Sterling Multifamily Grows Rental Revenues

The company increased rental income while navigating rising interest costs and a material control weakness.

May 09, 2025

Sterling Multifamily Trust Reports Strong First-Quarter Rental Income Amid Internal Control Issues

Sterling Multifamily Trust delivered solid rental performance in the first quarter of 2025, with revenues climbing and portfolio metrics holding steady. The company continued to push forward on its residential strategy, even as it flagged a material weakness in internal controls.

Rental Income Leads the Quarter

Sterling reported $42.2 million in real estate rental income for the quarter ending March 31, up 13.2% from the same period last year. Residential properties were the key driver—generating 88% of total rental income—with gains coming from stronger occupancy, higher lease rates, and the impact of two multifamily acquisitions completed in 2024.

Residential occupancy landed at 92.8%, slightly higher than last year. Commercial revenue dipped by $117,000, mostly due to two property sales last year, but commercial occupancy edged up to 90.9%.

Operating income reached $20.5 million, a 22% lift from the prior year. That came even as total operating expenses climbed 10%, driven by higher maintenance and property management costs.

Costs Climb with Expansion

Interest expense rose 17% to $6.3 million, reflecting debt tied to last year’s acquisitions. Depreciation and amortization came in at $7 million, up 19%, while REIT administration expenses grew 11.5%. These increases were in line with the company’s broader footprint.

Bottom line: net income attributable to Sterling reached $2.1 million, compared to $1.7 million in Q1 2024. But other comprehensive income took a hit, with unrealized losses on interest rate hedges bringing total comprehensive income down to $966,000.

Internal Control Weakness Identified

Alongside the results, Sterling disclosed that it identified two financial reporting errors during recent audits:

• A missing journal entry for a $3.3 million interest rate swap in 2024


• An unrecorded $2.8 million special assessment linked to a property acquisition

Neither issue required restating prior financials, but together they pointed to a gap in the company’s review process for acquisition accounting. Sterling has since begun implementing updates to its internal controls. The company plans to monitor the effectiveness of these changes over the coming months.

Capital Position and Cash Flow

Sterling closed the quarter with $15.4 million in cash and restricted deposits, including $5 million in unrestricted cash. Operating cash flow came in at $3.2 million, and the company raised an additional $12.5 million through credit draws, affiliate loans, and reinvested dividends.

The trust declared and paid $0.30 per share in dividends—fully covered by cash from operations and affiliate distributions. A total of $9.4 million was paid out to shareholders and unit holders.

Strategy in Focus

Sterling’s portfolio includes 177 properties across five states, with $857.8 million in net book value. Residential assets made up 83% of total investment cost. No new acquisitions or sales were completed in the quarter.

Construction continued at the Rosedale Estates parking project and other capital improvement sites. Development also progressed at Emory North Liberty, a multifamily joint venture in Iowa expected to complete in early 2027.

Looking ahead, Sterling remains focused on multifamily growth. With occupancy stable, distributions consistent, and internal controls under review, the company enters the next quarter with a clear focus: stay operationally sound, manage risk, and deliver for shareholders.