DEF 14A 1 v474075_def14a.htm DEF 14A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934



 
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BLUEROCK RESIDENTIAL GROWTH REIT, INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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712 Fifth Avenue, 9th Floor
New York, New York 10019

September 5, 2017

Dear Stockholder:

You are cordially invited to attend the annual meeting of stockholders (the “Annual Meeting”) of Bluerock Residential Growth REIT, Inc. (the “Company,” “we,” “our,” or “us”) to be held at 12:00 P.M. Eastern Time on October 26, 2017. The Annual Meeting will be held at the Warwick Hotel, 65 West 54th Street at 6th Avenue, New York, New York 10019, in the Oxford Room (2nd Floor). Directions to the Annual Meeting can be obtained by calling (877) 826-BLUE (2583).

At the Annual Meeting, you will be asked to consider and vote upon various proposals, including proposals that will facilitate the internalization of the management functions of our external manager, BRG Manager, LLC (the “Manager”), currently provided to us by the Manager pursuant to the management agreement (the “Management Agreement”) we entered into simultaneously with our initial public offering in April 2014 (the “IPO”). We refer to this transaction as the “Internalization.” The Internalization is described briefly below and in greater detail in the enclosed materials, which we urge you to read carefully.

In connection with the Internalization, the Company, the Manager and other affiliated parties have signed a definitive agreement dated August 3, 2017, as amended on August 9, 2017 (the “Contribution Agreement”), providing for the Company’s acquisition of a newly-formed entity that will own substantially all of the assets that the Manager uses to operate our business, for aggregate consideration to be determined pursuant to a formula established in the Management Agreement (the “Internalization Consideration”). Specifically, the Internalization Consideration will be an amount equal to three (3) times the sum of (i) the Base Management Fee (as defined in the Management Agreement) and (ii) the Incentive Fee (as defined in the Management Agreement), in each case earned by the Manager during the 12-month period ending on the last day of the most recently-completed fiscal quarter prior to the closing of the Internalization (the “Closing”), which period is currently expected to be the 12 months ending September 30, 2017. To further align the interests of our management with those of our stockholders, the Internalization Consideration will be comprised of only a de minimis amount of cash (the “Cash Consideration”), with the substantial majority (99.9%) (the “Contribution Consideration”) comprised of (x) units of limited partnership interest (“OP Units”) in the Company’s operating partnership, Bluerock Residential Holdings, L.P. (“the Operating Partnership”), and (y) shares of the Company’s common stock, newly reclassified as Class C Common Stock (the “Class C Common Stock”).

In connection with the Internalization, our board of directors formed a special committee comprised entirely of independent and disinterested directors (the “Special Committee”) to review, consider and negotiate the terms and conditions of the Internalization, including the composition of the Internalization Consideration, and to recommend to our full board of directors whether to pursue the Internalization and, if so, on what terms and conditions. As more fully described in the accompanying proxy statement, no member of the Special Committee is affiliated with the Manager, and none has a financial interest in the Internalization that differs from that of our stockholders. In evaluating the Internalization, the Special Committee engaged independent legal and financial advisors and received a fairness opinion from Duff & Phelps, LLC, its independent financial advisor, as more fully described in the accompanying proxy statement. Even if approved by our stockholders, the Internalization will not be implemented unless other conditions to the Internalization are satisfied. The Special Committee may waive certain of these conditions in its sole discretion.

Following the consummation of the Internalization, the Company will be led by the same highly experienced management team that has been integral to our growth and success. As further specified in the accompanying proxy statement, the following key executives and officers of the Manager will assume the


 
 

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following titles and duties with the Company: Mr. R. Ramin Kamfar will serve as our Chairman and Chief Executive Officer; Mr. James G, Babb, III will serve as our Chief Investment Officer; Mr. Ryan S. MacDonald will serve as our Chief Acquisitions Officer; Mr. Jordan B. Ruddy will serve as our Chief Operating Officer and President; Mr. Christopher J. Vohs will serve as our Chief Financial Officer and Treasurer; and Mr. Michael L. Konig will serve as our Chief Legal Officer and Secretary. Messrs. Kamfar, Babb, MacDonald, Ruddy and Vohs have entered into employment agreements with an indirect subsidiary of the Company, and Mr. Konig has likewise entered into a services agreement with that subsidiary through his wholly-owned law firm, Konig & Associates, LLC, on substantially the same terms as the employment agreements. Each such agreement will become effective upon Closing, and will have an initial term through and including December 31, 2020. As such, following the Internalization, our senior management team will continue to oversee, manage and operate the Company, and we will no longer be externally managed by the Manager. As an internally managed company, we will no longer pay the Manager any fees or expense reimbursements arising from the Management Agreement.

Each of our current officers, Messrs. Kamfar, Konig and Vohs, is an employee of an affiliate of the Manager, as are Messrs. Babb, MacDonald and Ruddy, who are also officers of the Manager. Messrs. Kamfar and Mr. Gary T. Kachadurian are non-independent members of our board of directors, and Mr. Kachadurian is Vice Chairman of the Manager. In addition, Messrs. Kamfar, Babb, MacDonald, Ruddy, Konig, and Kachadurian own direct or indirect economic interests in the Manager. These relationships result in those parties having material financial interests in the Internalization, which potential conflicts of interests have been considered and addressed by the Special Committee in connection with its recommendations to our board of directors with respect to the Internalization. Neither Mr. Kamfar nor Mr. Kachadurian are members of the Special Committee.

You are being asked to vote on the following proposals:

1. Second Amended 2014 Incentive Plans.  Approve the amendment and restatement of each of our Amended 2014 Individuals Plan and our Amended 2014 Entities Plan (together, the “Amended 2014 Incentive Plans,” and as amended and restated pursuant to this proposal, the “Second Amended 2014 Incentive Plans”). See “Proposal 1: Approval of Second Amended 2014 Incentive Plans” beginning on page 35 of the accompanying proxy statement.
2. Issuances.  Approve the issuance, pursuant to the Contribution Agreement, of (i) OP Units, and shares of our Class A common stock (the “Class A Common Stock”) that may be issued in the Company’s discretion upon redemption of such OP Units in certain circumstances, and (ii) shares of our Class C Common Stock, and shares of our Class A Common Stock that may be issued upon conversion of such shares of Class C Common Stock in certain circumstances; in each case, to the applicable contributor and its affiliates and related persons (each, a “Contributor”) in connection with the Internalization, which includes certain of the Company’s directors and officers, and affiliates thereof (collectively, the “Issuances”). As more fully described in the accompanying proxy statement, based on the Company’s estimate of the Base Management and Incentive Fees payable for the 12 months ending September 30, 2017, and assuming a range of valuation of the Contribution Consideration of between $10.00 and $13.00 per OP Unit and share of Class C Common Stock, the Company estimates that the number of OP Units to be issued as Contribution Consideration in connection with the Internalization will range from a low of 3,125,333 OP Units to a high of 4,062,933 OP Units, and that the number of shares of Class C Common Stock to be issued as Contribution Consideration in connection with the Internalization will range from a low of 63,782 shares of Class C Common Stock to a high of 82,917 shares of Class C Common Stock. However, the Contribution Agreement does not impose a minimum or maximum number of OP Units or shares of Class C Common Stock that may be issued as Contribution Consideration, and the estimated Base Management and Incentive Fees and price per share of Class A Common Stock used in making those estimates may differ from the actual Base Management and Incentive Fees and price per share of Class A Common Stock to be used in determining the actual number of OP Units and shares of Class C Common Stock issuable in connection with the Internalization. For these reasons, the actual number of OP Units and shares of Class C Common Stock issuable in connection


 
 

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with the Internalization may differ from those estimates and may fall inside or outside of the estimated ranges. See “Proposal 2: The Issuances” beginning on page 51 of the accompanying proxy statement.
3. Election of Directors.  Elect the five director nominees named in the accompanying proxy statement to hold office until the 2018 annual meeting of stockholders and until their successors are duly elected and qualified. See “Proposal 3: Election of Directors” beginning on page 107 of the accompanying proxy statement.
4. Ratification of Independent Auditor.  Ratify the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017. See “Proposal 4: Ratification of Selection of Independent Registered Public Accounting Firm” beginning on page 133 of the accompanying proxy statement.
5. Non-Binding, Advisory Vote on Executive Compensation.  Approve a non-binding, advisory resolution on the compensation of the Company’s named executive officers (“NEOs”). See “Proposal 5: Non-Binding, Advisory Vote on Executive Compensation” beginning on page 134 of the accompanying proxy statement.
6. Adjournment.  Approve the adjournment of the Annual Meeting, if necessary or appropriate in the discretion of the chairman of the Annual Meeting, to solicit additional proxies if there are not sufficient votes at the time of the Annual Meeting to approve either the Second Amended 2014 Incentive Plans, or the Issuances (the “Adjournment”). See “Proposal 6: Adjournment” beginning on page 136 of the accompanying proxy statement.
7. Other Business.  Attend to such other business as may properly come before the Annual Meeting.

After careful consideration of each of the proposals above, and the recommendation of the Special Committee that the Issuances are advisable to, and in the best interests of, the Company and its stockholders, THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE PROPOSALS TO BE CONSIDERED AND VOTED ON AT THE ANNUAL MEETING.

The accompanying proxy statement provides a detailed description of each of the proposals described above, and includes information about the Company, the Operating Partnership, the Manager, the director nominees, the Second Amended 2014 Incentive Plans, the Internalization and the Issuances. We urge you to review the accompanying proxy statement carefully to ensure you will be informed about the business to be addressed at the Annual Meeting. You may also obtain more information about the Company and the Manager from documents the Company has filed with the Securities and Exchange Commission. Shares of the Company’s Class A Common Stock are listed on the NYSE MKT under the ticker symbol “BRG.”

It is important that your shares be represented at the Annual Meeting, regardless of the number of shares you hold and whether or not you plan to attend the Annual Meeting in person. Accordingly, whether or not you plan to attend the Annual Meeting, you are requested to promptly grant a proxy for your shares by completing, signing and dating the enclosed proxy card and returning it as instructed. If you sign, date and mail your proxy card without indicating how you wish to vote, your vote will be counted as a vote (1) FOR approval of the Second Amended 2014 Incentive Plans, (2) FOR approval of the Issuances, (3) FOR approval of the election as directors of the five director nominees named in the accompanying proxy statement, (4) FOR the ratification of the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017, (5) FOR approval of the non-binding, advisory resolution on the compensation of the Company’s NEOs, and (6) FOR approval of the Adjournment, if necessary or appropriate in the discretion of the chairman of the Annual Meeting.

Unless otherwise specified, a proxy also will confer authority on the persons named therein to vote in their discretion on such other business as may properly come before the Annual Meeting. Granting a proxy will not prevent you from voting your shares in person if you choose to attend the Annual Meeting.


 
 

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If you have any questions or require any assistance with respect to voting your shares, please contact the Company’s proxy solicitor at the contact listed below:

Morrow Sodali, LLC
 
470 West Avenue
Stamford CT, 06902
Banks and Brokerage Firms Call: (203) 658-9400
Stockholders Call Toll Free: (800) 662-5200
E-mail: BRG@morrowsodali.com

Very truly yours,
 
/s/ R. Ramin Kamfar

R. Ramin Kamfar
Chairman of the Board of Directors


 
 

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712 Fifth Avenue, 9th Floor
New York, New York 10019

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on October 26, 2017

Dear Stockholder:

You are cordially invited to attend the annual meeting of stockholders (the “Annual Meeting”) of Bluerock Residential Growth REIT, Inc. (the “Company”) to be held at 12:00 P.M. Eastern Time on October 26, 2017. The Annual Meeting will be held at the Warwick Hotel, 65 West 54th Street at 6th Avenue, New York, New York 10019, in the Oxford Room (2nd Floor). Directions to the Annual Meeting can be obtained by calling (877) 826-BLUE (2583).

At the Annual Meeting, you will be asked to consider and vote on the following proposals:

1. Second Amended 2014 Incentive Plans.  Approve the amendment and restatement of each of our Amended 2014 Individuals Plan and our Amended 2014 Entities Plan (together, the “Amended 2014 Incentive Plans,” and as amended and restated pursuant to this proposal, the “Second Amended 2014 Incentive Plans”). See “Proposal 1: Second Amended 2014 Incentive Plans” beginning on page 35 of the accompanying proxy statement.
2. Issuances.  Approve the issuance, pursuant to the Contribution and Sale Agreement dated August 3, 2017, as amended on August 9, 2017 (the “Contribution Agreement”), of (i) OP Units, and shares of our Class A Common Stock that may be issued in the Company’s discretion upon redemption of such OP Units in certain circumstances, and (ii) shares of our Class C Common Stock, and shares of our Class A Common Stock that may be issued upon conversion of such shares of Class C Common Stock in certain circumstances; in each case, to the applicable contributor and its affiliates and related persons (each, a “Contributor”) in connection with the Internalization, which includes certain of the Company’s directors and officers, and affiliates thereof (collectively, the “Issuances”). As more fully described in the accompanying proxy statement, based on the Company’s estimate of the Base Management and Incentive Fees payable for the 12 months ending September 30, 2017, and assuming a range of valuation of the Contribution Consideration of between $10.00 and $13.00 per OP Unit and share of Class C Common Stock, the Company estimates that the number of OP Units to be issued as Contribution Consideration in connection with the Internalization will range from a low of 3,125,333 OP Units to a high of 4,062,933 OP Units, and that the number of shares of Class C Common Stock to be issued as Contribution Consideration in connection with the Internalization will range from a low of 63,782 shares of Class C Common Stock to a high of 82,917 shares of Class C Common Stock. However, the Contribution Agreement does not impose a minimum or maximum number of OP Units or shares of Class C Common Stock that may be issued as Contribution Consideration, and the estimated Base Management and Incentive Fees and price per share of Class A Common Stock used in making those estimates may differ from the actual Base Management and Incentive Fees and price per share of Class A Common Stock to be used in determining the actual number of OP Units and shares of Class C Common Stock issuable in connection with the Internalization. For these reasons, the actual number of OP Units and shares of Class C Common Stock issuable in connection with the Internalization may differ from those estimates, and may fall inside or outside of the estimated ranges. See “Proposal 2: The Issuances” beginning on page 51 of the accompanying proxy statement.


 
 

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3. Election of Directors.  Elect the five director nominees named in the accompanying proxy statement to hold office until the 2018 annual meeting of stockholders and until their successors are duly elected and qualified. See “Proposal 3: Election of Directors” beginning on page 107 of the accompanying proxy statement.
4. Ratification of Independent Auditor.  Ratify the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017. See “Proposal 4: Ratification of Selection of Independent Registered Public Accounting Firm” beginning on page 133 of the accompanying proxy statement.
5. Non-Binding, Advisory Vote on Executive Compensation.  Approve a non-binding, advisory resolution on the compensation of the Company’s named executive officers (“NEOs”). See “Proposal 5: Non-Binding, Advisory Vote on Executive Compensation” beginning on page 134 of the accompanying proxy statement.
6. Adjournment.  Approve the adjournment of the Annual Meeting, if necessary or appropriate in the discretion of the chairman of the Annual Meeting, to solicit additional proxies if there are not sufficient votes at the time of the Annual Meeting to approve either the Second Amended 2014 Incentive Plans, or the Issuances (the “Adjournment”). See “Proposal 6: Adjournment” beginning on page 136 of the accompanying proxy statement.
7. Other Business.  Attend to such other business as may properly come before the Annual Meeting.

Only stockholders of record at the close of business on August 22, 2017 will be entitled to notice of and to vote at the Annual Meeting or any adjournments or postponements thereof.

This notice and the enclosed proxy statement, proxy card, and annual report to stockholders is being mailed to our stockholders on or about September 13, 2017.

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.

If you have any questions or require any assistance with respect to voting your shares, please contact the Company’s proxy solicitor at the contact listed below:

Morrow Sodali, LLC
 
470 West Avenue
Stamford CT, 06902
Banks and Brokerage Firms Call: (203) 658-9400
Stockholders Call Toll Free: (800) 662-5200
E-mail: BRG@morrowsodali.com

By Order of the Board of Directors,

[GRAPHIC MISSING]

Michael L. Konig
Secretary
September 5, 2017


 
 

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GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING     1  
The Annual Meeting     1  
Purpose of the Annual Meeting     1  
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING     3  
SUMMARY     12  
The Second Amended 2014 Incentive Plans     12  
The Internalization     13  
Election of Directors     21  
Ratification of Independent Auditor     21  
Non-Binding, Advisory Vote on Executive Compensation     21  
Annual Meeting Information     22  
FORWARD-LOOKING STATEMENTS     24  
RISK FACTORS     26  
THE BUSINESS OF OUR COMPANY     31  
THE BUSINESS OF THE MANAGER AND THE MANAGEMENT AGREEMENT     31  
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT     33  
INTRODUCTORY NOTE TO PROPOSALS 1 AND 2     35  
PROPOSAL 1: APPROVAL OF SECOND AMENDED 2014 INCENTIVE PLANS     35  
Summary of the Second Amended 2014 Incentive Plans     35  
Administration of the Second Amended 2014 Incentive Plans     37  
Eligibility     38  
Share Authorization     38  
Awards Under the Second Amended 2014 Incentive Plans     39  
Section 162(m)     41  
Change in Control     42  
Amendment; Termination     43  
New Plan Benefits     44  
Compensation of Executive Officers and Directors     45  
Federal Tax Consequences     47  
Proposed Second Amended 2014 Incentive Plans     47  
Reasons for the Requested Approvals     49  
Consequences of Failure to Approve the Second Amended 2014 Incentive Plans     50  
Appraisal Rights     50  
Vote Required     50  
Recommendation     50  
PROPOSAL 2: THE ISSUANCES     51  
The Issuances     51  
Internalization Consideration     52  
Terms of the Class C Common Stock     55  

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Reasons for the Issuances     58  
Background of the Issuances     60  
Recommendations of the Special Committee and the Board of Directors     70  
Opinion of the Special Committee’s Financial Advisor     70  
Projected Financial Information     75  
No Appraisal or Approval Rights     75  
Regulatory Matters     77  
Interests of Certain Persons in the Internalization     77  
Vote Required     90  
Recommendation     91  
DESCRIPTION OF THE INTERNALIZATION AND THE CONTRIBUTION AGREEMENT     92  
Overview of the Internalization     92  
Consideration to be Paid in the Internalization     94  
Summary of the Contribution Agreement     95  
Conditions to the Closing of the Internalization     96  
Representations and Warranties     97  
Conduct of Business Prior to the Closing     99  
Change in Board Recommendation     100  
Other Covenants     101  
Termination     101  
Indemnification     102  
Amendment; Waiver     104  
Expenses     104  
CERTAIN AGREEMENTS TO BE ENTERED INTO PURSUANT TO THE CONTRIBUTION AGREEMENT     104  
Administrative Services Agreement     104  
Stockholders Agreement     105  
Premises Agreements     106  
PROPOSAL 3: ELECTION OF DIRECTORS     107  
Vote Required     107  
Recommendation     107  
CORPORATE GOVERNANCE     110  
The Board of Directors     110  
Committees of the Board of Directors     112  
Executive Officers     115  
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION     116  
Compensation Discussion and Analysis     116  
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS     121  
Compensation Committee Interlocks and Insider Participation     121  
Compensation of Directors     121  

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS     123  
Transactions with Affiliates     123  
Transactions with Affiliates of The Manager     124  
Current Policies and Procedures Relating to Conflicts of Interest     129  
Report of the Audit Committee     131  
PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     133  
Vote Required     133  
Recommendation     133  
PROPOSAL 5: NON-BINDING, ADVISORY VOTE ON EXECUTIVE COMPENSATION     134  
Resolution     134  
Vote Required     135  
Recommendation     135  
PROPOSAL 6: ADJOURNMENT     136  
Vote Required     136  
Recommendation     136  
PROXY CARD     137  
SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY     139  
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA OF THE COMPANY     140  
HISTORICAL AND PRO FORMA PER SHARE DATA OF THE COMPANY     141  
SELECTED HISTORICAL FINANCIAL DATA OF THE MANAGER     142  
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE MANAGER     143  
Overview     143  
Significant Accounting Policies     143  
Results of Operation     145  
ADDITIONAL INFORMATION     147  
STOCKHOLDER PROPOSALS FOR 2018 ANNUAL MEETING     147  
OTHER MATTERS     147  
INDEX TO FINANCIAL STATEMENTS     F-1  

Appendix A

Form of Second Amended 2014 Equity Incentive Plan for Individuals

    A-1  

Appendix B

Form of Second Amended 2014 Equity Incentive Plan for Entities

    B-1  

Appendix C

Contribution and Sale Agreement, dated as of August 3, 2017

    C-1  

Appendix D

Form of Amendment No. 1 to Contribution and Sale Agreement, dated as of August 9, 2017

    D-1  

Appendix E

Form of Administrative Services Agreement

    E-1  

Appendix F

Form of Stockholders Agreement

    F-1  

Appendix G

Form of Use and Occupancy Agreement (NY)

    G-1  

Appendix H

Form of Sublease Agreement (MI 1)

    H-1  

Appendix I

Form of Sublease Agreement (MI 2)

    I-1  

Appendix J

Opinion of Duff & Phelps, LLC, dated as of August 2, 2017

    J-1  

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BLUEROCK RESIDENTIAL GROWTH REIT, INC.
712 Fifth Avenue
9th Floor
New York, New York 10019
(877) 826-BLUE (2583)

PROXY STATEMENT

Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to be Held on October 26, 2017.

This proxy statement is available
at http://www.bluerockresidential.com/.

The accompanying proxy is solicited by the board of directors of Bluerock Residential Growth REIT, Inc. (the “Company,” “we,” “our,” or “us”) for use in voting at the 2017 annual meeting of stockholders (the “Annual Meeting”). This proxy statement, proxy card, and annual report to stockholders is being mailed to stockholders on or about September 13, 2017.

In this proxy statement, we refer to our sponsor, Bluerock Real Estate, L.L.C., as BRRE, and BRG Manager, LLC, as the Manager. We refer to Bluerock Residential Holdings, L.P. as our Operating Partnership.

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

The Annual Meeting

The Annual Meeting will be held on October 26, 2017 at 12:00 P.M. Eastern Time at the Warwick Hotel, 65 West 54th Street at 6th Avenue, New York, New York 10019, in the Oxford Room (2nd Floor), and at any adjournment or postponement thereof. For information on how to obtain directions to attend the Annual Meeting and vote in person, please contact our Investor Relations department at (888) 558-1031 or via email at investor.relations@bluerockre.com.

Purpose of the Annual Meeting

The purpose of the Annual Meeting is to vote on the following proposals:

1. Second Amended 2014 Incentive Plans.  Approve the amendment and restatement of each of our Amended 2014 Individuals Plan and our Amended 2014 Entities Plan (together, the “Amended 2014 Incentive Plans,” and as amended and restated pursuant to this proposal, the “Second Amended 2014 Incentive Plans”). See “Proposal 1: Approval of Second Amended 2014 Incentive Plans” beginning on page 35 of the accompanying proxy statement.
2. Issuances.  Approve the issuance, pursuant to the Contribution Agreement dated August 3, 2017, as amended on August 9, 2017 (the “Contribution Agreement”), of (i) OP Units, and shares of our Class A Common Stock that may be issued in the Company’s discretion upon redemption of such OP Units in certain circumstances, and (ii) shares of our Class C Common Stock, and shares of our Class A Common Stock that may be issued upon conversion of such shares of Class C Common Stock in certain circumstances; in each case, to the applicable contributor and its affiliates and related persons (each, a “Contributor”) in connection with the Internalization, which includes certain of the Company’s directors and officers, and affiliates thereof (collectively, the “Issuances”). As more fully described in this proxy statement, based on the Company’s estimate of the Base Management and Incentive Fees payable for the 12 months ending September 30, 2017, and assuming a range of valuation of the Contribution Consideration of between $10.00 and $13.00 per OP Unit and share of Class C Common Stock, the Company estimates that the number of OP Units to be issued as Contribution Consideration in connection with the Internalization will range from a low of 3,125,333 OP Units to a high of 4,062,933 OP Units, and that the number of shares of Class C Common Stock to be issued as Contribution Consideration in connection with the Internalization will range from a low of 63,782 shares of Class C Common Stock to a high of 82,917 shares of Class C Common Stock. However, the Contribution Agreement does not impose a minimum or maximum number of OP Units or shares of Class C Common Stock that may be issued

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as Contribution Consideration, and the estimated Base Management and Incentive Fees and price per share of Class A Common Stock used in making those estimates may differ from the actual Base Management and Incentive Fees and price per share of Class A Common Stock to be used in determining the actual number of OP Units and shares of Class C Common Stock issuable in connection with the Internalization. For these reasons, the actual number of OP Units and shares of Class C Common Stock issuable in connection with the Internalization may differ from those estimates, and may fall inside or outside of the estimated ranges. See “Proposal 2: The Issuances” beginning on page 51 of the accompanying proxy statement.
3. Election of Directors.  Elect the five director nominees named in this proxy statement to hold office until the 2018 annual meeting of stockholders and until their successors are duly elected and qualified. See “Proposal 3: Election of Directors” beginning on page 107 of the accompanying proxy statement.
4. Ratification of Independent Auditor.  Ratify the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017. See “Proposal 4: Ratification of Selection of Independent Registered Public Accounting Firm” beginning on page 133 of the accompanying proxy statement.
5. Non-Binding, Advisory Vote on Executive Compensation.  Approve a non-binding, advisory resolution on the compensation of the Company’s named executive officers (“NEOs”). See “Proposal 5: Non-Binding, Advisory Vote on Executive Compensation” beginning on page 134 of the accompanying proxy statement.
6. Adjournment.  Approve the adjournment of the Annual Meeting, if necessary or appropriate in the discretion of the chairman of the Annual Meeting, to solicit additional proxies if there are not sufficient votes at the time of the Annual Meeting to approve either the Second Amended 2014 Incentive Plans, or the Issuances (the “Adjournment”). See “Proposal 6: Adjournment” beginning on page 136 of the accompanying proxy statement.
7. Other Business.  Attend to such other business as may properly come before the Annual Meeting.

The board of directors is not aware of any other matter to be presented for action at the Annual Meeting. Should any other matter requiring a vote of stockholders arise, it is intended that the persons named in the enclosed proxy card and acting thereunder will vote the proxies in accordance with their discretion on any such matter.

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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING

Q: Why did you send me this proxy statement?
A: We sent you this proxy statement and the enclosed proxy card because our board of directors is soliciting your proxy to vote your shares at the 2017 Annual Meeting. This proxy statement includes information that we are required to provide to you under the rules of the Securities and Exchange Commission (the “SEC”), and is designed to assist you in voting. You are invited to attend the Annual Meeting to vote in person on the proposals described in this proxy statement. However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card as described below.
Q: What is a proxy?
A: A proxy is a person who votes the shares of stock of another person who could not attend a meeting. The term “proxy” also refers to the proxy card or other method of appointing a proxy. When you submit your proxy, you are appointing Mr. R. Ramin Kamfar and Mr. Christopher J. Vohs, each of whom is an officer of the Company, as your proxies, and you are giving them permission to vote your shares of Class A Common Stock at the Annual Meeting. The appointed proxies will vote all of your shares of Class A Common Stock as you instruct, unless you submit your proxy without instructions. In this case, they will vote FOR each of the five director nominees named in this proxy statement. With respect to any other proposals to be voted upon, they will vote in accordance with the recommendation of the board of directors or, in the absence of such a recommendation, in their discretion. If you do not submit your proxy, they will not vote your shares of Class A Common Stock. Accordingly, it is important for you to return the proxy card to us as soon as possible, whether or not you plan on attending the Annual Meeting.
Q: When is the Annual Meeting and where will it be held?
A: The Annual Meeting will be held on October 26, 2017, at 12:00 P.M. Eastern Time at the Warwick Hotel, 65 West 54th Street at 6th Avenue, New York, New York, 10019, in the Oxford Room (2nd Floor).
Q: Who is entitled to vote at the Annual Meeting?
A: Anyone who owned shares of our Class A Common Stock at the close of business on August 22, 2017, the record date for the Annual Meeting (the “Record Date”), or their duly appointed proxies, are entitled to vote at the Annual Meeting. Our Class A Common Stock is the only class of our common stock, and is the only class of securities entitled to vote at the Annual Meeting.
Q: Who can attend the Annual Meeting?
A: All holders of our Class A Common Stock at the close of business on the Record Date, or their duly appointed proxies, are authorized to attend the Annual Meeting. In order to be admitted to the Annual Meeting, you must present proof of ownership of our stock on the Record Date. Such proof can consist of: a brokerage statement or letter from a broker indicating ownership on the Record Date; a proxy card; a voting instruction form; or a legal proxy provided by your broker or nominee. Any holder of a proxy from a stockholder must present the proxy card, properly executed, and a copy of the proof of ownership.
Q: How many shares of Class A Common Stock are outstanding and entitled to vote at the Annual Meeting?
A: As of August 22, 2017 (i.e., the Record Date), there were 24,192,645 shares of our Class A Common Stock outstanding and entitled to vote at the Annual Meeting.
Q: What will constitute a quorum at the Annual Meeting?
A: A quorum consists of the presence, in person or by proxy, of stockholders holding at least a majority of the shares of our Class A Common Stock outstanding on the Record Date. There must be a quorum present in order for the Annual Meeting to be a duly held meeting at which business can be conducted. If you submit your proxy, even if you abstain from voting, you will be considered in determining the presence of a quorum.

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Q: How many votes do I have?
A: You are entitled to one vote for each share of Class A Common Stock you held as of the Record Date.
Q: What am I voting on?
A: At the Annual Meeting, you will be asked to vote on the following proposals:
1. To approve the Second Amended 2014 Incentive Plans.
2. To approve the Issuances.
3. To elect each of the five director nominees to serve on our board of directors until the 2018 annual meeting of stockholders and until their successors are duly elected and qualified.
4. To approve the ratification of the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017.
5. To approve, on a non-binding, advisory basis, the compensation of our NEOs.
6. To approve the Adjournment.
7. You may also be asked to vote on any other business as may properly come before the Annual Meeting.
Q: How may I vote on each proposal?
A: You may vote on each proposal as follows:
Proposal 1: You may vote for, against or abstain on the vote to approve the Second Amended 2014 Incentive Plans.
Proposal 2: You may vote for, against or abstain on the vote to approve the Issuances.
Proposal 3: You may vote for any or each of the five director nominees named in this proxy statement to serve on our board of directors, withhold from any particular director nominee, or withhold from all director nominees.
Proposal 4: You may vote for, against or abstain from voting to ratify the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017.
Proposal 5: You may vote for, against or abstain on the vote to approve, on a non-binding, advisory basis, the compensation of our NEOs.
Proposal 6: You may vote for, against or abstain on the vote to approve the Adjournment.
Proposal 7: You may vote for, against or abstain on the vote to approve any other business as may properly come before the Annual Meeting.
Q: How does the board of directors recommend I vote on each of the proposals?
A: The recommendations of the board of directors are set forth together with the description of each item in this proxy statement. In summary, the board of directors recommends a vote:
FOR the approval of the Second Amended 2014 Incentive Plans (see Proposal 1);
FOR the approval of the Issuances (see Proposal 2);
FOR the election as directors of the five director nominees named in this proxy statement (see Proposal 3);
FOR the ratification of the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017 (see Proposal 4);

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FOR the vote to approve, on a non-binding, advisory basis, the compensation of our named executive officers (see Proposal 5); and
FOR the vote to approve the Adjournment (see Proposal 6).

Should any business not described above properly come before the Annual Meeting, the persons named in the proxy will vote in accordance with their judgment.

Q: Why is the Company proposing the Issuances and the Internalization?
A: We believe that we can acquire the external management functions currently provided to us by the Manager pursuant to the management agreement (the “Management Agreement”) we entered into simultaneously with our initial public offering in April 2014 (the “IPO”) with compelling benefits to the Company and our stockholders, and with minimal disruption to our operations. Based upon our current size and the scope of our operations, we believe that we comfortably exceed the critical mass required to support an internally-managed structure. Upon the consummation of the Internalization, we expect to employ various individuals associated with the Manager or its affiliates who have been, and are expected to continue to be, instrumental in our growth and continued operations. We believe the Internalization will provide us with an experienced management team with industry expertise, management capabilities and a unique knowledge of our assets and business strategies. We also believe the Internalization will benefit our stockholders through anticipated reduction in expenses in the combined general, administrative and management fee expense categories, improved cash flow, potential accretion to net income and adjusted funds from operations (“AFFO”), enhanced access to capital, a simplified corporate structure, and direct control over experienced employees and an executive management team that will be under long-term (i.e., three-year-plus) agreements with financial incentives closely aligned with the interests of our stockholders.

We believe that the Internalization has several potential advantages, including:

the Internalization being accretive over time to our net income, earnings and AFFO on an annualized basis as a result of the reduction in operating costs resulting from the elimination of management and other fees and expense reimbursements to our external Manager under the Management Agreement. No assurances can be given, however, that any such accretion in our net income, earnings or AFFO will actually occur;
the Internalization resulting in the mitigation of perceived or actual conflicts of interest between the Company and the Manager and our officers, the greater alignment of the interests of certain of our officers and directors with those of our stockholders, and the simplification of our corporate structure;
the Company’s ability to lock in and incentivize key members of our executive management team through long-term (three-year-plus) employment and services agreements;
the Company’s ability, as a result of the Internalization, to control key functions that are important to the growth of its business; and
the enhanced ability to attract new institutional investors to the Company and improve the Company’s ability to raise capital.
Q: What are the potential risks relating to the Company involved in the Internalization?
A: In addition to those risk factors listed in “Risk Factors” beginning on page 26 and discussed elsewhere in this proxy statement, the Internalization presents some potential disadvantages and risks to our Company and its stockholders, including:
potential conflicts of interest in the Internalization between the Company and our directors and current and future executive officers, including our need for ongoing services from affiliates of the Manager;
the cost of, and our ability to successfully integrate and complete, the Internalization and successfully operate as a self-administered and self-managed real estate investment trust (“REIT”);

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the significant costs involved in connection with completing the transactions contemplated by the Contribution Agreement;
potential liabilities associated with the direct employment of personnel; and
potential liabilities that the Company may inherit from the Manager as a result of the Internalization that may not be covered by the indemnification provisions of the Contribution Agreement.
Q: What is the effect of the Internalization?
A: Upon consummation of the Internalization, we will become self-managed and self-advised. After that time, we no longer pay the management fees or expense reimbursements to the Manager under the Management Agreement. We will, however, be obligated to pay the salaries, other compensation and benefits of the employees of a new entity formed in connection with the Internalization, Bluerock REIT Operator, LLC (“Manager Sub”), which will then be our indirect subsidiary, our other operating expenses, and certain amounts under an Administrative Services Agreement to be entered into between the Company, the Operating Partnership, Bluerock Real Estate, L.L.C. (“BRRE”), and certain affiliates and subsidiaries thereof. See “Certain Agreements to be Entered into Pursuant to the Contribution Agreement — Administrative Services Agreement” beginning on page 104 of this proxy statement. Further, as a result of the Internalization, certain of our executive officers and directors who own membership interests in the Manager will receive Internalization Consideration.
Q: How were the terms of the Internalization determined?
A: The Internalization Consideration (i.e., the aggregate amount of consideration to be paid in connection with the Internalization) will be determined pursuant to a formula established in the Management Agreement at the time of the Company’s IPO in April 2014. Other terms and conditions of the Internalization, including but not limited to indemnification obligations and restrictive covenants binding upon the Contributors receiving the Internalization Consideration and certain of their affiliates, were determined through negotiation between the principals of the Manager and the Special Committee. The Special Committee is comprised solely of independent and disinterested directors who are not affiliated with the Manager. To assist with this process, the Special Committee hired its own independent financial advisor, Duff & Phelps, LLC (“Duff & Phelps”), and its own independent legal counsel, Morrison & Foerster LLP (“Morrison & Foerster”). In addition, the Company engaged FPL Associates L.P. (“FPL”), an independent executive compensation consulting firm, in connection with the negotiation of the terms and conditions of the employment and services agreements with our executive officers.

On August 2, 2017, Duff & Phelps delivered a written fairness opinion stating that, based upon and subject to the qualifications, limitations and assumptions of the fairness opinion, and, as of the date of the fairness opinion, the Internalization Consideration to be paid by us pursuant to the Contribution Agreement is fair to the Company from a financial viewpoint.

Q: Are there any conflicts in connection with the Internalization?
A: Yes. The executive officers of the Manager are either our directors or executive officers, or provide services to us through affiliates of the Manager. Most of the executive officers of the Manager will enter into employment or services agreements with Manager Sub following the Internalization, and most also own membership interests in the Manager and will be entitled to Internalization Consideration. As set forth in this proxy statement, those parties may have different interests in the consummation of the Internalization than the interests of our other stockholders. See “Proposal 2: The Issuances — Interests of Certain Persons in the Internalization.”
Q: How did you address these conflicts?
A: In November 2016, at the outset of the Internalization discussions, our board of directors authorized the formation of the Special Committee, which is comprised solely of independent and disinterested directors, to explore the potential internalization of management as permitted under the Management Agreement. The Special Committee hired its own independent financial advisor, Duff & Phelps, and independent legal counsel, Morrison & Foerster, to assist it in this process. After considering the possibility of

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remaining externally managed, and discussing and negotiating the terms and conditions of the Internalization, the Special Committee determined that the Internalization is advisable and in the best interests of our Company. In addition, in connection with the negotiation of the terms and conditions of the employment and services agreements with our executive officers, the Company engaged FPL to advise the compensation committee on alternatives for post-Internalization executive compensation design as more fully described in this proxy statement.
Q: What will the management team look like after the Internalization is completed?
A: Following the consummation of the Internalization, we expect that the Company will be led by the same highly experienced management team that has been integral to our growth and success. Mr. R. Ramin Kamfar, who has served as our Chairman, Chief Executive Officer and President, will continue to serve as our Chairman and Chief Executive Officer, while Mr. James G. Babb, III, who has served as Chief Investment Officer of the Manager and Chairman of the Manager’s investment committee, will serve as our Chief Investment Officer; Mr. Ryan S. MacDonald, who has served as Chief Acquisitions Officer of the Manager and as a member and secretary of the Manager’s investment committee, will serve as our Chief Acquisitions Officer; Mr. Jordan B. Ruddy, who has served as President of the Manager and as a member of the Manager’s investment committee, will serve as our Chief Operating Officer and President; Mr. Christopher J. Vohs, who has served as our Chief Accounting Officer and as Chief Financial Officer of the Manager, will serve as our Chief Financial Officer and Treasurer; and Mr. Michael L. Konig, who has served as Chief Operating Officer, General Counsel and Secretary of both the Manager and of the Company, will, through his wholly-owned law firm, Konig & Associates, LLC (“K&A”), will serve as our Chief Legal Officer and Secretary. The business of K&A is limited to owning membership interests in the Manager, and providing limited legal services to affiliates of BRRE.

Messrs. Kamfar, Babb, MacDonald, Ruddy and Vohs have entered into employment agreements with Manager Sub, and Mr. Konig has entered into a services agreement with Manager Sub through K&A. Each such agreement will become effective upon Closing, and will have an initial term through and including December 31, 2020. See “Proposal 2: The Issuances” beginning on page 51 of this proxy statement for a detailed summary of the terms of each of these employment and services agreements.

Q: What are the Issuances?
A: In connection with the Internalization, we will cause our Operating Partnership to issue OP Units, and we will issue shares of Class C Common Stock, to the Contributors. The number of OP Units and shares of Class C Common Stock issuable in connection with the Internalization will be determined by dividing the aggregate value of the Internalization Consideration payable in such OP Units and shares of Class C Common Stock (the “Contribution Consideration”) by the volume-weighted average closing price of our Class A Common Stock on the NYSE MKT for the twenty (20) trading days beginning on and including September 11, 2017, through and including October 6, 2017 (the “VWAP”). While the actual number of OP Units and shares of Class C Common Stock issuable in connection with the Internalization is not yet determinable, the Company estimates, based on the estimated aggregate value of the Internalization Consideration of approximately $41.5 million and assumed prices of $10.00, $11.50 and $13.00, respectively, per share (representing, for illustrative purposes only, a range of assumed potential closing prices of our Class A Common Stock on the NYSE MKT, or the “Reference Prices”), that the number of OP Units to be issued as Contribution Consideration in connection with the Internalization will range from a low of 3,125,333 OP Units based on the high Reference Price of $13.00 to a high of 4,062,933 OP Units based on the low Reference Price of $10.00 (with a midpoint of 3,532,985 OP Units based on the midpoint Reference Price of $11.50), and that the number of shares of Class C Common Stock to be issued as Contribution Consideration in connection with the Internalization will range from a low of 63,782 shares of Class C Common Stock based on the high Reference Price of $13.00 to a high of 82,917 shares of Class C Common Stock based on the low Reference Price of $10.00 (with a midpoint of 72,102 shares of Class C Common Stock based on the midpoint Reference Price of $11.50). However, the Contribution Agreement does not impose a minimum or maximum number of OP Units or shares of Class C Common Stock that may be issued as Contribution Consideration, and any or all of the Reference Prices may differ from the VWAP. For these reasons, the actual number of OP Units and

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shares of Class C Common Stock issuable in connection with the Internalization may differ from those estimates, and may fall inside or outside of the estimated ranges.

Commencing on the one-year anniversary of the Closing, each OP Unit issued as Contribution Consideration may be tendered for redemption, at the holder’s option and subject to the terms and conditions set forth in the limited partnership agreement of our Operating Partnership, for cash equal to the average closing price of our Class A Common Stock for the ten (10) consecutive trading days immediately preceding the date we receive a notice of redemption, or, at our sole option, for shares of our Class A Common Stock on a one-for-one basis, in lieu of cash. As of August 22, 2017 (i.e., the Record Date), there were 24,192,645 shares of our Class A Common Stock outstanding. Each share of Class C Common Stock will be convertible, at the holder’s option (at any time and from time to time), into one (1) fully-paid and non-assessable share of Class A Common Stock, and upon the occurrence of certain transfers of OP Units or shares of Class C Common Stock and similar events, will convert automatically into one (1) fully-paid and non-assessable share of Class A Common Stock.

Q: How can I vote?
A: You can vote in person at the Annual Meeting or by proxy. You may authorize a proxy by completing, dating, signing and promptly returning the proxy card in the pre-addressed, postage-paid envelope provided with this proxy statement. You may also authorize a proxy to vote by telephone, via fax, or via the internet by following the procedures described in your proxy card. Those stockholders of record authorizing a proxy to vote by telephone, via fax or via the internet must do so no later than 5:00 P.M. Eastern Time, on October 25, 2017.

If you elect to attend the Annual Meeting, you can submit your vote in person, and any previous votes that you submitted by mail will be superseded.

Q: Are voting procedures different if I hold my shares in the name of a broker, bank or other nominee?
A: If your shares are held in a “street name” through a broker, bank or other nominee, please refer to the instructions provided by such nominee regarding how to vote your shares or to revoke your voting instructions. The availability of telephone, fax and Internet proxy authorization depends on the voting processes of the broker, bank or other nominee.
Q: What if I submit my proxy and then change my mind?
A: You have the right to revoke your proxy at any time before the Annual Meeting by:
(1) providing written notice of the revocation to Michael L. Konig, our Secretary;
(2) attending the Annual Meeting and voting in person; or
(3) submitting another proxy card dated after your first proxy card by telephone, via fax or via the internet, if we receive it no later than 5:00 P.M. Eastern Time on October 25, 2017.

Only the most recent proxy vote will be counted, and all others will be discarded, regardless of the method of voting.

Q: Will my vote make a difference?
A: Yes. Your vote could affect the composition of our board of directors, as well as the outcome of the proposals regarding our Company’s ability to consummate the Internalization, incentivize and retain our management and non-employee directors through awards under the Second Amended 2014 Incentive Plans, the ratification of our independent registered public accounting firm for the fiscal year ending December 31, 2017, the non-binding, advisory vote on executive compensation, and, if necessary or appropriate in the discretion of the chairman of the Annual Meeting, the Adjournment. Moreover, your vote is needed to ensure that these proposals can be acted upon. Because we are a widely held company, YOUR VOTE IS VERY IMPORTANT! Your immediate response will help avoid potential delays and may save us significant additional expenses associated with soliciting stockholder votes.

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Q: What is a “broker non-vote,” and how are such votes cast and counted?
A: A “broker non-vote” occurs when a broker does not receive voting instructions from the beneficial owner of shares of common stock on a particular matter and indicates on the proxy delivered with respect to such shares of common stock that it does not have discretionary authority to vote on that matter.

SEC rules prohibit brokers from voting their customers’ shares on proposals considered by the rules of the NYSE MKT to be “non-routine” matters without receiving voting instructions from the customer. Under the rules of the NYSE MKT, Proposal 1 (the vote to approve the Second Amended 2014 Incentive Plans), Proposal 2 (the vote to approve the Issuances), Proposal 3 (the election of directors), and Proposal 5 (the non-binding, advisory vote on executive compensation) are considered “non-routine” matters. Beneficial owners of shares held in broker accounts are advised that, if they do not timely provide instructions to their broker, their shares will not be voted in connection with these proposals.

Proposal 4 (the ratification of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017) and Proposal 6 (the vote to approve the Adjournment) are the only matters to be presented at the Annual Meeting that are considered “routine” under NYSE MKT rules, and on which brokers may vote in their discretion on behalf of beneficial owners who have not provided voting instructions.

Broker non-votes will be considered “present” for the purpose of determining whether a quorum exists, but for Proposal 1, Proposal 2, Proposal 3, and Proposal 5, will not be counted as votes cast, and will have no effect on the result of the vote.

Q: How are abstentions counted?
A: Abstentions will be considered “present” for the purpose of determining whether a quorum exists. Under Maryland law, abstentions are not considered to be votes cast on a proposal. However, with respect to matters for which stockholder approval is a prerequisite to the listing of shares, the NYSE MKT has taken the position that abstentions should be treated as votes cast. Since the approval of Proposal 1 (the vote to approve the Second Amended 2014 Incentive Plans) would require the listing on the NYSE MKT of the increased number of shares of our Class A Common Stock issuable under the Second Amended 2014 Incentive Plans, and the approval of Proposal 2 (the vote to approve the Issuances) would require the listing on the NYSE MKT of the increased number of shares of our Class A Common Stock issuable upon redemption of OP Units and/or upon conversion of shares of the Class C Common Stock issued in the Issuances, an abstention with respect to either of Proposal 1 or Proposal 2 will be treated as a vote cast, and will thus have the same effect as a vote “against” Proposal 1 or Proposal 2 (as applicable).

For the other proposals, consistent with Maryland law, abstentions will not be treated as votes cast and will have no effect on the result of the vote.

Q: What vote is required to approve Proposals 1, 2, 4, 5 and 6?
A: Under our bylaws, the affirmative vote of at least a majority of all votes cast at the Annual Meeting at which a quorum is present is required to approve Proposal 1 (the vote to approve the Second Amended 2014 Incentive Plans), Proposal 2 (the vote to approve the Issuances), Proposal 4 (the ratification of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017), Proposal 5 (the non-binding, advisory vote on executive compensation) and Proposal 6 (the vote to approve the Adjournment).

This means that each of Proposals 1, 2, 4, 5 and 6 needs to receive more “for” votes than “against” votes in order to be approved. In the event that no option receives a majority of the votes cast on any such proposal, we will consider the option that receives the most votes to be the option selected by stockholders on such proposal.

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In addition, pursuant to the Contribution Agreement, Proposal 2 (the Issuances) must be approved without the votes of the Contributors and their respective subsidiaries and affiliates (including Messrs. Kamfar, Babb, MacDonald, Ruddy, Konig and Kachadurian, as well as Mr. Jerold E. Novack, who serves as BRRE’s Executive Vice President and Chief Financial Officer), as they have material financial interests in the Issuances. Therefore, Proposal 2 must be approved by the affirmative vote of (i) a majority of the votes cast, and (ii) a majority of the votes cast, excluding votes of shares cast by Messrs. Kamfar, Babb, MacDonald, Ruddy, Konig, Kachadurian, and Novack, and their respective subsidiaries and affiliates.

Q: What vote is required to approve Proposal 3?
A: Under our bylaws, in order to be elected as a director as described in Proposal 3, a director nominee must receive the affirmative vote of a plurality of all votes cast at the Annual Meeting at which a quorum is present. This means that a director nominee with the most votes for a particular board seat is elected to that seat. Because the number of director nominees does not exceed the number of board seats, a director nominee need only receive a single “for” vote to be elected. “Withhold” votes and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote, but will be considered “present” for the purpose of determining the presence of a quorum. If an incumbent director nominee fails to receive the required number of votes for reelection, then under Maryland law, he or she will continue to serve as a “holdover” director until his or her successor is duly elected and qualified. If approved, this proposal does not entitle stockholders to appraisal rights under Maryland law or our charter.
Q: What are the consequences if Proposal 1 is not approved by stockholders?
A: If Proposal 1 (the vote to approve the Second Amended 2014 Incentive Plans) is not approved by stockholders, the Issuances, and thus the Internalization, will not be consummated.
Q: What are the consequences if the Issuances and the Internalization are not consummated?
A: If the Issuances and the Internalization are not consummated for any reason, including if stockholders fail to approve Proposal 1 (the vote to approve the Second Amended 2014 Incentive Plans), we expect to continue to be externally managed by the Manager. We would continue to pay fees and expense reimbursements to the Manager under the existing Management Agreement.
Q: How will voting on any other business be conducted?
A: We do not know of any business to be considered at the Annual Meeting other than the vote to approve the Second Amended 2014 Incentive Plans, the vote to approve the Issuances, the election of directors, the ratification of the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017, the non-binding, advisory vote on executive compensation, and (if necessary or appropriate in the discretion of the chairman of the Annual Meeting), the vote to approve the Adjournment. However, if any other business is properly presented at the Annual Meeting, your submitted proxy gives authority to Messrs. Kamfar and Vohs, and each of them, to vote on such matters in accordance with the recommendation of the board of directors or, in the absence of such a recommendation, in their discretion.
Q: When are the stockholder proposals for the next annual meeting of stockholders due?
A: Stockholders interested in nominating a person as a director or presenting any other business for consideration at our annual meeting of stockholders in 2018 may do so by following the procedures prescribed in Article II, Section 11 of our Bylaws. To be eligible for presentation to and action by the stockholders at the 2018 annual meeting, director nominations and other stockholder proposals must be received by Michael L. Konig, our Secretary, no earlier than the 150th day, nor later than 5:00 P.M. Eastern Time on the 120th day, prior to the first anniversary of the date of this proxy statement (i.e., no earlier than April 8, 2018 and no later than May 8, 2018). However, if we hold our 2018 annual meeting before September 26, 2018, or after November 25, 2018, stockholders must submit proposals no earlier than 150 days prior to the 2018 annual meeting date and no later than the later of 120 days prior to the 2018 annual meeting date or ten (10) days after announcement of the 2018 annual meeting date.

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Q: Who will solicit and pay the cost of soliciting proxies for the Annual Meeting?
A: We will bear all expenses incurred in connection with the solicitation of proxies. We have retained Morrow Sodali LLC, a proxy solicitation firm, to solicit proxies in connection with the Annual Meeting at a cost of approximately $25,000 plus expenses. Additionally, our officers, directors and employees may solicit proxies by mail, personal contact, letter, telephone, telegram, facsimile or other electronic means. They will not receive any additional compensation for those activities, but they may be reimbursed for their out-of-pocket expenses.
Q: If I plan to attend the Annual Meeting in person, should I notify anyone?
A: While you are not required to notify anyone in order to attend the Annual Meeting, if you do plan to attend, we would appreciate your contacting our Investor Relations department in advance of the Annual Meeting at (888) 558-1031, or via email at investor.relations@bluerockre.com.
Q: Who can I contact with questions on how to vote?
A: If you have questions regarding the Annual Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help in voting your shares of common stock, please contact our Proxy Solicitor:

Morrow Sodali, LLC
470 West Avenue
Stamford, CT 06902

Banks and Brokerage Firms May Call Collect: (203) 658-9400
Shareholders May Call Toll-Free: (800) 662-5200
E-mail: BRG@morrowsodali.com

Q: How can I contact the Company?
A: The Company’s principal executive offices are located at 712 Fifth Avenue, 9th Floor, New York, New York 10019. The Company’s telephone number is (877) 826-BLUE (2583), and the telephone number for our Investor Relations department is (888) 558-1031.
Q: Where can I find more information?
A: We file annual, quarterly and current reports and other information with the SEC. You may read and copy any reports or other information we file with the SEC on the web site maintained by the SEC at http://www.sec.gov. Our SEC filings are also available to the public at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, DC 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 or 1-202-551-7900 for further information regarding the public reference facilities.

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SUMMARY

This summary highlights selected information contained in this proxy statement and does not contain all of the information you should consider in making your decision as to how to vote your shares. To better understand the matters discussed in this summary, and for a more complete description of the terms of and risks related to the Internalization, you should read this entire proxy statement and the other documents that are referred to in this proxy statement.

Second Amended 2014 Incentive Plans

We currently have in effect the Amended and Restated 2014 Equity Incentive Plan for Individuals (the “Amended 2014 Individuals Plan”) and the Amended and Restated 2014 Equity Incentive Plan for Entities (the “Amended 2014 Entities Plan”). We refer to these plans together as the “Amended 2014 Incentive Plans.” The Amended 2014 Incentive Plans provide for the grant of options to purchase shares of our common stock, stock awards, stock appreciation rights, performance units, incentive awards and other equity-based awards, including long-term incentive plan units of the Operating Partnership (“LTIP Units”). Our board of directors considers the Amended 2014 Incentive Plans an integral part of our ability to attract and retain independent directors, executive officers and other key employees with high ability and initiative.

In anticipation of the Internalization, our compensation committee worked with FPL Associates L.P. (“FPL”), an independent executive compensation consulting firm, to survey and study the market compensation ranges of our competitors and advise the compensation committee on alternatives for post-Internalization executive compensation design. In connection with that process and to help us to attract, retain and motivate highly qualified management personnel and more directly align the economic interests of our management with those of our stockholders, our board of directors has approved, subject to the approval of our stockholders pursuant to Proposal 1, the amendment and restatement of the Amended 2014 Individuals Plan (the “Second Amended 2014 Individuals Plan”), and the Amended 2014 Entities Plan (the “Second Amended 2014 Entities Plan,” and together with the Second Amended 2014 Individuals Plan, the “Second Amended 2014 Incentive Plans”). In addition, the compensation committee has separately approved the terms and conditions of the employment and services agreements with our executive officers to become effective upon Closing, which provide, among other things, for annual and long-term incentive compensation awards that will be paid pursuant to the Second Amended 2014 Incentive Plans. To ensure an adequate supply of shares available for such future awards, the Second Amended 2014 Incentive Plans reflect an increase in the number of shares of our Class A Common Stock available for issuance, to an aggregate of 1,625,000 shares.

If approved by our stockholders, the Second Amended 2014 Incentive Plans will be implemented regardless of whether the other proposals to be considered at the Annual Meeting are approved by our stockholders. If the Second Amended 2014 Incentive Plans are not approved by our stockholders, the Internalization will not be consummated. Our board of directors has adopted (subject to stockholder approval), and recommends that stockholders approve, the Second Amended 2014 Incentive Plans.

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The Internalization

Parties Involved in the Internalization

The parties involved in the Internalization include the following:

The Company, the Operating Partnership and the OP Sub:

 
Bluerock Residential Growth REIT, Inc.
(together with its subsidiaries, “we,” “us,” “our,” “our Company” or “the Company”)
  General.  We are a Maryland corporation and have elected to be taxed as a REIT for federal income tax purposes. We own a high-quality portfolio of apartment properties located in demographically attractive growth markets. We are the sole general partner of our Operating Partnership, Bluerock Residential Holdings, LP.
     External management.   Currently, we are externally managed and advised by BRG Manager, LLC (the “Manager”) pursuant to the terms of the Management Agreement. The Manager is an affiliate of BRRE.
     Role in the Internalization.  Pursuant to the terms and conditions of the Contribution Agreement, we will, through our Operating Partnership and its wholly-owned subsidiary, Bluerock TRS Holdings, LLC (the “OP Sub”), acquire the external asset management functions of the Manager currently provided to us pursuant to the Management Agreement, in order to facilitate the Internalization.
Bluerock Residential Holdings, LP
(the “Operating Partnership”)
  General.  The Operating Partnership is a Delaware limited partnership, in which the Company is the sole general partner. The Operating Partnership is a subsidiary of the Company through which the Company holds, directly or indirectly, all of its assets and conducts substantially all of its business.
     Role in the Internalization.  Pursuant to the terms and conditions of the Contribution Agreement, the Contributors will (a) contribute, to the Operating Partnership, 99.9% of the membership interests in Manager Sub, and (b) sell, to the OP Sub, 0.1% of the membership interests in Manager Sub, which entity will hold (i) all right, title and interest in, to and under the Management Agreement, and (ii) the assets and contract rights used by the Manager in the performance of its obligations under the Management Agreement.
Bluerock TRS Holdings, LLC
(the “OP Sub”)
  General.  The OP Sub is a Delaware limited liability company and a wholly owned subsidiary of the Operating Partnership.

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     Role in the Internalization.  Pursuant to the terms and conditions of the Contribution Agreement, the Contributors will (a) contribute, to the Operating Partnership, 99.9% of the membership interests in Manager Sub, and (b) sell, to the OP Sub, 0.1% of the membership interests in Manager Sub, which entity will hold (i) all right, title and interest in, to and under the Management Agreement, and (ii) the assets and contract rights used by the Manager in the performance of its obligations under the Management Agreement.
The Manager and Manager Sub:
    
BRG Manager, LLC
(the “Manager”)
  General.  The Manager is a Delaware limited liability company collectively owned by the Contributors (as defined below).
     Role in the Internalization.  Pursuant to the terms and conditions of the Contribution Agreement, prior to the consummation of the Internalization, the Manager will (a) assign to its wholly-owned subsidiary, Manager Sub, (i) all of its right, title and interest in, to and under the Management Agreement, and (ii) all of its assets and contract rights used in the performance of its obligations under the Management Agreement (collectively, the “Transferred Assets”), in exchange for 100% of the issued and outstanding membership interests in Manager Sub (the “Membership Interests”); and will then (b) distribute all of the Membership Interests in Manager Sub to its members (i.e., the Contributors) in proportion to their respective equity ownership interests in the Manager.
Bluerock REIT Operator, LLC
(“Manager Sub”)
  General.  Manager Sub is a Delaware limited liability company. Currently, Manager Sub is a wholly-owned subsidiary of the Manager. In connection with the Internalization, Manager Sub will become a wholly-owned subsidiary of the Operating Partnership and the OP Sub (and thus, indirectly, of the Company), as more fully described below.
     Role in the Internalization.  Pursuant to the terms and conditions of the Contribution Agreement, prior to the consummation of the Internalization, Manager Sub will accept the assignment of the Transferred Assets from the Manager. Manager Sub will thereby succeed to ownership and hold (i) all right, title and interest in, to and under the Management Agreement, and (ii) the assets and contract rights used by the Manager in the performance of its obligations under the Management Agreement.

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     The Manager will then distribute all of the Membership Interests in Manager Sub to the Contributors in proportion to their respective equity ownership interests in the Manager. The Contributors will then (a) contribute, to the Operating Partnership, 99.9% of the Membership Interests in Manager Sub, and (b) sell, to the OP Sub, 0.1% of the Membership Interests in Manager Sub. Collectively, the Operating Partnership and the OP Sub (and thus, indirectly, the Company) will thereafter own and control 100% of the Membership Interests in Manager Sub, and therefore, the Transferred Assets.
     Manager Sub, in its post-Closing capacity as an indirect subsidiary of the Company, has entered into the employment and services agreements with the Company’s executive officers to become effective at the Closing, as more fully described herein.
The Contributors:
    
Bluerock Real Estate, L.L.C.
(“BRRE”)
  BRRE is a Delaware limited liability company controlled by Mr. Kamfar and in which Mr. Kamfar owns a 99.90% equity interest. BRRE owns 49.80% of the equity interests in the Manager.
James G. Babb, III
(“Mr. Babb”)
  Mr. Babb serves as Chief Investment Officer of the Manager. Mr. Babb owns 14.25% of the equity interests in the Manager.
Ryan S. MacDonald
(“Mr. MacDonald”)
  Mr. MacDonald serves as the Managing Director —  Investments of the Manager. Mr. MacDonald owns 3.56% of the equity interests in the Manager.
Jordan B. Ruddy
(“Mr. Ruddy”)
  Mr. Ruddy serves as the President of the Manager. Mr. Ruddy owns 11.32% of the equity interests in the Manager.
Konig & Associates, LLC
(“K&A”)
  K&A is a New Jersey limited liability company controlled by Mr. Konig and in which Mr. Konig owns 100.00% of the equity interests. K&A owns 11.32% of the equity interests in the Manager.
The Kachadurian Group, LLC (“Kachadurian Group”)   Kachadurian Group is an Illinois limited liability company controlled by Mr. Kachadurian and in which Mr. Kachadurian owns 100% of the equity interests. Kachadurian Group owns 4.75% of the equity interests in the Manager.
Jenco Business Advisors, Inc.
(“Novack”)
  Novack is a New York corporation controlled by Mr. Jerold E. Novack, who serves as BRRE’s Senior Executive Vice President and Chief Financial Officer, and in which Mr. Novack owns a 100.00% equity interest. Novack owns a 5.00% equity interest in the Manager.

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Role of the Contributors in the Internalization:
    
BRRE, Mr. Babb, Mr. MacDonald, Mr. Ruddy, K&A, Kachadurian Group, and Novack
(collectively, the “Contributors”)
  Pursuant to the terms and conditions of the Contribution Agreement, prior to the consummation of the Internalization, the Contributors will accept the distribution from the Manager of the Membership Interests in Manager Sub in proportion to the respective equity ownership interest of each such Contributor in the Manager. In connection with the consummation of the Internalization, each Contributor will then (a) contribute, to the Operating Partnership, 99.9% of its pro rata portion of the Membership Interests in Manager Sub, and (b) sell, to the OP Sub, 0.1% of its pro rata portion of the Membership Interests in Manager Sub.
     Collectively, the Operating Partnership and the OP Sub (and thus, indirectly, the Company) will thereby own 100% of the Membership Interests in Manager Sub, its rights under the Management Agreement, and the assets and contract rights formerly used by the Manager in the performance of its obligations thereunder.

Overview of the Internalization (see page 92)

The following are the principal features of the Internalization:

Internally Managed REIT.  Upon consummation of the Internalization, we will become an internally managed REIT. We, through our Operating Partnership and the OP Sub, will acquire the external asset management functions currently provided to us by the Manager pursuant to the Management Agreement. In addition to our executive management team, we expect that approximately 33 of the current employees of an affiliate of the Manager will become direct employees of Manager Sub. Further, pursuant to an Administrative Services Agreement, we will have access to the services of additional employees and the business infrastructure of an affiliate of the Manager on an at-cost and as-needed basis. As a result, we expect the Internalization to provide us with a full complement of experienced personnel with expertise in investment, capital markets, asset management, finance, legal and administrative functions, with unique knowledge of our assets, business strategies and investment pipeline. We believe the Internalization will offer compelling benefits to the Company and our stockholders through anticipated reduction in expenses in the combined general, administrative and management fee expense categories, improved cash flow, potential accretion to net income and AFFO, enhanced access to capital, a simplified corporate structure, and direct control over experienced employees and an executive management team that will be under long-term (i.e., three-year-plus) agreements with financial incentives closely aligned with the interests of our stockholders.

Internalization of Executive Management Team.  Upon consummation of the Internalization, we expect that the Company will be led by the same highly experienced executive management team that has been integral to our growth and success:

Currently, Mr. Kamfar serves as our Chairman, Chief Executive Officer and President, and as a member of the Manager’s investment committee; Mr. Babb serves as Chief Investment Officer of the Manager and Chairman of the Manager’s investment committee; Mr. MacDonald serves as Chief Acquisitions Officer of the Manager and as a member and secretary of the Manager’s investment committee; Mr. Ruddy serves as President of the Manager and as a member of the Manager’s investment committee; Mr. Vohs serves as our Chief Accounting Officer and Treasurer, and as Chief Financial Officer of the Manager; and Mr. Konig serves as Chief Operating Officer, General Counsel and Secretary of both the Manager and the Company.

Following the consummation of the Internalization, Mr. Kamfar will continue in his roles as our Chairman and Chief Executive Officer; Mr. Babb will serve as our Chief Investment Officer; Mr. MacDonald will serve as our Chief Acquisitions Officer; Mr. Ruddy will serve as our Chief Operating Officer and

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President; Mr. Vohs will serve as our Chief Financial Officer and Treasurer; and Mr. Konig, through K&A, will serve as our Chief Legal Officer and Secretary. Messrs. Kamfar, Babb, MacDonald, Ruddy and Vohs have entered into employment agreements with Manager Sub, an indirect subsidiary of the Company, and Mr. Konig has entered into a services agreement with Manager Sub through K&A on substantially the same terms as the employment agreements. Each such agreement will become effective upon Closing, and will have an initial term through and including December 31, 2020.

Ownership and Management of the Operating Partnership.  Immediately following the Internalization, assuming the issuance of 3,532,985 OP Units based on the midpoint Reference Price of $11.50 (and including $8 million in issued and outstanding LTIP Units at an estimated price of $11.50 per share, which could vest over the next five years), the Company will beneficially own approximately 77.59% of the outstanding OP Units in the Operating Partnership and the Contributors will beneficially own, collectively, approximately 22.26% of the outstanding OP Units in the Operating Partnership (including OP Units owned prior to the Internalization). Overall, limited partners other than the Company will own approximately 22.41% of the aggregate OP Units in the Operating Partnership (12.18% will be held by holders of OP Units, and 10.23% will be held by holders of LTIP Units). The Company, as the sole general partner of the Operating Partnership, will continue to have sole responsibility and discretion in the management and control of the Operating Partnership (and its subsidiaries, including the OP Sub), and the limited partners of the Operating Partnership, in such capacity, will have no authority to transact business for, or take part in the operations, management or control of, the Operating Partnership.

Consideration to be Paid in the Internalization (see page 94)

In payment of the Internalization Consideration, we will cause our Operating Partnership to issue OP Units, and we will issue shares of our Class C Common Stock, to the Contributors. Pursuant to the Contribution Agreement, the amount of the Internalization Consideration will be determined pursuant to a formula established in the Management Agreement at the time of the Company’s IPO in April 2014. Specifically, the Internalization Consideration will be an amount equal to three (3) times the sum of (i) the Base Management Fee (as defined in the Management Agreement) and (ii) the Incentive Fee (as defined in the Management Agreement), in each case earned by the Manager during the 12-month period ending on the last day of the most recently-completed fiscal quarter prior to Closing, which period is currently expected to be the 12 months ending September 30, 2017.

While the actual value of the Internalization Consideration is not yet determinable, the Company currently estimates that the aggregate value of the Internalization Consideration will be approximately $41.5 million. This estimate is based on (a) the aggregate Base Management and Incentive Fees actually paid to the Manager for the three calendar quarters ending June 30, 2017, and (b) certain assumptions regarding the Base Management and Incentive Fees expected to be earned by the Manager for the calendar quarter ending September 30, 2017. Specifically, the Company has assumed that for the third quarter of 2017, (i) the Manager will earn Base Management Fees of $2.87 million to $2.92 million, premised on the Company’s current equity base plus an assumption that the Company will raise an additional $45.0 million to $75.0 million in equity from its continuous offering of Series B Preferred Stock, and (ii) the Manager will earn no Incentive Fees. Based on those assumptions for the quarter ending September 30, 2017, plus the aggregate Base Management and Incentive Fees actually paid to the Manager for the three calendar quarters ending June 30, 2017, the projected range of Internalization Consideration for the four quarters ending September 30, 2017 is estimated at $41.4 million to $41.6 million. As such, for purposes of providing estimated ranges for the number of OP Units and shares of Class C Common Stock expected to be issuable as Contribution Consideration as set forth in this proxy statement, the Company has utilized an estimated Internalization Consideration amount of $41.5 million.

Pursuant to the Contribution Agreement, the number of OP Units and shares of Class C Common Stock issuable as Contribution Consideration will be determined by dividing the aggregate value of the Internalization Consideration payable in such OP Units and shares of Class C Common Stock, which the Company estimates will be equal to approximately $41,458,500 (the “Contribution Consideration”), by the VWAP (i.e., the volume-weighted average closing price of our Class A Common Stock on the NYSE MKT for the twenty (20) trading days beginning on and including September 11, 2017, through and including October 6, 2017). We will also pay a de minimis amount of cash, which the Company estimates will be equal

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to approximately $41,500, as consideration in connection with the Internalization (the “Cash Consideration”). The sum of the Contribution Consideration and the Cash Consideration will equal the Internalization Consideration.

The actual number of OP Units and shares of Class C Common Stock issuable in connection with the Internalization will not be determinable until the actual Base Management and Incentive Fees for the quarter ending September 30, 2017 and the VWAP can be determined. However, based on the estimated amount of the Contribution Consideration and assumed prices of $10.00, $11.50 and $13.00, respectively, per share (representing, for illustrative purposes only, a range of assumed potential closing prices of our Class A Common Stock on the NYSE MKT, or the “Reference Prices”), the Company estimates that the number of OP Units to be issued as Contribution Consideration will range from a low of 3,125,333 OP Units based on the high Reference Price of $13.00 to a high of 4,062,933 OP Units based on the low Reference Price of $10.00 (with a midpoint of 3,532,985 OP Units based on the midpoint Reference Price of $11.50), and that the number of shares of Class C Common Stock to be issued as Contribution Consideration will range from a low of 63,782 shares of Class C Common Stock based on the high Reference Price of $13.00 to a high of 82,917 shares of Class C Common Stock based on the low Reference Price of $10.00 (with a midpoint of 72,102 shares of Class C Common Stock based on the midpoint Reference Price of $11.50). However, the Contribution Agreement does not impose a minimum or maximum number of OP Units or shares of Class C Common Stock that may be issued as Contribution Consideration, and any or all of the Reference Prices may differ from the VWAP. For these reasons, the actual number of OP Units and shares of Class C Common Stock issuable in connection with the Internalization may differ from those estimates, and may fall inside or outside of the estimated ranges.

For illustrative purpose only, assuming $41.5 million of Internalization Consideration, and assuming the Reference Prices of $10.00, $11.50 and $13.00, respectively, per share of our Class A Common Stock, the table below reflects for each such Reference Price the range of resulting allocations of Contribution Consideration consisting of OP Units and Class C Common Stock:

     
  Reference Price Per Share:
     $10.00   $11.50   $13.00
# of OP Units:     4,062,933       3,532,985       3,125,333  
# of Class C Common Shares:     82,917       72,102       63,782  
Total:     4,145,850       3,605,087       3,189,115  

Commencing on the one-year anniversary of the Closing, each OP Unit issued as Contribution Consideration may be tendered for redemption, at the holder’s option and subject to the terms and conditions set forth in the limited partnership agreement of the Operating Partnership, for cash equal to the average closing price of our Class A Common Stock for the ten (10) consecutive trading days immediately preceding the date we receive a notice of redemption, or, at our sole option, for shares of our Class A Common Stock on a one-for-one basis, in lieu of cash. Each share of Class C Common Stock will be convertible, at the holder’s option (at any time and from time to time), into one (1) fully-paid and non-assessable share of Class A Common Stock, and upon the occurrence of certain transfers of OP Units or shares of Class C Common Stock and similar events, will convert automatically into one (1) fully-paid and non-assessable share of Class A Common Stock. See “Terms of the Class C Common Stock” below for a more detailed description of the terms of the Class C Common Stock.

Regulatory Matters (see page 77)

No material regulatory approvals or filings are required in order to effect the Internalization.

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Interests of Certain Persons in the Internalization

In considering the recommendation of the board of directors to vote for the proposals described in this proxy statement, you should be aware that certain of our current directors and executive officers, as well as certain individuals who will become executive officers upon the consummation of the Internalization, have interests in those transactions that may be different from, or in addition to, the interests of our stockholders generally and that may create potential conflicts of interest. These interests include:

the payment of consideration in connection with the Internalization to certain of these individuals, including Messrs. Kamfar, Babb, MacDonald, Ruddy, Konig and Kachadurian, and the entry by the applicable individuals into arrangements relating to the payment of such consideration;
the entry by Manager Sub, in its post-Closing capacity as an indirect subsidiary of the Company, into employment agreements with Messrs. Kamfar, Babb, MacDonald, Ruddy and Vohs, and a services agreement with Mr. Konig through K&A, all of which will become effective upon the consummation of the Internalization; and
the grant of equity compensation to Messrs. Kamfar, Babb, MacDonald, Ruddy, Vohs and Konig in accordance with the employment and services agreements, as applicable, which will be effected upon the consummation of the Internalization.

The Special Committee was aware of each of these interests in reviewing, considering and negotiating the terms of the Internalization and in recommending to our board of directors to pursue the Internalization. Our board of directors, and the compensation committee and the compensation consultant (FPL), were also aware of these interests in approving the Contribution Agreement and the transactions described in this proxy statement, and in recommending to our stockholders the approval of the Issuances.

Description of the Internalization and the Contribution Agreement (see page 92)

On August 3, 2017, we entered into the Contribution Agreement, pursuant to which we, through our Operating Partnership and the OP Sub, will acquire the external asset management functions currently provided to us by the Manager pursuant to the Management Agreement, to facilitate the Internalization. Upon the consummation of the Internalization, we expect to employ and engage various individuals associated with the Manager or its affiliates who have been, and are expected to continue to be, instrumental in our growth and continued operations. We expect that the Internalization will provide us with an experienced management team with industry expertise, management capabilities and a unique knowledge of our assets, business strategies and investment pipeline. We believe the Internalization will offer compelling benefits to the Company and our stockholders through anticipated reduction in expenses in the combined general, administrative and management fee expense categories, improved cash flow, potential accretion to net income and AFFO, enhanced access to capital, a simplified corporate structure, and direct control over experienced employees and an executive management team that will be under long-term (i.e., three-year-plus) agreements with financial incentives closely aligned with the interests of our stockholders.

Conditions to the Closing of the Internalization (see page 96)

Each of our and the Contributors’ obligations to consummate the Internalization are subject to a number of conditions, as more fully described in this proxy statement. For example, the Closing is conditioned upon, among other things:

the entry by Messrs. Kamfar, Babb, MacDonald, Ruddy and Vohs into employment agreements with Manager Sub, in its post-Closing capacity as an indirect subsidiary of the Company, and by Mr. Konig into a services agreement with Manager Sub through K&A;
receipt of the requisite NYSE MKT approvals; and
receipt of the requisite stockholder approvals for the Second Amended 2014 Incentive Plans, and for the Issuances.

The Special Committee may waive certain of these conditions in its sole discretion.

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Closing

The Closing will occur as soon as reasonably practicable after the Annual Meeting and the satisfaction or waiver of the conditions to the transactions set forth in the Contribution Agreement (other than those conditions that by their nature can be satisfied only at the Closing, but subject to the satisfaction or waiver of such conditions).

Indemnification (see page 102)

In the Contribution Agreement, the Contributors on the one hand, and the Company and the Operating Partnership on the other hand, have agreed to indemnify the other and their affiliates for losses arising from certain matters following the Closing, subject to certain limitations, including a maximum aggregate indemnification amount potentially payable by each of the Contributors equal to the portion of Internalization Consideration actually received by each such Contributor, for breaches of most representations and warranties in the Contribution Agreement.

Termination of the Contribution Agreement (page 101)

The Contribution Agreement may be terminated and the Internalization may be abandoned prior to the Closing for a number of reasons, as described more fully in this proxy statement.

Features of Class C Common Stock (see page 55)

The Class C Common Stock has been structured to provide rights that are equivalent to the rights of Class A Common Stock. However, each share of Class C Common Stock entitles the holder to fifty (50) votes, which is intended to mirror the aggregate number of OP Units (which are redeemable for cash or Class A Common Stock of our Company, on a one-to-one basis) and shares of Class C Common Stock to be issued to the Contributors as Contribution Consideration. In addition, each share of Class C Common Stock will be convertible, at the holder’s option (at any time and from time to time), into one (1) fully-paid and non-assessable share of Class A Common Stock, and upon the occurrence of certain transfers of OP Units or shares of Class C Common Stock and similar events, will convert automatically into one (1) fully-paid and non-assessable share of Class A Common Stock. See “Terms of Class C Common Stock” beginning on page 55 for a more detailed description of the terms of the Class C Common Stock.

Risk Factors (see page 26)

There are risks involved in the Internalization. You should carefully consider these risks before voting on the proposals to issue securities in connection with the Internalization.

Fairness Opinion (see page 70)

In connection with the Internalization, at a meeting of the Special Committee on August 2, 2017, the Special Committee’s financial advisor, Duff & Phelps, rendered its oral opinion to the Special Committee, confirmed by delivery of a written opinion dated August 2, 2017 that, as of that date, and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken as set forth in the written opinion, the consideration to be paid by the Company pursuant to the Contribution Agreement was fair from a financial point of view to the Company.

Duff & Phelps’ opinion did not address any other aspects or implications of the Internalization. It was not intended to, and does not, constitute advice or a recommendation to any holder of shares of the Company’s common stock as to how to vote at the Annual Meeting to be held in connection with the Internalization or whether to take any other action with respect to the Internalization.

NYSE MKT Listing of our Class A Common Stock

We will seek approval from the NYSE MKT for the listing of Class A Common Stock reserved for issuance upon the redemption of OP Units, and/or the conversion of Class C Common Stock, issued in the Issuances. Shares of our Class A Common Stock will continue to trade under the “BRG” ticker symbol.

Accounting Treatment

The consideration paid by the Company for the Internalization transaction will be allocated according to fair value of the assets acquired in accordance with generally accepted accounting principles (“GAAP”),

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consisting of certain assets used or held for use in connection with the performance by the Manager of its obligations under the Management Agreement, including but not limited to certain IT equipment, furniture and other assets, with the residual amount being recorded as an expense. Thus, the Internalization transaction represents a multi-element transaction in which the acquisition of Manager Sub and the Management Agreement, as a primary component of the transaction, will be recorded as an expense in the Company’s post-Internalization financial statements.

Rights of Dissenting Stockholders (see page 76)

Stockholders are not entitled to dissenters’ rights of appraisal under Maryland law.

Amendment to our Charter to Reflect the Terms of the Class C Common Stock (see page 55)

In order to issue the shares to the Contributors at the Closing of the Contribution Agreement, we agreed in the Contribution Agreement to amend our charter to create the Class C Common Stock and, consequently, reclassify as Class C Common Stock a number of authorized but unissued shares of the Company’s Class A Common Stock equal to the number of shares of Class C Common Stock to be issued as consideration in the Internalization as calculated in accordance with the definition of “Contribution Consideration” in the Contribution Agreement (the “Class C Classification”). Pursuant to Section 5.2.2 of our charter, our board of directors, without any action by our stockholders, may classify or reclassify any unissued shares of our common stock into one or more classes or series of common stock or preferred stock. For this reason, no action by holders of our Class A Common Stock is required to effectuate the Class C Classification. Shares of our Class A Common Stock will continue to trade under the “BRG” ticker on the NYSE MKT. The Class C Common Stock will be structured to provide rights that are equivalent to the rights of Class A Common Stock. However, each share of Class C Common Stock will entitle the holder to fifty (50) votes, which is intended to mirror the aggregate number of OP Units (which are redeemable for cash or Class A Common Stock, on a one-to-one basis) and shares of Class C Common Stock issued to the Contributors as Contribution Consideration. In addition, each share of Class C Common Stock will be convertible, at the holder’s option (at any time and from time to time), into one (1) fully-paid and non-assessable share of Class A Common Stock, and upon the occurrence of certain transfers of OP Units or shares of Class common stock and similar events, will convert automatically into one (1) fully-paid and non-assessable share of Class A Common Stock.

Election of Directors

At the Annual Meeting, stockholders will vote on the election of all five members of our board of directors. Those persons elected will serve as directors until the 2018 annual meeting of stockholders and until their successors are duly elected and qualified. The board of directors has nominated the following individuals for re-election as directors:

   
  •   R. Ramin Kamfar   •   Gary T. Kachadurian
     •   Brian D. Bailey   •   I. Bobby Majumder
     •   Romano Tio     

Each of the nominees for director is a current member of our board of directors. The board of directors believes the nominees have played and will continue to play a vital role in our management and operations, particularly in connection with the continued growth and success of our Company. Detailed information on each nominee is provided on pages 107 through 109.

Ratification of Independent Auditor

At the Annual Meeting, stockholders will vote on the ratification of the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017.

The appointed proxies will vote your shares of common stock as you instruct, unless you submit your proxy without instructions. This proposal is considered “routine” under NYSE MKT rules, so brokers may vote in their discretion on behalf of beneficial owners who have not provided voting instructions. Where no such vote is cast, the appointed proxies will vote FOR this proposal.

Non-Binding, Advisory Vote on Executive Compensation

At the Annual Meeting, in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act stockholders will cast a non-binding, advisory vote on the compensation of our NEOs as disclosed in this

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proxy statement in accordance with the compensation disclosure rules of the SEC. This non-binding, advisory vote, commonly referred to as a “say-on-pay” vote, is not intended to address any specific item of compensation, but instead relates to the information set forth in the “Executive Officer and Director Compensation” section of this proxy statement regarding our executive compensation program.

The vote on this proposal will not be binding on the Company, our board of directors or our compensation committee, and it will not be construed as overruling any decision by us or our board of directors or creating or implying any change to, or additional, fiduciary duties for us or our board of directors. However, the compensation committee of our board of directors, which is comprised solely of independent directors and is responsible for making decisions regarding the amount and form of compensation paid to our NEOs, will carefully consider the stockholder vote on this matter. If there are a significant number of unfavorable votes, our compensation committee will seek to understand the concerns that influenced the vote and evaluate whether any actions are necessary to address those concerns in making future decisions affecting our executive compensation program.

Annual Meeting Information

Date, Time and Place of Meeting

The Annual Meeting will be held on October 26, 2017 at 12:00 P.M. Eastern Time at the Warwick Hotel, 65 West 54th Street at 6th Avenue, New York, New York 10019, in the Oxford Room (2nd Floor), and at any adjournment or postponement thereof. This proxy statement is furnished in connection with the solicitation of proxies by our board of directors.

Record Date; Shares Entitled to Vote

Holders of record of our Class A Common Stock at the close of business on August 22, 2017 are entitled to notice of and to vote at the Annual Meeting.

Voting; Vote Required

Voting.  You may vote by completing, signing and mailing the enclosed proxy card in the enclosed return envelope. Even if you plan to attend the Annual Meeting in person, we urge you to return your proxy card to assure the representation of your shares at the Annual Meeting.

Vote Required.  Under our bylaws, the affirmative vote of at least a majority of all votes cast at the Annual Meeting at which a quorum is present is required to approve Proposal 1 (the vote to approve the Second Amended 2014 Incentive Plans), Proposal 2 (the vote to approve the Issuances), Proposal 4 (the ratification of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017), Proposal 5 (the non-binding, advisory vote on executive compensation) and Proposal 6 (the vote to approve the Adjournment, if necessary or appropriate in the discretion of the chairman of the Annual Meeting). Under our bylaws, in order to be elected as a director as described in Proposal 3, a director nominee must receive the affirmative vote of a plurality of all votes cast at the Annual Meeting at which a quorum is present. This means that a director nominee with the most votes for a particular board seat is elected to that seat. Because the number of director nominees does not exceed the number of board seats, a director nominee need only receive a single “for” vote to be elected.

Security Ownership of Management and Other Persons (see page 33)

As of August 22, 2017 (i.e., the Record Date), there were 24,192,645 shares of our Class A Common Stock outstanding and entitled to vote, of which 79,150 shares of our Class A Common Stock, or approximately 0.33%, were beneficially owned by our executive officers and the executive officers of the Manager.

Quorum

The presence at the Annual Meeting, in person or by proxy, of stockholders holding a majority of the shares of our Class A Common Stock outstanding on August 22, 2017 (i.e., the Record Date) will constitute a quorum. We will include abstentions and broker non-votes in the calculation of the number of shares considered to be present at the Annual Meeting for the purpose of determining the presence of a quorum at

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the Annual Meeting. Broker non-votes may arise in the context of voting on Proposal 1 (the vote to approve the Second Amended 2014 Incentive Plans), Proposal 2 (the vote to approve the Issuances), Proposal 3 (the election of directors), and Proposal 5 (the non-binding, advisory vote on executive compensation), because such proposals are considered “non-routine” matters under the rules of the NYSE MKT. Unless specific voting instructions are provided by the beneficial owner, the bank, broker or other nominee will be unable to vote for approval of such proposals. Accordingly, we urge stockholders who hold their shares through a bank, broker or other nominee to provide voting instructions so that your shares of Class A Common Stock may be voted on these proposals.

Recommendations of the Special Committee and our Board of Directors

The Special Committee and our board of directors recommend that you vote “FOR” the Issuances, and our board of directors recommends that you vote “FOR” the Second Amended 2014 Incentive Plans, “FOR” the election of the five director nominees named in this proxy statement, “FOR” the ratification of the selection of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017, “FOR” the vote to approve, on a non-binding, advisory basis, the compensation of our NEOs, and “FOR” the Adjournment (if necessary or appropriate in the discretion of the chairman of the Annual Meeting).

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FORWARD-LOOKING STATEMENTS

Statements included in this proxy statement that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and pursuant to the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology. We intend for these forward-looking statements to be covered by the applicable safe harbor provisions created by Section 27A of the Securities Act and Section 21E of the Exchange Act and the PSLRA.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:

potential conflicts of interest in the Internalization between the Company and our directors and current and future executive officers, including our need for ongoing services from affiliates of the Manager;
the cost of and our ability to successfully integrate and complete the Internalization and successfully operate as a self-administered and self-managed REIT;
the significant costs involved in connection with completing the transactions contemplated by the Contribution Agreement;
potential liabilities associated with the direct employment of personnel;
potential liabilities that we may inherit from the Manager as a result of the Internalization that would not be covered by the indemnification provisions in the Contribution Agreement;
the competitive environment in which we operate;
real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets;
decreased rental rates or increasing vacancy rates;
our ability to lease units in newly acquired or newly constructed apartment properties;
potential defaults on or non-renewal of leases by tenants;
creditworthiness of tenants;
our ability to obtain financing for and complete acquisitions under contract under the contemplated terms, or at all;
development and acquisition risks, including rising and unanticipated costs and failure of such acquisitions and developments to perform in accordance with projections;
the timing of acquisitions and dispositions;
the performance of our network of BRRE strategic partners (the “Partner Network”);

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potential natural disasters such as hurricanes, tornadoes and floods;
national, international, regional and local economic conditions;
board determination as to timing and payment of dividends, and our ability to pay future distributions at the dividend rates we have paid historically;
the general level of interest rates;
potential changes in the law or governmental regulations that affect us and interpretations of those laws and regulations, including changes in real estate and zoning or tax laws, and potential increases in real property tax rates;
financing risks, including the risks that our cash flows from operations may be insufficient to meet required payments of principal and interest and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all;
lack of or insufficient amounts of insurance;
our ability to maintain our qualification as a REIT;
litigation, including costs associated with prosecuting or defending claims and any adverse outcomes;
possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us or a subsidiary owned by us or acquired by us.

Forward-looking statements are found throughout this proxy statement, including under the heading “Risk Factors,” and elsewhere in this proxy statement. We caution investors not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date of this proxy statement. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.

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RISK FACTORS

In addition to the other information contained or incorporated by reference in this proxy statement, readers should carefully consider the following risk factors:

RISKS RELATED TO THE INTERNALIZATION

The Issuances of shares of our Class C Common Stock in connection with the Internalization, and the Issuances of shares of our Class A Common Stock upon redemption of OP Units and/or conversion of shares of our Class C Common Stock issued in connection with the Internalization, will have a dilutive effect and will reduce the voting power and relative percentage interests of current holders of our Class A Common Stockholders in our earnings and market value.

We estimate that the number of OP Units to be issued as Contribution Consideration in connection with the Internalization will range from a low of 3,125,333 OP Units to a high of 4,062,933 OP Units (with a midpoint of 3,532,985 OP Units based on the midpoint Reference Price of $11.50), and that the number of shares of our Class C Common Stock to be issued as Contribution Consideration in connection with the Internalization will range from a low of 63,782 shares of Class C Common Stock to a high of 82,917 shares of Class C Common Stock (with a midpoint of 72,102 shares of Class C Common Stock based on the midpoint Reference Price of $11.50). Based on those ranges, we estimate that the number of OP Units and shares of our Class C Common Stock to be issued as Contribution Consideration in connection with the Internalization will range from a low of approximately 10.57% to a high of approximately 13.32% of the post-Closing total issued and outstanding shares of our Class A Common Stock and OP Units on a fully diluted basis. However, the Contribution Agreement does not impose a minimum or maximum number of OP Units or shares of Class C Common Stock that may be issued as Contribution Consideration, and any or all of the Reference Prices may differ from the VWAP. For these reasons, the actual number of OP Units and shares of Class C Common Stock issuable in connection with the Internalization may differ from those estimates, and may fall inside or outside of the estimated ranges. The issuance of shares of our Class C Common Stock in connection with the Internalization will have a dilutive effect and will reduce the voting power and relative percentage interests of current Class A Common Stockholders in our earnings and market value.

Additionally, part of the Internalization Consideration consists of OP Units, which may have a dilutive effect on the voting power and percentage interests of our current Class A Common Stockholders. Commencing on the one-year anniversary of the Closing, each OP Unit issued as Contribution Consideration may be tendered for redemption, at the holder’s option and subject to the terms and conditions set forth in the limited partnership agreement of our Operating Partnership, for cash equal to the average closing price of Class A Common Stock for the ten (10) consecutive trading days immediately preceding the date we receive a notice of redemption, or, at our sole option, for shares of Class A Common Stock on a one-for-one basis, in lieu of cash. If the recipients of OP Units in the Internalization exercise their redemption rights and part or all of their outstanding OP Units are redeemed for shares of our Class A Common Stock, such redemption will have a dilutive effect on our common stock and reduce the relative percentage interests of existing common stockholders in our earnings, voting power and market value.

Future sales of our Class A Common Stock by the Contributors may adversely affect the market price of our Class A Common Stock.

Future sales of our Class A Common Stock by the Contributors may adversely affect the market price of our Class A Common Stock. These sales also might make it more difficult for us to sell equity securities in the future at a time and price we deem appropriate. Upon consummation of the Internalization, and based on the Reference Prices of $10.00, $11.50 and $13.00, respectively, per share of our Class A Common Stock, we estimate that the number of OP Units to be issued by our Operating Partnership to the Contributors as Contribution Consideration will range from a low of 3,125,333 OP Units to a high of 4,062,933 OP Units (with a midpoint of 3,532,985 OP Units based on the midpoint Reference Price of $11.50), which OP Units may be redeemed in shares of our Class A Common Stock rather than cash, at the Company’s option. In addition, upon consummation of the Internalization, we estimate that the number of shares of our Class C Common Stock we will issue to the Contributors as Contribution Consideration will range from a low of 63,782 shares of Class C Common Stock to a high of 82,917 shares of Class C Common Stock (with a

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midpoint of 72,102 shares of Class C Common Stock based on the midpoint Reference Price of $11.50), which shares of Class C Common Stock will be convertible, at the holder’s option (at any time and from time to time), into one (1) fully-paid and non-assessable share of our Class A Common Stock, and upon the occurrence of certain transfers of OP Units or shares of Class C Common Stock and similar events, will convert automatically into one (1) fully-paid and non-assessable share of our Class A Common Stock. However, the Contribution Agreement does not impose a minimum or maximum number of OP Units or shares of Class C Common Stock that may be issued as Contribution Consideration, and any or all of the Reference Prices may differ from the VWAP. For these reasons, the actual number of OP Units and shares of Class C Common Stock issuable in connection with the Internalization may differ from those estimates, and may fall inside or outside of the estimated ranges. Sales of a substantial number of shares of our Class A Common Stock by the Contributors, the perception or expectation that such sales may occur, or sales of shares of our Class A Common Stock to cover tax obligations (some of which may occur shortly after the Closing), could have a material adverse effect on our business, financial condition, results of operations and the prevailing market price for shares of our Class A Common Stock.

The Internalization was negotiated between the Special Committee, which is comprised solely of independent and disinterested members of our board of directors, and the Manager, which is affiliated with certain of our officers and directors.

The Internalization was negotiated with the Manager, which is affiliated with certain of our officers and directors. As a result, those officers and directors may have different interests than the Company as a whole. This potential conflict would not exist in the case of a transaction negotiated with unaffiliated third parties. Moreover, if the Manager or any Contributor breaches any of the representations, warranties or covenants made by it in the Contribution Agreement, we may choose not to enforce, or to enforce less vigorously, our rights because of our desire to maintain our ongoing relationship with the Manager and the interests of certain of our directors and officers. Moreover, the representations, warranties, covenants and indemnities in the Contribution Agreement are subject to limitations and qualifiers, which may also limit our ability to enforce any remedy under the Contribution Agreement.

Certain of our directors and executive officers have interests in the Internalization that are different from, and may potentially conflict with, the interests of us and our stockholders.

Certain of our directors and executive officers have interests in the Internalization and the other transactions described in this proxy statement that may be different from, or in addition to, the interests of our stockholders generally and that may create potential conflicts of interest, including (i) the payment of Internalization Consideration in connection with the Internalization directly or indirectly to certain of these individuals, including Messrs. Kamfar, Babb, MacDonald, Ruddy, Konig and Kachadurian, and the entry by the applicable individuals into arrangements relating to the payment of that consideration, and (ii) the entry by Manager Sub, in its post-Closing capacity as an indirect subsidiary of the Company, into employment agreements with Messrs. Kamfar, Babb, MacDonald, Ruddy and Vohs, and into a services agreement with Mr. Konig through K&A, all of which will become effective upon consummation of the Internalization. See “Proposal 2: The Issuances — Interests of Certain Persons in the Internalization” beginning on page 77 for a description of the consideration to be received by these individuals.

In addition, Mr. Kamfar owns a controlling interest in BRRE, the sole managing member of the Manager; Messrs. Babb, MacDonald, Ruddy, Vohs and Konig are also executive officers or principals of the Manager; and Mr. Kachadurian is Vice Chairman of the Manager. The respective roles of these individuals in the Manager may create additional conflicts of interest in respect of the Internalization and the other transactions described in this proxy statement.

Following the Internalization, Mr. Kamfar will control a significant number of votes in any matter presented to our Class A Common Stockholders for approval, including the election of directors.

Although the Class C Common Stock to be issued in connection with the Internalization is not designed to provide for disproportionate voting rights, the issuance of the Class C Common Stock will result in Mr. Kamfar controlling 6.68% of the voting power in matters submitted to a vote of our Class A Common Stockholders, including the election of directors, as a result of his beneficial ownership of Class C Common

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Stock (which will give him voting power equal to the economic interest in the Company issued to BRRE in the form of OP Units as if all of those OP Units were redeemed by the Company for shares of Class A Common Stock), assuming none of the OP Units and LTIP Units indirectly held by him are redeemed by the Company for shares of Class A Common Stock. OP Units issued as Internalization Consideration may not be tendered for redemption for one year following the closing of the Internalization; however, if the Company were to redeem all OP Units Mr. Kamfar beneficially owns (including any OP Units received upon his conversion of LTIP Units) for shares of Class A Common Stock, including the OP Units issued as Internalization Consideration, he may control up to 14.08% of the voting power in matters submitted to a vote of our Class A Common Stockholders, including the election of directors; provided, however, the voting powers attributable to the Class C Common Stock issued as Internalization Consideration will be subject to certain limitations set forth in the Stockholders Agreement. See “Proposal 2: The Issuances — Terms of the Class C Common Stock — Limitation on the Class C Common Stock Voting Rights.” Mr. Kamfar may have interests that differ from our other stockholders, including by reason of his direct or indirect interest in our Operating Partnership, and may accordingly vote in ways that may not be consistent with the interests of those other stockholders.

Our net income, FFO and AFFO may decrease in the near term as a result of the Internalization.

We will expense all cash and non-cash costs involved in the Internalization. As a result, our statement of operations and FFO will be negatively impacted, driven predominately by the non-cash charges related to the issuance of OP Units and shares of Class C Common Stock as Internalization Consideration and, to a lesser extent, other transaction-related costs. In addition, while we will no longer effectively bear the costs of the various fees and expense reimbursements previously paid to the Manager if and after we become internally managed pursuant to the Internalization, our expenses will include the compensation and benefits of our executive officers and the employees and consultants of Manager Sub, which will then be our indirect subsidiary, as well as overhead previously paid by the Manager or its affiliates in managing our business and operations. Furthermore, these employees and consultants of Manager Sub will be providing us services historically provided by the Manager. There are no assurances that, following the Internalization, these employees and consultants will be able or incentivized to provide services at the same level or for the same costs as were previously provided to us by the Manager, and there may be other unforeseen costs, expenses and difficulties associated with operating as an internally managed company. If the expenses we assume as a result of the Internalization are higher than the fees that we currently pay the Manager or otherwise higher than we anticipate, we may not realize the anticipated cost savings and other benefits from the Internalization and our net income, FFO and AFFO could decrease further, which could have a material adverse effect on our business, financial condition and results of operations.

The Internalization may not be accretive to our stockholders.

The Internalization may not be accretive to our stockholders. While it is intended that the Internalization be accretive to our net income, earnings and AFFO, there can be no assurance that this will be the case, as, among other things, the expenses we assume as a result of the Internalization may be higher than we anticipate and we may not achieve our anticipated cost savings from the Internalization. The failure of the Internalization to be accretive to our stockholders could have a material adverse effect on our business, financial condition and results of operations.

We may not manage the Internalization effectively or realize its anticipated benefits.

We may not manage the Internalization effectively. The Internalization could be a time-consuming and costly process and we may encounter potential difficulties in the integration process including, among other things:

the inability to successfully internalize corporate management in a manner that permits us to achieve the cost savings anticipated to result from the Internalization, which could result in the anticipated benefits of the Internalization not being realized in the timeframe currently anticipated or at all;
the risk of not realizing all of the anticipated operational efficiencies or other anticipated strategic and financial benefits of the Internalization within the expected timeframe or at all;

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potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the Internalization; and
performance shortfalls as a result of the diversion of management’s attention caused by completing the Internalization and integrating the companies’ operations.

For all these reasons, you should be aware that it is possible that the Internalization process could result in the distraction of our management, the disruption of our ongoing business or inconsistencies in our operations, services, standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with employees or third-parties to achieve the anticipated benefits of the Internalization, or could otherwise adversely affect our business and financial results. Therefore, the failure to plan and manage the Internalization effectively could have a material adverse effect on our business, financial condition and results of operations.

We depend on our key executives and other employees of the affiliate of the Manager. There is no guarantee that such key executives and employees will remain employed or engaged by us for any specified period of time, and will not engage in competitive activities if they cease to be employed with or engaged by us.

We depend on the key executives and employees of the affiliate of the Manager. It is expected that, following the consummation of the Internalization, we will continue to substantially depend on the services of Messrs. Kamfar, Babb, MacDonald, Ruddy and Vohs, who have each entered into employment agreements with Manager Sub, which will then be an indirect subsidiary of the Company, and Mr. Konig, who has entered into a services agreement with Manager Sub through K&A on substantially the same terms as the employment agreements. Each such agreement will become effective upon Closing, and will have an initial term through and including December 31, 2020. These agreements have been structured to incentivize our executives to stay through the end of their initial terms and, subject to the Company’s approval, to extend the terms of service for successive one-year terms. Nevertheless, as is presently the case under the Management Agreement with the Manager, the departure or the loss of the services of any of these individuals, or other senior management personnel or employees, following the Internalization could have a material adverse effect on our business, financial condition, results of operations and ability to effectively operate our business.

Further, the employment and services agreements entered into by Manager Sub with each of Messrs. Kamfar, Babb, MacDonald, Ruddy, Vohs and Konig contain certain restrictions on these executives, including a restriction on engaging in activities that are deemed competitive to our business. Although we believe these covenants to be enforceable under current law in the states in which we do business, there can be no guarantee that if our executives were to breach these covenants and engage in competitive activities, a court of law would fully enforce these restrictions. If these executives were to terminate their employment or service relationship (as applicable) with Manager Sub and engage in competitive activities, such activities could have a material adverse effect on our business, financial condition and results of operations.

Mr. Kamfar and certain other executive officers and members of our senior management team will have competing demands on their time and attention.

Mr. Kamfar, who will continue to serve as our Chief Executive Officer and as Chairman of our board of directors following the Internalization, and Messrs. Ruddy, MacDonald and Konig, will continue to have competing demands on their respective time and attention following the Internalization, principally with respect to the provision of services to certain outside entities affiliated with BRRE. Such competing demands are not expected to be different from those that presently exist, but there is no assurance those demands will not increase and may result in these individuals devoting time to such outside entities in a manner that could adversely affect our business. Under their respective employment or services agreements (as applicable), Mr. Kamfar and our other executive officers are permitted to devote time to certain outside activities, so long as those duties and activities do not unreasonably interfere with the performance of their respective duties to us.

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We may be exposed to risks to which we have not historically been exposed, including liabilities with respect to the assets acquired from the Manager.

The Internalization will expose us to risks to which we have not historically been exposed. Pursuant to the Contribution Agreement, we will incur liabilities with respect to the assets acquired from the Manager and certain of its affiliates. In addition, our overhead will increase as a result of our becoming internally managed, as the responsibility for overhead relating to management of our business currently is borne by the Manager, and will become our responsibility following the Internalization. In addition, in our current externally-advised structure, we do not directly employ any employees. As a result of the Internalization, we will indirectly, through Manager Sub, employ persons who are currently associated with the Manager or its affiliates. As their employer, we will indirectly, through Manager Sub, be subject to those potential liabilities that are commonly faced by employers, such as workers’ disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances, and we will bear the costs of the establishment and maintenance of employee benefit plans, if established. Furthermore, these employees will be providing us services historically provided by the Manager, which will be provided with the support of the Administrative Services Agreement. There are no assurances that, following the Internalization, these employees of Manager Sub will be able to provide us with the same level of services as were previously provided to us by the Manager, and there may be other unforeseen costs, expenses and difficulties associated with operating as an internally managed company.

The representations, warranties, covenants and indemnities in the Contribution Agreement and related agreements are subject to limitations and qualifiers, which may limit our ability to enforce any remedy under these agreements.

The representations, warranties, covenants and indemnities in the Contribution Agreement, the related Administrative Services Agreement and other agreements related to the Internalization are subject to limitations and qualifiers, which may limit our ability to enforce any remedy under these agreements. These include, without limitation, limitations on liability and materiality qualifiers on certain representations and covenants.

Conflicts of interest may exist or could arise in the future with our Operating Partnership and its limited partners, which may impede business decisions that could benefit our stockholders.

Following the implementation of our Company’s structure as a result of the Internalization, conflicts of interest may exist or could arise as a result of the relationships between us and our affiliates, on the one hand, and our Operating Partnership or any member thereof, on the other. Our directors and officers have duties to our Company and our stockholders under applicable Maryland law in connection with their management of our Company. At the same time, we, as general partner of our Operating Partnership, have fiduciary duties to our Operating Partnership and to its limited partners under Delaware law in connection with the management of our Operating Partnership. Our duties to our Operating Partnership and its limited partners as the general partner may come into conflict with the duties of our directors and officers to our Company and our stockholders. These conflicts may be resolved in a manner that is not in the best interest of our stockholders.

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THE BUSINESS OF OUR COMPANY

General

The Company was incorporated on July 25, 2008 under the laws of the state of Maryland. The Company’s objective is to maximize long-term stockholder value by acquiring and developing well-located institutional-quality apartment properties in demographically attractive growth markets across the United States. We seek to maximize returns through investments where we believe we can drive substantial growth in our funds from operations and net asset value through one or more of our Core-Plus, Value-Add, Opportunistic and Invest-to-Own investment strategies.

As of June 30, 2017, our portfolio consisted of interests in 34 properties (24 operating properties and 10 development properties). Our 34 properties contain an aggregate of 10,041 units, comprised of 7,446 operating units and 2,595 units under development. As of June 30, 2017, these properties, exclusive of development properties, were approximately 95% occupied.

We have elected to be taxed as a REIT under Sections 856 through 860 of the Code and have qualified as a REIT commencing with our taxable year ended December 31, 2010. In order to continue to qualify as a REIT, we must distribute to our stockholders each calendar year at least 90% of our taxable income (excluding net capital gains). If we qualify as a REIT for federal income tax purposes, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify as a REIT for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income and results of operations. We intend to continue to organize and operate in such a manner as to remain qualified as a REIT.

THE BUSINESS OF THE MANAGER AND THE MANAGEMENT AGREEMENT

At the closing of our IPO on April 2, 2014, we entered into the Management Agreement with the Manager, pursuant to which, while we are externally managed, the Manager manages our business affairs in conformity with the investment guidelines and other policies that are approved and monitored by our board of directors. The Manager acts under the supervision and direction of our board of directors. Specifically, the Manager is responsible for (1) the selection, purchase and sale of our investment portfolio, (2) our financing activities, and (3) providing us with advisory and management services. The Manager does not manage or advise any other entities and is not actively seeking new management or advisory clients, although it is not prohibited from doing so by the Management Agreement. The Manager provides us with a management team, including a chief executive officer, president, chief accounting officer, chief operating officer and general counsel, along with appropriate support personnel. None of the officers or employees of the Manager are dedicated exclusively to the Company. While we are externally managed, we are dependent on the Manager to provide these services that are essential to our operations, growth and success.

The initial term of the Management Agreement expired on April 2, 2017 (the third anniversary of the closing of our IPO), and automatically renewed for a one-year term expiring on April 2, 2018. The Management Agreement will automatically renew for a one-year term on each anniversary date thereafter unless previously terminated in accordance with its terms.

Pursuant to the terms of the Management Agreement, while we are externally managed, the Manager is entitled to receive from us a base management fee (the “Base Management Fee”) and, if earned, an incentive fee (the “Incentive Fee”). The Base Management Fee is payable in an amount equal to the sum of: (A) 0.25% of our stockholders’ existing and contributed equity prior to the IPO and in connection with our contribution transactions, per annum, calculated quarterly based on our stockholders’ existing and contributed equity for the most recently completed calendar quarter and payable in quarterly installments in arrears, and (B) 1.5% of the equity per annum of our stockholders who purchase shares of our stock, calculated quarterly based on their equity for the most recently completed calendar quarter and payable in quarterly installments in arrears. The Base Management Fee is payable independent of the performance of our investments. We amended the Management Agreement to provide that the Base Management Fee can be payable in cash or LTIP Units, at the election of our board of directors. The number of LTIP Units issued for the Base Management Fee or

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Incentive Fee is based on the fees earned divided by the 5-day trailing average Class A Common Stock price prior to issuance. For the trailing twelve-month period ended June 30, 2017, we incurred Base Management Fees of approximately $8.7 million.

If earned, the Incentive Fee is payable with respect to each calendar quarter in arrears. The Incentive Fee is equal to the difference between (1) the product of (x) 20% and (y) the difference between (i) our adjusted funds from operations (“AFFO”) for the previous 12-month period, and (ii) the product of (A) the weighted average of the issue price of equity securities issued in the IPO and in future offerings and transactions, multiplied by the weighted average number of all shares of our Class A Common Stock outstanding on a fully-diluted basis (including any restricted stock units, any restricted shares of Class A Common Stock, LTIP Units, and other shares of common stock underlying awards granted under the Amended and Restated 2014 Incentive Plans, and OP Units) in the previous 12-month period, exclusive of equity securities issued prior to the IPO or in the contribution transactions, and (B) 8%, and (2) the sum of any Incentive Fee paid to the Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no Incentive Fee is payable with respect to any calendar quarter unless AFFO is greater than zero for the four most recently completed calendar quarters. One half of each quarterly installment of the Incentive Fee is payable in LTIP Units, calculated pursuant to the formula above. The remainder of the Incentive Fee is payable in cash or in LTIP Units, at the election of our board of directors, in each case calculated pursuant to the formula above. For the trailing twelve-month period ended June 30, 2017, we incurred Incentive Fees of approximately $4.1 million.

While we are externally managed, we are also required to reimburse the Manager for certain expenses and pay all operating expenses, except those specifically required to be borne by the Manager under the Management Agreement. For the trailing twelve-month period ended June 30, 2017, we reimbursed the Manager approximately $1.5 million, which are recorded as part of general and administrative expenses.

Currently, each of our officers is an employee of an affiliate of the Manager. In addition, certain of our executive officers and directors, including our Chairman, Chief Executive Officer and President, R. Ramin Kamfar, our Chief Operating Officer, Secretary and General Counsel, Michael L. Konig, and the Vice Chairman of the Manager and member of our board of directors, Gary T. Kachadurian, own direct or indirect economic interests in the Manager. As a result, the Management Agreement between us and the Manager was negotiated between related parties, and its terms, including fees and other amounts payable, may not be as favorable to us as if it had been negotiated with an unaffiliated third party.

While we are externally managed, the Management Agreement provides us with access to the Manager’s infrastructure, team of management, investment, capital markets, asset management, finance, legal and administrative personnel, and other resources necessary for the implementation and execution of our business and growth strategies.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of August 22, 2017 (i.e., the Record Date), certain information regarding the beneficial ownership of our shares of Class A Common Stock, shares of Class A Common Stock issuable upon redemption of OP and LTIP Units and, solely for illustrations purposes, shares of Class C Common Stock and OP Units (for purposes of the table below, “Internalization OP Units”) assuming the estimated number of shares of Class C Common Stock to be issued at the closing of the Internalization were issued as of August 22, 2017 for (1) each person who is the beneficial owner of 5% or more of our outstanding shares of common stock, (2) each of our directors and NEOs, and (3) all of our directors and NEOs as a group. Each person named in the table has sole voting and investment power with respect to all of the shares of common stock shown as beneficially owned by such person, except as otherwise set forth in the notes to the table. The extent to which a person will hold shares of Class A Common Stock as opposed to OP Units or LTIP Units is set forth in the table below.

The SEC has defined “beneficial ownership” of a security to mean the possession, directly or indirectly, of voting power and/or investment power over such security. A stockholder is also deemed to be, as of any date, the beneficial owner of all securities that such stockholder has the right to acquire within 60 days after that date through (1) the exercise of any option, warrant or right, (2) the conversion of a security, (3) the power to revoke a trust, discretionary account or similar arrangement or (4) the automatic termination of a trust, discretionary account or similar arrangement. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, our shares of common stock subject to options, vesting or other rights (as set forth above) held by that person that are exercisable or will become exercisable or vest within 60 days thereafter, are deemed outstanding, while such shares are not deemed outstanding for purposes of computing percentage ownership of any other person.

For an illustrative allocation of the Internalization Consideration to be payable to each of the Contributors, including estimated post-Internalization ownership of OP Units and shares of Class C Common Stock represented thereby, see “Proposal 2: The Issuances — Internalization Consideration.” Internalization OP Units are represented on a 49-to-1 basis by the Class C Common Stock listed below for voting purposes, and are not otherwise redeemable in shares of Class A Common Stock within 60 days. The column titled “Percentage of Total Voting Interest Attributable to All Securities Owned” and “Total Voting Interest” assumes that all OP Units, Internalization OP Units and LTIP Units are redeemed for shares of Class A Common Stock.

           
Name of Beneficial Owner   Title of Class of
Securities Owned
  Amount and
Nature of
Beneficial
Ownership
  Percent of
Class
  Post-Internalization
  Percentage
of All
Securities
  Total
Voting
Interest
  Percentage
Total Voting
Interest
Attributable
to All
Securities
Owned
5% Stockholders:
                                                     
None.
                                                     
Named Executive Officers and Directors:(1)
                                                     
R. Ramin Kamfar     Class A Common Stock(2)
      61,713       0.26 %      0.20 %      61,713           
       OP Units(2)
      165,654       0.68 %      0.54 %      165,654           
       LTIP Units(2)(3)
      2,282,686       91.22 %      7.47 %      2,282,686           
       Class C Common Stock(4)
      35,907       49.80 %      0.12 %      1,795,350        
       Internalization OP Units(4)
      1,759,427       49.80 %      5.75 %             
             4,305,387             14.08 %      4,305,403       14.08 % 
Gary T. Kachadurian, Director     Class A Common Stock       4,600       0.02 %      0.02 %      4,600           
       Class C Common Stock(4)
      3,425       4.75 %      0.01 %      171,250           
       Internalization OP Units(4)
      167,817       4.75 %      0.55 %             
             175,842             0.58 %      175,850       0.58%  

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Name of Beneficial Owner   Title of Class of
Securities Owned
  Amount and
Nature of
Beneficial
Ownership
  Percent of
Class
  Post-Internalization
  Percentage
of All
Securities
  Total
Voting
Interest
  Percentage
Total Voting
Interest
Attributable
to All
Securities
Owned
Michael L. Konig     Class C Common Stock(4)
      8,162       11.32 %      0.03 %      408,100           
       Internalization OP Units(4)
      399,934       11.32 %      1.31 %             
             408,096             1.34 %      408,100       1.34 % 
Christopher J. Vohs     Class A Common Stock       2,500       0.01 %      0.01 %      2,500        
             2,500             0.01 %      2,500       0.01 % 
Brian D. Bailey, Independent Director     Class A Common Stock       15,274       0.06 %      0.05 %      15,274           
       LTIP Units       2,500       0.1 %      0.01 %      2,500        
             17,774             0.06 %      17,775       0.06 % 
I. Bobby Majumder, Independent Director     Class A Common Stock       14,225       0.06 %      0.05 %      14,225           
       LTIP Units       2,500       0.1 %      0.01 %      2,500        
             16,725             0.06 %      16,744       0.06 % 
Romano Tio, Independent Director     Class A Common Stock       14,244       0.06 %      0.05 %      14,244           
       LTIP Units       2,500       0.1 %      0.01 %      2,500        
             16,744             0.06 %      16,744       0.06 % 
All Named Executive Officers and Directors as a Group(3)     Class A Common Stock(2)
      112,556       0.47 %      0.37 %      112,556           
       OP Units(2)
      165,654       0.68 %      0.54 %      165,654           
       LTIP Units(2)(3)
      2,290,186       91.22 %      7.49 %      2,290,186           
       Class C Common Stock       47,494       65.87 %      0.16 %      2,374,700           
       Internalization OP Units       2,327,178       65.87 %      7.61 %             
             4,943,068             16.17 %      4,943,096       16.17 % 

(1) The address of each beneficial owner listed is 712 Fifth Avenue, 9th Floor, New York, New York 10019.
(2) 13,676 shares of Class A Common Stock, 32,276 OP Units and 1,708,312 LTIP Units are pledged as a security in connection with a third party loan.
(3) Totals include 153,333 LTIP Units that will vest within sixty (60) days of August 22, 2017. Totals do not include (a) 94,463 remaining unvested LTIP Units issued to the Manager on July 2, 2015, which will vest on July 2, 2018, and (b) 117,740 remaining unvested LTIP Units issued to the Manager on August 3, 2016, which will vest half on August 3, 2018 and half on August 3, 2019. As the indirect controlling person of the Manager, Mr. Kamfar possesses voting and investment power over LTIP Units that are currently held by the Manager.
(4) The voting rights assume application of an $11.50 Reference Price to the assumed number of OP Units and shares of Class C Common Stock issued as Contribution Consideration.

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INTRODUCTORY NOTE TO PROPOSALS 1 AND 2

Pursuant to the Contribution Agreement, the Company has prepared this proxy statement under the direction of the Special Committee, which is comprised of independent and disinterested directors who are not affiliated with the Manager, and with input from the Manager. The Special Committee unanimously recommends, and the Board unanimously recommends, that you vote to (1) approve the Second Amended 2014 Incentive Plans under Proposal 1, and (2) approve the Issuances under Proposal 2. If Proposal 1 is not approved by stockholders, the Issuances under Proposal 2, and thus the Internalization, will not be consummated.

PROPOSAL 1
APPROVAL OF SECOND AMENDED 2014 INCENTIVE PLANS

Summary of the Second Amended 2014 Incentive Plans

We currently have in effect the Amended and Restated 2014 Equity Incentive Plan for Individuals (the “Amended 2014 Individuals Plan”) and the Amended and Restated 2014 Equity Incentive Plan for Entities (the “Amended 2014 Entities Plan”). We refer to these plans together as the “Amended 2014 Incentive Plans.” We are asking our stockholders to consider and approve the Second Amended 2014 Equity Incentive Plan for Individuals and the Second Amended 2014 Equity Incentive Plan for Entities (which we refer to together as the “Second Amended 2014 Incentive Plans”). The Second Amended 2014 Incentive Plans were approved by our board of directors on August 3, 2017, subject to the approval of our stockholders. Copies of the Second Amended 2014 Incentive Plans are attached hereto as Appendices A and B. This summary of the provisions of the Second Amended 2014 Incentive Plans is qualified in its entirety by reference to the full text of each of the Second Amended 2014 Incentive Plans. To the extent of any conflict between this summary and the Second Amended 2014 Incentive Plans, the Second Amended 2014 Incentive Plans will govern. Capitalized terms used but not defined herein will have the meanings ascribed to them in the Second Amended 2014 Incentive Plans.

Background and Purpose

The Company’s incentive plans were originally adopted by our board of directors on December 16, 2013, and approved by our stockholders on January 23, 2014, as the 2014 Equity Incentive Plan for Individuals (the “2014 Individuals Plan”) and the 2014 Equity Incentive Plan for Entities (the “2014 Entities Plan,” and together with the 2014 Individuals Plan, the “2014 Incentive Plans”). The 2014 Incentive Plans were subsequently amended and restated by the Amended 2014 Incentive Plans as adopted by our board of directors on April 7, 2015 and approved by our stockholders on May 28, 2015.

Our board of directors considers the Amended 2014 Incentive Plans an integral part of our ability to attract and retain independent directors, executive officers and other key employees, including employees of the Operating Partnership, and (while we are externally managed), employees of the Manager, and their affiliates, as well as other service providers, including (while we are externally managed) the Manager. The Amended 2014 Incentive Plans provide for the grant of options to purchase shares of our common stock, stock awards, stock appreciation rights, performance units, incentive awards and other equity-based awards. Our board of directors believes that the Amended 2014 Incentive Plans have benefited the Company by (i) assisting in recruiting and retaining the services of individuals and other service providers with high ability and initiative, (ii) providing greater incentives for participants who provide valuable services to the Company and its affiliates, and (iii) associating the interests of participants with the Company and its stockholders.

On August 3, 2017, our board of directors approved the amendment and restatement of each of the Amended 2014 Individuals Plan (the “Second Amended 2014 Individuals Plan”), and the Amended 2014 Entities Plan (the “Second Amended 2014 Entities Plan”), as described herein, subject to the approval of our stockholders.

The more significant changes included in the Second Amended 2014 Incentive Plans can be summarized as follows:

The aggregate number of shares of our Class A Common Stock authorized for issuance under the Second Amended 2014 Incentive Plans is 1,625,000 shares, an increase of 1,150,000 shares.

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Awards under the Second Amended 2014 Incentive Plans generally will not become fully exercisable or vested until at least one year after their grant, except in the event of the death or disability of the holder or a Change in Control of the Company.
Awards for up to five percent (5%) of the aggregate number of shares of Class A Common Stock authorized for issuance under the Second Amended 2014 Incentive Plans may be granted or awarded without regard to the one-year minimum vesting requirement otherwise applicable to any such awards.
In the event the Company experiences a Change in Control:
Awards (including LTIP Units) that vest, are earned or become exercisable based solely on continued employment or service (“Time-Based Awards”) that are outstanding on the date of such Change in Control and that are not assumed or replaced with substitute awards in connection with the Change in Control will automatically become vested in full on such date. Any Time-Based Awards that are assumed or replaced with substitute awards in connection with the Change in Control will continue to vest in accordance with their original terms; except, that any such assumed or substitute awards for Time-Based Awards originally granted under the Second Amended 2014 Individuals Plan will automatically become vested in full on the last day of the holder’s employment if (A) the holder’s employment with the Company, the Successor Entity, or an affiliate thereof is terminated (i) involuntarily without Cause, (ii) following the Company’s non-renewal of the employment agreement, if any, between the holder and the Company, the Successor Entity or the applicable affiliate thereof, (iii) voluntarily by the holder with Good Reason, or (iv) on account of the holder’s death or disability, and (B) the holder remained in the continuous employ of the Company, the Successor Entity, or the applicable affiliate thereof from the date of such Change in Control until the date of such termination of employment. Any assumed or substitute Time-Based Awards will be of the same type of award as the original Time-Based Awards being assumed or replaced, and will have a value, as of the date of such Change in Control, that is substantially equal to the value of the original Time-Based Awards.
Awards that are not Time-Based Awards (“Performance Awards”) that are outstanding on the date of such Change in Control must be assumed or replaced with substitute awards granted under the Second Amended 2014 Incentive Plans in connection with the Change in Control. Such assumed or substituted Performance Awards will be of the same type of award as the original Performance Awards being assumed or replaced, and will have a value, as of the date of such Change in Control, that is substantially equal to the value of the original Performance Awards. In addition, such assumed or substituted Performance Awards will continue to vest in accordance with the terms and conditions of the original Performance Awards being assumed or replaced; provided, that the performance objectives and measures of the original Performance Awards being assumed or replaced shall be adjusted as the administrator determines is equitably required. Notwithstanding the preceding sentence (and solely with respect to assumed or substitute awards for Performance Awards originally granted under the Second Amended 2014 Individuals Plan), if (A) the holder’s employment with the Company, the Successor Entity, or an affiliate thereof is terminated (i) involuntarily without Cause, (ii) following the Company’s non-renewal of the employment agreement, if any, between the holder and the Company, the Successor Entity or the applicable affiliate thereof (if the holder has an employment agreement requiring accelerated vesting in such case), (iii) voluntarily by the holder with Good Reason, or (iv) on account of the holder’s death or disability, and (B) the holder remained in the continuous employ of the Company, the Successor Entity or the applicable affiliate thereof from the date of such Change in Control until the date of such termination of employment, then the assumed or substituted Performance Awards will automatically become vested with respect to a pro rata number of the shares or other securities subject to such assumed or substituted Performance Awards based on the extent to which the performance or other objectives are achieved as of the date of such termination of employment or service. Any portion of any such Performance Award that does not become so vested will be forfeited.

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Any Time-Based Awards (or any portion thereof) that become vested in a Change in Control as set forth above may be cancelled, in the sole discretion of the administrator of the Second Amended 2014 Incentive Plans, in exchange for a payment in cash, shares of Class A Common Stock, or other securities or consideration received by stockholders in the Change in Control transaction, in an amount equal to the value received by stockholders in the Change in Control transaction (or, in the case of Options and SARs, the amount by which that transaction value exceeds the exercise price).
The maximum number of shares of Class A Common Stock with respect to which a nonemployee director may be granted awards in any calendar year under the Second Amended 2014 Individuals Plan has been increased from 20,000 to 40,000 shares.
Any award granted under the Second Amended 2014 Incentive Plans, and any payment made with respect to any such award, are subject to the condition that we may require such award to be returned, and any payment made with respect to such award to be repaid, if such action is required under the terms of any Company recoupment or “clawback” (forfeiture or repayment) policy as in effect on the date the award was granted or if recoupment is required by any law, rule, requirement or regulation.

The more significant features of the Second Amended 2014 Incentive Plans are summarized below. The summary of the Second Amended 2014 Incentive Plans is qualified in its entirety by reference to the plan documents, copies of which are attached as Appendix A and Appendix B to this proxy statement. Copies of the Second Amended 2014 Incentive Plans also may be accessed from the Securities and Exchange Commission’s Web site at www.sec.gov.

The Board of Directors recommends that you vote “FOR” Proposal 1.

Administration of the Second Amended 2014 Incentive Plans

The Second Amended 2014 Incentive Plans will be administered by the compensation committee of our board of directors, except that the Second Amended 2014 Incentive Plans will be administered by our board of directors with respect to awards made to directors who are not employees. This summary uses the term “administrator” to refer to the compensation committee or our board of directors, as applicable. The administrator will approve who will receive grants under the Second Amended 2014 Incentive Plans, determine the type of award that will be granted and will specify the number of shares of our Class A Common Stock subject to each grant. Notwithstanding the minimum vesting periods described below, the administrator may accelerate the vesting or exercisability of awards with respect to up to five percent (5%) of the aggregate number of shares of our Class A Common Stock authorized for issuance under the Second Amended 2014 Incentive Plans (or 81,250 shares based on a total authorization of 1,625,000 shares) at any time in its discretion. The administrator also may accelerate the vesting or exercisability of any award if the award has been outstanding for at least one year or if the acceleration is effected in connection with the termination of the participant’s employment or service.

As of March 31, 2015, 194,562 shares of Class A Common Stock (comprised of 179,562 shares of Class A Common Stock underlying LTIP Unit awards and 15,000 restricted shares of Class A Common Stock) had been issued under the 2014 Incentive Plans (prior to their amendment and restatement as the Amended 2014 Incentive Plans). As of August 8, 2017, 475,000 additional shares of Class A Common Stock (comprised of 467,500 shares of Class A Common Stock underlying LTIP Unit awards and 7,500 restricted shares of Class A Common Stock) had been issued under the Amended 2014 Incentive Plans (prior to their further amendment and restatement as the Second Amended 2014 Incentive Plans, as proposed by this Proposal 1).

Except as otherwise indicated in this proxy statement, awards under the Second Amended 2014 Incentive Plans will be made at the administrator’s discretion. We are unable to determine who will be selected to receive awards other than those described herein, or the type, size or terms of any such awards that may be granted.

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Eligibility

Employees and officers of our Company and our affiliates (including employees of our Operating Partnership and, while we are externally managed, employees of the Manager), and members of our board of directors, will remain eligible to receive grants under the Second Amended 2014 Individuals Plan. In addition, individuals who provide significant services to us or an affiliate, including individuals who provide services to us or an affiliate by virtue of employment with, or providing services to, our Operating Partnership or (while we are externally managed) the Manager will remain eligible to receive grants under the Second Amended 2014 Individuals Plan. Currently, the Company has five (5) directors, three (3) officers and no employees who will remain eligible for grants under the Second Amended 2014 Individuals Plan. While we are externally managed, the Manager will remain eligible for grants under the Second Amended 2014 Entities Plan, and currently has five (5) officers and no employees who would be eligible for grants under the Second Amended 2014 Individuals Plan.

If our stockholders approve the Second Amended 2014 Incentive Plans pursuant to this Proposal 1 and the Issuances pursuant to Proposal 2, we expect that the Internalization will be consummated. Upon consummation of the Internalization, the Manager will no longer be eligible for grants under the Second Amended 2014 Entities Plan, and its officers and employees will no longer be eligible for grants under the Second Amended 2014 Individuals Plan by virtue of their service to the Manager in such capacities. However, other entities that provide significant services to us or our affiliates that are selected by the administrator will remain eligible for grants under the Second Amended 2014 Entities Plan.

Share Authorization

Currently, the aggregate number of shares of our Class A Common Stock that may be issued under the Amended 2014 Incentive Plans is equal to 475,000 shares. As of August 8, 2017, all 475,000 shares of Class A Common Stock available for issuance under the Amended 2014 Incentive Plans, including shares of Class A Common Stock underlying LTIP Unit awards, had been issued, as further described below.

The aggregate number of shares of our Class A Common Stock that will be authorized for issuance under the Second Amended 2014 Incentive Plans is 1,625,000 shares, which total includes the 475,000 shares previously issued under the Amended 2014 Incentive Plans. For that reason, the aggregate number of additional shares of our Class A Common Stock that will be available for issuance under the Second Amended 2014 Incentive Plans with respect to awards granted on and after stockholder approval is equal to 1,150,000 shares. (The prior issuance of 194,562 shares pursuant to awards granted under the 2014 Incentive Plans will not reduce the number of shares authorized or available for issuance under the Second Amended 2014 Incentive Plans.)

The issuance of shares or awards under the Second Amended 2014 Individuals Plan reduces the number of shares that may be issued under the Second Amended 2014 Entities Plan, and vice versa.

In connection with stock splits, dividends, recapitalizations and certain other events, our board of directors will make equitable adjustments that it deems appropriate in the aggregate number of shares of our Class A Common Stock that may be issued under the Second Amended 2014 Incentive Plans, the individual grant limit for Nonemployee Directors described below and the terms of outstanding awards.

If any options or stock appreciation rights terminate, expire or are canceled, forfeited, exchanged or surrendered without having been exercised or are paid in cash without delivery of common stock or if any stock awards, performance units or other equity-based awards are forfeited (including any such awards granted under the 2014 Incentive Plans and/or the Amended 2014 Incentive Plans that are forfeited, exchanged, etc. after approval of the Second Amended 2014 Incentive Plans), the shares of our Class A Common Stock subject to such awards will again be available for purposes of the Second Amended 2014 Incentive Plans. Shares of our Class A Common Stock tendered or withheld to satisfy the exercise price of an award or for tax withholding are not available for future grants under the Second Amended 2014 Incentive Plans. If shares of common stock are issued upon the exercise of a stock appreciation right, the number of shares available for future awards under the Second Amended 2014 Incentive Plans shall be reduced by the number of shares for which the stock appreciation right was exercised rather than the number of shares issued to the participant.

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Awards Under the Second Amended 2014 Incentive Plans

Options

The Second Amended 2014 Individuals Plan authorizes the grant of incentive stock options (under Section 422 of the Code) and both the Second Amended 2014 Individuals Plan and the Second Amended 2014 Entities Plan authorize the grant of options that do not qualify as incentive stock options. The exercise price of each option will be determined by the administrator, provided that the price cannot be less than 100% of the fair market value of the shares of our Class A Common Stock on the date on which the option is granted (or 110% of the shares’ fair market value on the grant date in the case of an incentive stock option granted to an individual who is a “ten percent stockholder” under Sections 422 and 424 of the Code). Except for adjustments to equitably reflect stock splits, stock dividends or similar events, the exercise price of an outstanding option may not be reduced and no payment may be made to cancel an “underwater” option without the approval of our stockholders. The exercise price for any option is generally payable (i) in cash, (ii) by certified check, (iii) by the surrender of shares of our Class A Common Stock (or attestation of ownership of shares of our Class A Common Stock) with an aggregate fair market value on the date on which the option is exercised, equal to the exercise price, or (iv) by payment through a broker in accordance with procedures established by the Federal Reserve Board. The term of an option cannot exceed ten years from the date of grant (or five years in the case of an incentive stock option granted to an individual who is a “ten percent stockholder”). The administrator will prescribe when an option will become exercisable, but options generally will not become exercisable before the first anniversary of its grant, except in the event of the death or disability of the holder or a Change in Control of the Company, and further provided that awards for up to five percent (5%) of the aggregate number of shares of Class A Common Stock authorized for issuance under the Second Amended 2014 Incentive Plans may be granted or awarded without regard to the one-year minimum vesting requirement, in the discretion of the administrator. A participant cannot sell or dispose of more than fifty percent of the shares acquired under an option before the earlier of the first anniversary of the date of the option exercise or the date the participant is no longer employed by or providing services to us, our affiliate, the Manager or the Operating Partnership. Incentive stock options may only be granted under the Second Amended 2014 Individuals Plan to our employees and employees of our subsidiaries.

Stock Awards

The Second Amended 2014 Incentive Plans also provide for the grant of stock awards. A stock award is an award of shares of our Class A Common Stock that are subject to vesting requirements, restrictions on transfer and other restrictions as the administrator determines in its sole discretion on the date of grant, including the attainment of performance objectives. The restriction period generally will be at least one year, except in the event of the death or disability of the holder or a Change in Control of the Company, and further provided that awards for up to five percent (5%) of the aggregate number of shares of Class A Common Stock authorized for issuance under the Second Amended 2014 Incentive Plans may be granted or awarded without regard to the one-year minimum vesting requirement, in the discretion of the administrator. A participant may not sell or dispose of more than fifty percent of the shares acquired under a stock award before the earlier of the first anniversary of the date the stock award vests or the date the participant is no longer employed by or providing services to us, our affiliate, the Manager or the Operating Partnership. A participant who receives a stock award will have all of the rights of a stockholder as to those shares, including, without limitation, voting rights and the right to receive distributions; provided that if a stock award does not vest solely on the basis of continued employment or service, dividends will be accumulated and paid only when, and to the extent that, the stock award vests. During the period when stock awards are non-transferable or forfeitable, (i) a participant is prohibited from selling, transferring, pledging, exchanging, hypothecating or otherwise disposing of the participant’s stock award shares, (ii) the Company will retain custody of any certificates and (iii) a participant must deliver a stock power to the Company for each stock award.

Stock Appreciation Rights

The Second Amended 2014 Incentive Plans authorize the grant of stock appreciation rights. A stock appreciation right provides the participant with the right to receive, upon exercise of the stock appreciation right, a payment in cash, shares of our Class A Common Stock or a combination of the two. The amount that

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the participant will receive upon exercise of the stock appreciation right generally will equal the excess of the fair market value of the shares of our Class A Common Stock on the date of exercise over the shares’ fair market value on the date of grant. Stock appreciation rights will become exercisable in accordance with terms determined by the administrator but generally will not become exercisable before the first anniversary of the grant, except in the event of the death or disability of the holder or a Change in Control of the Company, and further provided that awards for up to five percent (5%) of the aggregate number of shares of Class A Common Stock authorized for issuance under the Second Amended 2014 Incentive Plans may be granted or awarded without regard to the one-year minimum vesting requirement, in the discretion of the administrator. A participant cannot sell or dispose of more than fifty percent of the shares acquired under a stock appreciation right before the earlier of the first anniversary of the date the stock appreciation right is exercised or the date the participant is no longer employed by or providing services to us, our affiliate, the Manager or the Operating Partnership. Stock appreciation rights may be granted in tandem with an option grant or as independent grants. The term of a stock appreciation right cannot exceed ten years from the date of grant or five years in the case of a stock appreciation right granted under the Second Amended 2014 Individuals Plan in tandem with an incentive stock option awarded to an individual who is a “ten percent stockholder.”

Performance Units

The Second Amended 2014 Incentive Plans also authorize the grant of performance units. Performance units represent the participant’s right to receive an amount, based on the value of a specified number of shares of our Class A Common Stock, if performance goals or other requirements established by the administrator are met. The administrator will determine the applicable performance period, the performance goals and such other conditions that apply to the performance unit. If the performance goals are met, payment will be made with respect to the performance units. Performance units will become earned or vested in accordance with terms determined by the administrator, but generally will not become earned or vested before the first anniversary of their grant, except in the event of the death or disability of the holder or a Change in Control of the Company, and further provided that awards for up to five percent (5%) of the aggregate number of shares of Class A Common Stock authorized for issuance under the Second Amended 2014 Incentive Plans may be granted or awarded without regard to the one-year minimum vesting requirement, in the discretion of the administrator. Performance units will be paid in cash, shares of our Class A Common Stock, other equity-based awards (including LTIP Units), other securities or property or a combination thereof. No more than fifty percent of the shares issued in settlement of performance units may be sold or disposed of before the first anniversary of the date that the shares were issued or the date that the participant is no longer employed by or providing services to us, our affiliate, the Manager or the Operating Partnership.

Incentive Awards

The Second Amended 2014 Incentive Plans also authorize us to make incentive awards. An incentive award entitles the participant to receive a payment if certain requirements are met. The administrator will establish the requirements that must be met before an incentive award is earned and the requirements may be stated with reference to one or more performance measures or criteria prescribed by the administrator. A performance goal or objective may be expressed on an absolute basis or relative to the performance of one or more similarly situated companies or a published index and may be adjusted for unusual or non-recurring events, changes in applicable tax laws or accounting principles. The period in which the performance will be measured will be at least one year, and the administrator will determine the applicable performance goals and such other conditions that apply to the incentive award. If the performance goals are met, the incentive award will be paid. Incentive awards will become earned or vested in accordance with terms determined by the administrator, but generally will not become earned or vested before the first anniversary of their grant, except in the event of the death or disability of the holder or a Change in Control of the Company, and further provided that awards for up to five percent (5%) of the aggregate number of shares of Class A Common Stock authorized for issuance under the Second Amended 2014 Incentive Plans may be granted or awarded without regard to the one-year minimum vesting requirement, in the discretion of the administrator. An incentive award that is earned will be settled in a single payment which may be in cash, Class A Common Stock, an other equity-based award (including LTIP Units), or a combination thereof. No more than fifty percent of the shares issued in settlement of an incentive award may be sold or disposed of before the first anniversary of

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the date that the shares are issued or the date that the participant is no longer employed by or providing services to us, our affiliate, the Manager or the Operating Partnership.

Other Equity-Based Awards

The administrator may grant other types of stock-based awards as other equity-based awards, including LTIP Units, under the Second Amended 2014 Incentive Plans. Other equity-based awards are payable in cash, shares of our Class A Common Stock or shares or units of such other equity, or a combination thereof, as determined by the administrator. The terms and conditions of other equity-based awards are determined by the administrator, and will include a requirement that performance objectives or other criteria be satisfied. Other equity-based awards generally will not become earned or vested before the first anniversary of their grant, except in the event of the death or disability of the holder or a Change in Control of the Company, and further provided that awards for up to five percent (5%) of the aggregate number of shares of Class A Common Stock authorized for issuance under the Second Amended 2014 Incentive Plans may be granted or awarded without regard to the one-year minimum vesting requirement, in the discretion of the administrator. In addition, a participant may not sell or dispose of more than fifty percent of the shares of common stock or other equity interests (including LTIP Units) covered by an other equity-based award before the earlier of the first anniversary of the date that the shares or interests become vested or the date that the participant is no longer employed by or providing services to us, our affiliate, the Manager or the Operating Partnership.

LTIP Units are a special class of partnership interest in our Operating Partnership. Each LTIP Unit awarded will be deemed equivalent to an award of one share of Class A Common Stock under the Second Amended 2014 Incentive Plans, reducing their aggregate share authorization for other awards on a one-for-one basis. We will not receive a tax deduction for the value of any LTIP Units granted to participants. The vesting period for any LTIP Units, if any, will be determined at the time of issuance. LTIP Units, whether vested or not, will receive the same quarterly per-unit distributions as OP Units, which distributions will generally equal the per share distributions on shares of our Class A Common Stock. This treatment with respect to quarterly distributions is similar to the expected treatment of our stock awards, which will generally receive full dividends whether vested or not. Initially, LTIP Units will not have full parity with OP Units with respect to liquidating distributions. Under the terms of the LTIP Units, our Operating Partnership will revalue its assets upon the occurrence of certain specified events, and any increase in the Operating Partnership’s valuation from the time of the last revaluation until such event will be allocated first to the holders of LTIP Units to equalize the capital accounts of such holders with the capital accounts of holders of OP Units. Upon equalization of the capital accounts of the holders of LTIP Units with the other holders of OP Units, the LTIP Units will achieve full parity with OP Units for all purposes, including with respect to liquidating distributions. If such parity is reached, vested LTIP Units may be converted into an equal number of OP Units at any time, and thereafter enjoy all the rights of OP Units, including redemption/exchange rights. However, there are circumstances under which such parity would not be reached. Until and unless such parity is reached, the value that a holder of LTIP Units will realize for a given number of vested LTIP Units will be less than the value of an equal number of shares of our Class A Common Stock.

Dividend Equivalent Rights

The administrator may grant dividend equivalent rights in connection with the grant of performance units, other equity-based awards and incentive awards granted under the Second Amended 2014 Incentive Plans. Dividend equivalent rights may be paid currently or accrued as contingent cash obligations (in which case they may be deemed to have been reinvested in shares of our Class A Common Stock or otherwise reinvested) except that if the underlying award will not vest solely on account of continued employment or service, any dividend equivalents will be accumulated and paid only when and to the extent that the underlying award vests.

Section 162(m)

Section 162(m) of the Code limits, to $1,000,000, the deduction that a public corporation may claim each year for compensation paid to each of its chief executive officer and its three other most highly paid executive officers (other than the chief financial officer). The deduction limitation does not apply to compensation that qualifies as “performance based compensation” under Section 162(m) of the Code.

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The Company has not designed the Second Amended 2014 Individuals Plan so that awards can qualify under Section 162(m) of the Code. The Company has determined that the deduction limitation has not limited the deductibility of our executives’ compensation and is not expected to affect the Company’s compensation deductions in the foreseeable future. However, the Company has determined that the compensation committee of our board of directors should retain discretion to design executive compensation awards to meet our objectives, taking into account any potential effects of Section 162(m) of the Code. The Company in the future may determine that the Second Amended 2014 Individuals Plan should be further amended, and submitted to stockholders for approval, so that awards can qualify as performance based compensation under Section 162(m) of the Code.

Change in Control

If we experience a Change in Control, the administrator may, at its discretion, provide that outstanding awards that are Time-Based Awards and that are not exercised prior to the Change in Control will be assumed by the surviving entity, or will be replaced by a comparable substitute award of substantially equal value granted by the surviving entity. Any Time-Based Awards so assumed or replaced with substitute awards in connection with the Change in Control will vest in accordance with their original terms, except that any such Time-Based Awards or substitute awards granted under the Second Amended 2014 Individuals Plan automatically become vested in full if (A) the holder’s employment or service with the Company, the Successor Entity, or an affiliate thereof is terminated (i) involuntarily without Cause or following non-renewal of the holder’s employment agreement, (ii) voluntarily by the holder with Good Reason, or (iii) on account of the holder’s death or disability, and (B) the holder remained in the continuous employ or service of the Company, the Successor Entity, or the applicable affiliate thereof from the date of such Change in Control until the date of such termination of employment or service.

On the date of such Change in Control, all outstanding Time-Based Awards that are not assumed or replaced with substitute awards in connection with the Change in Control will become fully exercisable, restrictions and conditions on outstanding stock awards will lapse, and performance units, incentive awards or other equity-based awards will become earned and nonforfeitable in their entirety.

Performance Awards that are outstanding on the date of such Change in Control must be assumed or replaced with substitute awards granted under the Second Amended 2014 Incentive Plans in connection with the Change in Control. Such assumed or substituted Performance Awards will be of the same type of award as the original Performance Awards being assumed or replaced, and will have a value, as of the date of such Change in Control, that is substantially equal to the value of the original Performance Awards. In addition, such assumed or substituted Performance Awards will continue to vest in accordance with the terms and conditions of the original Performance Awards being assumed or replaced; provided, that the performance objectives and measures of the original Performance Awards being assumed or replaced shall be adjusted as the administrator determines is equitably required. Notwithstanding the preceding sentence (and solely with respect to assumed or substitute awards for Performance Awards originally granted under the Second Amended 2014 Individuals Plan), if (A) the holder’s employment with the Company, the Successor Entity, or an affiliate thereof is terminated (i) involuntarily without Cause, (ii) following non-renewal of the employment agreement, if any, between the holder and the Company, the Successor Entity or the applicable affiliate thereof (if the holder has an employment agreement requiring accelerated vesting in such case), (iii) voluntarily by the holder with Good Reason, or (iv) on account of the holder’s death or disability, and (B) the holder remained in the continuous employ of the Company, the Successor Entity or the applicable affiliate thereof from the date of such Change in Control until the date of such termination of employment, then the assumed or substituted Performance Awards will automatically become vested with respect to a pro rata number of the shares or other securities subject to such assumed or substituted Performance Awards based on the extent to which the performance or other objectives are achieved as of the date of such termination of employment or service. Any portion of any such Performance Awards that does not become so vested will be forfeited.

The administrator may also provide that any Time-Based Awards (or any portion thereof) that become vested in connection with the Change in Control as set forth above may be cancelled, in the sole discretion of the administrator, in exchange for a payment, in cash or shares of our common stock or other securities or consideration received by stockholders in the Change in Control transaction, in an amount substantially equal to (i) the price per share of Class A Common Stock received by stockholders (in the case of vested shares of

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Class A Common Stock), (ii) the amount by which the price per share of Class A Common Stock received by stockholders exceeds the option price or Initial Value (in the case of Options and SARs), and (iii) if applicable, the value of the other securities or property in which a Performance Unit or Other Equity-Based Award is denominated. However, in the case of Options and SARs, if the option price or Initial Value exceeds the price per share of Class A Common Stock received by stockholders in the Change in Control transaction, the Option or SAR may be cancelled without any payment to the holder.

In summary, a Change in Control under the Second Amended 2014 Incentive Plans occurs if:

a person, entity or affiliated group (with certain exceptions) acquires, in a transaction or series of transactions, more than 50% of the total combined voting power of our outstanding securities;
there occurs a merger, consolidation, reorganization, or business combination, unless the holders of our voting securities immediately prior to such transaction have more than 50% of the combined voting power of the securities in the successor entity or its parent;
we (i) sell or dispose of all or substantially all of our assets or (ii) acquire assets or stock of another entity, unless the holders of our voting securities immediately prior to such transaction have more than 50% of the combined voting power of the securities in the successor entity or its parent; or
during any period of twelve consecutive months, individuals who, at the beginning of such period, constitute our board of directors together with any new directors (other than individuals who become directors in connection with certain transactions or election contests) cease for any reason to constitute a majority of our board of directors.

The Code has special rules that apply to “parachute payments,” i.e., compensation or benefits the payment of which is contingent upon a Change in Control. If certain individuals receive parachute payments in excess of a safe harbor amount prescribed by the Code, the payor is denied a federal income tax deduction for a portion of the payments and the recipient must pay a 20% excise tax, in addition to income tax, on a portion of the payments.

If we experience a Change in Control, benefits provided under the Second Amended 2014 Incentive Plans could be treated as parachute payments. In that event, the Second Amended 2014 Incentive Plans provide that the benefits under the Second Amended 2014 Incentive Plans, and all other parachute payments provided under other plans and agreements, will be reduced to the safe harbor amount, i.e., the maximum amount that may be paid without excise tax liability or loss of deduction, if the reduction allows the participant to receive greater after-tax benefits. The benefits under the Second Amended 2014 Incentive Plans and other plans and agreements will not be reduced, however, if the participant will receive greater after-tax benefits (taking into account the 20% excise tax payable by the participant) by receiving the total benefits. The Second Amended 2014 Incentive Plans also provide that these provisions do not apply to a participant who has an agreement with us providing that the participant cannot receive payments in excess of the safe harbor amount.

Clawback Policy

Any award granted under the Second Amended 2014 Incentive Plans, and any payment made with respect to any such award, are subject to the condition that we may require such award to be returned, and any payment made with respect to such award to be repaid, if such action is required under the terms of any Company recoupment or “clawback” (forfeiture or repayment) policy as in effect on the date the award was granted or if recoupment is required by any law, rule, requirement or regulation.

Amendment; Termination

Our board of directors may amend or terminate the Second Amended 2014 Incentive Plans at any time, provided that no amendment may adversely impair the rights of participants under outstanding awards. Our stockholders must approve any amendment if such approval is required under applicable law or stock exchange requirements. Our stockholders also must approve, among other things, any amendment that materially increases the benefits accruing to participants under the Second Amended 2014 Incentive Plans, materially increases the aggregate number of shares of our Class A Common Stock that may be issued under the Second Amended 2014 Incentive Plans (other than on account of stock dividends, stock splits, or other changes in capitalization as described above) or materially modifies the requirements as to eligibility for

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participation in the Second Amended 2014 Incentive Plans. For the avoidance of doubt, without the approval of stockholders, our board of directors may not (except on account of stock dividends, stock splits, or other changes in capitalization) (a) reduce the option price per share of an outstanding option or the exercise price of a stock appreciation right, (b) cancel an outstanding option or stock appreciation right when the option price or exercise prices applicable exceeds the fair market value of our common stock or (c) take any other action that may be treated as a repricing of an option or stock appreciation right under the rules and regulations of the principal exchange on which the common stock is listed for trading. Unless terminated sooner by our board of directors or extended with stockholder approval, the Second Amended 2014 Incentive Plans will terminate on the day before the tenth anniversary of the date our board of directors adopted the Second Amended 2014 Incentive Plans.

New Plan Benefits

If our stockholders approve both the Second Amended 2014 Incentive Plans pursuant to Proposal 1 and the Issuances pursuant to Proposal 2, we expect that the Internalization will be consummated. As described in more detail under “EXECUTIVE OFFICER AND DIRECTOR COMPENSATION — Compensation Discussion and Analysis,” upon the Closing of the Internalization, each of Mr. Kamfar, Mr. Babb, Mr. MacDonald, Mr. Ruddy, Mr. Vohs and Mr. Konig (through K&A) will receive (a) a grant of a pro-rated time-vested equity award in the form of LTIP Units for the 2017 stub period (each, a “Closing LTIP Award”), determined by dividing (x) the pro-rated amount of each such executive officer’s initial annual grant of a time-vested equity award in the form of LTIP Units for 2018 (each, an “Annual LTIP Award”), by (y) the volume weighted average price of a share of the Company’s Class A Common Stock, as reported on the NYSE MKT (or then-applicable exchange), for the twenty (20) trading days immediately preceding the date of grant of such award (the “Employment Agreement VWAP”), which will vest and become nonforfeitable in three equal installments on each anniversary of grant; and (b) a grant of LTIP Units (the “Initial Commitment Award”) determined by dividing (x) $2,500,000 in the case of Mr. Kamfar, $1,250,000 in the case of Mr. Babb, $1,250,000 in the case of Mr. MacDonald, $1,250,000 in the case of Mr. Ruddy, $500,000 in the case of Mr. Vohs, and $1,250,000 in the case of Mr. Konig (through K&A) by (y) the Employment Agreement VWAP, which will vest and become nonforfeitable in five equal annual installments on each anniversary of the Closing. Each such award will be subject to certain clawback and termination provisions. However, neither the value nor the number of LTIP Units to be awarded as Closing LTIP Awards are currently determinable, and while the value of the LTIP Units to be awarded to each such executive officer as Initial Commitment Awards are as specified above, the number of LTIP Units to be awarded to each such executive officer as Initial Commitment Awards is not currently determinable. Further, all of the LTIP Units awarded as Closing LTIP Awards or Initial Commitment Awards will be subject to time-based vesting requirements, such that neither the value nor the number of such LTIP Units that will vest and become nonforfeitable in each such executive officer is currently determinable.

Following Closing of the Internalization, each of our executive officers will be eligible for additional compensation incentives designed to reward, among other things, favorable stockholder returns and share appreciation, same store net operating income growth, on-time and on-budget completion of development projects and our inclusion in real estate industry indices, and each executive officer’s long-term career contributions to our Company, and to incentivize long-term careers with the Company. As described in more detail under “EXECUTIVE OFFICER AND DIRECTOR COMPENSATION — Compensation Discussion and Analysis,” such awards will be in the form of annual cash compensation, as well as long-term vesting of one-time equity awards and both time- and performance-based incentive compensation, including annual performance bonuses and long-term equity awards, subject to performance criteria and targets established and administered by our compensation committee pursuant to the Second Amended 2014 Incentive Plans.

Specifically, beginning in fiscal year 2018, each of our current NEOs and other executive officers will be entitled to an Annual LTIP Award, determined by dividing (x) $600,000 for Mr. Kamfar, $200,000 for Mr. Konig (through K&A), $50,000 for Mr. Vohs, $200,000 for Mr. Babb, $175,000 for Mr. MacDonald, and $200,000 for Mr. Ruddy, by (y) the Employment Agreement VWAP. Annual LTIP Awards will vest and become nonforfeitable in three equal installments on each anniversary of grant. Also beginning in fiscal year 2018, each of our executive officers will be entitled to an annual grant of long term performance-vested equity awards in the form of LTIP Units (each, a “Long Term Performance Award”) for a three-year performance

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period, subject to the performance criteria and targets established and administered by our compensation committee, with a target value equal to that year’s Annual LTIP Award and a maximum value equal to 150% of that year’s Annual LTIP Award. Long Term Performance Awards will vest and become nonforfeitable effective as of the last day of the performance period. However, while the current value of the LTIP Units to be awarded to each such executive officer as Annual LTIP Awards are as specified above, the number of LTIP Units to be awarded to each such executive officer as Annual LTIP Awards is not currently determinable, and neither the value nor the number of LTIP Units to be awarded as Long Term Performance Awards are currently determinable. Further, all LTIP Units awarded as Annual LTIP Awards or Long Term Performance Awards will be subject to time- or performance-based vesting requirements, such that neither the value nor the number of such LTIP Units that will vest and become nonforfeitable in each such executive officer is currently determinable.

In addition, our compensation committee may decide to make awards to new executive officers in order to attract talented professionals. Any future awards made under the Second Amended 2014 Incentive Plans will be determined in the discretion of the administrator.

Except as described above, as of the date of this proxy statement, the administrator has not made any determination to make any future grants under the Second Amended 2014 Incentive Plans. Therefore, it is not possible to determine any other future benefits that will be received by any individual participant (or any group of participants) under the Second Amended 2014 Incentive Plans. As of March 31, 2017, the Manager and all of our independent directors were actually participating in the Amended 2014 Incentive Plans. If the Second Amended 2014 Incentive Plans are approved by our stockholders, then for the period during which we remain externally managed prior to the consummation of the Internalization, the Manager will remain eligible for grants pursuant to the Second Amended 2014 Entities Plan. However, we do not intend to make any such grants to the Manager pursuant to the Second Amended 2014 Entities Plan.

If the Internalization is consummated, the Manager will no longer be eligible for grants under the Second Amended 2014 Entities Plan, and its officers and employees will no longer be eligible for grants under the Second Amended 2014 Individuals Plan by virtue of their service to the Manager in such capacities. However, other entities that provide significant services to us or our affiliates that are selected by the administrator will remain eligible for grants under the Second Amended 2014 Entities Plan.

Each of R. Ramin Kamfar, who will continue to serve as our Chief Executive Officer and Chairman of our board of directors following the Internalization, James G. Babb, III, who will serve as our Chief Investment Officer following the Internalization, Ryan S. MacDonald, who will serve as our Chief Acquisitions Officer following the Internalization, Jordan B. Ruddy, who will serve as our Chief Operating Officer and President following the Internalization, Christopher J. Vohs, who will serve as our Chief Financial Officer and Treasurer following the Internalization, and Michael L. Konig, who will serve as our Chief Legal Officer and Secretary following the Internalization, as well as Brian D. Bailey, I. Bobby Majumder and Romano Tio, who are the independent members of our board of directors, have a substantial interest in the approval by stockholders of the Second Amended 2014 Individuals Plan as potential recipients of awards thereunder by virtue of their service in such capacities.

Compensation of Executive Officers and Directors

While we are externally managed, we do not currently have any employees, and our executive officers are employed by an affiliate of the Manager. We do not reimburse the Manager for compensation paid to our executive officers.

Upon consummation of the Internalization, we will become an internally managed REIT, and our executive officers and certain other employees currently employed by an affiliate of the Manager will be employed or engaged by Manager Sub, which will then be an indirect subsidiary of the Company. Messrs. Kamfar, Babb, MacDonald, Ruddy and Vohs have entered into employment agreements with Manager Sub, and Mr. Konig has entered into a services agreement with Manager Sub through K&A. Each such agreement will become effective upon Closing, and will have an initial term through and including December 31, 2020. See “Proposal 2: The Issuances — Interests of Certain Persons in the Internalization” for a description of the terms of each of these employment and services agreements. Our executive officers and employees will then

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be eligible for awards under the Second Amended 2014 Individuals Plan, as described above and as discussed in the Compensation Discussion and Analysis section of this proxy statement.

If a director is also one of our executive officers, we do not currently pay any compensation for services rendered as a director, and we intend to maintain that policy following the consummation of the Internalization. The amount and form of compensation payable to our independent directors for their service to us is determined by our board of directors, which determinations, while we are externally managed, are based upon recommendations from the Manager. Two of our executive officers, Messrs. Konig and Vohs, manage the Manager, and Mr. Kamfar, our Chief Executive Officer and President and the Chairman of our board of directors, controls the Manager, and through the Manager, while we are externally managed, they are involved in recommending and setting the compensation to be paid to our independent directors. However, following the consummation of the Internalization, the amount and form of compensation payable to our independent directors will determined by our board of directors alone.

We currently pay each of our independent directors an annual retainer of $25,000. In addition, we pay our independent directors $2,500 in cash per board meeting attended in person or telephonically, and $2,000 in cash for each committee meeting attended in person or telephonically. All directors currently receive reimbursement of reasonable out-of-pocket expenses incurred in connection with attendance at meetings of the board of directors. In addition, the chairman of our audit committee receives an additional annual cash retainer of $10,000. We intend to review and evaluate these policies following the Closing of the Internalization.

We have provided below certain information regarding compensation earned by and paid to our directors during fiscal year 2016 (amounts in thousands).

     
Name   Fees Paid in Cash in 2016(1)   Restricted Stock Awards(2)   Total
Brian D. Bailey(3)   $ 81     $ 26     $ 107  
I. Bobby Majumder(4)     85       26       111  
Romano Tio(5)     79       26       105  
Gary T. Kachadurian                  
R. Ramin Kamfar                  

(1) Includes the $25,000 annual retainer paid in 2016, which retainer also compensated for services to be rendered in 2017 in the amount of $8,333.
(2) Reflects 2,500 shares of restricted stock granted in 2016 under the Amended 2014 Individuals Plan to each non-employee director. The amounts reported for each non-employee director reflect the grant date fair value of the award based on the closing price of the shares on March 24, 2016 (i.e. $10.33).
(3) Includes eighteen $2,000 payments and five $2,500 payment related to joint board of directors/audit committee/investment committee teleconference and in-person meetings, respectively. Includes seven $1,000 payments for six meetings held in 2015, but paid in 2016.
(4) Includes fifteen $2,000 payments and five $2,500 payment related to joint board of directors/audit committee/investment committee teleconference and in-person meetings, respectively. Includes seven $1,000 payments for six meetings held in 2015, but paid in 2016. Also includes $10,000 for compensation as audit committee chairman.
(5) Includes seventeen $2,000 payments and five $2,500 payment related to joint board of directors/audit committee/investment committee teleconference and in-person meetings, respectively. Includes seven $1,000 payments for six meetings held in 2015, but paid in 2016.

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Federal Tax Consequences

Counsel advised us regarding the federal income tax consequences of the Second Amended 2014 Incentive Plans. No income is recognized by a participant at the time an option or stock appreciation right is granted. If the option is an incentive stock option, no income will be recognized upon the participant’s exercise of the incentive stock option. Income is recognized by a participant when he or she disposes of shares acquired under an incentive stock option. The exercise of a nonqualified stock option or a stock appreciation right generally is a taxable event that requires the participant to recognize, as ordinary income, the difference between the shares’ fair market value and the option price or the amount paid in settlement of the stock appreciation right.

Income is recognized on account of the grant of a stock award or another equity-based award (other than LTIP Units) when the shares or other property subject to the award first become transferable or are no longer subject to a substantial risk of forfeiture. At that time, the participant recognizes ordinary income equal to the fair market value of the shares or other property, less any amount paid by the participant for the shares or other property.

A participant should not recognize income on account of the grant or vesting of LTIP Units. The amount received under the LTIP Units will be taxed as ordinary income or capital gain, depending on the character of the income received by the Operating Partnership. Upon a sale or exchange of an LTIP Unit a participant will recognize long-term or short-term capital gain, depending on the period that the participant held the LTIP Units.

No income is recognized upon the grant of performance units or incentive awards. Income will be recognized on the date that payment is made under the performance units or incentive award in an amount equal to the amount paid in settlement of the awards.

The employer (either the Company or its affiliate) generally will be entitled to claim a federal income tax deduction on the account of the exercise of a nonqualified stock option or stock appreciation right, the vesting of a stock award or other equity-based award and the settlement of performance units and incentive awards. The amount of the deduction generally is equal to the ordinary income recognized by the participant. The employer will not be entitled to a federal income tax deduction on account of the grant or exercise of an incentive stock option but may claim a federal income tax deduction on account of certain dispositions of shares acquired under an incentive stock option.

Proposed Second Amended 2014 Incentive Plans

This Proposal No. 1 requests stockholder approval of the Second Amended 2014 Incentive Plans as previously approved by our board of directors, which will reflect (1) an aggregate of 1,625,000 shares authorized for issuance, (an aggregate increase of 1,150,000 shares available for issuance), and (2) other administrative changes as further described above.

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Additional Shares Available for Issuance

When the Amended 2014 Incentive Plans were adopted by stockholders in May 2015, the Amended 2014 Incentive Plans provided for the issuance of an aggregate number of shares of Class A Common Stock equal to 475,000. As of August 8, 2017, all 475,000 shares available for issuance under the Amended 2014 Incentive Plans have been issued, leaving no shares available for issuance under the Amended 2014 Incentive Plans. If the stockholders approve this Proposal No. 1, the aggregate number of shares available for issuance under the Second Amended 2014 Incentive Plans will be increased by 1,150,000 shares (so that the aggregate number of shares authorized for issuance under the Amended 2014 Incentive Plans and the Second Amended 2014 Incentive Plans will be 1,625,000 shares). The following table reflects the activity that will have taken place since May 28, 2015 if this Proposal No. 1 is approved:

 
  Shares Available For
Future Grants
Shares available and reserved at inception of Amended 2014 Incentive Plans – May 28, 2015:(1)
    475,000  
LTIP Units:
        
BRG Manager, LLC(2)     (460,000 ) 
Brian D. Bailey(3)     (2,500 ) 
I. Bobby Majumder(3)     (2,500 ) 
Romano Tio(3)     (2,500 ) 
Restricted Class A Common Stock:(4)
        
Brian D. Bailey     (2,500 ) 
I. Bobby Majumder     (2,500 ) 
Romano Tio     (2,500 ) 
Shares available under Amended 2014 Incentive Plans as of August 8, 2017:     0  
Requested shares under Proposal No. 1:     1,150,000  
Shares available under Second Amended 2014 Incentive Plans after authorized increase:(5)     1,150,000  

(1) Table reflects only the issuance of (i) a total of 7,500 restricted shares of our Class A Common Stock and (ii) a total of 467,500 LTIP Units made under the Amended 2014 Incentive Plans. Table does not reflect the issuances of (a) a total of 21,242 shares of restricted common stock made under our former Incentive Plan, which were not included in and did not reduce the 275,862 shares available for issuance under the 2014 Incentive Plans; or (b) (i) a total of 15,000 restricted shares of our Class A Common Stock or (ii) a total of 179,562 LTIP Units made under the 2014 Incentive Plans, which were not included in and did not reduce the 475,000 shares available for issuance under the Amended 2014 Incentive Plans. The former Incentive Plan was terminated upon the inception of the 2014 Incentive Plans, and no additional grants will be made under the former Incentive Plan. Upon the adoption of the Amended 2014 Incentive Plans, the 81,300 shares that remained available under the 2014 Incentive Plans were subsumed by and included within the 475,000 shares available under the Amended 2014 Incentive Plans, such that an aggregate of 475,000 shares were available for issuance under the Amended 2014 Incentive Plans.
(2) On July 2, 2015, 283,390 LTIP Units were granted to BRG Manager, LLC under the Amended 2014 Incentive Plans. On August 3, 2016, 176,610 LTIP Units were granted to BRG Manager, LLC under the Amended 2014 Incentive Plans.
(3) On February 14, 2017, each of our independent directors received a grant of 2,500 LTIP Units under the Amended 2014 Incentive Plans.
(4) On March 24, 2016, each of our independent directors received a grant of 2,500 restricted shares of our Class A Common Stock under the Amended 2014 Incentive Plans.
(5) If the stockholders approve this Proposal No. 1, an aggregate of 1,150,000 shares will be available for issuance under the Second Amended 2014 Incentive Plans.

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Reasons for the Requested Approvals

Share Increase

Since our IPO in April 2014, our stockholder equity has grown significantly through an October 2014 follow-on offering and a January 2015 follow-on offering, and since the adoption of the Amended 2014 Incentive Plans in May 2015, our stockholder equity has continued its significant growth through additional follow-on offerings in May 2015 and January 2017, and preferred stock offerings in October 2015 and over the course of 2016 and 2017. We currently have no additional shares available for issuance under the Amended 2014 Incentive Plans, and with our continued growth, it is difficult to forecast how many shares we will need each year. We anticipate that increasing the aggregate number of shares that may be issued under the Second Amended 2014 Incentive Plans pursuant to awards granted on and after the date that stockholders approve the Second Amended 2014 Incentive Plans by 1,150,000 shares will provide for adequate shares for at least one additional year based on our current size and share count. In determining that amount, we engaged a compensation consultant, FPL Associates L.P. (“FPL”), to provide an analysis of certain of our equity incentive compensation practices, including the number of shares reserved for issuance under our Amended 2014 Incentive Plans. In connection with this engagement, FPL established a benchmark group of competitive peer REITs, conducted a competitive analysis of the overall size and rate of grants made under the Amended 2014 Incentive Plans relative to those of the benchmark group, reviewed the Amended 2014 Incentive Plans relative to potential ISS and institutional investor concerns, and recommended an appropriate size of new share authorization for inclusion in the Second Amended 2014 Incentive Plans. The compensation committee and the board of directors utilized this information regarding the historical amounts of equity awards that we have granted in the past year and comparable award information from our peers in recommending that stockholders approve the Second Amended 2014 Incentive Plans.

In determining the appropriate size of new share authorization for inclusion in the Second Amended 2014 Incentive Plans, the compensation committee and the board of directors also considered the total amount of awards outstanding under existing grants. As of August 8, 2017, there were a total of 212,862 unvested restricted shares outstanding (including 659 unvested restricted shares issued under our former Incentive Plan), and 212,203 unvested LTIP Units. Our 212,862 outstanding unvested awards represent approximately 0.8% of our outstanding shares of Class A Common Stock (inclusive of shares of Class A Common Stock underlying outstanding OP Units). We believe that our success could not have been achieved without the efforts of our management. The demand and competition for qualified personnel in the real estate investment industry remains high, and without a strong retention program, it would be extremely difficult to retain qualified personnel. We believe awards under the Second Amended 2014 Incentive Plans are necessary to retain the Manager (while we are externally managed), our management team (if we become internally managed following consummation of the Internalization), and our non-employee directors, and to remain competitive in our industry. Without stockholder approval of the Second Amended 2014 Incentive Plans, there will be no awards available to the Manager (while we are externally managed), our management team (if we become internally managed following consummation of the Internalization), or our non-employee directors, and we will be forced to either reduce or eliminate long-term incentive awards or replace them with cash compensation. If we eliminate long-term awards, it will likely diminish our ability to retain the Manager (while we are externally managed), and our management team (if we become internally managed following consummation of the Internalization). If we instead pay compensation in cash, the amount of capital that we have available to reinvest in our growth will be reduced. We believe that both of these alternatives may reduce stockholder value.

Additional Changes

The additional changes to our Amended 2014 Incentive Plans as set forth in the Second Amended 2014 Incentive Plans, in addition to the increase in share authorization, are designed to improve plan governance and to better align the interests of our executive officers, directors, and employees of Manager Sub with those of our stockholders. We believe these changes will align our Second Amended 2014 Incentive Plans with new market developments relative to equity compensation, and ultimately create additional stockholder value.

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Consequences of Failure to Approve the Second Amended 2014 Incentive Plan

Stockholder approval of this Proposal 1 (the vote to approve the Second Amended 2014 Incentive Plans) is a condition to closing under the Contribution Agreement. If this Proposal 1 is not approved by our stockholders, the Issuances, and thus the Internalization, will not be consummated.

Appraisal Rights

Under Maryland law and our charter, you will not be entitled to rights of appraisal with respect to the approval of the Second Amended 2014 Incentive Plans. Accordingly, to the extent that you object to the Second Amended 2014 Incentive Plans, you will not have the right to have a court judicially determine (and you will not receive) the fair value for your shares of common stock under the provisions of Maryland law governing appraisal rights.

Vote Required

The affirmative vote of a majority of the votes cast by stockholders present in person or by proxy at the Annual Meeting is required to approve this proposal.

For purposes of the vote on this proposal, both broker non-votes and abstentions will be considered present for the purpose of determining the presence of a quorum.

However, under the NYSE MKT rules, brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote. Broker non-votes and other shares not voted will not be counted as votes cast, and will therefore have no effect on the result of the vote on this proposal.

In addition, under the NYSE MKT rules, abstentions will be counted as votes cast, and will therefore have the same effect as votes “against” the proposal.

Recommendation

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THE SECOND AMENDED 2014 INCENTIVE PLANS.

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PROPOSAL 2
THE ISSUANCES

The Internalization Consideration includes equity to be issued by us and equity to be issued by our Operating Partnership, as well as nominal cash consideration. In particular, in order to effect the Internalization, the Contribution Agreement requires the issuance of (i) OP Units, and shares of our Class A Common Stock that may be issued in the Company’s discretion upon redemption of such OP Units on a one-for-one basis in certain circumstances, and (ii) shares of our Class C Common Stock, and shares of our Class A Common Stock to be issued upon conversion of such shares of Class C Common Stock on a one-for-one basis in certain circumstances (such issuances, the “Issuances”). The Issuances will be made without registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder. This Proposal 2 is to consider and vote upon these Issuances, which the Special Committee has determined are advisable to, and in the best interests of, the Company. The Special Committee has recommended the submission of this Proposal 2 for stockholder approval at the Annual Meeting.

The Issuances

In payment of the aggregate Internalization Consideration, we will cause our Operating Partnership to issue OP Units, and we will issue shares of our Class C Common Stock, to the Contributors. Pursuant to the Contribution Agreement, the amount of the Internalization Consideration will be determined pursuant to a formula established in the Management Agreement at the time of the Company’s IPO in April 2014. Specifically, the Internalization Consideration will be an amount equal to three (3) times the sum of (i) the Base Management Fee and (ii) the Incentive Fee, in each case earned by the Manager during the 12-month period ending on the last day of the most recently-completed fiscal quarter prior to Closing, which period is currently expected to be the 12 months ending September 30, 2017. While the actual value of the Internalization Consideration is not yet determinable, the Company currently estimates that the aggregate value of the Internalization Consideration will be approximately $41.5 million. As more fully explained below, this estimate is based on the aggregate Base Management and Incentives Fees actually paid to the Manager for the nine months ending June 30, 2017, and estimated Base Management Fees (and no Incentive Fees) for the three months ending September 30, 2017. Pursuant to the Contribution Agreement, the number of OP Units and shares of Class C Common Stock issuable as Internalization Consideration will be determined by dividing the aggregate value of the Internalization Consideration payable in such OP Units and shares of Class C Common Stock, which the Company estimates will be equal to approximately $41,458,500 (the “Contribution Consideration”), by the VWAP (i.e., the volume-weighted average closing price of our Class A Common Stock on the NYSE MKT for the twenty (20) trading days beginning on and including September 11, 2017, through and including October 6, 2017. We will also pay 0.1% of the Internalization Consideration, which the Company estimates will be equal to approximately $41,500, in cash in connection with the Internalization (the “Cash Consideration”). The sum of the Contribution Consideration and the Cash Consideration will equal the Internalization Consideration. Payment of the Internalization Consideration primarily in OP Units and shares of our Class C Common Stock, rather than principally in cash, is intended to further align the interests of our management with those of our stockholders.

The actual number of OP Units and shares of Class C Common Stock issuable in connection with the Internalization will not be determinable until the actual Base Management and Incentive Fees for the quarter ending September 30, 2017 and the VWAP can be determined. However, based on the estimated amount of the Contribution Consideration and utilizing Reference Prices of $10.00, $11.50 and $13.00, respectively, per share (representing, for illustrative purposes only, a range of assumed potential closing prices of our Class A Common Stock on the NYSE MKT), the Company estimates that the number of OP Units to be issued as Contribution Consideration will range from a low of 3,125,333 OP Units based on the high Reference Price of $13.00 to a high of 4,062,933 OP Units based on the low Reference Price of $10.00 (with a midpoint of 3,532,985 OP Units based on the midpoint Reference Price of $11.50), and that the number of shares of Class C Common Stock to be issued as Contribution Consideration will range from a low of 63,782 shares of Class C Common Stock based on the high Reference Price of $13.00 to a high of 82,917 shares of Class C Common Stock based on the low Reference Price of $10.00 (with a midpoint of 72,102 shares of Class C Common Stock based on the midpoint Reference Price of $11.50). However, the Contribution Agreement does not impose a minimum or maximum number of OP Units or shares of Class C Common Stock that may be issued as Contribution Consideration, and any or all of the Reference Prices used in this illustration may differ

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from the VWAP. For these reasons, the actual number of OP Units and shares of Class C Common Stock issuable in connection with the Internalization may differ from those estimates, and may fall inside or outside of the estimated ranges.

For illustrative purpose only, assuming $41.5 million of Internalization Consideration, and assuming the Reference Prices of $10.00, $11.50 and $13.00, respectively, per share of our Class A Common Stock, the table below reflects for each such Reference Price the range of resulting allocations of Contribution Consideration consisting of OP Units and Class C Common Stock:

     
  Reference Price Per Share:
     $10.00   $11.50   $13.00
# of OP Units:     4,062,933       3,532,985       3,125,333  
# of Class C Common Shares:     82,917       72,102       63,782  
Total:     4,145,850       3,605,087       3,189,115  

Commencing on the one-year anniversary of the Closing, each OP Unit issued as Contribution Consideration may be tendered for redemption, at the holder’s option and subject to the terms and conditions set forth in the limited partnership agreement of the Operating Partnership, for cash equal to the average closing price of our Class A Common Stock for the ten (10) consecutive trading days immediately preceding the date we receive a notice of redemption, or, at our sole option, for shares of our Class A Common Stock on a one-for-one basis, in lieu of cash. Each share of Class C Common Stock will be convertible, at the holder’s option (at any time and from time to time), into one (1) fully-paid and non-assessable share of Class A Common Stock, and upon the occurrence of certain transfers or redemptions of OP Units, certain transfers of shares of Class C Common Stock, and similar events, will convert automatically into one (1) fully-paid and non-assessable share of Class A Common Stock. See “Terms of the Class C Common Stock” below for a more detailed description of the terms of the Class C Common Stock.

Internalization Consideration

While the actual value of the Internalization Consideration is not yet determinable, the Company currently estimates that the aggregate value of the Internalization Consideration will be approximately $41.5 million. This estimate is based on (a) the aggregate Base Management and Incentive Fees actually paid to the Manager for the three calendar quarters ending June 30, 2017, and (b) certain assumptions regarding the Base Management and Incentive Fees expected to be earned by the Manager for the calendar quarter ending September 30, 2017. Specifically, the Company has assumed that for the third quarter of 2017, (i) the Manager will earn Base Management Fees of $2.87 million to $2.92 million, premised on the Company’s current equity base plus an assumption that the Company will raise an additional $45.0 million to $75.0 million in equity from its continuous offering of Series B Preferred Stock, and (ii) the Manager will earn no Incentive Fees. Based on those assumptions for the quarter ending September 30, 2017, plus the aggregate Base Management and Incentive Fees actually paid to the Manager for the three calendar quarters ending June 30, 2017, the projected range of Internalization Consideration for the four quarters ending September 30, 2017 is estimated at $41.4 million to $41.6 million. As such, for purposes of providing estimated ranges for the number of OP Units and shares of Class C Common Stock expected to be issuable as Contribution Consideration as set forth in this proxy statement, the Company has utilized an estimated Internalization Consideration amount of $41.5 million.

In accordance with the Contribution Agreement, the Internalization Consideration is payable 0.1% in cash and 99.9% in a combination of OP Units and shares of Class C Common Stock, in a ratio of 49 OP Units for each share of Class C Common Stock.

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Set forth below is an illustrative allocation of the Internalization Consideration to be payable to each of the Contributors, including the following:

(1) the approximate value of the OP Units and shares of Class C Common Stock estimated to be issuable to each of the Contributors in payment of the Contribution Consideration;
(2) the estimated number of OP Units and shares of Class C Common Stock to be issuable to each of the Contributors in payment of the Contribution Consideration, based on:
(a) the estimated total number of OP Units to be issued as Contribution Consideration ranging from (i) 3,125,333 OP Units (i.e., the low end of the estimated range) to (ii) an estimated 4,062,933 OP Units (i.e., the high end of the estimated range), in each case based on the assumed Reference Price, and
(b) the estimated total number of shares of Class C Common Stock to be issued as Contribution Consideration ranging from (i) 63,782 shares of Class C Common Stock (i.e., the low end of the estimated range) to (ii) 82,917 shares of Class C Common Stock (i.e., the high end of the estimated range), in each case based on the assumed Reference Price;
(3) the estimated voting interest represented by the estimated number of shares of Class C Common Stock to be issuable to each of the Contributors in payment of the Contribution Consideration, based on the anticipated post-Closing total issued and outstanding shares of Class A Common Stock, Class C Common Stock and OP Units (other than those OP Units represented for voting purposes by shares of Class C Common Stock) on a fully diluted basis; as described in more detail under “Terms of the Class C Common Stock” below, the shares of Class C Common Stock provide voting representation with respect to the OP Units being issued to the Contributors as part of the Internalization Consideration;
(4) the approximate total value of the Cash Consideration to be payable to each of the Contributors; and
(5) the approximate total value of the Internalization Consideration to be payable to each of the Contributors.

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Contributor:   OP Units:   Class C   Cash Consideration   Internalization
Consideration
  Common Stock:
BRRE 49.80%
                                                                       
Value:   $ 20,233,406                       $ 412,927                       $ 20,667     $ 20,667,000  
Reference Price
  $ 10.00     $ 11.50     $ 13.00     $ 10.00     $ 11.50     $ 13.00              
Estimated Number:     2,023,341       1,759,427       1,556,416       41,293       35,907       31,764              
Estimated Voting Interest:                                7.86 %      6.91 %      6.16 %                   
Mr. Babb 14.25%
                                                                       
Value:   $ 5,789,680                       $ 118,157                       $ 5,914     $ 5,913,750  
Reference Price
  $ 10.00     $ 11.50     $ 13.00     $ 10.00     $ 11.50     $ 13.00              
Estimated Number:     578,968       503,450       445,360       11,816       10,274       9,089              
Estimated Voting Interest:                                2.38 %      2.08 %      1.84 %                   
Mr. MacDonald 3.56%
                                                                       
Value:   $ 1,446,404                       $ 29,518                       $ 1,477     $ 1,477,400  
Reference Price
  $ 10.00     $ 11.50     $ 13.00     $ 10.00     $ 11.50     $ 13.00              
Estimated Number:     144,640       125,774       111,262       2,952       2,567       2,271              
Estimated Voting Interest:                                0.61 %      0.53 %      0.47 %                   
Mr. Ruddy 11.32%
                                                                       
Value:   $ 4,599,240                       $ 93,862                       $ 4,698     $ 4,697,800  
Reference Price
  $ 10.00     $ 11.50     $ 13.00     $ 10.00     $ 11.50     $ 13.00              
Estimated Number:     459,924       399,934       353,788       9,386       8,162       7,220              
Estimated Voting Interest:                                1.90 %      1.66 %      1.47 %                   
K&A 11.32%
                                                                       
Value:   $ 4,599,240                       $ 93,862                       $ 4,698     $ 4,697,800  
Reference Price
  $ 10.00     $ 11.50     $ 13.00     $ 10.00     $ 11.50     $ 13.00              
Estimated Number:     459,924       399,934       353,788       9,386       8,162       7,220              
Estimated Voting Interest:                                1.90 %      1.66 %      1.47 %                   
Kachadurian Group 4.75%
                                                                       
Value:   $ 1,929,893                       $ 39,386                       $ 1,971     $ 1,971,250  
Reference Price
  $ 10.00     $ 11.50     $ 13.00     $ 10.00     $ 11.50     $ 13.00              
Estimated Number:     192,989       167,817       148,453       3,939       3,425       3,030              
Estimated Voting Interest:                                0.81 %      0.70 %      0.62 %                   
Novack 5.00%
                                                                       
Value:   $ 2,031,467                       $ 41,459                       $ 2,075     $ 2,075,000  
Reference Price
  $ 10.00     $ 11.50     $ 13.00     $ 10.00     $ 11.50     $ 13.00              
Estimated Number:     203,147       176,649       156,267       4,146       3,605       3,189              
Estimated Voting Interest:                                0.85 %      0.74 %      0.65 %                   
Totals:
                                                                       
Value:   $ 40,629,330                       $ 829,170                       $ 41,500     $ 41,500,000  
Reference Price
  $ 10.00     $ 11.50     $ 13.00     $ 10.00     $ 11.50     $ 13.00              
Estimated Number:     4,062,933       3,532,985       3,125,333       82,917       72,102       63,782              
Estimated Voting Interest:                                14.63 %      12.97 %      11.65 %                   

(1) Pursuant to the Contribution Agreement, the aggregate amount of Contribution Consideration payable to the Contributors may be reduced by up to $450,000 for direct reimbursement to the Manager of out of pocket transaction costs and expenses incurred in connection with the transactions contemplated by the Contribution Agreement. Any such reduction to the amount of Contribution Consideration payable to each Contributor will be made in proportion to the equity ownership interest of such Contributor in the Manager. The Contribution Consideration amounts above do not reflect any such reductions. See “Description of the Internalization and the Contribution Agreement — Consideration to be Paid in the Internalization.”

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Terms of the Class A Common Stock

Our charter currently authorizes 1,000,000,000 shares of stock, consisting of 750,000,000 shares of common stock, $0.01 par value per share, and 250,000,000 shares of preferred stock, $0.01 par value per share. As of August 22, 2017 (i.e., the Record Date), there were 24,192,645 shares of our Class A Common Stock outstanding. Our Class A Common Stock is listed on the NYSE MKT under the symbol “BRG.”

Holders of shares of our Class A Common Stock are entitled to receive dividends authorized by our board of directors and declared by us out of legally available funds after payment of, or provision for, full cumulative distributions on and any required redemptions of shares of preferred stock then outstanding, which includes our Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock. Upon our liquidation or dissolution, holders of our Class A Common Stock are entitled to share ratably in the distributable assets of the Company remaining after satisfaction of the prior preferential rights of any preferred stock and the satisfaction of all of our debts and liabilities. Holders of our Class A Common Stock do not have preference, conversion, exchange, sinking fund, or redemption rights or preemptive rights to subscribe for any of our securities, and generally have no appraisal rights.

To assist us in maintaining our qualification as a REIT for federal income tax purposes, among other purposes, we impose restrictions on the ownership and transfer of our capital stock, including our Class A Common Stock. Our charter contains certain restrictions relating to the ownership and transfer of our capital stock, including, subject to certain exceptions, a 9.8% ownership limit (by value or number of shares, whichever is more restrictive) of common stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, or Series D Preferred Stock.

Subject to the restrictions on ownership and transfer of stock contained in our charter and except as may otherwise be specified in our charter, each share of our Class A Common Stock will have one vote per share on all matters voted on by stockholders, including the election of directors. Because stockholders do not have cumulative voting rights, holders of a majority of the outstanding shares of Class A Common Stock can elect our entire board of directors. Generally, the affirmative vote of a majority of all votes cast is necessary to take stockholder action, except that a plurality of all votes cast at a meeting at which a quorum is present is sufficient to elect a director, and a majority of all votes entitled to be cast on the matter is generally required to authorize dissolution, certain charter amendments, mergers, conversions, the sale of all or substantially all of the Company’s assets, or engaging in a share exchange or similar transactions outside the ordinary course of business

Terms of the OP Units

OP Units are units of limited partnership interest in the Operating Partnership, which may, subject to certain limitations, be redeemed for cash or, at our option, exchanged for shares of our Class A Common Stock on a one-for-one basis in lieu of cash; provided, however, that OP Units issued as part of the Contribution Consideration may not be redeemed for one (1) year following the Closing. Subject to certain restrictions and exceptions, limited partners of the Operating Partnership holding OP Units may exercise their redemption rights at any time after one year following the date of issuance of their OP Units. Holders of OP Units are entitled to receive “distribution equivalents” at the same time as dividends are paid to holders of our Class A Common Stock.

Terms of the Class C Common Stock

Pursuant to the Contribution Agreement, we will issue shares of our newly-created Class C Common Stock to the Contributors. In order to issue these shares to each such Contributor at the Closing under the Contribution Agreement, our board of directors has authorized an amendment to our charter to create the Class C Common Stock and, consequently, reclassify as Class C Common Stock a number of authorized but unissued shares of the Company’s Class A Common Stock equal to the number of shares of Class C Common Stock to be issued as consideration in the Internalization as calculated in accordance with the definition of “Contribution Consideration” in the Contribution Agreement (the “Class C Classification”). Pursuant to Section 5.2.2 of our charter, our board of directors, without any action by our stockholders, may classify or reclassify any unissued shares of our common stock into one or more classes or series of common stock or preferred stock. For this reason, no action by our Class A Common Stockholders is required to effectuate the

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Class C Classification. The Class C Common Stock is intended to be equivalent in all material respects to, and rank on parity with, the Class A Common Stock, except that each share of Class C Common Stock entitles the holder thereof to fifty (50) votes, which is intended to mirror the aggregate number of OP Units (which are redeemable for cash or, at our sole option, for shares of our Class A Common Stock, on a one-to-one basis) and shares of Class C Common Stock issued as Contribution Consideration. The Class C Common Stock will thus provide its holders a right to vote that is proportionate to the outstanding non-voting economic interest in the Company attributable to such holders or their affiliates by virtue of the OP Units issued pursuant to the Contribution Agreement, as if all such OP Units were redeemed by us for shares of Class A Common Stock, but without providing any disproportionate voting rights. We do not intend to list the Class C Common Stock on any exchange.

Shares of Class C Common Stock will only be issued (a) to the Contributors, (b) in conjunction with the issuance of OP Units as Contribution Consideration in the Internalization, and (c) in a ratio of no more than one (1) share of Class C Common Stock for every forty-nine (49) OP Units so issued.

Our charter currently authorizes 1,000,000,000 shares of stock, consisting of 750,000,000 shares of common stock, $0.01 par value per share, and 250,000,000 shares of preferred stock, $0.01 par value per share.

Pursuant to our charter, our common stock entitles its holders to one vote per share and to participation in the distribution upon liquidation of our assets remaining after payment of our debts and liabilities and distributions to holders of shares having a preference over our common stock. Prior to the Closing, our board of directors will amend our charter (i) to effectuate the Class C Classification, with the terms described below, (ii) to provide that, other than as described below, the Class C Common Stock will be equivalent in all material respects to, and rank on parity with, the Class A Common Stock, and (iii) to make conforming and immaterial changes and modifications related to the foregoing.

Specifically, our board of directors intends to amend our charter to provide the following terms to apply exclusively to the Class C Common Stock:

Each share of the newly reclassified Class C Common Stock will entitle the holder thereof to fifty (50) votes on each matter on which holders of Class A Common Stock are entitled to vote. The Class C Common Stock and Class A Common Stock will vote together as a single class.
Our board of directors may reclassify any unissued shares of Class C Common Stock from time to time in one or more classes or series of common stock or preferred stock.
Subject to any preferences on other outstanding shares of the Company, if and when our board of directors authorizes or declares a dividend or distribution with respect to the Class A Common Stock, such authorization or declaration also shall constitute a simultaneous authorization or declaration of an equivalent dividend or distribution with respect to each share of Class C Common Stock.
In the event of any liquidation, dissolution or winding up of the Company or any distribution of the Company’s assets, each holder of Class C Common Stock will be entitled to participate, together with the Class A Common Stock and any other class of stock not having a preference over Class C Common Stock, in the distribution of any remaining assets after payment of the Company’s debts and liabilities and distributions to holders of shares having a preference over the Class C Common Stock.
In the event any Contributor to whom OP Units and/or shares of Class C Common Stock were originally issued in connection with the Internalization (each, an “Initial Holder”) or any of their respective family members directly or indirectly transfers beneficial ownership of such Class C Common Stock other than among each other, each share of Class C Common Stock being transferred shall convert automatically into one (1) fully-paid and non-assessable share of Class A Common Stock.

In addition, one share of Class C Common Stock shall convert automatically into one (1) fully-paid and non-assessable share of Class A Common Stock for every group of between one (1) and

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forty-nine (49) OP Units involved in any of the following transfers or cessations: (a) if any Initial Holder or any of their respective family members directly or indirectly transfers beneficial ownership of OP Units directly or indirectly held by such Initial Holder other than to another Initial Holder or a “Qualified Transferee” (as defined below); (b) if any Qualified Transferee directly or indirectly transfers beneficial ownership of OP Units directly or indirectly held by it other than to an Initial Holder or to another Qualified Transferee; or (c) if a Qualified Transferee that beneficially owns OP Units ceases at any time to continue to be a “Qualified Transferee” as a result of a divorce or annulment.

In other words, with respect to clauses (a), (b) and (c), one share of Class C Common Stock will convert automatically for every group of between one (1) and forty-nine (49) OP Units involved in any such transfer or cessation. “Qualified Transferee” means (i) each of R. Ramin Kamfar, James G. Babb, III, Ryan S. MacDonald, Jordan B. Ruddy, Michael L. Konig, Gary Kachadurian, and Jerold E. Novack, in each case for so long as such person remains employed by us or our affiliates, (ii) any family member or affiliate of such persons or of an Initial Holder, (iii) any person controlled by any combination of one or more of such persons or their family members, and (iv) any family member of a person who controls an Initial Holder.

Finally, in the event of the redemption by the Company of OP Units issued pursuant to the Contribution Agreement, each share of Class C Common Stock beneficially owned by the holder of such OP Units (whether such holder is an Initial Holder or a Qualified Transferee) shall convert automatically into one (1) fully-paid and non-assessable share of Class A Common Stock for every group of between one (1) and forty-nine (49) OP Units so redeemed.

The purpose of this automatic conversion feature is to ensure that the holders of Class C Common Stock do not at any time have votes in excess of the number of OP Units then held by them (or the other permitted holders described above). To the extent that a share of Class C Common Stock or any group of up to forty-nine (49) OP Units is transferred or ceases to be held by a permitted holder, a share of Class C Common Stock will convert into one share Class A Common Stock, thereafter carrying only one vote.

Each holder of Class C Common Stock shall have the right, at the holder’s option at any time and from time to time, to convert all or a portion of such holder’s Class C Common Stock into an equal number of fully paid and non-assessable shares of Class A Common Stock by delivering the certificates (if any) representing the shares of Class C Common Stock to be converted, duly endorsed for transfer, together with a written conversion notice to the transfer agent for the Class C Common Stock.
Any share certificates will bear a legend, as set forth in our charter, describing the conversion features of the Class C Common Stock.

All of the foregoing terms of the Class C Common Stock will be subject to operation of our charter’s stock ownership limitation provisions.

This new class of common stock will enable us to comply with our obligations under the Contribution Agreement to issue shares of Class C Common Stock at Closing. In addition, the amendment to our charter will enable us to comply with our obligation under the Contribution Agreement to file the charter amendment prior to the Closing. The issuance of the Class C Common Stock pursuant to the Contribution Agreement will result in the Contributors, as the Initial Holders, controlling a significant number of votes in matters submitted to a vote of stockholders as a result of their beneficial ownership of Class C Common Stock (which will give the Contributors voting power equal to the economic interest in the Company issued to the Contributors in the form of OP Units pursuant to the Contribution Agreement (but not equal to that of all issued and outstanding OP Units) as if all of the OP Units issued pursuant to the Contribution Agreement were redeemed by us for shares of Class A Common Stock), including the election of directors. Each Contributor may have interests that differ from our other stockholders, including by reason of their respective interests in our Operating Partnership, and may accordingly vote in ways that may not be consistent with the interests of such other stockholders.

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Limitation on the Class C Common Stock Voting Rights

Pursuant to a stockholders agreement between the Contributors and us (the “Stockholders Agreement”), if, as of the record date for determining the stockholders of the Company entitled to vote at any annual or special meeting of the stockholders of the Company (however noticed or called) or for determining the stockholders of the Company entitled to consent to any corporate action by written consent, the holders of the Class C Common Stock own shares of Class C Common Stock (the “Subject Shares”) representing, in the aggregate, more than 9.9% of the voting rights of the then-outstanding shares of common stock of the Company and any preferred stock of the Company that has voting rights on the matters being voted upon at such meeting (such number of Subject Shares representing, in the aggregate, more than 9.9% of the voting rights of the then-outstanding shares of common stock of the Company and other classes of common stock and preferred stock with voting rights being referred to as the “Excess Shares”), then at each such meeting or in each such action by written consent, the holders of the Subject Shares may vote or furnish a written consent in respect of the Excess Shares, or cause the Excess Shares to be voted or consented, in each case, in such manner as directed by a majority of the members of the board of directors (such limitation on the voting rights of the Excess Shares, the “Voting Limitation”). Each holder of the Subject Shares must vote, or cause to be voted, his proportion of the Excess Shares, calculated by multiplying the total number of Excess Shares by the quotient obtained by dividing the number of such holder’s Subject Shares by the total number of Subject Shares, in accordance with the Voting Limitation. All Subject Shares other than the Excess Shares may be voted for or against any matter, in the sole and absolute discretion of the holder of Class C Common Stock.

Reasons for the Issuances

The Special Committee

In evaluating the Issuances, the Contribution Agreement, and the other transactions contemplated by the Contribution Agreement, the Special Committee consulted with its independent legal and financial advisors. In reaching its determination, the Special Committee considered a number of factors, including the following material factors which the Special Committee viewed as supporting its decisions with respect to the Issuances, the Contribution Agreement, and the other transactions contemplated by the Contribution Agreement.

the belief that the Internalization would be accretive over time to our net income, earnings and AFFO on an annualized basis as a result of the reduction in operating costs resulting from the elimination of management and other fees and expense reimbursements to our external Manager under the Management Agreement. No assurances can be given, however, that any such accretion in our net income, earnings or AFFO will actually occur;
the belief that Internalization of the Manager will mitigate perceived or actual conflicts of interest between the Company and the Manager;
the belief that increased ownership of the Company by certain of the Company’s officers and directors would more directly align the interests of such officers and directors with those of the Company’s stockholders;
the belief that the Internalization would enable the Company to realize efficiencies arising from an internally managed structure in that the Company will pay for management, advisory, acquisition and development services directly rather than paying fees to a third-party for such services;
the belief that the Internalization would result in a reduction in the Company’s operating expenses, including as a result of replacing management fees paid to the Manager with directly incurred costs;
the Company’s ability, as a result of the Internalization, to control key functions that are important to the growth of its business;
enhanced simplicity by virtue of unifying all of the Company’s and the Manager’s investment activity and resources under a single, transparent corporate structure;
the belief that the transactions may attract new institutional investors to the Company and improve the Company’s ability to raise capital;

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the terms and conditions of the Contribution Agreement and related agreements, including the type and amount of consideration to be paid and the representations, warranties, covenants, conditions to the Closing and indemnification obligations set forth therein, together with the material terms of the ancillary agreements entered into or to be entered into in connection with the Internalization;
the employment agreements entered into by Messrs. Kamfar, Babb, MacDonald, Ruddy and Vohs, and the services agreement entered into by Mr. Konig through K&A, all of which will become effective upon the Closing;
the belief that as the Company continues its expansion into equity or equity-like investments, an internal management structure (which predominates for equity REITs, as opposed to traditional mortgage REITs) would become more expected and retaining an external management structure would be more likely to lead to resistance from existing and potential investors;
the fact that the approval of the Issuances is subject to the approval of the Company’s common stockholders and the right of the Company’s common stockholders to vote against the Issuances for any reason;
the fact that the Contributors agreed to limit their voting discretion over their Class C Common Stock pursuant to the Stockholders Agreement;
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the fact that after the consummation of the Internalization, subject to certain limitations set forth in the Contribution Agreement, the Manager and certain affiliates thereof will be restricted from engaging, directly or indirectly, in any capacity, or having any direct or indirect ownership interest, in any business in the United States that is engaged directly in the business of acquiring, owning and operating multi-family rental residential properties;