Sterling Real Estate Trust

Table of Contents

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 March 31, 2026

☐ 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 South, 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 (§232.405 of this chapter) during the preceding 12 months (or for 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	☐
(Do not check if a smaller reporting 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 May 6, 2026
Common Shares of Beneficial Interest, $0.01 par value per share		13,346,610

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STERLING REAL ESTATE TRUST

INDEX

	Page
	No.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets – as of March 31, 2026 and December 31, 2025	3
Consolidated Statements of Operations and Other Comprehensive (Loss) Income – Three months ended March 31, 2026 and 2025	4
Consolidated Statements of Shareholders’ Equity – Three months ended March 31, 2026 and 2025	5
Consolidated Statements of Cash Flows – Three months ended March 31, 2026 and 2025	6
Notes to Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3. Quantitative and Qualitative Disclosures About Market Risk	40
Item 4. Controls and Procedures	40

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	41
Item 1A. Risk Factors	41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3. Defaults Upon Senior Securities	42
Item 4. Mine Safety Disclosures	42
Item 5. Other Information	42
Item 6. Exhibits	43
Signatures	44

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

as of March 31, 2026 (UNAUDITED) and December 31, 2025


	March 31,			December 31,
	2026			2025

	(in thousands)
ASSETS
Real estate investments
Land	$	156,014		$	152,561
Buildings and improvements		966,546			947,217
Furniture, fixtures and equipment		35,996			35,535
Construction in progress		30,851			24,026
Real estate investments		1,189,407			1,159,339
Less accumulated depreciation		(261,123)			(256,951)
Real estate investments, net		928,284			902,388
Cash and cash equivalents		5,337			7,764
Restricted deposits		10,323			9,812
Investment in unconsolidated affiliates		29,854			29,791
Notes receivable		1,500			1,500
Notes receivable, affiliates		2,315			2,315
Assets held for sale		4,552			2,832
Lease intangible assets, less accumulated amortization		1,743			1,998
Other assets, net		19,403			20,228

Total Assets	$	1,003,311		$	978,628

LIABILITIES
Mortgage notes payable, net	$	529,885		$	511,737
Mortgage notes payable, net, affiliates		53,203			53,797
Notes payable, affiliate		—			10,000
Lines of credit		29,496			16,579
Dividends payable		10,311			9,589
Tenant security deposits payable		9,161			8,670
Lease intangible liabilities, less accumulated amortization		144			177
Liabilities related to assets held for sale		4,230			4,243
Accrued expenses and other liabilities		25,857			28,244
Total Liabilities		662,287			643,036

COMMITMENTS and CONTINGENCIES - Note 14

SHAREHOLDERS' EQUITY
Beneficial interest		160,224			159,383
Noncontrolling interest
Operating partnership		161,614			159,935
Partially owned properties		12,476			9,849
Accumulated other comprehensive income		6,710			6,425
Total Shareholders' Equity		341,024			335,592

	$	1,003,311		$	978,628

See Notes to Consolidated Financial Statements

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED March 31, 2026 and 2025 (UNAUDITED)


	Three Months Ended
	March 31,
	2026			2025

	(in thousands, except per share data)
Income from rental operations
Real estate rental income	$	44,147		$	42,180
Expenses
Expenses from rental operations
Operating expenses		18,843			17,836
Real estate taxes		4,512			3,860
Depreciation and amortization		7,755			7,025
Interest		7,083			6,270
		38,193			34,991
Administration of REIT		1,601			1,500
Total expenses		39,794			36,491
Income from operations		4,353			5,689

Other income (loss)
Equity in losses of unconsolidated affiliates		845			(919)
Other income		333			137
Gain on involuntary conversion		239			—
Total other income (loss)		1,417			(782)
Net income	$	5,770		$	4,907
Net income (loss) attributable to noncontrolling interest:
Operating partnership		3,437			3,031
Partially owned properties		(61)			(230)
Net income attributable to Sterling Real Estate Trust	$	2,394		$	2,106

Net income attributable to Sterling Real Estate Trust per common share, basic and diluted	$	0.18		$	0.16

Comprehensive income
Net income	$	5,770		$	4,907
Other comprehensive (loss) income:
Gain on cash flow hedges		848			(1,994)
Cash flow hedge losses reclassified to earnings		(563)			(788)
Total other comprehensive gain		285			(2,782)
Total comprehensive income		6,055			2,125
Comprehensive income attributable to noncontrolling interest		3,545			1,159
Comprehensive income attributable to Sterling Real Estate Trust	$	2,510		$	966

Weighted average common shares outstanding, basic and diluted		13,253			12,900

See Notes to Consolidated Financial Statements

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED March 31, 2026 and 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


				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, 2025	13,140	$	212,282	$	(52,899)	$	159,383	$	159,935	$	9,849	$	6,425	$	335,592
Contribution of assets in exchange for UPREIT partnership units	-	-		-		-		8,551		-		-		8,551
Shares/units redeemed	(16)		(391)		-		(391)		(1,533)		-		-		(1,924)
Dividends and distributions declared ($0.3188 per share/unit)	-		-		(4,224)		(4,224)		(6,088)		-		-		(10,312)
Dividends reinvested - stock dividend	86		2,080		-		2,080		-		-		-		2,080
Issuance of shares under optional purchase plan	39		982		-		982		-		-		-		982
Owner contribution reclassification	-		-		-		-		(2,688)		2,688		-		-
Total other comprehensive income	-		-		-		-		-		-		285		285
Net income (loss)	-		-		2,394		2,394		3,437		(61)		-		5,770
BALANCE AT MARCH 31, 2026	13,249	$	214,953	$	(54,729)	$	160,224	$	161,614	$	12,476	$	6,710	$	341,024

See Notes to Consolidated Financial Statements

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED March 31, 2026 and 2025 (UNAUDITED)


	Three Months Ended
	March 31,
	2026		2025

	(in thousands)
OPERATING ACTIVITIES
Net income	$	5,770	$	4,907
Adjustments to reconcile net income to net cash provided by operating activities
Gain on involuntary conversion		(239)		—
Equity in loss of unconsolidated affiliates		(845)		919
Depreciation		6,709		6,613
Amortization		1,046		412
Amortization of debt issuance costs		180		131
Effects on operating cash flows due to changes in
Other assets		2,549		(6,056)
Tenant security deposits payable		491		309
Accrued expenses and other liabilities		(2,842)		(3,910)
NET CASH PROVIDED BY OPERATING ACTIVITIES		12,819		3,325
INVESTING ACTIVITIES
Purchase of real estate investment properties		(18,165)		—
Capital expenditures and tenant improvements		(8,952)		(4,469)
Payments from sale of real estate investments and non-real estate investments		(12)		(17)
Investment in unconsolidated affiliates		—		(567)
Distributions in excess of earnings received from unconsolidated affiliates		782		786
Notes receivable issued net of payments received		—		(904)
NET CASH USED IN INVESTING ACTIVITIES		(26,347)		(5,171)
FINANCING ACTIVITIES
Payments for financing, debt issuance		(219)		—
Principal payments on special assessments payable		(309)		(203)
Proceeds from issuance of mortgage notes payable, net of financing costs		29,630		—
Principal payments on mortgage notes payable		(11,955)		(6,528)
Draws on lines of credit		34,920		7,074
Payments on lines of credit		(22,003)		—
Proceeds from contributions received from noncontrolling interest - partially owned properties		—		1,000
Draws (payments) on notes payable		(10,000)		—
Proceeds on notes payable, affiliate		—		10,000
Proceeds from issuance of shares under optional purchase plan		982		529
Shares/units redeemed		(1,925)		(2,580)
Dividends/distributions paid		(7,509)		(6,973)
NET CASH PROVIDED BY FINANCING ACTIVITIES		11,612		2,319
NET CHANGE IN CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS		(1,916)		473
CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT BEGINNING OF PERIOD		17,576		14,925
CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT END OF PERIOD	$	15,660	$	15,398

CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS AT END OF PERIOD
Cash and cash equivalents	$	5,337	$	4,999
Restricted deposits		10,323		10,399
TOTAL CASH AND CASH EQUIVALENTS AND RESTRICTED DEPOSITS, END OF PERIOD	$	15,660	$	15,398

(Continued)

See Notes to Consolidated Financial Statements

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED March 31, 2026 and 2025 (UNAUDITED) (Continued)


	Three Months Ended
	March 31,
	2026		2025

	(in thousands)
SCHEDULE OF CASH FLOW INFORMATION
Cash paid during the period for interest	$	6,821	$	6,032

SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Dividends reinvested	$	2,080	$	2,066
Dividends declared and not paid		4,224		3,867
UPREIT distributions declared and not paid		6,089		5,565
Acquisition of assets in exchange for the issuance of noncontrolling interest units in UPREIT		8,551		—
Increase in land improvements due to increase in special assessments payable		25		3,320
Accrued capital expenditures		3,764		1,433
Total other comprehensive income (loss)		285		(2,782)
Acquisition of assets through assumption of debt and liabilities		63		—
Capitalized interest and real estate taxes related to construction in progress		100		68

See Notes to Consolidated Financial Statements

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

Note 1 - Organization

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

Sterling previously established an operating partnership (Sterling Properties, LLLP or the “Operating Partnership”) and transferred all of its assets and liabilities to the Operating Partnership in exchange for general partnership units. As the general partner, Sterling has management responsibility for all activities of the Operating Partnership. As of March 31, 2026 and December 31, 2025, Sterling owned approximately 40.96% and 41.11%, 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 2025, 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 months ended March 31, 2026. 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 March 31, 2026, the Trust owned approximately 40.96% 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 redemptions plans, 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 interests having preferences and

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

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 loss. Additionally, the Trust’s net investment in the joint venture will be reflected as investment in unconsolidated affiliates on the consolidated balance sheets. See Note 5 for additional details regarding variable interest entities where the Trust uses the equity method of investing.

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

Concentration of Credit Risk

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

Use of Estimates

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

Real Estate Investments

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

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

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (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 are accounted for as asset acquisitions and 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 evaluation, there were no impairment losses during the three months ended March 31, 2026 and 2025.

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 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 March 31, 2026 and December 31, 2025, 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 2022.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

Reclassifications

Certain classifications considered necessary for a fair presentation have been made to the prior period financial statements in order to conform to the current year’s presentation. These reclassifications have not changed the results of operations or total shareholders’ equity.

During the three months ended March 31, 2026, the Trust recorded a reclassification of $2,688 from noncontrolling interest – operating partnership to noncontrolling interest – partially owned properties within owner contribution reclassification on the consolidated statement of shareholders’ equity . The reclassification did not affect total shareholders’ equity, net income, funds from operations, or previously reported cash flows.

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 March 31, 2026, 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 months ended March 31, 2026 and therefore, basic earnings per common share was equal to diluted earnings per common share for both periods.

For the three months ended March 31, 2026 and 2025, Sterling’s denominators for the basic and diluted earnings per common share were approximately 13,253,000 and 12,900,000, respectively.

Recent Accounting Pronouncements

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.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

NOTE 3 – segment reporting

Segment information is presented in accordance with a “management approach,” which designates the internal reporting used by the Company's CODM for making decisions and assessing performance as the source of the Company’s reportable segments. The Company’s segments are organized in a manner consistent with which discrete financial information is available and evaluated regularly by the CODM in deciding how to allocate resources and assess performance.

An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenue and incur expenses, and about which separate financial information is regularly evaluated by the CODM. The CODM is the Company’s chief executive officer.

Each of the operating segments are directly responsible for revenue and expenses related to their operations, including direct segment general and administrative expenses. The CODM assesses the performance of each operating segment using information about operating income (loss) as the primary measure of performance but does not evaluate segments using discrete asset information. There were no material inter-segment transactions during the three months ended March 31, 2026 and 2025, and the Company does not allocate depreciation and amortization, interest, administration of REIT, loss on impairment of property or other income (loss) to the operating segments. The accounting policies for segment reporting are the same as for the Company as a whole.

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, and medical properties. We assess and measure operating results based on net operating income (“NOI”), which we define as total real estate revenues less real estate expenses (which consist of real estate taxes, property management fees, utilities, repairs and maintenance, insurance and direct administrative costs). 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.

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 months ended March 31, 2026 and 2025, 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 March 31, 2026						Three months ended March 31, 2025
	Residential		Commercial		Total		Residential		Commercial		Total

	(in thousands)						(in thousands)
Income from rental operations	$	39,299	$	4,848	$	44,147	$	37,191	$	4,989	$	42,180
Real Estate Expenses
Real Estate Taxes		4,053		459		4,512		3,394		466		3,860
Property Management		5,165		229		5,394		4,915		235		5,150
Utilities		4,111		274		4,385		3,721		282		4,003
Repairs and Maintenance		7,161		423		7,584		6,599		524		7,123
Insurance		1,444		36		1,480		1,527		33		1,560
Expenses from rental operations		21,934		1,421		23,355		20,156		1,540		21,696
Net operating income	$	17,365	$	3,427	$	20,792	$	17,035	$	3,449	$	20,484
Depreciation and amortization ¹						7,755						7,025
Interest ¹						7,083						6,270
Administration of REIT ¹						1,601						1,500
Other income (expense) ¹						(1,417)						782
Net income					$	5,770					$	4,907

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

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

Segment Assets and Accumulated Depreciation


As of March 31, 2026	Residential		Commercial		Total

	(in thousands)
Real estate investments	$	1,023,021	$	166,386	$	1,189,407
Accumulated depreciation		(207,896)		(53,227)		(261,123)
Total real estate investments, net	$	815,125	$	113,159	$	928,284
Lease intangible assets, less accumulated amortization		238		1,505		1,743
Cash and cash equivalents						5,337
Restricted deposits						10,323
Investment in unconsolidated affiliates						29,854
Notes receivable						1,500
Notes receivable, affiliates						2,315
Assets held for sale						4,552
Other assets, net						19,403
Total Assets					$	1,003,311


As of December 31, 2025	Residential		Commercial		Total

	(in thousands)
Real estate investments	$	989,224	$	170,115	$	1,159,339
Accumulated depreciation		(202,714)		(54,237)		(256,951)
Total real estate investments, net	$	786,510	$	115,878	$	902,388
Lease intangible assets, less accumulated amortization		365		1,633		1,998
Cash and cash equivalents						7,764
Restricted deposits						9,812
Investment in unconsolidated affiliates						29,791
Notes receivable						1,500
Notes receivable, affiliates						2,315
Assets held for sale						2,832
Other assets, net						20,228
Total Assets					$	978,628

NOTE 4 – restricted deposits and funded reserves

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


		As of March 31,		As of December 31,
		2026		2025

		(in thousands)
Tenant security deposits		$	8,692	$	8,272
Real estate tax and insurance escrows			1,265		1,198
Replacement reserves			366		342
		$	10,323	$	9,812

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

NOTE 5 – CONSOLIDATED VARIABLE INTEREST ENTITIES




			Total Assets in Consolidated Affiliates at				Total Liabilities of Consolidated Affiliates at
Consolidated Affiliates	Date Acquired	Trust Ownership Interest	March 31, 2026			December 31, 2025	March 31, 2026		December 31, 2025
Sterling Northland, LLC	2015	70%	$	36,027	$	35,822	$	29,081	$	29,056
SRENOR1, LLC & SRENOR2, LLC	2024	60%		68,608		68,704		51,733		51,403
SE Rosemount, LLC	2025	75%		17,159		13,038		6,500		2,348
			$	121,794	$	117,564	$	87,314	$	82,807

Sterling Northland, LLC – the Operating Partnership owns a 70% interest as limited liability company in an office building in Bloomington, Minnesota. The property is encumbered by a mortgage, with the Trust acting as a guarantor on the outstanding indebtedness.

SRENOR1, LLC & SRENOR2, LLC – the Operating Partnership owns a 60% interest as limited liability company in a multifamily property in Circle Pines, Minnesota. The property is encumbered by a mortgage, with the Trust acting as a guarantor on the outstanding indebtedness.

SE Rosemount, LLC – the Operating Partnership owns a 75% interest as limited liability company in a multifamily development in Rosemount, Minnesota. The property is encumbered by a mortgage, with the Trust acting as a guarantor on the outstanding indebtedness.

The following is a summary of the financial position of the consolidated variable interest entities at March 31, 2026 and December 31, 2025.


	March 31, 2026		December 31, 2025

	(in thousands)
ASSETS
Real estate investments	$	134,374	$	130,741
Accumulated depreciation		(18,902)		(18,751)
Total Real Estate Investments, net		115,472		111,990
Cash and cash equivalents		3,006		2,669
Restricted deposits		933		726
Financing and lease costs, net		886		584
Other assets, net		1,497		1,595
Total Assets	$	121,794	$	117,564

LIABILITIES
Mortgage notes payable, net	$	83,441	$	80,216
Tenant security deposits payable		580		547
Accrued expenses and other liabilities		3,293		2,044
Total Liabilities		87,314		82,807
SHAREHOLDERS' EQUITY
Total Shareholders' Equity		34,480		34,757

Total liabilities and shareholders' equity	$	121,794	$	117,564

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

The following is a summary of results of operations of the consolidated variable interest entities for the three months ended March 31, 2026 and 2025.


	Three months ended March 31,
	2026		2025

	(in thousands)
Income from rental operations	$	3,615	$	3,530
Expenses from rental operations		1,663		1,683
Net operating income		1,952		1,847
Depreciation and amortization		964		1,145
Interest		1,125		1,175
Other (income) expense		(19)		92
Net loss	$	(118)	$	(565)

NOTE 6 – 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	March 31, 2026		December 31, 2025		March 31, 2026			December 31, 2025	March 31, 2026		December 31, 2025
Banner Building	2007	66.67%	$	1,357	$	1,347	$	8,434	$	8,470	$	6,455	$	6,505
Grand Forks INREIT, LLC	2003	50%		5,318		5,417		19,285		19,848		8,651		9,015
SE Savage, LLC	2019	60%		(923)		(575)		28,268		28,783		29,806		30,274
SE Maple Grove, LLC	2019	60%		251		553		25,946		26,394		26,374		26,545
SE Rogers, LLC	2020	60%		(63)		40		27,482		28,040		27,712		28,210
ST Oak Cliff, LLC	2021	70%		5,775		5,930		44,587		45,608		36,200		37,073
SE Brooklyn Park, LLC	2021	60%		(21)		144		26,287		26,535		26,314		26,398
ST Fossil Creek, LLC	2022	70%		6,357		5,333		46,536		46,131		37,956		39,013
SHG Emory North Liberty, LLC	2024	99%		10,797		11,027		12,175		12,241		654		482
			$	28,848	$	29,216	$	239,000	$	242,050	$	200,122	$	203,515

Negative investments presented in accrued expenses and other liabilities				1,006		575

Total investment in unconsolidated affiliates			$	29,854	$	29,791

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.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

Grand Forks INREIT, LLC - the Operating Partnership is a 50% owner of a 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 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.

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. During 2025, the first mortgage was refinanced. As part of the refinancing process, a portion of the existing second mortgage payable to Sterling Properties, LLLP was repaid. The new senior lender did not permit subordinate debt; therefore, the remaining balance of the second mortgage was converted into a preferred equity interest in the entity.

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. During 2025, the first mortgage was refinanced and the second mortgage to Sterling Properties, LLLP was satisfied.

ST Oak Cliff, LLC - the Operating Partnership owns a 70% interest in a limited liability company, with a related party multifamily property. The entity is located in Dallas, Texas. The property 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 March 31, 2026 and December 31, 2025, respectively. The note is included in Notes receivable, affiliates on the consolidated balance sheet at March 31, 2026 and December 31, 2025.

ST Fossil Creek, LLC - the Operating Partnership owns a 70% interest in a limited liability company, with a related party multifamily property. 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.

SHG Emory North Liberty, LLC - the Operating Partnership owns a 99% interest in SHG Emory North Liberty, LLC (“SHG”), a limited liability company. Sterling determined that it does not control the key decision-making rights of SHG and is not the primary beneficiary of the entity. Accordingly, SHG is not consolidated in Sterling’s financial statements and is accounted for as an unconsolidated affiliate under the equity method of accounting from the date of acquisition.

●

SHG owns a 50% interest in Emory North Liberty, LC (“ENL”), a limited company that is developing a multifamily property located in North Liberty, Iowa. SHG has determined that it does not control the key decision-making rights of ENL and is not the primary beneficiary of the entity. Accordingly, EBL is not consolidated by SHG and is also accounted for as an unconsolidated affiliated under the equity method from the date of acquisition.

●

Sterling’s investment in ENL is indirect and is reflected solely through its equity method investment in SHG. Accordingly, ENL is not presented separately in the Company’s unconsolidated affiliate tables. However, the Company considers the underlying activities of ENL to be meaningful to an understanding of its investment in SHG. As of March 31, 2026, ENL had total assets of approximately $55,225 and total liabilities of approximately $33,308, consisting primarily of project-level development and construction financing.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (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 March 31, 2026 and December 31, 2025.


	March 31, 2026		December 31, 2025

	(in thousands)
ASSETS
Real estate investments	$	272,104	$	272,102
Accumulated depreciation		(52,126)		(51,086)
Total Real Estate Investments, net		219,978		221,016
Cash and cash equivalents		3,782		6,130
Restricted deposits		2,203		1,451
Investment in unconsolidated affiliates		11,691		11,758
Financing and lease costs, net		689		710
Other assets, net		657		985
Total Assets	$	239,000	$	242,050

LIABILITIES
Mortgage notes payable, net	$	195,971	$	196,774
Tenant security deposits payable		422		428
Accrued expenses and other liabilities		3,729		6,313
Total Liabilities		200,122		203,515
SHAREHOLDERS' EQUITY
Total Shareholders' Equity		38,878		38,535

Total liabilities and shareholders' equity	$	239,000	$	242,050

The following is a summary of results of operations of the unconsolidated affiliates for the three months ended March 31, 2026 and 2025.


	Three months ended March 31,
	2026		2025

	(in thousands)
Income from rental operations	$	7,296	$	7,380
Expenses from rental operations		3,259		3,237
Net operating income		4,037		4,143
Depreciation and amortization		1,062		3,352
Interest		1,820		1,850
Other income (expense)		19		(162)
Net income (loss)	$	1,174	$	(1,221)

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

NOTE 7 - 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 March 31, 2026		Intangibles			Amortization			Intangibles, net

Lease Intangible Assets		(in thousands)
In-place leases		$	16,274		$	(14,815)		$	1,459
Above-market leases			1,378			(1,094)			284
		$	17,652		$	(15,909)		$	1,743
Lease Intangible Liabilities
Below-market leases		$	(1,309)		$	1,165		$	(144)


		Lease			Accumulated			Lease
As of December 31, 2025		Intangibles			Amortization			Intangibles, net

Lease Intangible Assets		(in thousands)
In-place leases		$	16,744		$	(15,051)		$	1,693
Above-market leases			1,377			(1,072)			305
		$	18,121		$	(16,123)		$	1,998
Lease Intangible Liabilities
Below-market leases		$	(2,107)		$	1,930		$	(177)

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)
2026 (April - December)	$	540	$	44
2027		375		38
2028		308		19
2029		207		17
2030		101		12
Thereafter		212		14
	$	1,743	$	144

NOTE 8 – LINES OF CREDIT

The trust maintains a $4,915 variable rate (floating SOFR plus 2.00%) line of credit agreement with Old National Bank (formerly Bremer Bank), which expires in December 2026 and a $3,500 variable rate (floating SOFR plus 2.00%) line of credit agreement with Old National Bank (formerly Bremer Bank), which expires December 2026. We also have a $20,000 variable rate (Prime minus 0.75%) line of credit agreement with Gate City Bank, which expires in November 2028 and a $20,000 variable rate (Prime minus 1.50%) line of credit agreement with Gate City Bank, which expires in November 2028. The lines of credit are secured by specific properties. At March 31, 2026, the lines of credit have $48,415 available and an unused balance of $18,919 under the agreements. These operating lines are designed to enhance treasury management activities and more effectively manage cash balances. As of March 31, 2026, and December 31, 2025, there was an outstanding balance of $29,496, and $16,579, respectively. The Trust anticipates it will hold it as a cash resource to the Trust.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

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

NOTE 9 - NOTES PAYABLE

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


	Principal Balance At
	March 31,		December 31,
	2026		2025
	(in thousands)
Mortgage notes payable, net (a)	$	532,142	$	513,947
Mortgage notes payable, net, affiliates		53,203		53,797
Less unamortized debt issuance costs		2,257		2,210
	$	583,088	$	565,534

(a)	Includes $134,996 and $123,120 of variable rate mortgage debt that was swapped to a fixed rate at March 31, 2026 and December 31, 2025, 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)
2026 (April - December)		$	75,479
2027			80,141
2028			47,971
2029			92,323
2030			86,326
Thereafter			200,848
Total payments		$	583,088

NOTE 10 – 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 for the Trust making fixed rate payments over the life of the agreement without exchange of the underlying notional amount.

As of March 31, 2026, the Trust used 17 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 that qualify as cash flow hedges are recorded in accumulated other comprehensive loss and are reclassified into interest expense as interest payments are made on the Trust’s variable rate debt. During the next 12 months, the Trust estimates that an additional $2,109 will be reclassified as a decrease to interest expense.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

The following table summarizes the Trust’s interest rate swaps as of March 31, 2026, which effectively convert on month floating rate LIBOR to a fixed rate:


			Fixed
Effective Date		Notional	Interest Rate	Maturity Date
November 1, 2019	$	5,866	3.15%	November 1, 2029
November 1, 2019	$	4,083	3.28%	November 1, 2029
January 10, 2020	$	2,672	3.39%	January 10, 2030
December 2, 2020	$	11,148	2.91%	December 2, 2027
July 1, 2021	$	23,418	2.99%	July 1, 2031
November 10, 2021	$	26,104	3.54%	August 1, 2029
December 1, 2021	$	9,810	3.32%	December 1, 2031
August 15, 2022	$	1,334	3.07%	June 15, 2030
August 15, 2022	$	2,585	3.07%	June 15, 2030
August 15, 2022	$	1,442	2.94%	June 15, 2030
August 15, 2022	$	3,816	2.94%	June 15, 2030
May 10, 2023	$	4,368	2.79%	June 10, 2030
April 15, 2024	$	9,163	3.57%	May 15, 2032
April 15, 2024	$	3,577	3.57%	May 15, 2032
April 15, 2024	$	12,727	3.57%	May 15, 2032
January 6, 2026	$	8,554	5.88%	December 23, 2030
January 21, 2026	$	4,329	5.85%	January 15, 2031

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	March 31, 2026	December 31, 2025		March 31, 2026		December 31, 2025
Interest rate swaps	17	15	$	134,996	$	123,120

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.


	March 31, 2026			December 31, 2025
Derivatives designated as
cash flow hedges:	Balance Sheet Location		Fair Value	Balance Sheet Location		Fair Value
Interest rate swaps	Other assets, net	$	9,113	Other assets, net	$	8,949

The carrying amount of the swaps have been adjusted to their fair value at the end of the quarter, which because of changes in forecasted levels of SOFR, resulted in reporting an asset and liability 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 comprehensive income.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

The following table presents the effect of the Company’s derivative financial instruments on the accompanying consolidated statements of operations and other comprehensive loss (income) for the quarter ended March 31, 2026 and 2025:


			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
		2026			2026
Interest rate swaps	$	285	Interest expense	$	(564)
		2025			2025
Interest rate swaps	$	2,782	Interest expense	$	(789)

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 March 31, 2026, the termination value of derivatives in an asset position was $9,113. As of March 31, 2026, the Trust has pledged the properties related to the loans which are hedged as collateral.

NOTE 11 - FAIR VALUE MEASUREMENT

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


	March 31, 2026				December 31, 2025
	Carrying				Carrying
	Value		Fair Value		Value		Fair Value

	(in thousands)
Financial assets:
Notes receivable	$	1,500	$	1,487	$	1,500	$	1,500
Notes receivable, affiliates	$	2,315	$	2,216	$	2,315	$	2,192
Derivative assets	$	9,113	$	9,113	$	8,949	$	8,949


Financial liabilities:
Lines of Credit	$	29,496	$	29,496	$	16,579	$	16,579
Mortgage notes payable	$	532,142	$	482,347	$	513,947	$	471,230
Mortgage notes payable, affiliates	$	53,203	$	52,016	$	53,797	$	54,548
Derivative liabilities	$	145	$	145	$	153	$	153

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.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

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.

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)
March 31, 2026
Derivative assets	$	—	$	9,113	$	—	$	9,113
Derivative liabilities	$	—	$	145	$	—	$	145

December 31, 2025
Derivative assets	$	—	$	8,949	$	—	$	8,949
Derivative liabilities	$	—	$	153	$	—	$	153

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.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

Fair Value Disclosures

The following table presents the Company’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)
March 31, 2026
Lines of Credit	$	—	$	—	$	29,496	$	29,496
Mortgage notes payable	$	—	$	—	$	482,347	$	482,347
Mortgage notes payable, affiliate	$	—	$	—	$	52,016	$	52,016
Notes receivable	$	—	$	—	$	1,487	$	1,487
Notes receivable, affiliate	$	—	$	—	$	2,216	$	2,216

December 31, 2025
Lines of Credit	$	—	$	—	$	16,579	$	16,579
Mortgage notes payable	$	—	$	—	$	471,230	$	471,230
Mortgage notes payable, affiliate	$	—	$	—	$	54,548	$	54,548
Notes receivable	$	—	$	—	$	1,500	$	1,500
Notes receivable, affiliate	$	—	$	—	$	2,192	$	2,192

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 the Trust’s lenders. The rates used ranged from 5.95% to 5.95% at March 31, 2026 and ranged from 5.75% to 5.75% at December 31, 2025.

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 March 31, 2026 and December 31, 2025.

NOTE 12 – LEASES

As of March 31, 2026, we derived 89.0% 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 March 31, 2026, we derived 11.0% 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.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

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.

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


	Three months ended March 31, 2026
	Residential		Commercial		Total

	(in thousands)
Lease income related to fixed lease payments	$	37,536	$	3,889	$	41,425
Lease income related to variable lease payments		—		1,126		1,126
Other (a)		(939)		(232)		(1,171)
Lease Income (b)	$	36,597	$	4,783	$	41,380

(a)

For the three months ended March 31, 2026, “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 March 31, 2026 of $2,768, which is accounted for under the revenue recognition standard.


	Three months ended March 31, 2025
	Residential		Commercial		Total

	(in thousands)
Lease income related to fixed lease payments	$	34,961	$	3,936	$	38,897
Lease income related to variable lease payments		—		1,106		1,106
Other (a)		(220)		(77)		(297)
Lease Income (b)	$	34,741	$	4,965	$	39,706

(c)

For the three months ended March 31, 2025, “Other” is comprised of revenue adjustments related to changes in collectability and amortization of above and below market lease intangibles and lease inducements.

(d)

Excludes other rental income for the three months ended March 31, 2025 of $2,473 respectively, which is accounted for under the revenue recognition standard.

As of March 31, 2026, non-cancelable commercial operating leases provide for future minimum rental income as follows. Apartment leases are not included as the terms are generally for one year or less.


Years ending December 31,		Amount
		(in thousands)
2026 (April - December)		$	13,326
2027			13,314
2028			12,509
2029			11,468
2030			9,556
Thereafter			18,699
		$	78,872

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

NOTE 13 – 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 Kenneth P. Regan, by Trustee James S. Wieland, by the Trust’s President and Chief Financial Officer, Megan E. Schreiner, by the Trust’s General Counsel and Secretary Michael P. Carlson, by the Trust’s Chief Investment Officer Luke B. Swenson, and by the Trust’s Vice President David F. Perkins. Messrs. Regan, Carlson, Swenson, and Perkins and Mmes. Schreiner all serve as officers of the Advisor. Messrs. Regan, Carlson, Swenson, and Perkins and Mmes. Schreiner all serve on the Advisor’s Board of Governors 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.

Property Management Fee

We paid fees to GOLDMARK Property Management, Inc. related to the management of various properties, including on-site staff costs and other miscellaneous fees required to manage to such properties. 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 March 31,
	2026		2025

	(in thousands)

Onsite staff costs, and other misc.	$	4,935	$	4,680
Goldmark Management fees	$	1,863	$	1,678
R&M related payroll and payroll related expenses	$	2,497	$	2,475
Sterling Management fees	$	29	$	26

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

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 19, 2026, and is effective until March 31, 2027.

The below table summarizes the fees incurred to our Advisor.


	Three Months ended March 31,
	2026		2025

	(in thousands)
Fee:
Advisory	$	1,213	$	1,124
Acquisition	$	375	$	-
Financing	$	38	$	-
Project Management	$	66	$	381

The below table summarizes the fees payable to our Advisor.


	Payable at
	March 31,		December 31,
	2026		2025

	(in thousands)
Fee:
Advisory	$	33	$	20
Development	$	101	$	115
Project Management	$	19	$	-

Operating Partnership Units Issued in Connection with Acquisitions

During the three months ended March 31, 2026, 158,000 Operating Partnership units were issued to an entity affiliated with Messrs. Regan and Wieland, two of our trustees, in connection with the acquisition of Stonebridge Apartments. The aggregate value of these units was $4,017. During the three months ended March 31, 2025 there were no Operating Partnership units issued.

Commissions

During the three months ended March 31, 2026 there were $402 real estate commissions paid to GOLDMARK Commercial Real Estate. During the three months ended March 31, 2025 there were no real estate commissions paid to GOLDMARK Commercial Real Estate. As of March 31, 2026 and December 31, 2025, there were no unpaid commissions to GOLDMARK Commercial Real Estate.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

During the three months ended March 31, 2026, there were $100 in real estate commissions paid to GOLDMARK Property Management. During the three months ended March 31, 2025, there were no commissions paid to GOLDMARK Property Management. As of March 31, 2026 and December 31, 2025, there were no unpaid commissions to GOLDMARK Property Management.

Due to Related Parties

As of March 31, 2026, and December 31, 2025, the Trust had $354 and $616, respectively, for other related party payables.

Rental Income

The Trust leases office space to certain affiliates pursuant to operating lease agreements. The table below summarizes rental income earned from affiliates.


	Three Months ended March 31,
	2026		2025

	(in thousands)
Rental Income:
Operating lease agreement with our Advisor	$	35	$	34
Goldmark Property Management, Inc.	$	72	$	70
Bell Bank	$	327	$	320

Debt Financing

At March 31, 2026 and December 31, 2025, the Trust had $53,203 and $53,797, respectively, of outstanding principal on loans entered into with Bell Bank. During the three months ended March 31, 2026 and 2025, the Trust incurred interest expense on debt held with Bell Bank of $555 and $571, respectively. Accrued interest as of March 31, 2026, and December 31, 2025, related to this debt was $126 and $128, respectively.

At March 31, 2026 and December 31, 2025, the Trust had $- and $10,000, respectively, of outstanding principal on loans entered into with Sterling Office and Industrial Properties, LLLP. During the three months ended March 31, 2026 and 2025, the Trust incurred interest expense on debt held with Sterling Office and Industrial Properties, LLLP of $16 and $25, respectively. Accrued interest as of March 31, 2026, and December 31, 2025, related to this debt was $- and $39, respectively.

Mezzanine Financing

The trust offers mezzanine financing to joint ventures, see note 5 for investment in unconsolidated affiliates.

Sterling issued a second mortgage financing to certain investments in unconsolidated affiliate as follows: On August 18, 2020, financing was secured with SE Maple Grove, LLC for $3,305 at a rate of 7.25% with the full amount of principal and accrued interest paid off in September 2025. On December 17, 2020, financing was secured with SE Rogers, LLC for $2,932 at a rate of 7.25% with the full amount of principal and accrued interest paid off in December 2025. On November 5, 2021, financing was secured with SE Brooklyn Park, LLC for $3,127 at a rate of 7.25% with the full amount of principal and accrued interest due on December 10, 2026. As of March 31, 2026 and December 31, 2025, Sterling issued $2,294, and $2,294 respectively, in second mortgage financing to investments in unconsolidated affiliates.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

During the three months ended March 31, 2026 and 2025, the trust earned interest income of $64 and $142 respectively, related to the second mortgage financing.

Insurance Services

The trust retains insurance services from Bell Insurance. Policies provided by these services provide insurance coverage for the Trust’s Director and Officer general and liability coverage. As of March 31, 2026, and December 31, 2025, total premiums incurred for this policy were $63 and $65. As of March 31, 2025, total premiums incurred for this policy was $-.

NOTE 14 - 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, tornadoes, 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.

NOTE 15 – DISPOSITIONS

The Trust had no dispositions during the three months ended March 31, 2026 and 2025.

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STERLING REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2026 and 2025 (UNAUDITED)

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

NOTE 16 – ACQUISITIONS

The Trust had one acquisition during the three months ended March 31, 2026.

Date

Property Name

Location

Property Type

Units/ Square Footage/ Acres

Total Net Assets Acquired

2/9/26

Stonebridge Apartments

Fargo, ND

Apartment Complex

246 units

26,716

The Trust has no acquisitions during the three months ended March 31, 2025.

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


	March 31,
	2026		2025
Real estate investment acquired	$	26,032	$	-
Assumed interest rate derivative		-		-
Acquired lease intangible assets		715		-
Assumed assets		32		-
Total Assets Acquired	$	26,779	$	-
Assumed loans		-		-
Other liabilities		(63)		-
Net assets acquired		26,716		-
Restricted cash proceeds related to IRC Section 1031 tax-deferred exchange		-		-
Equity/limited partnership unit consideration		(8,551)		-
Net cash consideration	$	18,165	$	-

NOTE 17 - SUBSEQUENT EVENTS

On April 15, 2026, we paid a dividend or distribution of $0.3188 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 March 31, 2026.

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 Items 2. through 4. and Part II Items 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 contained in this section and elsewhere in this Form 10-Q constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Please see “Note Regarding Forward-Looking Statements” and “Risk Factors” in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, for more information. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statements were made and are not guarantees of future performance.

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 must consist of real estate assets and that 75% of its gross income must be derived from real estate. The net income of the REIT is allocated in accordance with stock ownership in the same fashion as a regular corporation. Our real estate portfolio consisted of 176 properties containing 12,389 apartment units and approximately 1,159,000 square feet of leasable commercial space as of March 31, 2026. The portfolio has a net book value of real estate investments (cost less accumulated depreciation) of approximately $928,284, which includes construction in progress. Sterling’s current acquisition strategy and focus is on multifamily apartment properties.

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.

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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 evaluation, there were no impairment losses during the three months ended March 31, 2026 and 2025.

There have been no material changes in our Critical Accounting Policies as disclosed in Note 2 to our financial statements for the three months ended March 31, 2026 included elsewhere in this report.

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, including 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 considers 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 at 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.

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Principal Business Activity

Sterling currently directly owns 176 properties. The Trust’s 142 residential properties are located in North Dakota, Minnesota, Missouri, Nebraska, and Texas and are principally multifamily apartment buildings. The Trust owns 34 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, and medical properties. The Trust’s mix of properties is 84.4% residential and 15.6% commercial (based on cost) with a total carrying value of $928,284 at March 31, 2026. 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.

The following table represents the number of properties the Trust owns in each state as of March 31, 2026


Residential Property		Location		No. of Properties		Units
		North Dakota		120		7,941
		Minnesota		16		3,375
		Missouri		1		164
		Nebraska		4		639
		Texas		1		270
				142		12,389

Commercial Property		Location		No. of Properties		Sq. Ft
		North Dakota		16		473,000
		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
				34		1,159,000

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Results of Operations

Management Highlights

●

Increased revenues from rental operations by $1,967 or 4.7% for the three months ended March 31, 2026, compared to the same three month-period in 2025.

●

Declared and paid dividends aggregating $0.3188 per common share for the three months ending March 31, 2026.

Results of Operations for the Three Months Ended March 31, 2026 and 2025


		Three months ended March 31, 2026						Three months ended March 31, 2025
		Residential		Commercial		Total		Residential		Commercial		Total

		(unaudited)						(unaudited)
		(in thousands)						(in thousands)
Real Estate Revenues		$	39,299	$	4,848	$	44,147	$	37,191	$	4,989	$	42,180
Real Estate Expenses
Real Estate Taxes			4,053		459		4,512		3,394		466		3,860
Property Management			5,165		229		5,394		4,915		235		5,150
Utilities			4,111		274		4,385		3,721		282		4,003
Repairs and Maintenance			7,161		423		7,584		6,599		524		7,123
Insurance			1,444		36		1,480		1,527		33		1,560
Total Real Estate Expenses			21,934		1,421		23,355		20,156		1,540		21,696
Net Operating Income		$	17,365	$	3,427		20,792	$	17,035	$	3,449		20,484
Interest							7,083						6,270
Depreciation and amortization							7,755						7,025
Administration of REIT							1,601						1,500
Other (income) expense							(1,417)						782
Net Income						$	5,770					$	4,907

Net Income Attributed to:
Noncontrolling Interest						$	3,376					$	2,801
Sterling Real Estate Trust						$	2,394					$	2,106
Dividends per share⁽¹⁾						$	0.3188					$	0.3000
Earnings per share						$	0.18					$	0.16
Weighted average number of common shares							13,253						12,900

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

Revenues

Property revenues of $44,147 for the three months ended March 31, 2026 increased $1,967 or 4.7% in comparison to the same period in 2025. Residential property revenues increased $2,108 and commercial property revenues decreased ($141).

The following table illustrates the occupancy percentage for the periods ended indicated:


		March 31,		March 31,
		2026		2025
Residential		93.3	%	92.8	%
Commercial		90.2	%	90.9	%

Residential revenues for the three months ended March 31, 2026 increased $2,108 or 5.7% in comparison to the same period for 2025. The increase is primarily due to the acquisition of three multi-family properties offset by the sale of one multi-family property during the 12 months ended March 31, 2026. Residential revenues comprised 89.0% of total revenues for the three months ended March 31, 2026 compared to 88.2% of total revenues for the three months ended March 31, 2025. The residential occupancy rates for the three months ended March 31, 2026 increased 0.5%. This increase

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in occupancy was primarily driven by enhanced property-level execution including proactive resident engagement and retention strategies, targeted leasing initiatives, and strengthened digital marketing and online reputation management across the portfolio.

For the three months ended March 31, 2026, total commercial revenues decreased ($141) or (2.8%) in comparison to the same period for 2025. The decrease was primarily attributed to the disposition of three commercial properties in 2025. The commercial occupancy rates for the three months ended March 31, 2026 increased 0.7%.

Expenses

Residential expenses from operations of $21,934 during the three months ended March 31, 2026 increased $1,778, or 8.8% in comparison to the same period in 2025. The increase in expenses is primarily attributable to property acquisitions during the 12 months ended March 31, 2026.

Commercial expenses from operations of $1,421 during the three months ended March 31, 2026 decreased ($119) or (7.7%) in comparison to the same period in 2025. The decrease is primarily attributable to the disposition of three commercial properties in 2025.

Interest expense of $7,083 during the three months ended March 31, 2026 increased $813 or 13.0% in comparison to the same period in 2025. Interest expense increased due to the increase in the debt balance as a result of acquisitions and refinances as well as elevated interest rates. Interest expense as a percentage of rental income for the three months ended March 31, 2026 and 2025 was 16.0% and 14.9%, respectively.

Depreciation and amortization expense of $7,755 during the three months ended March 31, 2026 increased $730 or 10.4% in comparison to the same period in 2025. 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 rental income for the three months ended March 31, 2026 and 2025 was 17.6% and 16.8%, respectively.

REIT administration expenses of $1,601 during the three months ended March 31, 2026 increased $101 or 6.7% compared to the same period in 2025. The increase is primarily attributable to the increase in assets due to the acquisitions closed during the twelve months ended March 31, 2026.

Other (income) expense was ($1,418) for the three months ended March 31, 2026, compared to expense of $782 for the same period in 2025, a favorable change of $2,200, or 281.3%. The change was primarily driven by $1,280 of income recognized in the current quarter resulting from the correction of depreciation expense that had been recorded using an incorrect methodology in prior periods. Management evaluated the cumulative impact of the depreciation error on previously issued financial statements and concluded that the effects on those prior periods were not material; accordingly, the cumulative correction was recorded in the current period. The Company also recognized a gain of $239 from an insurance claim during the quarter and a $181 favorable adjustment from the refund of previously accrued real estate taxes following the successful contest of valuations for certain properties. The remainder of the favorable change was attributable to lower miscellaneous non-operating expenses in the current period, none of which were individually significant. Each of the items described above was non-recurring in nature.

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 and 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 March 31, 2026, consists primarily of construction at several residential properties located in North Dakota and Minnesota. The Rosedale Estates has a project for a parking structure and parking lot. The current project budgeted is $7,827, of which $6,782 has been incurred. Stony Brook has an ongoing exterior remodel project with a budget of $4,278 of which $4,061 has been incurred. Both of these projects are expected to be completed and placed in

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service during the third quarter of 2026. Remaining construction in progress projects are primarily related to building and roof system, roof replacements on multiple residential properties, residential exterior window systems, and new deck systems on multiple residential properties.

The Trust has one on-going development through ventures in unconsolidated affiliates.

Emory North Liberty is a development project that is underway in North Liberty, Iowa. As of March 31, 2026, phase II is in process and anticipated to be completed in Q4 2026. Phase II has a budget of $41,724 of which $21,888 has been incurred.

SE Rosemount, LLC is a development project that is underway in Rosemount, MN. The current project budget approximates $64,200, of which $17,376 has been incurred as of March 31, 2026.

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. The term Funds From Operations (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 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 need 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, the three months ended March 31, 2026 and 2025, respectively. We believe these calculations are the most comparable GAAP financial measure:

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


	Three months ended March 31, 2026			Three months ended March 31, 2025
			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	$	2,394	13,253	$	2,106	12,900

Adjustments:
Noncontrolling Interest - Operating Partnership Units		3,437	18,972		3,031	18,566
Depreciation & Amortization from continuing operations (1)		7,417			6,613
Pro rata share of unconsolidated affiliate depreciation and amortization		530			2,259
Funds from operations applicable to common shares and limited partnership units (FFO)	$	13,778	32,225	$	14,009	31,466

(1)

Excludes the portion allocated to noncontrolling interest in the amount of $338 and $411 for the three months ended March 31, 2026 and 2025, 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, and current lease terms and projected expiration dates.

Our principal demands for funds will be for the: (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 the payment of 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; however, we may use other sources to fund dividends/distributions and repurchases, as necessary.

At March 31, 2026, our unrestricted cash resources consisted of cash and cash equivalents totaling approximately $5,337. 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 $69,748, which could potentially be used as collateral to secure additional financing in future periods.

The Trust maintains a $4,915 variable rate (floating SOFR plus 2.00%) line of credit agreement with Old National Bank (formerly Bremer Bank), which expires in December 2026; and a $3,500 variable rate (floating SOFR plus 2.00%) line of credit agreement with Old National Bank (formerly Bremer Bank), which expires December 2026. We also have a $20,000 variable rate (Prime minus 1.50%) line of credit agreement with Gate City Bank, which expires in November 2028, and a $20,000 variable rate (Prime minus 0.75%) line of credit agreement with Gate City Bank, which expires in November 2028. The lines of credit are secured by specific properties. 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 us.

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 us.

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During the three months ended March 31, 2026, we did not sell any common shares in private placements. During the three months ended March 31, 2026, we issued 86,000 and 39,000 common shares under the dividend reinvestment plan and optional share purchases, respectively, which raised gross proceeds of $3,062. During the three months ended March 31, 2025, we did not sell any common shares in private placements. During the three months ended March 31, 2025, we issued 91,000 and 22,000 common shares under the dividend reinvestment plan and as optional share purchases, respectively, which raised gross proceeds of $2,595.

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 three months ended March 31, 2026, the Operating Partnership issued approximately 335,000 limited partnership units of the Operating Partnership valued at $25.50 per unit for an aggregate consideration of approximately $8,551 for the purchase of real estate investments. During the three months ended March 31, 2025, no limited partnership units were issued.

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.

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 and 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 property’s 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

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of tenants, refinancing debt and selling properties, as well as protecting our rights when tenants default or enter into bankruptcy.

Lease Expirations and Occupancy

Our residential leases are for a term of one year or less. With the assistance of our property managers, we actively manage our real estate portfolio and begin 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 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.


	Three Months Ended
	March 31,
	2026		2025

	(in thousands)
Net cash flows provided by operating activities	$	12,819	$	3,325
Net cash flows used in investing activities	$	(26,347)	$	(5,171)
Net cash flows provided by financing activities	$	11,612	$	2,319

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 and building maintenance cost, 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 $12,819 and $3,325 the three months ended March 31, 2026 and 2025, 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 $ (26,347) and $ (5,171) for the three months ended March 31, 2026 and 2025, respectively (this does not include the value of UPREIT units issued in connection with investing activities). For the three months ended March 31, 2026 and 2025, cash flows used in investing activities related to the acquisition of properties and capital expenditures was $27,117 and $4,469, respectively. During the three months ended March 31, 2026 and 2025, respectively, there were no proceeds from the maturity of securities. During the three months ended March 31, 2026 and 2025, respectively, there were no proceeds from the sale of real estate investments.

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.

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Net cash used in financing activities was $11,612 and provided by financing activities was $2,319 for the three months ended March 31, 2026 and 2025. During the three months ended March 31, 2026, we paid $7,509 in dividends and distributions, redeemed $1,925 of shares and units, received no proceeds from new mortgage notes, and made mortgage principal payments of $11,955. For the three months ended March 31, 2025, we paid $6,973 in dividends and distributions, redeemed $2,580 of shares and units, received no proceeds from new mortgage notes, and made mortgage principal payments of $6,528.

Dividends and Distributions

Common Stock

We declared cash dividends to our shareholders during the three months ended March 31, 2026 totaling $4,224 or $0.3188 per share, of which $1,982 were cash dividends and $2,242 were reinvested under the dividend reinvestment plan. The cash dividends were paid from our $12,819 of net cash flows from operations.

We declared cash dividends to our shareholders during the three months ended March 31, 2025 totaling $3,867 or $0.3000 per share, of which $1,737 were cash dividends and $2,131 were reinvested under the dividend reinvestment plan. The cash dividends were paid from our $3,325 of net cash flows from operations.

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 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:


	Three Months Ended
	March 31,
	2026		2025

	(in thousands)
Cash flows provided by operations (net income of $5,770 and $4,907, respectively)	$	12,819	$	3,325
Distributions in excess of earnings received from unconsolidated affiliates		782		786
Proceeds from sale of real estate investments and non-real estate investments		(12)		(17)
Dividends declared		(4,224)		(3,867)
Excess	$	9,365	$	227

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. Through the role of general partner of the Operating Partnership, we determine the amounts of such distributions in our sole discretion.

For the three months ended March 31, 2026, we declared quarterly distributions totaling $6,089 to holders of limited partnership units in our Operating Partnership, which we paid on April 15, 2026. Distributions were paid at a rate of $0.3188 per unit per quarter, which is equal to the per share distribution rate paid to the common shareholders.

For the three months ended March 31, 2025, we declared quarterly distributions totaling $5,565 to holders of limited partnership units in our Operating Partnership, which we paid on April 15, 2025. 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.

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Sources of Dividends and Distributions

For the three months ended March 31, 2026, aggregate dividends and distributions of $3,942, were funded with cash flows provided by operating activities and distributions from unconsolidated affiliates. Our Funds From Operations (FFO), was $13,778 for the three months ended March 31, 2026; therefore, we believe our dividend and distribution policy is sustainable over time. For the three months ended March 31, 2025, we paid aggregate dividends and distributions of $3,867 with cash flows provided by operating activities and distributions from unconsolidated affiliates. Our FFO was $14,009 as of the three months ended March 31, 2025. For a further discussion of FFO, including a reconciliation of FFO to net income, see “Funds from Operations” above.

Recently Issued Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, see Note 2, Principal Activity and Significant Accounting Policies— Recently Issued Accounting Pronouncements, to the consolidated financial statements that are a part of this Annual Report on Form 10-Q.

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 three months ended March 31, 2026, the Trust used 17 interest rate swaps to hedge the variable cash flows associated with market interest rate risk. These swaps have an aggregated notional amount of $134,996 the three months ended March 31, 2026. 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 March 31, 2026 the Trust had $134,996 of variable-rate borrowings, with the total outstanding balance fixed through interest rate swaps. Even though our goal is to maintain 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

Disclosure Controls and Procedures

Sterling Real Estate Trust’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of Sterling Real Estate Trust’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Report. Based on the evaluation, Sterling Real Estate Trust’s Chief Executive Officer and Chief Financial Officer have concluded that Sterling Real Estate Trust’s disclosure controls and procedures were not effective as of such date due to a material weakness in internal control over financial reporting, described below.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting occurred during the first fiscal quarter of 2026 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 or results of operation.

Item 1A. Risk Factors.

Other than as described above, 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, 2025.

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 March 31, 2026.

Other Sales

During the three months ended March 31, 2026, we did not issue any common shares in exchange for limited partnership units of the Operating Partnership.

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Redemptions of Securities

Set forth below is information regarding common shares and limited partnership units redeemed during the three months ended March 31, 2026:


						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, 2026		4,000		29,000		$	24.22		2,034,000		1,847,000		$	7,280
February 1-28, 2026		9,000		3,000		$	24.22		2,043,000		1,850,000		$	6,998
March 1-31, 2026		3,000		31,000		$	24.22		2,046,000		1,881,000		$	31,168
Total		16,000		63,000

For the three months ended March 31, 2026, the Trust redeemed all shares or units for which we received redemption requests. In addition, for the three months ended March 31, 2026, all common shares and units redeemed were redeemed as part of the publicly announced plans.

The Amended and Restated Share Redemption Plan, effective March 19, 2026, permits us to repurchase common shares held by our shareholders and limited partnership units held by partners of our Operating Partnership, up to a maximum amount of $100,000 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 March 31, 2026, was $31,168. The redemption price for such shares and units redeemed under the plan was fixed at $24.22 per share or unit, which became effective January 1, 2026. 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.

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

10.1		Sixteenth Amended and Restated Advisory Agreement, effective April 1, 2026 (incorporated by reference to Exhibit No. 10.1 to the Trust’s current report on Form 8-K filed March 23, 2026).

99.1		Amended and Restated Share Redemption Plan (incorporated by reference to Exhibit No. 99.1 to the Trust’s current report on Form 8-K filed May 1, 2026).

99.2		Amended and Restated Unit Redemption Plan (incorporated by reference to Exhibit No. 99.2 to the Trust’s current report on Form 8-K filed May 1, 2026).

99.3		Amendment No. 3 to Amended and Restated Independent Trustee Stock Plan (incorporated by reference to Exhibit No. 99.3 to the Trust’s current report on Form 8-K filed May 1, 2026).

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 Interim-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 Interim-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 March 31, 2026, formatted in iXBRL (Inline iXtensible Business Reporting Language): (i) Consolidated Balance Sheets at March 31, 2026 and December 31, 2025; (ii) Consolidated Statements of Operations and Other Comprehensive Income for the three months ended March 31, 2026 and 2025; (iii) Consolidated Statements of Shareholders’ Equity for three months ended March 31, 2026 and 2025; (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and 2025, 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:May 6, 2026

	STERLING REAL ESTATE TRUST

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

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