dividends from operating cash flows. In setting a dividend rate, we focus primarily on expected returns from investments we have already made to assess the sustainability of a particular dividend rate over time.


	Nine Months Ended
	September 30,
	2025		2024

	(in thousands)
Net cash flows provided by operating activities	$	37,827	$	34,071
Net cash flows used in investing activities	$	(26,333)	$	(36,164)
Net cash flows used in financing activities	$	(9,098)	$	(14,042)

Operating Activities

Our real estate properties generate cash flow in the form of rental revenues, which is reduced by interest payments, direct lease costs and property-level operating expenses. Property-level operating expenses consist primarily of property management fees including salaries and wages of property management personnel, utilities, cleaning, repairs, insurance, security, building maintenance costs, and real estate taxes. Additionally, we incur general and administrative expenses, advisory fees, acquisition and disposition expenses, and financing fees.

Net cash provided by operating activities was $37,827 and $34,071 for the nine months ended September 30, 2025 and 2024, respectively, which consists primarily of net income from property operations adjusted for non-cash depreciation and amortization.

Investing Activities

Our investing activities generally consist of real estate-related transactions (purchases and sales of properties) and payments of capitalized property-related costs such as intangible assets and reserve escrows.

Net cash used in investing activities was $26,333 and $36,164 for the nine months ended September 30, 2025 and 2024, respectively (this does not include the value of UPREIT units issued in connection with investing activities). For the nine months ended September 30, 2025 and 2024, cash flows used in investing activities related specifically to the acquisition of properties and capital expenditures was $27,207 and $41,104, respectively. Cash outlays related to investments in unconsolidated affiliates were $(4,540) and $(6,119) for the nine months ended September 30, 2025 and 2024, respectively. During the nine months ended September 30, 2025 and 2024, there were no proceeds from the maturity of securities. Proceeds from the sale of real estate investments during the nine months ended September 30, 2025 and 2024, were $0 and $9,863, respectively.

Financing Activities

Our financing activities generally consist of funding property purchases by raising proceeds and securing mortgage notes payable as well as paying dividends, paying syndication costs and making principal payments on mortgage notes payable.

Net cash used in financing activities was $9,098 for the nine months ended September 30, 2025. Net cash used in financing was $14,042 for the nine months ended September 30, 2024. During the nine months ended September 30, 2025, we paid $21,572 in dividends and distributions, redeemed $7,677 of shares and units, and made mortgage principal payments of $27,512. Net cash used in financing activities was $14,042 for the nine months ended September 30, 2024. For the nine

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months ended September 30, 2024, we paid $20,235 in dividends and distributions, redeemed $9,768 of shares and units, received $152 from new mortgage notes payable, and made mortgage principal payments of $14,522.

Dividends and Distributions

Common Stock

We declared cash dividends to our shareholders during the period from January 1, 2025 to September 30, 2025 totaling $11,649 or $0.9000 per share, of which $5,311 were cash dividends and $6,338 were reinvested through the dividend reinvestment plan. The cash dividends were paid from our $37,827 of cash flows from operations.

We declared cash dividends to our shareholders during the period from January 1, 2024 to September 30, 2024 totaling $9,873 or $0.8625 per share, of which $4,285 were cash dividends and $5,588 were reinvested through the dividend reinvestment plan. The cash dividends were paid from our $34,071 of cash flows from operations.

The Amended and Restated Dividend Reinvestment Plan, effective January 1, 2025, permits us to provide eligible shareholders with a simple and convenient way to invest dividends as well as additional cash in additional shares of the Trust’s Common Shares. The Plan is intended to be used as a vehicle for long-term investment in the Trust’s common shares of beneficial interest. The number of common shares of the Trust issuable under the plan is 10,000,000. The cap on the quarterly dividend reinvestments and quarterly optional cash purchases, in each case, is $25,000. The Annual cap on purchases under the Dividend Reinvestment Plan is $100,000 and provides participants the ability to exceed such cap with approval of the Trust.

We continue to provide cash dividends to our shareholders from cash generated by our operations. The following chart summarizes the sources of our cash used to pay dividends. Our primary source of cash is cash flow provided by operating activities from our investments as presented in our cash flow statement. We also include distributions from unconsolidated affiliates to the extent that the underlying real estate operations in these entities generate cash flow and the gain on sale of properties relates to net profits from the sale of certain properties. Our presentation is not intended to be an alternative to our consolidated statement of cash flows and does not present all sources and uses of our cash.

The following table presents certain information regarding our dividend coverage:


	Nine months ended
	September 30,
	2025		2024

	(in thousands)
Cash flows provided by operations (net income of $14,498 and $14,761, respectively)	$	37,827	$	34,071
Distributions in excess of earnings received from unconsolidated affiliates		970		1,706
Proceeds from sale of real estate investments and non-real estate investments		83		9,863
Dividends declared		(11,649)		(6,509)
Excess	$	27,231	$	39,131

Limited Partnership Units

The Operating Partnership agreement provides that our Operating Partnership will distribute to the partners (subject to certain limitations) cash from operations on a quarterly basis (or more frequently, if we so elect) in accordance with the percentage interests of the partners. We determine the amounts of such distributions in our sole discretion.

For the nine months ended September 30, 2025, the Operating Partnership declared distributions totaling $16,781 to holders of limited partnership units in our Operating Partnership, which we paid on April 15; July 15; and October 15, 2025. Declared distributions are included in dividends payable on the balance sheet. Distributions were paid at a rate of $0.3000 per unit per quarter, which is equal to the per share distribution rate paid to the common shareholders.

For the nine months ended September 30, 2024, we declared quarterly distributions totaling $16,096 to holders of limited partnership units in our Operating Partnership, which we paid on April 15; July 15; and October 15, 2024 . Distributions were paid at a rate of $0.2875 per unit per quarter, which is equal to the per share distribution rate paid to the common shareholders.

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Sources of Dividends and Distributions

For the nine months ended September 30, 2025, we paid aggregate dividends of $11,433, of which $5,106 were paid with cash flows provided by operating activities and $6,327 were reinvested. Our FFO for the nine months ended September 30, 2025 was $42,514. Therefore, our management believes our distribution policy is sustainable over time. For the nine months ended September 30, 2024, we paid aggregate dividends of $9,745, of which $4,164 were paid with cash flows provided by operating activities and $5,579 were reinvested. Our FFO was $36,560 for the nine months ended September 30, 2024. For a further discussion of FFO, including a reconciliation of FFO to net income, see “Funds from Operations” above.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Trust is exposed to certain risk arising from both its business operations and economic conditions and principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Trust manages economic risks, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities. The principal material financial market risk to which we are exposed, is interest-rate risk, which the Trust manages through the use of derivative financial instruments. Specifically, the Trust 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. During the nine months ended September 30, 2025, the Trust used 15 interest rate swaps to hedge the variable cash flows associated with market interest rate risk. These swaps have an aggregated notional amount of $124,117 at September 30, 2025. We do not enter into derivative instruments for trading or speculative purposes. The interest rate swaps expose us to credit risk in the event of non-performance by the counterparty under the terms of the agreement.

As of September 30, 2025, the Trust had $124,117 of variable-rate borrowings, with the total outstanding balance fixed through interest rate swaps. Even though our goal is to maintain a fairly low exposure to interest rate risk, we may become vulnerable to significant fluctuations in interest rates on any future repricing or refinancing of our fixed or variable rate debt or future debt.

Item 4. Controls and Procedures.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and interim-Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and interim-Chief Financial Officer have concluded that, as of September 30, 2025, such disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the third fiscal quarter of 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time we may be involved in disputes or litigation relating to claims arising out of our operations. We are not currently a party to any legal proceedings that could reasonably be expected to have a material adverse effect on our business, financial condition, results of operation, or cash flows.

Item 1A. Risk Factors.

There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the period ended December 31, 2024.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Sale of Securities

Neither Sterling nor the Operating Partnership issued any unregistered securities during the three months ended September 30, 2025.

Redemptions of Securities

Set forth below is information regarding common shares and limited partnership units redeemed during the three and nine months ended September 30, 2025:


			Average		Total Number of	Total Number of	Approximate Dollar Value of
	Total Number	Total Number	Price		Shares Redeemed	Units Redeemed	Shares (or Units) that May
	of Common	of Limited	Paid per		as Part of	as Part of	Yet Be Redeemed Under
	Shares	Partner Units	Common		Publicly Announced	Publicly Announced	Publicly Announced
Period	Redeemed	Redeemed	Share/Unit		Plans or Programs	Plans or Programs	Plans or Programs
January 1-31, 2025	27,000	13,000	$	22.80	1,858,000	1,605,000	$	16,857
February 1-28, 2025	21,000	50,000	$	22.80	1,879,000	1,655,000	$	15,242
March 1-31, 2025	2,000	—	$	22.80	1,881,000	1,655,000	$	15,193
Total	50,000	63,000

April 1-30, 2025	4,000	5,000	$	22.80	1,885,000	1,660,000	$	14,979
May 1-31, 2025	10,000	16,000	$	22.80	1,895,000	1,676,000	$	14,390
June 1-30, 2025	75,000	30,000	$	22.80	1,970,000	1,706,000	$	11,998
Total	89,000	51,000

July 1-31, 2025	2,000	17,000	$	22.80	1,972,000	1,723,000	$	11,583
August 1-31, 2025	28,000	18,000	$	22.80	2,000,000	1,741,000	$	10,531
September 1-30, 2025	10,000	9,000	$	22.80	2,010,000	1,750,000	$	10,096
Total	40,000	44,000

For the three months ended September 30, 2025, we redeemed all shares or units for which we received redemption requests. In addition, for the three months ended September 30, 2025, all common shares and units redeemed were redeemed as part of the publicly announced plans.

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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.

The Trust may, at its sole discretion, acting for itself, or as General Partner of the Limited Partnership, redeem up to an aggregate of $75,000 of Shares and/or Units presented to the Trust or Limited Partnership for cash to the extent it has sufficient proceeds to do so and subject to the conditions and limitations set forth herein. 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.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

Exhibit
Number		Title of Document
3.1		Articles of Organization of Sterling Real Estate Trust filed December 3, 2002 (incorporated by reference to Exhibit 3.1 to the Company’s General Form for Registration of Securities on Form 10-12G filed on March 7, 2011).

3.2		Amendment to Articles of Organization of Sterling Real Estate Trust dated August 1, 2014 (incorporated by reference to Exhibit 5.02 to the Company’s Current Report on Form 8-K filed June 24, 2014).

3.3		Amended and Restated Bylaws dated June 2, 2020 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 3, 2020).

10.1		Revolving Promissory Note, dated June 25, 2025, between Sterling Real Estate Trust and Sterling Office and Industrial Properties, LLLP(incorporated by reference to Exhibit No. 10.1 to the Trust’s current report on Form 8-K filed June 30, 2025).

31.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the of the Sarbanes-Oxley Act of 2002.

101		The following materials from Sterling Real Estate Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at September 30, 2025 and December 31, 2024; (ii) Consolidated Statements of Operations and Other Comprehensive Income for the three and nine months ended September 30, 2025 and 2024; (iii) Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2025 and 2024; (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024, and; (v) Notes to Consolidated Financial Statements.

104		Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:November 5, 2025

	STERLING REAL ESTATE TRUST

	By:	/s/ Kenneth P. Regan
		Kenneth P. Regan
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Megan E. Schreiner
		Megan E. Schreiner
		Interim Chief Financial Officer
		(Principal Financial Officer)